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2. George Soros wins with Abe trade

SAC Capital recently announced that it expected about $1 billion to be redeemed by outside investors, largely as a result of the insider trading scandals that have engulfed the company. The hedge fund firm founded by Steven Cohen has not been charged with any wrongdoing, but the controversy has been more than enough cause for discomfort on the part of limited investors.

When the $1 billion figure was released, I thought it might be a high-ball estimate, one that was designed for media. The PR ploy, I thought, was to over-estimate redemptions, so when the real figure comes in, it would appear as though the damage was less than expected. But the real figure is now in---and unfortunately the totals are worse than let on.

According to CNBC, limited partners have decided to redeem $1.68 billion from the fund firm. The funds will be redeemed in quarterly installments over the next 12 months.

The damage could have been even worse. Influential Blackstone Group has decided, for the moment, to leave $550 million in client money with the controversial hedge fund firm. It has, however, negotiated a special withdrawal right and has been given 3 more months to make a final decision on whether to redeem or not. Other have apparently also been given additional time to make decisions.

SAC Capital is not in the danger zone right now. After all, it has more than $15 billion in assets under management. But only about $6 billion is from outside investors.

If the news continues to be negative regarding the insider trading investigation, redemptions will likely escalate, casting doubt more doubt about the future of the firm.

For more:
- here's the CNBC report

Read more about: Steven Cohen, insider trading
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By Jim Kim

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3. JPMorgan pares cash equities unit

I noted recently that hedge funds had hit upon what seems like a sure-fire winner: The so-called Abe trade, named for Shinzo Abe, Japan's PrimeMinister who is bent on lowering interest rates.

The essence of the trade is to short the yen to fund purchases of equities. Lots of the big-name funds have seized upon on this concept, including Caxton Associates, Moore Capital and Tudor Investment Corporation. Bloomberg reports that another big believer has emerged in George Soros, the iconic hedge fund manager of yesteryear who now manages his family office.

Soros "made almost $1 billion since November from bets that the yen would tumble, according to a person close to the billionaire's $24 billion family office. The Japanese wager helped the firm return about 10 percent last year and 5 percent so far this year, said the person, who asked not to be named because the firm is private. The yen has weakened 17 percent versus the dollar since about the start of the fourth quarter, the worst performance over a similar period since 1985," Bloomberg Businessweek noted.

Soros of course is famous for some if his historic currency bets. He's recalled fondly in the industry as the Man who Broke the Bank of England, a moniker that stems from this bet that the United Kingdom would have no choice but to devalue its currency. He made $1 billion from the wager---back in 1992.

For more:
- here's the item

Related articles:
"Abe trade" winning converts

Read more about: Abe Trade
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By Jim Kim

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4. Dell management ponders moves, reaches out to shareholders

There once was a day when working as an equities trader was really cool. But over the years, as the margins on equities trading dwindled and as margins on other securities soared, the job lost some of it cachet.

The much more lucrative sales and trading jobs shifted to other units in investment banks. Much of this owes to market structure changes over the past decade or so. The push for the structure we have now was driven by the notion that lower commissions and tighter spreads are worthy goals, and that crimped margins. The rise of hands-off, technology driven trading has played a big role as well.

So it's not surprising that, as Bloomberg notes, JPMorgan Chase's equities unit dismissed about two dozen U.S. traders and sales staff and cut pay 4 percent to "more closely align it with revenue after the industry's worst year for stock trading since 2008." The bank also recently pared back on equity analysts in the United States.

Revenue from the equities unit fell 1.8 percent to $4.4 billion last year, compared with a 4 percent gain in fixed-income revenue to $15.4 billion.

This is not merely a JPMorgan Chase issue. All banks are feeling this. Equities sales and trading revenue was said fell 5 percent across the globe from 2011, the third-straight year of decline, according to data from Coalition.

While some think we're at the beginning of a "Great Rotation," which will give rise to a surge in equities investment at the expense of fixed-income investment, not everyone buys that concept. Even if such a rotation were to get underway, it may be that the margins from cash equities are so low that the resulting revenue gains would be much lower than the volume gains. Equities may not again become a hiring center for a long time.

For more:
- here's the article

Read more about: JPMorgan Chase, Cash Equities
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By Jim Kim

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