Editor's Corner: Questions remain for funds of hedge funds Also Noted: Spotlight On... Bonuses to rise this year News From the Fierce Network:
Today's Top News1. Jamie Dimon and what a banker ought to be
Not too long ago, Nike ran a Tiger Woods advertisement featuring his famous quote: "winning takes care of everything." The ads arrived just as the golfer was entering a major hot streak and the insanity over his extramarital affairs was receding into "old news" oblivion. Needless to say, the ads revived the "old news," if only briefly. JPMorgan Chase CEO and Chairman Jamie Dimon never said anything as crass as, "Making money for shareholders takes care of everything." But as he heads into a closely watched vote on whether his Chairman and CEO titles should be separated, he has plenty of supporters willing to make that case for him. According to Bloomberg Businessweek, in a lengthy look at the embattled CEO on the brink of the annual shareholder meeting, Dimon "bristles at the suggestion that the bank's bottom line matters above all, knowing that such a callous formulation would only anger regulators. More personally, the idea dirties his view of what banking, and his legacy, ought to be. Dimon is not just the biggest banker in America, overseeing $2.4 trillion in assets and 256,000 employees, more than the population of Orlando. He's supposed to be the noblest, too, the one CEO who kept his bank secure and profitable through the crisis and who defended the industry's honor during the populist outrage that followed." Nobility in management is a fine trait, and Dimon's ideals are not to be discounted. But there might be truth to the notion that making money for shareholders can heal a lot of major wounds. JPMorgan Chase earned $21.3 billion last year for shareholders. No other CEO in the industry can make that claim. Had Dimon taken a visionary step and voluntarily given up the Chairman job in the name of good corporate governance, he would have written another storied chapter in the Dimon story. He could have made that work. There likely would have been little change in the boardroom, and he would have avoided a shareholder vote on the issue. But he apparently just doesn't believe that's the right thing to do. For more: Related Articles: Read more about: CEO, CEO succession
2. Main Street vs. Wall Street battle on real estate
Once home prices were battered into submission, private equity firms rode to the rescue, sensing the deal of a lifetime. They quickly raised funds to invest in single-family homes -- many being sold out of foreclosure -- with the idea that they would rent them before selling them at a nice premium. The top investors have bought up 55,000 single family homes across the nation in the past year. That has lifted the market in some metropolitan areas, leading to grumbling among locals about the soaring price of real estate. Reuters takes an interesting look at the Las Vegas market. "The once-beleaguered Las Vegas housing market has been on fire since investment firms led by Blackstone Group LP, Colony Capital and American Homes 4 Rent began buying homes here some eight months ago, backed by $8 billion in investor cash to spend nationally," it noted. It continues saying that, "In the Vegas area alone, they have accounted for at least 10 percent of the homes sold since January 2012, according to a Reuters analysis of housing transactions. That added firepower helps explain why home prices in this metropolitan area of 2 million people are up 30 percent over a year ago, far more than the national average of 10 percent. Permits for new home construction are up 50 percent, twice the national average." More local folks feel they are being crowded out by "greedy" Wall Street investors, especially as these entities move beyond foreclosures and bid on homes for sale by banks and others. People who have remained in their homes are thankful that home prices have bottomed out and are moving north again. Of course, with local economies still weak and unemployment high, the surge in home prices may strike some as being built on a house of cards. For more: Related Article: Read more about: Private Equity, real estate 3. Massive victory for dealers in derivatives rules
One of the most contentious issues recently in the years-long battle to create the new, improved derivatives marketplace was about RFQs. The essence of the debate was pretty simple: Should institutional investors be forced to broadly seek quotes from a variety of dealers and SEFs, which just might yield strong price improvement over time? Or should regulators tread lightly and leave it up to the institutions as to how many quotes they should solicit? In the end, the CFTC struck a compromise. The agency had proposed to require institutions to solicit five quotes before trading. But that proposal galvanized the Wall Street lobby, which saw the requirement as overly onerous and a risk to profits. The lobbying has produced a partial victory. The CFTC passed rules that would require market participants to contact just two dealers when seeking prices of derivatives. The requirement will rise to three at the beginning of 2014. The requirement to contact two dealers was the minimum allowed by the landmark Dodd-Frank bill. The vote will be panned by financial reform advocates, who will paint this as another example of the industry watering down Dodd-Frank. All in all, however, the new rules will likely lead to a more modern market, one that is safer compared to the OTC market of old. It will not be a perfect market, and the big dealers will see little challenge to their hegemony. There will be some financial consequences in the aggregate, but there are also some new opportunities. It's likely that derivatives revenues across the industry will take a hit, but analysts will also have to factor in some offsets, such as revenue derived from new collateral services. For more: Read more about: derivatives, Dodd-Frank 4. Hedge fund managers face the hazards of poker
Image counts a lot in the hedge fund industry. So if you are a hedge fund manager and you let it be known that you also play poker, you had better play pretty well. Poker is taken quite seriously in the industry. Success in poker is something that you would definitely want on your resume. Hedge fund managers like David Einhorn have adroitly used their poker playing prowess to burnish their personal brands. He finished third at the World Series of Poker last year, and was likely pleased with the media coverage, which noted that he planned to give his $4.4 million in winnings to charity. It's not about the money. It's about image. If you are bad poker player, the last thing you want is publicity, which brings me to Talal Shakerchi, a London "hedge fund boss," according to The Sun. He "joined five other fat cats who each staked 500,000 euros (£424,112) for an unofficial game at the European Poker Tour in Monaco." That's roughly $636,000. He apparently lost it all. Afterwards, Sharkerchi said to the remaining two players: "Goodbye, see you guys tomorrow." He doesn't really have to fear a big hit to his finances, as he is said to have won millions previously. If he stages a big comeback, he might want to ensure that it finds its way into the press, lest people think he's lost his touch. For more: Read more about: Poker Players, Hedge Fund Managers 5. SAC Capital investigation heating up
Criminal investigators have sent a new, apparently quite aggressive round of subpoenas to SAC Capital. The requests seem to be pushing the high-profile investigation to the moment of truth in the quest to bring criminal charges against the embattled hedge fund and its founder Steven Cohen. According to media reports, SAC Capital has responded by battening down the hatches. It has informed its limited partners that the aggressive actions of prosecutors have left it no choice but to reduce its level of cooperation. "Our cooperation is no longer unconditional," the firm wrote in a letter. In addition, the firm says it has no choice be to be less forthcoming with investors. "In the past we have tried to be as transparent as possible," the fund said. But SAC Capital added that going forward it may "need to keep details confidential." In a tantalizing hint, the firm also suggested that a significant milestone may be in the offing. "Over the coming months, there will be more clarity about the outcome of these matters." As of now, one might conclude that the government is going all out for fresh information. What prompted the move is unclear. It might have new avenues of investigation, or perhaps a new cooperating witness. At the same time, it still appears that neither Michael Steinberg, who has been accused of insider trading while working for Cohen's firm, nor Mathew Martoma, who was charged for crimes while in the employ of the firm, are willing to turn over on their former boss. Without an insider witness, a case against Cohen will be much harder to bring forward. For more: Related Articles: Read more about: insider trading Also NotedSPOTLIGHT ON... Bonuses to rise this year Johnson Associates' annual report indicates that senior bank executives will see bonus increases of 5 percent to 15 percent this year, with investment bankers leading the pack. They'll garner bonus increases of up to 20 percent. At the same time, employment will likely grow 5 to 10 percent. A pick up in trading and deal-making activity will buoy bonuses and employments. Of course, markets are always volatile. Nothing is guaranteed. Article Company news:
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Monday, May 20, 2013
| 05.20.13 | Questions remain for funds of hedge funds
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