A hedge fund trade group has weighed in with recommendations as the Securities and Exchange Commission mulls changes to its definition of “accredited investor.” In a comment letter sent to the regulator, The Hedge Fund Association said using net worth or income “as a litmus test for investor sophistication” is outdated. Rather, it prefers a knowledge-based or education-based standard. It calls for a requirement that a non-sophisticated investor hire an independent registered investment professional, who would then review and approve the investment. The HFA also supports setting a maximum percentage of net worth that any investor may contribute.
“The HFA believes that changes to the net-worth requirements would fundamentally undermine the private placement market, which infused nearly $50 billion into the United States’ economy in 2013 and will materially and negatively impact small business growth by reducing the number of accredited investors in the U.S. by more than half,” says Ron Geffner, HFA vice president, in a press release. Currently under Rule 506 of Regulation D, a sophisticated investor is defined as an individual who earns $200,000 for two consecutive years—$300,000 for a couple—or has a net worth of at least $1 million, excluding the value of the primary residence.
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Allergan has asked a judge to bar William Ackman’s Pershing Square Capital Management from voting its 10 percent stake in the botox maker when shareholders decide on December 10 whether to approve Valeant Pharmaceuticals International’s unsolicited takeover offer, according to Bloomberg. In a federal court filing, Allergan asserts that Pershing Square acquired its stake using insider information because it knew Valeant was going to make its bid for the company, according to the report. Bloomberg says a hearing on this request is scheduled for October 28. Bloomberg points out that Ackman had earlier said in an interview with its television arm that the hedge fund used options as a way to avoid the need for government approval to buy more than $75 million of a company’s stock “with an intent to influence control of the business.” Bloomberg also quotes Ackman saying this maneuver was “helping facilitate a transaction between two companies for the benefit of the shareholders.”
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The San Francisco Employees’ Retirement System is mulling whether to invest in hedge funds as part of its asset mix. The pension fund’s board will consider investing 15 percent of its assets in hedge funds at a scheduled meeting on Wednesday, according to Bloomberg. “Hedge-fund returns have been more consistent,” says William Coaker, the fund’s chief investment officer, according to the report. “They have provided good protection in market downturns.” The move comes on the heels of the California Public Employees’ Retirement System’s recent announcement that it will unload its hedge fund portfolio.
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The HFRI Fund Weighted Composite Index lost 0.4 percent in September, bringing its gain for the third quarter to a meager 0.3 percent. It lost money in two of the quarter’s three months. For the year, the index is up 3.4 percent. Macro led the way, posting a gain of 1.8 percent in September, its fifth profitable month in six months. The macro index includes the multi-strategy, CTA and currency sub-strategies. The HFRI Relative Value Arbitrage Index fell 0.2 percent in September but remains the top performing group, up 5.1 percent for the year.
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Former Millennium Management portfolio manager Daniel Gotvald is launching Livingston Capital Partners, an equities market-neutral strategy. The Dallas firm, which plans to get off the ground in January, has received commitments of $50 million, according to Bloomberg. It hopes to launch with as much as $150 million. The firm will be named after a fictional character in Edwin LeFevre's "Reminiscences of a Stock Operator," a novel considered to be a thinly-veiled autobiography of Wall Street speculator Jesse Livermore. Gotvald told Bloomberg the biggest lesson learned from the legendary investor — best known for making and losing a fortune— is to cut your losses and let your winners ride. “Livingston was a proponent of following ‘underlying conditions’ and we do this through over 200 company management meetings per year,” he reportedly said.
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Point72 Asset Management, Steven Cohen’s family office, disclosed that it owns 5.8 percent of Applied Genetic Technologies, a specialty drug maker. On Friday, Stifel Nicolaus initiated coverage of the stock with a Buy rating and a $29 stock price, stating in a note to clients the company is “positioned to capitalize on improving investor sentiment around product development opportunities in the gene therapy space and capable of leveraging its expertise in viral vector design, delivery, and manufacturing to address genetically-based Orphan diseases in ophthalmology.”
