The Morning Brief: Everest To Shutter Flagship Fund After Swiss Franc Losses
The Swiss National Bank’s sudden and stunning decision to let Switzerland’s currency float freely after three years of carefully capping its trading range claimed its first hedge fund victim. Marko Dimitrijevic’s Everest Capital is closing its $830 million Global fund after it suffered huge losses, according to the Wall Street Journal. Dimitrijevic, known for investing in emerging markets and even far flung frontier markets, has been betting the Swiss franc would fall. The firm will continue to operate other funds managing more than $2 billion, according to the report. The firm’s oldest fund, Everest Capital Global, has compounded at 12.6 percent since its 1991 launch. Everest Capital Emerging Markets has compounded at 11.2 percent since its 1995 launch, while Everest Capital Frontier Markets has surged 10.9 percent since its 2008 inception, easily trouncing their benchmarks.
Swedish hedge fund manager Magnus Peterson was convicted on eight counts of fraud, forgery, false accounting and fraudulent trading in what is described as the U.K.’s first prominent hedge fund manager conviction since the credit crisis, according to a Wall Street Journal report. Investors in Peterson’s Cayman Islands-based Weavering Macro Fund lost about $536 million when the fund collapsed in 2009. The U.K.’s Serious Fraud Office had asserted that Weavering was sold as a fund that produced low-risk, stable returns. However, its entire portfolio was invested in interest-rate swaps whose counterparty was a British Virgin Islands company controlled by Peterson. He was, however, acquitted of one count of fraudulent trading and six counts of fraud by false representation.
Charles (Chase) Coleman III’s Tiger Global Management has made another investment in India. The New York investment firm led a $100 million funding of India-based online retailer ShopClues, according to indiatimes.com. ShopClues had earlier turned down offers from Alibaba, Flipkart and Snapdeal, according to the report. Tiger Global now has investments in Alibaba and Flipkart.
Soft drink giant PepsiCo settled with New York-based activist hedge fund firm Trian Fund Management late Friday, saying that William Johnson, an advisory partner of the hedge fund, will join PepsiCo’s board of directors and be included in the company’s slate of nominees at its 2015 annual meeting. Johnson is a retired chairman, president and chief executive officer of H.J. Heinz, another one-time Trian investment. Pepsi was Trian’s second largest holding at the end of December. In a statement, Trian founder Nelson Peltz emphasized his commitment to PepsiCo chairman and CEO Indra Nooyi, stressing “We support Indra’s commitment to operational excellence, which has resulted in improved performance of the company.”
Forget about the downward spiral in the price of oil or Switzerland’s surprise move to freely float its currency against the euro. The most interesting story last Friday involved embattled mortgage servicer Ocwen Financial Corp. and Altisource Solutions, one of a number of companies created by Ocwen founder William Erbey and spun off from Ocwen and which does a significant amount of business with Ocwen. Both stocks are down more than 80 percent after Ocwen in late December agreed to a settlement with New York regulators and more recently on news that California may try to suspend the company’s mortgage license.
However, on Friday shares of Altisource surged more than 50 percent after Altisource CEO Bill Shepro said on a conference call with analysts and investors the chances of the license being suspended is “very low.” He also reassured investors that even under a worst-case scenario, Altisource’s pricing to Ocwen would be much better than some feared. However, the highlight of the call came when hedge fund manager Leon Cooperman of Omega Advisors asked Shepro “whether your testicles are bigger than your brains or your brains are bigger than your testicles.”
Cooperman reportedly pointed out that Altisource shelled out $200 million to repurchase its stock at $104, which Cooperman reportedly said was “obviously a colossal misallocation of capital.” He urged the company to do a better job this time when mulling whether to do another buyback, although he did say it was a “no-brainer.” Ocwen rose more than 5 percent on Friday.
Yihao Ben Pu, a former computer engineer at Kenneth Griffin’s Citadel, was sentenced to three years in prison for stealing trade secrets from the Chicago-based hedge fund firm, according to a Chicago Tribune report. The 27 year-old’s attorney was seeking no time in prison, arguing there was no loss from his theft of source code. Pu, who worked in Citadel’s high-frequency trading unit, in August pleaded guilty to illegally downloading confidential information about Citadel’s computerized trading system, according to the report. Sentencing guidelines had called for an 87-month sentence.