Presidential hopeful Carly Fiorina visited Julian Robertson Jr. on Tuesday morning at his midtown Manhattan office. We don’t know what they discussed, but presumably the one-time Hewlett-Packard head is interested in financial support from the billionaire founder of Tiger Management and his well-heeled buddies. However, we are told Robertson is still supporting Jeb Bush for president. Nice try, Carly.
Hedge funds suffered their largest decline in quarterly assets since the fourth quarter of 2008, during the depths of the global financial crisis. In the third quarter, total hedge fund capital decreased by $95 billion, to $2.87 trillion, according to HFR.
“New investor capital inflows only partially offset performance-based declines,” according to a press release from Chicago-based data tracker Hedge Fund Research. The HFRI Fund Weighted Composite Index declined by 3.9 percent in the third quarter and is down 5.1 percent over the past four months. The index is down 1.5 percent for the year.
New investor money flows amounted to $47.9 billion during the third quarter, compared with redemptions of $42.3 billion. This works out to a meager net inflow of $5.6 billion for the quarter. Three of four main hedge fund strategies as defined by HFR enjoyed net capital inflows for the quarter, including Event-Driven, Activist and Distressed funds. Macro funds suffered net outflows.
Score this one for Corvex Management’s Keith Meister. Shares of Yum! Brands jumped nearly 2 percent on Tuesday after the fast-food company announced plans to break off its China operation, Yum! China, into a separate company. It will have “no significant debt, with substantial financial capacity to invest in its business,” assures the announcement. Yum! Brands will become more of a pure-play franchisor over time, according to a press release, adding that the company aims to have at least 95 percent of its restaurants owned and operated by franchisees by the end of 2017.
“Yum! Brands is committed to returning substantial capital to shareholders in conjunction with the separation,” it adds, an apparent nod to frequent demands of activist shareholders. It said it will move to become a non-investment grade credit, noting this would be “more consistent with highly leveraged peer restaurant franchise companies.”
It also would be more consistent with companies that, under pressure from activists, load up debt to finance a one-time dividend or stock buyback. Indeed, the company concedes in its announcement: “This will allow for an ongoing return of capital framework that will seek to optimize the company’s long-term growth rate on a per-share basis.” Last week, Yum! Brands appointed Meister to its board of directors. It also said that for the year, the China division’s same-store sales are expected to be negative in the low-single-digit range, while profits are expected to be about flat.
Shares of Valeant Pharmaceuticals International fell another 10 percent or so after the drug giant said it plans a number of key changes to its business model. According to the Wall Street Journal, the company said it plans to ramp up research and development — which is opposite to its current strategy — scale back acquisitions, pay down debt and sell its neurological drugs, whose revenue growth has been fueled by hefty price increases.
“Given the evolution of our product mix, coupled with the recent events, it is likely that we will pursue fewer, if any, transactions that are focused on mispriced products,” states Valeant CEO Michael Pearson, according to the report. The stock stands at $146.74, down 44 percent from its early August high. However, it is still up for the year.