The Morning Brief: An Early Look at November Hedge Fund Performance
Partial November performance results are coming in, reflecting both the stock market sell-off in the week or so leading up to the U.S. elections and the subsequent rally in certain sectors. Also, interest rates have surged since the elections, sending bond prices down sharply, while the U.S. dollar has been staging a huge rally against many currencies.
With that in mind, Marcato International, Richard (Mick) McGuire III’s activist fund, gained 10 percent through the middle of the month. As a result, it’s back in the black, up 8.7 percent for the year.
Joseph Edelman’s wildly volatile Perceptive Life Sciences Fund climbed 4.9 percent this month through November 11, boosting the health care–oriented fund’s gain for the year to 8 percent.
Lee Ainslie III’s Maverick Fund was up 1.65 percent for the month as of November 11, trimming its 2016 loss to 6.3 percent.
Bill Ackman’s Pershing Square International rose 4.5 percent this month through November 15, cutting its loss for the year to 14.7 percent.
On the other hand, Crispin Odey’s Odey European fund lost another 2.6 percent in the first half of November, extending its loss for 2016 to 44 percent. Ouch!
James Shaver’s Electron Global Fund dropped 4.4 percent this month through November 11, leaving it down about 4.9 percent for the year.
It was a roller-coaster ride for the shares of hedge fund favorite Valeant Pharmaceuticals International on Thursday after two former executives associated with the embattled drugmaker were arrested for allegedly engaging in a multimillion-dollar fraud and kickback scheme. The stock opened down 7 percent but rallied to close up slightly, at $17.98.
Gary Tanner, a onetime Valeant executive, and Andrew Davenport, former CEO of Philidor Rx Services, a specialty mail order pharmacy that was formed with Valeant’s assistance, were accused of creating an illegal scheme that resulted in Davenport kicking back nearly $10 million to Tanner, according to the U.S. Attorney for the Southern District of New York. The money was allegedly laundered through shell company bank accounts, including a company created by Tanner called Befrielse Consolidated.
According to the government’s complaint, Tanner used the cash to buy a new home, pay personal expenses, retire debts, and make investments, among other things. Davenport allegedly used his share of the money to purchase tens of millions of dollars worth of securities and to buy luxury goods and items, including the installation of a $50,000 custom wine cellar.
Tanner was primarily responsible for the Philidor relationship and for Valeant’s so-called alternative fulfillment program, the U.S. Attorney’s office explained. Tanner interacted directly with Philidor’s executives, including Davenport, and senior Valeant executives.
“Despite being well compensated by Valeant to represent its interests, Tanner used Valeant human and financial resources to benefit Philidor and its largest owner, Davenport, in a variety of ways, including by arranging for Philidor to receive $2 million in Valeant financing, as well as the support of numerous Valeant staff, including a Valeant-paid sales force that was dedicated to promoting sales through Philidor,” the government stated. “Some of Tanner’s actions benefiting Philidor placed Valeant and its shareholders at risk.”
The pair are accused of orchestrating Valeant’s agreement to buy an option to acquire Philidor for nearly $300 million, including $100 million in up-front payments, a $33 million time-based milestone payment, and potential future multimillion-dollar sales-based milestone payments. They’re also accused of creating shell companies and shell company bank accounts for laundering and distributing the kickbacks.