The Morning Brief: Hedge Funds’ Formula for Success

Wow! Here is another reminder than some investors are more equal than others. Liberty Media Corporation announced it has raised $1.55 billion from a cadre of investors — mostly hedge funds — to pay for its acquisition of Formula 1. Under the deal, the investors agreed to buy shares of Liberty’s Series C stock for $25 a pop. On Tuesday, the stock closed at $30.80. This investment instantly gives these investors a more than 23 percent gain. Nice work if you can get it.

The investors are hedge fund firms Coatue Management, D.E. Shaw & Co., JANA Partners, Soroban Capital Partners, SPO Advisory Corp., and Viking Global Investors and investment firm Ruane, Cunniff & Goldfarb. “We are excited that this impressive list of investors will participate in the acquisition of Formula 1,” says Greg Maffei, president and chief executive officer of Liberty Media, in a press release. The stock slipped $0.27 on Wednesday, to close at $30.53.

November was a strong month for activist managers, and this includes even the very small ones. For example, Voce Capital, which has about $120 million under management, surged 11 percent last month, its best month ever. This put the San Francisco firm, headed by Dan Plants, very close to the break-even point, down 0.83 percent for the year. November results were led by its two largest positions: Cutera, a cosmetic laser company, and Air Methods, a helicopter operator. ___

Barington Companies Equity Partners LP, another activist fund that is roughly the same size as Voce, surged about 6 percent in November. The fund, managed by Barington Capital Group and headed by James Mitarotonda, is now up 19.34 percent for the year.
One day after Pershing Square Capital Management’s Bill Ackman unloaded 3.5 million shares in Valeant Pharmaceuticals International, the stock sunk about 4.4 percent on Wednesday, to close at $14.13, just slightly above its all-time low. Pershing Square Holdings, Ackman’s public fund, is up 1.5 percent this month through December. It has now cut its loss for the year to 12.2 percent.