This content is from: Portfolio

Morning Brief: Renaissance Warns of ‘Significant’ Market Risk

The quant firm’s head of risk control warns that investors may have been lulled into “a false sense of security.”

  • By Stephen Taub

Renaissance Technologies is telling clients there is a “significant” risk of a market correction and that low volatility may have given investors “a false sense of security.” The warning was delivered by Ed Hubner, the computer-driven firm’s head of risk control, in a December letter to clients, according to Bloomberg.

Renaissance, founded by Jim Simons, acknowledges a number of positives that are helping to fuel the rally, including global growth, corporate tax reform, and a business-friendly government in the U.S. However, it questions whether current valuations are justified, given large levels of sovereign debt.

“With higher rates and more volatility a distinct possibility, there is a significant risk that asset prices will correct,” Hubner said, according to the report. “While the fear of missing out may not be a concern for equity investors, increasing euphoria mixed with a bit of complacency certainly is.”

Last year, Renaissance Institutional Equities (RIEF) returned 14.5 percent, while Renaissance Institutional Diversified Alpha Fund (RIDA) rose about 11.2 percent, according to an HSBC document that tracks hedge fund performance.

___

Och-Ziff Capital Management Group announced a major shake-up Tuesday morning. Robert Shafir will succeed Dan Och as chief executive officer, effective February 5. He will also join the firm’s board of directors. Och will continue to serve as chairman through March 31, 2019. After that, Och, the largest shareholder, will remain involved with the firm, the company said in its announcement.

Shafir’s hiring is somewhat of a surprise. He is an outsider, previously serving as the CEO of Credit Suisse Americas and co-head of private banking and wealth management. He will be responsible for the day-to-day leadership and management of the company, one of the few alternative investments firms to be publicly traded. He will also be responsible for the planning and execution of the firm’s strategic direction, financial objectives and client engagement. “Rob is a world-class executive who will be a great asset to OZ as we continue our evolution as a firm,” Och said in a press release. “His distinguished career of over 30 years leading global financial institutions and asset management businesses brings unique experience that will benefit Oz significantly.”

Och-Ziff’s thorny succession plans came to light last week when the Wall Street Journal published a story about how Och seemingly balked at an earlier plan to be replaced by protégé James Levin. Levin remains at the firm for now.

The announcement comes one day after Och-Ziff announced that William Barr is resigning from the board, effective January 31. He also served as chairman of the corporate responsibility and compliance committee and as a member of the audit committee and the nominating committee. “Mr. Barr’s resignation relates to a disagreement over CEO succession, as well as business and governance plans for the company,” the company stated in a separate regulatory filing.

Shares of Och-Ziff surged 4.35 percent, to close at $2.40, on an otherwise lousy day for the stock market. Och-Ziff’s stock, however, is still down nearly 40 percent since late October.

___

Tiger Global Management sold 2.778 million shares of eHi Car Services Limited, the Chinese car rental services company. The hedge fund firm headed by Chase Coleman now owns 14.2 percent of the shares, held in the form of American Depositary Shares.

Related Content