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Morning Brief: Paul Tudor Jones II Warns About a Bond Bubble

The macro legend is telling investors they should “steer very clear” of bonds, which he says are overvalued and over-owned.

  • By Stephen Taub

Paul Tudor Jones II is warning investors to stay away from fixed income. “With rates so low, you can’t trust asset prices today,” the founder of Tudor Investment Corporation said in an interview with Goldman Sachs that the bank published and sent to clients, Reuters reported. “And if you can’t tell by now, I would steer very clear of bonds.”

He thinks the yield on the 10-year Treasury could rise as high as 3.75 percent by the end of the year, calling this a “conservative” target, according to the report. The yield was 2.46 percent at the beginning of the year and recently hit a four-year high of 2.95 percent. This suggests investors are anticipating higher inflation.

“Bonds are the most expensive they’ve ever been by virtually any metric,” Jones reportedly said. “They’re overvalued and over-owned. Valuations haven’t been that relevant in recent years because of central bank manipulation outside of the U.S., but with the Fed in motion and the US economy in fifth gear, they start to matter a lot. I believe we’re at that critical threshold right now.”

Jones’ macro fund, Tudor BVI Fund, had returned 5.20 percent for the year through February 23, according to HSBC. It lost more than 2 percent last year after three consecutive years of posting single-digit gains.

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The Blackstone Group’s Tom Hill made a little more than $21 million last year, according to the company’s 10-K filing. Hill, who serves as vice chairman, earlier this year relinquished his role as president and chief executive of Blackstone Alternative Asset Management (BAAM), the company’s hedge fund unit. Hill received a $350,000 salary and a $10.44 million bonus last year. He also received nearly $6.7 million worth of restricted stock units. In addition, Hill received nearly $3.8 million in “other” compensation, which Blackstone explains “includes distributions, whether in cash or in-kind, in respect of carried interest or incentive fee allocations relating to our performance plans.”

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Och-Ziff Capital Management Group posted a small 0.12 percent gain in February in its flagship multistrategy fund, OZ Master Fund, bringing its gain for the year to 3.46 percent. OZ Asia Master Fund, however, lost 1.91 percent last month, cutting its gain for the year to 2.09 percent. OZ Europe Master Fund was down 0.69 percent for the month and is up 1.89 percent for the year. Och-Ziff also said firm-wide assets currently stand at $33.3 billion, unchanged from the previous month.

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Shares of Snap — a favorite among the Tiger crowd —surged 4.65 percent on Friday, to close at $18.01, on the one-year anniversary of the company’s initial public offering. They are now up about 46 percent from their late-November low. The volatile stock is also above its IPO price of $17.

Friday’s big price jump came on the same day the last lock-up of shares expired. As of year-end, several firms that bought shares when the social media company was still private continued to hold on to a stake. Coatue Management was the second-largest shareholder, with about 27.4 million shares, after adding nearly 3.8 million shares in the fourth quarter. Glade Brook Capital Partners still owns nearly 4 million shares, even after slightly trimming the stake in the fourth quarter. Other Tiger Management descendants still holding stakes include Valiant Capital Management and SRS Investment Management.

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