This content is from: Portfolio

The Morning Brief: Court Delivers Big Blow to Fannie, Freddie

Bad news for Bill Ackman’s Pershing Square Capital Management, Richard Perry’s Perry Corp. and other hedge fund firms hoping to see Fannie Mae and Freddie Mac privatized. The U.S. Circuit Court of Appeals for the District of Columbia upheld a lower court ruling that essentially said the government could eliminate dividends paid to shareholders of the government mortgage companies and require the companies to pay a hefty percentage of their net worth to the U.S. Treasury, according to Reuters. The court also said shareholders of the two mortgage companies can still seek some damage claims. Even so, investors negatively interpreted the rulings, slicing about one-third of the value of the various securities traded by the two companies on Tuesday. The stocks are still roughly double the price they traded at shortly after election day.

The government bailed out Fannie and Freddie during the financial crisis and put them in a conservatorship. Since then they have been sending the government a big chunk of their profits. Several weeks after the election, the stocks surged after then Treasury secretary nominee Steven Mnuchin suggested this arrangement could change as early as 2017, making it clear in a published interview that removing Fannie and Freddie from the government’s grip was one of his major priorities. “We will make sure that when they are restructured, they are absolutely safe and don’t get taken over again. But we’ve got to get them out of government control,” Mnuchin said in late November.

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Shares of Tiffany & Co. rose about 2.6 percent, to close at $88.42, after the high-end jewelry retailer announced a settlement with activist shareholder JANA Partners and Francesco Trapani, the former chief executive officer at Bulgari. The pair own a combined 5.1 percent of the shares. Under the deal, Trapani, a leader in the luxury goods industry, and two other industry luminaries will join the board of directors. They are Roger Farah, who has served as co-CEO and as a member of the board of Tory Burch since September 2014, and James Lillie, former CEO of Jarden Corporation. The trio will begin serving on the board no later than March 6. Trapani also will join the board’s nominating and corporate governance committee and the search committee, which will oversee the company’s search for a new chief executive officer. JANA’s Tiffany holding took most outsiders by surprise. The firm did not disclose the position in its recently required regulatory filing disclosing year-end U.S. stock holdings.

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Dan Loeb’s Third Point Ventures participated in the $500 million fund raising for SoFi, the online lender. This is at least the third investment in the company made by Third Point. Altogether, SoFi has raised around $2 billion, according to crunchbase.com.

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The amount of capital invested in Asian hedge funds fell by $8.6 billion last year, according to a new report from HFR. However, about $7 billion of the decline took place in the first quarter. As a group Asian hedge funds got off to a strong start this year. For example, the HFRI China Index gained 4.3 percent last month, easily beating the Shanghai Composite Index, which rose 1.8 percent. In 2016, the HFRI China Index fell 4.3 percent, much better than the 12.3 percent decline posted by the Shanghai index. The HFRI Japan Index rose 0.9 percent in January.

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