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The Morning Brief: Glenview Wins Tenet Healthcare Board Seats

Two partners and co-heads of healthcare for Glenview Capital Management were appointed to the board of directors of Tenet Healthcare Corp. as part of a compromise agreement between the New York hedge fund firm and the manager of acute care hospitals and other healthcare facilities. The two individuals are Randolph Simpson and Matthew Ripperger. Glenview, which has owned a position in the stock for four years and is currently the largest shareholder, also has the option to propose two additional director candidates who are independent of Tenet and Glenview, effective January 31, 2017.

Glenview, headed by Larry Robbins, also converted its regulatory filing to 13D to reflect its activist position. Back in November Glenview boosted its stake in Tenet to 17.95 percent. It made this disclosure at the time in an amended 13G, meaning it was a passive investment. Under the deal, Ripperger will be appointed to the board’s human resources (compensation) committee and its health IT committee. Simpson will be appointed to the nominating and corporate governance committee and the quality, compliance and ethics committee, according to a regulatory filing. Shares of Tenet tumbled roughly 40 percent last year.

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David Einhorn’s Greenlight Capital has established a stake in retailing giant Macy’s, following another activist firm, Starboard Value, whose founder Jeffrey Smith touted the stock at July’s Delivering Alpha conference. New York-based Greenlight says in its fourth quarter letter that it paid an average price of $45.69 for the stock. Macy’s earlier disagreed with Starboard’s suggestion it place its real estate in a separate real estate investment trust (REIT). Starboard made the recommendation when the stock was trading around $70.

Greenlight notes in the letter that, with the stock recently selling around $35, “the math might make more sense,” adding, “it wouldn’t surprise us if a private equity firm teamed up with a REIT to buy the company and unlock the value privately.”

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Greenlight also said it took a new stake in generic drug giant Mylan. Its stock collapsed after Teva Pharmaceutical Industries dropped its hostile bid for the company. Greenlight says it paid an average price of $45.32 for the stock.

The hedge fund firm also said it finally exited its position in Micron Technology, noting it was its biggest winner in 2014 and biggest loser in 2015. In fact, Greenlight points out that the chip maker and CONSOL Energy, another major long position all year, were among the ten worst-performing stocks in the Standard & Poor’s 500 stock index last year.

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Hedge funds have deftly maneuvered through the market’s turmoil during the first two weeks of the year. The Lyxor Hedge Fund index is down by just 0.80 percent so far compared with losses of 5 percent to 10 percent for many of the global stock market indices. A commodity index is down by 10 percent already this year.

The modest decline posted by the hedge fund index is partly attributable to actions taken by commodity trading advisors (CTAs), which as a group are up an impressive 3.6 percent for the year, evoking memories of how this mostly uncorrelated strategy posted strong gains in 2008. According to Lyxor, their gains so far this year are driven by long positions in fixed income and the U.S. dollar and short commodities. Also, CTAs “massively shaved off their equity holdings” during the first week of January, according to Lyxor’s latest weekly note.

Elsewhere, the Lyxor global macro index is down 0.5 percent for the first two weeks, the Lyxor event driven broad index is off 2.2 percent and the worst performing sub-strategy is special situations, down 3.8 percent. “This is a strategy that we downgraded to underweight December,” Lyxor reminds its clients.

“Going forward, CTAs appear as the best hedge against additional nasty market developments,” the report adds. “We believe that market concerns are somewhat exaggerated but the momentum and sentiment is so negative amongst the market participants that it seems too early to lean against the wind. We stick to our recommended allocation, which involves a preference for hedge funds with a relative value approach and limited market directionality.”

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Denver-based Equinox Fund Management agreed to pay $6.4 million to settle Securities and Exchange Commission charges that it overcharged management fees and misled investors about how it valued certain assets for its managed futures fund, The Frontier Fund. The firm agreed to refund to its investors $5.4 million in “excessive management fees” over a seven-year period, to pay $600,000 in prejudgment interest and to pay a $400,000 penalty. Equinox consented to the SEC’s order without admitting or denying the findings.

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The Credit Suisse Hedge Fund Index fell 0.85 percent in December, putting it down 0.71 percent for the year. Event driven funds declined 6.29 percent for the year, while multi-strategy funds returned 3.84 percent in 2015 and dedicated short bias funds gained 2.38 percent for the year.

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