This content is from: Portfolio
The Morning Brief: Tudor Resizes as Returns Sag
The fallout from mediocre performance has hit another firm. Paul Tudor Jones II’s Tudor Investment Corp., based in Greenwich, Connecticut, laid off about 15 percent of its employees, according to Bloomberg, with the roughly $11 billion firm making cuts across the board. Tudor BVI Global Fund, headed by Jones, was down about 2.5 percent through August 5 and posted low single-digit returns in three of the four previous years. Earlier this year, it suffered about $2 billion in redemptions, according to reports.
“Amid a changing operating environment, we have made strategic adjustments to our firm’s staffing,” Bloomberg reported the firm said in a statement. “These difficult changes were made after conducting a deep and broad review of our business and are meant to optimally size the firm for future success. We are committed to treating our departing employees with care and support and appreciate their many contributions to Tudor.”
Steven Cohen took another step closer toward getting back into the hedge fund business. The Commodity Futures Trading Commission settled charges with the one-time founder of Greenwich, Connecticut-based SAC Capital Advisors in an agreement that mostly mirrors the former hedge fund manager’s earlier deal with the Securities and Exchange Commission. Under Cohen’s pact with the CFTC, he is barred from any activity that requires registration with the agency until at least December 31, 2017, similar to the SEC’s order on January 8, 2016. This sets the stage for Cohen to possibly launch a hedge fund in 2018.
The SEC had found Cohen had “failed reasonably to supervise” Matthew Martoma, a former portfolio manager who engaged in insider trading. Under the SEC’s deal, if Cohen creates a registered broker, dealer or investment adviser in 2018 or 2019, the firm must retain an independent consultant through 2019. “Before Cohen can handle outside money again, an independent consultant will ensure there are legally sufficient policies, procedures and supervision mechanisms in place to detect and deter any insider trading,” said Andrew Ceresney, director of the SEC’s Enforcement Division, in a statement at the time the SEC announced its settlement.
Very few significant holders of Valeant Pharmaceuticals International liquidated their stakes in the second quarter, according to an analysis of the recently filed 13F quarterly disclosure forms. Perhaps the biggest seller was New York-based Hound Partners, which we previously reported. Hound unloaded its entire position of nearly 5 million shares. New York-based Tourbillon Capital Partners sold more than 3.4 million shares, which previously accounted for nearly 2 percent of the hedge fund firm’s U.S. long equity assets. Otherwise, most of the hedge funds that liquidated their positions last quarter held small stakes. On the buy side, New York-based Paulson & Co. bought nearly 5.8 million shares, boosting its stake to more than 19 million shares. As a result, it is now the second-largest shareholder, behind New York-based Pershing Square Capital Management. Health-care specialist North Tide Capital established a new 2.5-million share position, making Valeant the seventh largest U.S. long of the Boston-based hedge fund firm founded in 2010 by Conan Laughlin.
Sandell Asset Management fired off a letter to Viavi Solutions — formerly JDS Uniphase — insisting that the stock is undervalued and that the company should take steps to close the gap, including asset sales and a significant share buyback. In a letter to Oleg Khaykin, CEO and president of the communications-equipment company, Sandell president Thomas Sandell urged the company to sell its service enablement segment, which has been generating operating losses for the past three years. He also said Viavi should allocate “a meaningful amount of available funds” for an accelerated share-repurchase program to be implemented as soon as possible; negotiate a settlement with holders of its convertible notes “that would deliver more value”; and that the board should retain a major investment bank to serve as a new financial advisor. “It is our opinion, which is shared by many other shareholders, that the current board has not demonstrated the requisite sense of urgency needed to address many of the issues that have been plaguing the company,” Sandell wrote. “It is our belief that the company would benefit from having additional members on the board of directors who are financially sophisticated and who have a true understanding of the public markets, as well as [are] highly-motivated to create shareholder value.” Sandell argued that Viavi’s intrinsic value ranges between $10.46 and $14.90 per share. The stock Tuesday rose a little less than 1 percent, to close at $7.60.
Soros Fund Management disclosed it owns 6.61 percent of Allot Communications, which provides services and products to Internet service providers. The position is passive since it was disclosed in a 13G filing.
Shares of Morgan Stanley climbed 2 percent after reports that activist firm ValueAct Capital Management took a roughly $1.1 billion position in the bank. The San Francisco hedge fund manager is said to believe the company is misunderstood by investors, noting much of its business is driven by fee income.