This content is from: Portfolio

The Morning Brief: New Funds Have Pre-Crisis Feel

Everything old is new again — at least when looking at new hedge funds, which increasingly have similar features to funds started before the global financial crisis of 2008. The typical hedge fund that was launched in 2013 had significantly less liquidity than funds trotted out the previous year. According to Seward & Kissel’s annual study of new funds, 89 percent of the funds started in 2013 permitted quarterly or less frequent redemptions. Just 11 percent allowed investors to remove their money every month, compared with 36 percent of the funds started in 2012, according to the New York law firm.

The funds launched in 2013 required investors to give 30, 45 or 60 days’ notice to redeem funds, but the report notes that 15 percent of the funds launched require 90 days’ notice. What’s more, the firm reports that 85 percent of the funds had some sort of lockup, versus just 58 percent in 2012. For example, in 2013, 58 percent had a soft lockup, usually for one year with a 2 percent to 4 percent redemption fee, while 27 percent had a hard lockup, compared with just 8 percent launched in 2012. In addition, 23 percent had an investor level gate, compared with 15 percent in 2012. Just 8 percent had no lockup or gate.

John Paulson’s Paulson & Co. is expanding its investments in Puerto Rico. The New York hedge fund firm is negotiating to buy two San Juan resorts, La Concha Resort and the Condado Vanderbilt, for about $200 million, according to Bloomberg, citing two people with knowledge of the transaction. In September, Paulson & Co. made an investment in the St. Regis Bahia Beach Resort and the Bahia Beach Resort & Golf Club. Paulson also reportedly plans to invest $1 billion in Puerto Rican projects over the next two years, according to the report, citing island officials.

“These commitments are over $1 billion, half a billion in 2014 and half a billion in 2015,” Alberto Baco Bague, Secretary of Economic Development and Commerce, reportedly told bondholders last week in a webcast. Paulson earlier mulled moving to Puerto Rico after a new law would have enabled him to not pay taxes on gains from his own money invested in his funds — the bulk of his earnings — but changed his mind shortly afterwards when he received negative media coverage.

Balyasny Asset Management’s Dmitry Balyasny has hired three former SAC Capital Advisors traders and told investors in a conference call he is not afraid of hiring investment pros from Steve Cohen’s embattled firm as long as they were far away from the “messiness” that engulfed the firm, according to DealBook. “There were people there who did the wrong things and it seems to have been an aggressive culture,” Balyasny reportedly told investors in the call last month. “Quite a number of people are completely clean and had no contact with the messiness that was going on.” This is great news for the scores of individuals who may have feared they would have a tough time finding another job in the hedge fund community.

Henry Swieca, who co-founded Highbridge Capital Management with Glenn Dubin, was appointed to Columbia Business School’s Board of Overseers, an advisory body comprising more than 100 alumni and business leaders. The Board of Overseers is co-chaired by Henry Kravis of KKR and Arthur Samberg of the defunct Pequot Capital Management. Swieca, who left Highbridge after it was fully acquired by JPMorgan Chase in 2009, subsequently launched Talpion Fund Management, a New York–based family office.

AllianceBernstein named Michael Conn a managing director for strategy, operations and development in the firm’s funds-of-funds business. He will work with Marc Gamsin, head of AllianceBernstein’s Alternative Investment Management Group, to develop the business strategy and new products for the group, as well as support existing and potential clients. AllianceBernstein manages about $16 billion in alternative assets.

Shares of Tesla Motors gained another 2 percent on Wednesday, a further reminder that most hedge funds are missing out on a stock that has swelled sevenfold in 14 months.

J.C. Penney lost $0.68 per share in the most recent quarter, but this was not as bad as the $0.85 investors were forecasting. However, revenues came in slightly below expectations. The stock jumped about 5 percent in after-hours trading after surging more than 5 percent to $5.93 in the regular trading session on Wednesday.

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