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The Morning Brief: Herbalife Plunges Amid Nu Skin Drama

Is this the beginning of the end for multi-level marketers? It may be too soon to make this leap. But there is no dispute that Thursday was not a good day for the sector. Shares of Nu Skin Enterprises, a maker of skincare products, plunged more than 26 percent that day after falling more than 15 percent the previous day on news that the Chinese media questioned its business practices and whether the company is a pyramid scheme.

On Thursday, the company fired off a press release acknowledging that Chinese regulators have initiated investigations “to review issues raised by recent news reports.” The stock is not a big favorite among hedge funds. Although Viking Global Investors and Och-Ziff Capitalm Management were major initial buyers of the stock in the third quarter, they were small overall positions in their respective stock portfolios. However, other multi-level marketers plunged in price at the same time, led by Herbalife, which fell nearly 10 percent. Its trading volume was the highest since late July.

Is this the start of what Pershing Square founder William Ackman has been patiently waiting for since December 2012? Will other governments launch their own probes and expand them to other companies? It will be interesting to see what Ackman’s next move is.

Shares of J.C. Penney fell 1.57 percent, to close at $6.90, after the struggling retailer announced plans to cut 2,000 jobs and close 33 stores. The stock is now down 25 percent this year alone after hitting a recent high on the last day of 2013.

A unit of China’s sovereign wealth fund is bankrolling a new U.S.-based investment firm headed by former executives of currency trader FX Concepts, which closed down last year. The new firm will be run by Bob Savage, who previously served as FX Concepts’ chief operating officer and chief strategist, and Ron DiRusso, formerly the firm’s co-chief investment officer and director of research, according to Reuters.

DiRusso had managed FX Concepts’ volatility fund, which had performed well, accordign to the report. The Chinese unit, CITIC Capital, manages more than $4 billion. In October, FX Concepts, the once high-flying currency hedge fund founded by John Taylor, announced it was shutting down several funds. The New York–based firm made the decision after its flagship $619 million Global Currency Program lost 13.9 percent in the first eight months of the year, through the end of August. Its small FX Concepts Multi-Strategy Program dropped 10.96 percent through August.

Taylor founded the firm in 1981 as an advisory firm specializing in quantitative currency forecasting and providing research to major corporate and bank treasuries actively managing currency risk. Since 1988, it has been managing currencies for institutional investors. Taylor made his only appearance on Alpha’s Rich List when he made $250 million in 2008 after heavily betting on interest rates would go down. At the time he managed $14.6 billion.

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