This content is from: Portfolio

The Morning Brief: Treasury Officials say Hedge Funds Aren’t So Risky

The largest hedge fund managers are not very likely to be deemed a systemic risk by regulators. The Deal, citing participants at a U.S. Department of the Treasury conference on asset managers on Monday, says Treasury officials are likely to find some other large asset managers — large mutual funds, for example — more systemically risky than hedge funds. However some participants in the conference raised concerns about the leverage that some hedge funds undertake and inadequate disclosure within the industry. These issues are being raised by the Financial Stability Oversight Council, a group of regulators who are charged with identifying potential threats to the economy. The Deal points out that this panel is determining which large non-banks are “systemically important” and therefore should be subjected to Federal Reserve oversight and tougher capital and liquidity requirements. Monday’s session focused on asset managers, including hedge funds and private equity funds.



The California State Teachers’ Retirement System, known as CalSTRS, has given money to another activist hedge fund. The second largest U.S. public pension system pledged $200 million to Legion Partners Asset Management, its first hedge fund seed investment. Under the deal, CalSTRS received a 30 percent stake in the hedge fund firm, founded by Ted White, Chris Kiper and Bradley Vizi in 2012, according to Bloomberg, citing an interview with Philip Larrieu, who oversees the pension’s allocations to activist managers. Legion previously launched activist campaigns against Carter’s Inc. and Timken Co. Altogether, CalSTRS has invested $4.6 billion with activist managers, including Trian Fund Management, Relational Investors, Blue Harbour Group, New Mountain Capital, Starboard Value, Cartica Capital and Knight Vinke.



Allergan fired off a press release Tuesday claiming it has “received a strong outpouring of support” from its physician customers, their nurses and office staff members, as well as from patient advocacy groups and medical associations, after the botox specialist rejected the unsolicited takeover offer from Valeant Pharmaceuticals International. Allergan claims it received more than 500 letters that express their appreciation for the company’s “many contributions in the fields of research and development, product innovation, market creation, and physician support and services.” Some of those who sent letters encouraged Allergan to remain an independent company, the company adds.



Deutsche Bank points out the hot momentum internet stocks were up more than 100 percent in 2013, but most of the gains were the result of multiple expansion. It notes that “fundamentals” measured by upward EBITDA estimate revisions were up only 10 percent. After the recent selloff, the investment bank tells clients in a report that its universe of internet stocks is down 39 percent from their 2013 peak but still 5 percent above the average 2011-2012 valuation. So, it still does not recommend buying its entire group. But it does single out several stocks that it deems to be attractive—Amazon.com, Facebook and Google among large caps and Yelp, Yankdex and Trulia among small caps. Although the report came out the same day the market fell sharply, Amazon.com was up 1.50 percent on Tuesday, Yandex rose nearly 1 percent, while Google and Yelp were up slightly. Trulia was down nearly 4 percent while Facebook fell 1.10 percent.

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