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The Morning Brief: Hackers Hit Hedge Fund; Man Buys Numeric

A major hedge fund firm was a victim of a very sophisticated cyber-security attack late last year, which thwarted its high-speed trading strategy and sent trading information to unknown offsite computers, according to a report by CNBC. BAE Systems Applied Intelligence, which reported the attack, said it involved installing a malicious computer program. BAE declined to name the firm to preserve the privacy of its client.

However, the report sent shivers around the financial industry. In fact, BAE also said an insurance company was also a victim of a sophisticated breach, according to CNBC. The attackers tried to disrupt the hedge fund's trading strategy with the goal of obtaining details of the actual trades, the report noted.

"It's pretty amazing," Paul Henninger, global product director at BAE Systems Applied Intelligence, told CNBC in an interview. "The level of business sophistication involved as opposed to technical sophistication involved was something we had not seen before." He said the attackers are especially savvy to go after a hedge fund, which may be reluctant to turn to law enforcement officials. "It often takes a while for firms to get comfortable with the idea of exposing what is in effect their dirty laundry to a law enforcement investigation," Henninger said. "You can imagine the impact potentially on investor confidence."

A total of 289 new hedge funds were launched in the first quarter, up from 244 in the previous quarter and the highest total since 297 funds were trotted out in the first quarter of 2013, according to Chicago-based industry tracker Hedge Fund Research. At the same time, 272 hedge funds were liquidated in the first quarter. Although this was down from 296 in the previous quarter, it still represents the second highest quarterly closures since the second quarter of 2009. Meanwhile, total global hedge fund capital rose to a record $2.7 trillion at the end of the first quarter. Equity hedge and event driven funds accounted for the most new launches.

London-based Man Group has agreed to acquire Boston-based Numeric Holdings, creating a global quantitative investment giant with more than $25 billion under management spread across Man's AHL/Man Systematic Strategies division and Numeric. The group's product offerings include trend following, technical and fundamentally based quantitative strategies. Under the deal, London-based Man will acquire Numeric, which has $14.7 billion in assets under management, for $219 million in cash. In addition, up to $275 million will be paid to a group of Numeric's management team following the fifth anniversary of the deal's completion, contingent on meeting certain profitability hurdles.

Shares of Michael Kors slumped nearly 1 percent after competitor Coach announced plans to shut 70 underperforming stores and warned that revenue will decline by a low double digit percentage rate for the fiscal year ending June 2015. Michael Kors' stock is now down nearly 5 percent this quarter, which probably does not make two prominent Tiger Cubs too happy. Stephen Mandel Jr.'s Lone Pine Capital, which is already losing money this year, is the second largest shareholder with 4.43 percent of the stock, while the fifth largest holder is O. Andreas Halvorsen's Viking Global Investors. Coach, whose stock dropped more than 9 percent, only counts one noted hedge fund among its top holders — Tiger Cub Blue Ridge Capital, headed by John Griffin, who boosted his stake by roughly 80 percent in the first quarter.

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