This content is from: Portfolio

The Morning Brief: Pershing Square Gets the Energizer Bunny Award

July was a big letdown for activist hedge funds after six months of almost invincible performance for most. According to performance numbers that CNBC compiled going up to July 25, John Paulson’s Paulson Advantage fund has been the biggest loser year-to-date, down 3.36 percent for the year through July 25 and down 4.49 percent for the month up to the 25th. The losses came mostly from recently-reorganized companies and the health-care sector. Paulson International has done better, earning 5.22 percent in the first nearly-seven months of the year but declining 1.3 percent in July. William Ackman’s Pershing Square Capital Management returned a modest 0.6 percent but 26.11 percent year-to-date. Dan Loeb’s Third Point Offshore fund rose 4.7 percent from the first of the year but lost 1.2 percent in July, most likely from such stocks as Sotheby’s and AIG. And Marcato Capital Management’s activist strategy, the fund that rising star Richard Maguire started three years ago after cutting his teeth at Pershing Square, has been flat year-to-date and lost 2.4 percent in July, mostly due to losses in NCR Corp. and Life Time Fitness.

___ As of Monday Ackman’s Pershing Square was still rising. A rally in Burger King Worldwide stock earned Ackman’s fund around $203 million in one trading day. Pershing Square owns 38,387,865 shares of Burger King, according to FactSet. Burger King’s stock rose more than 19 percent, to close at $32.40.

___Blackstone Group might soon be backing Jason Brown, a former global head of Goldman Sachs’ Special Situations Group, in a new Hong Kong-based hedge fund specializing in distressed situations. According to Bloomberg, people familiar with the matter say the fund firm, Arkkan Capital Management, will invest mostly in Asian distressed assets but will have the ability to invest globally.

___ Two smaller activist hedge fund firms managers, $30 million Engine Capital Management and $200 million Red Alder, are pushing Ann Inc., the parent company of Ann Taylor Stores, to explore options that include a private equity buyout. The two firms, which together own more than 1 percent of Ann Inc., sent a letter to the company’s independent board members saying the stock could be worth 33 to 46.5 percent more than its current price. “In light of the current robust M&A environment, the recent arrival of [private equity firm] Golden Gate Capital as the company’s largest shareholder, our public involvement, likely significant private equity interest, the aforementioned significant value gap, and the company’s suboptimal balance sheet, we think the status quo is untenable,” the letter said.

___ Under Governor Chris Christie’s administration New Jersey has invested about one-third of its $80 billion public pension fund assets with alternative managers including Blackstone, Elliott Associates, Omega Advisors and Third Point. The state is now one of the biggest hedge fund investors in the United States. But the International Business Times reports that the returns for the state’s pension funds between fiscal years 2011 and 2014 have been, to say the least, disappointing, falling below median returns for public pension systems of a similar size. Pension consultant and whistleblower Chris Tobe estimates that the state could have made $3.8 billion more than it did during that period by matching the median return rate.

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