A new report by consultant McKinsey and Co. concludes that the recent influx of cash into hedge funds comes from investors who think these funds have become, get this, steady and boring — a far cry from the reputation hedge funds had for years for being risky cowboys. A DealBook article on the study notes that institutional investors are looking for security with regard to volatile markets, and below-average returns can be an acceptable by-product. Says McKinsey partner Onur Erzan: “That is a bit of a transition or switch from what the perception of hedge funds was six years ago when they were viewed as high risk.”
Institutional investors that are responsible for pension plans are putting their money into alternative asset classes “out of desperation,” the report says, in an effort to reach return levels that will allow them to maintain adequate funding.
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The continuing would-be takeover saga between Valeant Pharmaceuticals and Botox-maker Allergan took an interesting twist yesterday as a pair of Fidelity’s most prominent fund managers drastically reduced their stakes in the potential acquirer’s shares, Reuters reports.
William Danoff and Steven Wymer, who run the $106 billion Fidelity Contrafund and the $40 billion Fidelity Growth Company Fund, respectively lessened their positions by 83 and 58 percent as of the end of June, suggesting doubts over the company’s future, according to disclosures.
The buyout attempt has attracted heavy news coverage since Valeant made its unsolicited $47 billion bid in April, at least in part because of Valeant’s novel idea to partner with activist hedge fund manager and noted media connoisseur William Ackman of Pershing Square Capital Management. Their most recent offer values the deal at around $51 billion.
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While the Portuguese central bank looks to salvage the wreckage of Banco Espirito Santo, hedge fund firm Marshall Wace may have earned a tidy profit from the bank’s fall. The London-based firm founded by Paul Marshall and Ian Wace would have pocketed some $36 million, according to the Wall Street Journal, if the position were closed at the suspended share price of 12 euro cents. Regulatory filings show Marshall Wace made its bet on May 15th, when the bank’s shares were just less than one euro. TT International, another London-based hedge fund firm, also may have profited, according to the report.
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Keurig Green Mountain, maker of the ubiquitous K-cup single-serve coffee pods, reported a 33 percent jump in earnings for the third quarter. This is not good news for Greenlight Capital’s David Einhorn, who has long maintained a short position in the coffee maven. Keurig’s profits came mainly from the sale of its single-serves, or portion packs, with an increase of almost 75 percent for the quarter year-over-year to $826.3 million.
