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The Morning Brief: BlueCrest Sues Meredith Whitney Fund

A bitter battle is brewing between one-time star analyst Meredith Whitney and hedge fund honcho Michael Platt, according to Bloomberg. A fund run by Platt, the founder of London-based BlueCrest Capital Management, filed a lawsuit in Bermuda against Whitney’s American Revival Fund, run by her New York-based firm Kenbelle Capital, according to Bloomberg. With a $50 million allocation, Platt’s fund was the largest investor in Whitney’s fund, which has lost 11 percent this year, and the BlueCrest fund submitted a redemption request in October, according to the report. An attorney for Whitney said the money manager “feels insulted” by the lawsuit, which claims her firm violated agreements, Bloomberg reports.

Whitney, who shot to fame as an analyst at Oppenheimer for predicting problems in the subprime mortgage market ahead of the financial crisis and for correctly making skeptical calls on Citi, later predicted widespread problems in the municipal bond market that ultimately failed to pan out. Several top executives have left Kenbelle and its offices are now listed for sublease, according to Bloomberg.

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Appaloosa Management’s David Tepper told CNBC on Monday that he thinks the S&P 500 index could gain another 8 to 10 percent next year despite being “fairly valued.”

“I think we’ll have a good year,” Tepper told the network, adding that central banks’ quantitative easing policies could power further growth.

Last week, Tepper said in an e-mail to CNBC that the S&P 500 was fairly valued and cited parallels to 1999, when stock markets peaked before starting a vicious three-year decline — although he did not say the market will peak in 2015. Yesterday he clarified that fair value is a range, and that the S&P’s price-to-earnings multiple could rise to 18. Tepper said investors should “enjoy the ride” next year but that they should also be prepared for the markets to be overvalued at some point in 2015.

Tepper warned attendees at the SkyBridge Alternatives Conference in Las Vegas this past May that they should not be “too frickin’ long,” but has since changed his tune, telling CNBC that he is now positioned “longer” than he was in April, when his portfolio was 70 to 80 percent net long. His remarks are widely followed, given his impressive long-term track record at Appaloosa, where he has produced a roughly 29 percent annualized gain in the firm’s Appaloosa I fund since 1993. But with a return of just 2 percent in his Palomino fund this year, Tepper looks unlikely to reclaim the No. 1 ranking he earned on Alpha’s 2014 Rich List.

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A hedge fund founded by a former Ospraie Management analyst is shutting its doors, Bloomberg Businessweek reports. Jason Capello’s New York-based Merchant’s Gate Capital is looking to return at least 90 percent of investor capital by the end of January. The firm, whose flagship long-short equity fund focused on the energy, transportation, retail and business services sectors, managed $2.3 billion at its peak in 2012 but had since fallen to $1.1 billion at the end of November, according to the report, even though its flagship fund returned 6.7 percent this year.

Capello’s letter to investors cited a desire to “take a break, focus on my young family and take time to figure out the next chapter” as the reason behind the closure, the report said. Capello was previously a senior manager at Ospraie, a commodities-focused hedge fund firm founded by former Tiger Management and Tudor Investment Corp. veteran Dwight Anderson. Ospraie has suffered its own ups and downs, having shuttered its flagship fund in 2008 after big losses but later returning with new funds.

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