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The Morning Brief: Once-Hot Tiger Cub White Elm Cools Off

Once again, what goes up must come down. Tiger Cub While Elm Capital Partners extended its losses in July, dropping about 2.50 percent for the month. The fund, managed out of Greenwich, Connecticut–based White Elm Capital, is now down about 11.2 percent for the first seven months of the year. Most of its losses in July came from its long positions. The fund is headed by Matthew Iorio, who previously worked for Stephen Mandel’s Lone Pine Capital. Until this year it was on a hot streak. The fund gained 23.6 percent last year and roughly 32 percent in 2012. Since its September 2007 inception, it is up between 47 percent and 51 percent, depending upon the share class, slightly below the 52.33 percent gain for the S&P 500 but better than the 33.2 percent return for the MSCI-World Index.

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Pershing Square Capital Management’s 30 percent gain through August is multiples better than most other activist hedge funds. For example, through August Barry Rosenstein’s New York-based Jana Partners is up 5.9 percent, while his more aggressive Jana Nirvana is up 9.2 percent. In addition, Nelson Peltz’s New York-based Trian Partners is up 6.70 percent, while Richard McGuire’s Marcato International is up 2.94 percent.

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Speaking of McGuire, his firm Marcato Capital Management is turning up the heat on Life Time Fitness. The San Francisco-based activist hedge fund firm, which is the largest shareholder of the chain of health clubs, sent a letter to company chairman and chief executive Bahram Akradi praising the company’s August 25 announcement that it has retained financial and legal advisors to explore a potential conversion of its real estate assets into a Real Estate Investment Trust. However, after reviewing several skeptical research reports, McGuire asserts that many investors and those following the company “do not fully appreciate the transformational nature” of the announcement. McGuire adds that based on his analysis, he thinks the stock could reach $70, at the mid-point of its valuation range, once the real estate assets are separated. “We are writing this letter to you and the board of directors to share this analysis and to offer suggestions for your consideration that we believe may help clarify any confusion in the marketplace,” McGuire states in the letter. The stock Friday surged more than 6 percent on this news, to close around $50 on Friday.

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Man Group closed on its previously announced acquisition of Numeric Holdings, a Boston-based quantitative equity manager with $14.7 billion of funds under management. Combined with its AHL unit, MAN now has over $26 billion of funds under management in its quantitative investment platform.

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Barry Rosenstein’s Jana Partners sold more than 2.3 million shares of QEP Resources, reducing its stake to 7.2 percent of the total outstanding. In an amended 13D filing, the New York-based activist hedge fund firm said it is “highly supportive” of recent steps taken by the company, including its decision to separate its midstream business into a separate publicly traded company, as well as adding a board member with midstream energy expertise to help complete the transaction. 

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Jeffrey Smith’s New York-based firm Starboard Value boosted its stake in RealD to 9.1 percent from 7.9 percent in July. The investment is still not officially an activist one. In the initial 13D filing in May, Starboard simply stated it bought the shares of the maker of projection technology for 3-D films because it was "undervalued and represented an attractive investment opportunity." It does not address the nature of the investment in the updated filing, its second amendment since the initial stake was disclosed.

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