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The Morning Brief: Investors Still High on Hedge Funds

Hedge fund investors are apparently happy with mediocrity. Although hedge funds are on their way to underperforming the broader markets for the fifth straight year, just 26 percent of hedge fund investors said their funds had fallen short of expectations, according to a new, comprehensive report on alternative investments published by London-based data and research firm Preqin. This is the lowest level since Preqin began conducting this study in 2008. And 77 percent of investors stated that there has been no change in their confidence in hedge funds to meet portfolio objectives in the last year.

What’s more, investors said there are more important issues to consider than good performance when looking at individual hedge funds. Most crucial to investors is the strategy of the fund and the managers. Still, 60 percent of investors said they have exited a hedge fund investment due to performance concerns and 41 percent said they are under-allocated. On the other hand 88 percent of hedge fund investors plan to commit the same amount or more capital to hedge funds over the next 12 months. What’s more, 38 percent of investors expect to increase their allocation to single-manager hedge funds in the next 12 months, but just 8 percent to funds of funds.


Carl Icahn tweeted again, telling followers on Thursday that he is having dinner with Apple CEO Tim Cook. “Tim believes in buyback and is doing one,” he stated. “What will be discussed is magnitude.” The activist investor wants the iPad and iPhone maker to repurchase $150 billion of stock.


In SAC legal news, prosecutors filed a superseding indictment in the insider trading case against former portfolio manager Mathew Martoma that describes a second doctor who allegedly passed on inside information and met with Martoma, Reuters reported. The former SAC manager has been charged with insider trading in the shares of two drug companies — Elan and Wyeth, now a part of Pfizer.


Two key people from Israel Englander’s New York–based hedge fund firm Millennium Management are about to launch a $1.4 billion hedge fund in Asia, with their former firm’s blessing. Millennium portfolio manager Feng Guo and Asian regional manager Michael Robinson are likely to receive as much as $1.2 billion from Millennium and $200 million from external investors, according to a Reuters report. If so, this will be one of the most successful launches of a new hedge fund since before the financial crisis.

The Clinton Group raised its stake in Wet Seal to 6.48 percent from 6.41 percent. The New York hedge fund firm also said in a regulatory filing it urged management of the specialty retailer to renew its buyback plan or otherwise return excess capital to stockholders.

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