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The Morning Brief: The Heavyweight Hedgie Fight of the Century

Herbalife’s long-awaited rebuttal to Bill Ackman’s case for shorting the stock turned into a dud. One day after Third Point’s Dan Loeb disclosed he owned 8.2 percent of the shares of the health are beauty products company, investors initially seemed to feel reassured by CEO Michael Johnson’s presentation, with the stock up a dollar or two.

However, the shares took a decided decline when Johnson sat down for an interview with CNBC. He did not seem to rebut any of Ackman’s biggest assertions. But his stock—both personal and financial—seemed to crumble when he told his interviewer that his earlier claim that 90 percent of his products were sold outside his sales and distribution network was wrong. Rather, he startlingly stated the 90 percent of his distributors who are buying the product buy it for self-consumption. Wow! When pressed to explain his earlier explanation in response to Ackman’s 3½ hour presentation back in December, Johnson replied: “I was a little upset that day.”

The stock closed Thursday at $39.24, down 1.8 percent after being down more than 3 percent earlier in the day. With Ackman and seemingly Greenlight Capital David Einhorn squaring off against Lioeb, David Chapman and perhaps even Carl Icahn and George Soros, this has become the heavyweight hedgie fight of the century. 

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Are women better at running hedge funds than men? Yes, according to an index of 67 women-owned hedge funds put together by Rothstein Kass. It found that through the first nine months of 2012, the average woman hedge fund manager posted an 8.95 percent net return, compared with 2.69 percent for the HFRX Global Hedge Fund Index. Looking over the past five years, the average woman-owned fund produced a 3.6 percent annualized return, versus a 3 percent annualized loss for the HFRX index and a 1.1 percent gain for the S&P 500.

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Jeff Ubben’s VA Partners has reduced its stake in long-time holding Moody’s to 4.7 percent. His hedge fund was up a little more than 20 percent in 2012. In presentations at investment conferences in late October and early November, the activist investor said his Moody's Investment was in the fifth inning and that it accounted for 9 percent of his generally very concentrated portfolio.

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Carlson Capital L.P. reported it owns nearly eight million shares of EnergySolutions, or 8.8 percent of the total outstanding. The 13D filing comes on the heels of the nuclear commercial services company’s announcement that it has agreed to be acquired by a subsidiary of Energy Capital Partners II, LLC for $3.75 per share in cash, a premium of 20 percent over the average closing share price of EnergySolutions' stock for the previous 30 days. In the filing, Carlson conceded it has not decided whether it will vote in favor of the proposed merger.

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Fortress bucked the mediocre returns posted by the largest macro funds. Its main global macro fund—Fortress Macro—was up 3 percent in December and 17.8 percent for the year while Fortress Asia Macro fund was up 3.65 percent in December and 21.22 percent for the year.

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Izzy Englander’s Millennium multi-strategy funds were up about 6.50 percent last year. Not bad considering he did not put on much risk for the year.

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A Tudor Investment defector is planning to launch his own hedge fund. Andrew McMillan, who was Tudor’s energy expert in Singapore, is said to have left on friendly terms, as partners at his former firm plan to invest in his new fund.

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Another hedge fund manager is probably headed to prison. Benton Hochfeld, former manager of Hochfeld Capital Management, pled guilty to securities fraud and wire fraud charges after stealing more than $1 million from investors. According to federal prosecutors, Hochfeld, who also served as the General Partner of the Heppelwhite Fund, a hedge fund created to mostly invest in technology stocks, inflated the value of the fund and used money from the fund for his personal use. He faces up to 20 years in prison on each of two counts and a fine of $5 million on the securities fraud charge.

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