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The Morning Brief: Caxton Opens to New Investment; Hedge Funds Boost Fortress Earnings

Andrew Law’s Caxton Associates is opening up to new investors. It is the first time Law is taking in additional money from outsiders since he took over the New York-based macro hedge fund firm from founder Bruce Kovner in January 2012. That year he finished up less than 1 percent. But in the first six months of this year Law’s Caxton Global Investment fund gained 15.9 percent.

“Our enthusiasm stems from an identifiable change in the market environment in recent months,” Caxton stated in a letter to clients, according to the Financial Times. "The previous regime was characterized on the one hand by 'trendless' volatility in many parts of the capital markets and elsewhere by an incessant hunt for yield, both spurred on by repeated rounds of monetary easing and near-zero official interest rates. We believe that recent market developments are foreshadowing many opportunities in liquid markets over the coming months and years."

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J.C. Penney, a major long holding for William Ackman’s Pershing Square Capital Management, issued a press release disputing a report that lender CIT Group had cut off credit to some of its suppliers. “Contrary to the news report, CIT continues to factor and support deliveries from J.C. Penney suppliers,” it said in its statement. It also said the embattled retailer “continues to have the support of all of its key vendors, who have maintained their shipments to the company.” It also said that CIT-factored merchandise accounts for less than 4 percent of its overall inventory for the year. The company also stressed that it has ample liquidity to manage its business and expects to have $1.5 billion in cash at the end of the current quarter. The stock, however, closed down slightly after tumbling more than 10 percent on Wednesday.


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Former Goldman Sachs trader Fabrice Tourre was found liable in six of seven SEC fraud claims in a civil trial in New York. "Fabulous Fab," as Tourre dubbed himself in a now infamous e-mail, was accused of misleading institutional investors in a package of subprime mortgage securities called Abacus that he knew would blow up and that enabled John Paulson’s hedge fund firm, Paulson & Co., to make $1 billion betting against the MBS portfolio. Tourre could be fined and banned from the securities industry.

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Fortress Investment Group said that second quarter earnings tripled thanks to higher fees paid for its hedge funds and private equity funds. The publicly traded firm also said its macro hedge fund rose 13 percent in the first half. “Strong hedge-fund performance is setting up Fortress for solid performance fees, even as the stock’s valuation improvement lags peers,” Goldman Sachs analyst Marc Irizarry reportedly said in a note to clients before Fortress reported its earnings. Och-Ziff, another publicly traded hedge fund firm, generally reports its monthly performance the second day of the following month.

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It looks like Scout Capital Management is ratcheting down its activist campaign against DineEquity, which owns and operates Applebee's Neighborhood Grill and Bar and International House of Pancakes. The New York hedge fund firm, founded in 1999 by James Crichton and Adam Weiss, disclosed in a regulatory filing that it has reduced its stake in the company to 5.4 percent from 6.6 percent.

When it reported its earlier stake, Scout, which had $6 billion under management at the end of May, said it had discussions with senior management regarding the company’s optimal capital structure, debt refinancing, timing and magnitude of share repurchases, management compensation metrics and merger and acquisition strategies, among other matters. It also conceded it did not have a plan or proposal related to these issues. Scout also has an activist stake in Tim Hortons, the Canadian coffee and donut chain.


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Leon Cooperman told clients in his comprehensive second quarter letter that last month Omega Advisors was up 3.5 percent through July 19 and 15 percent for the year.

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Alan Howard’s BH Macro Fund lost 0.56 percent last month through July 26, trimming its gain for the year to 3.33 percent. The fund is managed by Howard’s London-based firm, Brevan Howard.


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Ken Griffin’s Citadel disclosed that it owns 8.2 percent of Jones Energy, an Austin, Texas independent oil and gas company, according to a 13G filing, which suggests the investment is passive.











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