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The Morning Brief: George Soros Redeems from Ackman's Pershing Square

Now for the daily William Ackman report. George Soros, who reportedly took a long position in Herbalife, is withdrawing his money from Ackman's Pershing Square Capital Management, citing performance. Pershing Square, which lost 2.2 percent in July but is still up 3.8 percent for the year, will return Soros’ money, said to be less than $250 million, by early 2014, according to Reuters. Ackman is still said to be clinging to his $1 billion short position in Herbalife, whose stock has risen substantially since Ackman announced the position.

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Shares of J.C. Penney surged more than 7 percent from their 12-year low to close at $13.66 after its largest investor, Ackman’s Pershing Square, fired off a letter urging the embattled retailer’s board to find a permanent chief executive. Ackman told the board he is “very concerned” about the retailer’s future and is worried it is taking too long to replace Mike Ullman, who was brought in on an interim basis in April after J.C. Penney fired former Apple executive Ron Johnson, CNBC reported. Johnson was perceived to be a savior for the company at the time he was hired.

Ackman also reportedly said former J.C. Penney CEO Allen Questrom has conditionally agreed to return as chairman. "Considering the scale of J.C. Penney, the seriousness of the issues it faces, and the complexity of its business, there are only a handful of executives with sufficient talent and experience to take on the CEO role," Ackman reportedly wrote in his letter. "We need a CEO with extensive, ideally department-store retail experience, strong operational skills, and a strong public company track record."


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Groupon’s stock soared more than 21 percent on Thursday after it reported better than expected revenue in the second quarter and announced that co-founder Eric Lefkofsky would become its permanent CEO. This was probably good news for Tiger Global Management, which was the e-commerce company’s biggest shareholder at the end of the first quarter, with nearly 10 percent of the total shares outstanding. By next week we will know for sure how much Tiger Global owned at the end of the second quarter.

In his second quarter letter to investors, Barry Rosenstein’s Jana Partners said it took an initial position in Groupon in the first quarter and “added to the position materially” in the second quarter as its conviction grew. Rosenstein said he was originally interested in Groupon late last year when the stock sold off. However, he determined that Groupon’s first mover advantage in the Internet discount arena “is a defensible moat.”


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Score one for Corvex Management’s Keith Meister. An arbitration panel ruled that CommonWealth REIT’s recently modified bylaw provisions, designed to make it harder for an outsider to run a consent solicitation, are illegal, Bloomberg reports. This enables Corvex — the hedge fund firm founded by Meister, formerly Carl Icahn’s right-hand man — and Related Fund Management, which collectively own 9.6 percent of the company’s shares, to move forward with their plans to unseat its current board of directors.

In March Commonwealth adopted a bylaw that sought to impose a minimum requirement of three years and three percent holdings for shareholders to request a record date for a consent solicitation. The arbitration panel’s ruling also said shareholders of CommonWealth can remove trustees without cause. In a joint statement, Meister and Jeff Blau of Related stated: “Today’s decision is a tremendous victory for shareholder rights and for all CommonWealth shareholders.” Shares of CommonWealth surged 6 percent on the news.


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Daniel Loeb’s reinsurance company, Third Point Reinsurance, can take advantage of provisions of the JOBS Act legislation that allows companies with less than $1 billion in annual revenue to provide limited financial disclosures. The goal of the law is to help promote employment. Trouble is, Third Point Reinsurance has no staff in the U.S., Bloomberg points out, citing the company’s recent IPO filing.

“This was all about small companies and startups, not wealthy hedge-fund managers,” Barry Ritholtz, chief executive of equity analysis software firm FusionIQ, told Bloomberg. “Was this anticipated by the JOBS Act? Well, not if you paid attention to the rhetoric we heard.”


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Winton Capital, the London-based, quantitatively-driven macro hedge fund firm, said in a quarterly filing it had $8.2 billion invested in U.S. equities at the end of the second quarter. This is up about 50 percent from $5.5 billion at the end of the March period. Most hedge fund firms figure to report their quarterly holdings in their 13f filings around mid-August.


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Chicago-based fund tracker Hedge Fund Research is the latest hedge fund data collector to tabulate performance for July. Its HFRI Fund Weighted Composite rose 1.4 percent for the month, putting it up 4.7 percent for the first seven months. Funds of funds performed similarly. The most interesting part of the report addresses money flowing in and out of hedge funds. In the second quarter, more money flowed into funds that were redeemed, no matter the fund size.

For example, firms below $500 million in assets under management saw $2.4 billion more come in than go out. The largest firms — those with more than $5 billion — had net inflows of $6.1 billion, while firms between $1 and $5 billion experienced net inflows of $5.8 billion. On the other hand, investors withdrew $4.6 billion more from funds of hedge funds in the second quarter than they invested with them. As a result, total 2013 fund-of-fund redemptions stand at $9.6 billion.


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BlueCrest Capital Management trader John Silvetz and his model wife, Wilda Deon Bray, have plunked down $10 million for a condo in the Whitman apartment building in Manhattan, where they can count Chelsea Clinton as one of their neighbors.

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