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Tag: Hedge funds

  • Bridgewater, D.E. Shaw among top hedge fund gainers of 2025 | Fortune

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    Bridgewater Associates’ flagship money pool posted record gains, while D.E. Shaw & Co.’s strategies soared as much as 28% to rank among the biggest hedge fund winners of 2025 when tariff-fueled market uncertainty presented a fertile hunting ground for traders.

    Bridgewater’s Pure Alpha II macro fund returned 34% last year, its best ever, while the All Weather strategy rose 20%, a person with knowledge of the matter said, asking not to be identified discussing private information. D.E. Shaw’s flagship multistrategy Composite hedge fund gained18.5% and Oculus made an estimated 28.2%. 

    Michel Massoud’s event-driven Melqart Opportunities Fund surged 45%, another person said. Millennium Management, the $83.5 billion multistrategy hedge fund firm, gained 10.5% last year. ExodusPoint, which has been building out its equities group to complement its fixed-income operations led by co-founder Michael Gelband, gained 18%, the most since its founding in 2017. The firm manages about $12 billion.

    Citadel’s flagship hedge fund posted a 10.2% increase in 2025, according to a person familiar with the matter, who asked not to be identified citing private information. It was the first year that Millennium outperformed Citadel’s Wellington fund since 2020.

    Read More: Citadel’s Flagship Hedge Fund Climbed 10.2% Last Year 

    The initial estimates show hedge funds overall posted strong gains with industry returns on track to be the best in at least five years as surging US stocks, precious metals and volatility in bond and currency markets spurred by President Donald Trump’s trade wars helped. 

    Bridgewater, the 50-year-old firm, posted double-digit returns across strategies. The money manager has been in reboot mode since Nir Bar Dea became sole chief executive officer in 2023 and made sweeping personnel changes and cut assets in a bid to boost performance. Westport, Connecticut-based Bridgewater’s billionaire founder, Ray Dalio, has completely exited the firm, selling his remaining stake and stepping down from the board last year.

    Bridgewater’s Pure Alpha II fund’s gains last year represent a rebound from annualized returns of less than 3% between 2012 and 2024, Bloomberg has previously reported. The firm’s AIA Labs fund that uses machine learning as the primary basis of its decision-making, has raised more than $5 billion and was up 11% last year, the person added.

    In the world of quantitative investing, AQR Capital Management’s multistrategy offering returned 19.6% in 2025, according to a person familiar with the matter who declined to be identified as the information is private.

    Read More: AQR’s Multistrategy Apex Gains 19.6% in Turbulent Quant Year

    Here’s how other hedge funds fared last year based on initial estimates:

    Hedge Fund Strategy 2025 Return
    Melqart Opportunities Event-Driven 45.1%
    Bridgewater Asia  Macro 37
    Discovery  Macro 35.6
    Bridgewater Pure Alpha II Macro 34
    Bridgewater China Macro 34
    DE Shaw Oculus Multistrategy 28.2
    Soroban Opportunities Equity Long/Short 25
    AQR Adaptive Quant Equity Market Neutral 24.4
    Anson Investments Master Equity 21.2
    Bridgewater All Weather Risk Parity 20
    AQR Apex Quant Multistrategy 19.6
    Citadel Tactical Trading Multistrategy 18.6
    DE Shaw Composite Multistrategy 18.5
    Dymon Multistrategy 18.1
    ExodusPoint Multistrategy 18.04
    Kite Lake Special Opportunities Event-Driven 17.9
    AQR Delphi Quant Equity Long/Short 16.8
    Balyasny Multistrategy 16.7
    Schonfeld Fundamental Equity Multimanager equity 16.5
    Walleye Multistrategy 15.5
    Citadel Equities Equities 14.5
    LMR Partners Multistrategy 13.5
    Schonfeld Strategic Partners Multistrategy 12.5
    Marshall Wace Eureka*/Equity Long/Short 11.6
    Pinpoint Multi-Strategy Multistrategy 11.6
    Bridgewater AIA  Quant Macro 11
    Taula Macro 11
    Millennium  Multistrategy 10.5
    Citadel Wellington Multistrategy 10.2
    FIFTHDELTA Equity 10.3
    New Holland Tactical Alpha Multistrategy 9.8
    Citadel Global Fixed Income Fixed Income 9.4
    Winton Quant multistrategy 7.4
         
    Source: Bloomberg reporting    
    *as of Dec. 30    

    A representative for Bridgewater, which managed $92 billion as of September, declined to comment. Massoud, who manages about $1.4 billion, as well as representatives for the hedge funds mentioned in the table declined to comment.

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    Nishant Kumar, Bloomberg

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  • Michael Burry’s Big Bets Still Move Markets—Even When He’s Wrong

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    Even when his calls miss, Michael Burry’s reputation keeps Wall Street watching his every move. Astrid Stawiarz/Getty Images

    Michael Burry earned a whopping $800 million by shorting the U.S. housing market ahead of the 2008 financial crisis. Whether the famed investor has made comparable money since then is far less clear. Still, his reputation endures. Investors continue to closely track his high-profile bets, hoping to ride his coattails to similar gains.

    Burry ran the hedge fund Scion Asset Management and now publishes commentary through a weekly newsletter, though he discloses little about performance. He has also repeatedly deleted and reactivated his X account over the years, but remains active on the platform, where he has roughly 1.6 million followers and frequently posts cryptic market takes.

    His celebrity status was cemented by the 2015 film The Big Short, which turned Burry into a household name. That visibility has granted him a level of credibility few investors retain for so long, even when their predictions miss the mark.

    “People like superstars, and they love to listen to folks who they think are smart and successful,” Tom Sosnoff, founder of investment media network Tastylive, told Observer. “He is a personality and a contrarian. He is interesting and pretty famous in the world of finance. Love him or not, people listen to him.”

    While Burry’s early success is well documented, his performance since then is harder to evaluate. As a hedge fund manager, he is only required to disclose limited information through quarterly filings such as 13Fs, which reveal long equity positions but not short positions, derivatives or overall performance. As a result, the full picture of his gains and losses remains largely opaque.

    There have been claims that Burry has made more than $1 billion in total trading profits, but those figures have never been independently verified, and his fund has never been publicly audited.

    Nvidia and Palantir in the crosshairs

    Despite the uncertainty around his track record, Burry’s words still move markets. His recent bearish bets against Nvidia and Palantir have drawn particular attention, with Burry arguing that both sit at the center of an A.I.-driven market bubble.

    On Nov. 3, regulatory filings revealed that Scion had placed roughly $1.1 billion in bearish options positions tied to those companies. The structure of the trade—largely long-dated put options—gives him time for the thesis to play out rather than requiring an immediate downturn.

    “His timing was very good,” said Sosnoff. “He pretty much got short Nvidia near the top (around $200), and it’s now down 10 percent to 15 percent. It’s a good call.”

    Palantir, which represents Burry’s largest short at roughly $912 million, has not fallen as sharply. The stock is down about 7.8 percent from its Nov. 3 level. Still, because the position is structured with options expiring in 2027, some analysts say it’s far too early to judge.

    “His logic is extremely good, and he has over a year to be right,” David Trainer, CEO of A.I.-driven investment research firm New Constructs, told Observer.

    Trainer, a former hedge fund manager, also backed Burry’s broader critique of A.I. hyperscalers, arguing that companies such as Oracle and Microsoft are using aggressive accounting practices, particularly around GPU depreciation, to flatter earnings.

    “These companies are definitely using questionable billing and receivables to make their earnings look better,” said Trainer. “I can’t say if Burry has been right or wrong in previous trades, but I think he has made some money. “This time [with the A.I. Bubble], he seems right.”

    The cult of the contrarian

    Not everyone is convinced. Matthew Tuttle, CEO of Tuttle Capital Management and a frequent contrarian himself, said Burry’s post-2008 track record is far less impressive than his reputation suggests.

    “When you look at the calls Burry has made since 2008, they have not been good,” he told Observer. “He has said ‘this is going to crash and that is going to crash’ many times since, and he hasn’t been right.”

    Still, big bearish bets tend to attract attention precisely because they go against the grain.

    “Any time someone makes a major down call, there’s a fascination with it as long [bullish] calls are always okay because the market always goes up,” said Tuttle.

    That dynamic helps explain why hedge fund stars can remain influential long after their best trades are behind them.

    “If I’m the main character in a movie and in a book like Burry and have been right in a big way, that buys me a lot of getting things wrong,” added Tuttle.

    The same dynamic applies to other market personalities such as Robert Kiyosaki, Peter Schiff and CNBC’s Jim Cramer, whose reputations often outlast their accuracy.

    “Robert Kiyosaki is constantly calling a bear market, and he is wrong, and Peter Schiff has been calling gold up for a long time,” said Tuttle. In Schiff’s case, it eventually worked—but more because of timing and luck than brilliance.

    “When you say gold is going to go up every year, and one year it does well, does that make you a genius? I would argue it doesn’t,” he added.

    Fame as financial fuel

    Wall Street is full of one-hit wonders whose early success grants them enduring influence.

    “Most of the time, they don’t risk their money,” said Sosnoff. “If they have one big win one year, they’re set. Their reputation is made.”

    John Paulson, who famously made $15 billion betting against subprime mortgages, fits that mold, as do figures like Ralph Acampora, who called the 1990s bull market, and Paul Tudor Jones, who predicted the 1987 crash.

    Other famous short sellers have stumbled. Jim Chanos, known for shorting Enron, closed his Kynikos fund in late 2023 after his Tesla bet went wrong. Bill Ackman lost roughly $1 billion betting against Herbalife in 2018, despite previously scoring a massive win betting against mortgage insurers during the financial crisis.

    Ultimately, fame often matters more than accuracy.

    “We live in a world where celebrities (movie, social media) have megaphones, and Michael is a celebrity because of the movie,” NYU Stern professor Aswath Damodaran told Observer. “Put simply, I will wager that most people who follow his advice (good or bad) are doing so because they liked the movie, think he is Christian Bale or like Batman, rather than because they read his treatises on Nvidia or Palantir. “

    That doesn’t mean Burry lacks insight. “Michael actually is a good macro thinker and often willing to break away from the herd,” Damodaran added. “But so are many other smart investors who never get noticed.”

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    Ivan Castano

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  • After Shutting His Hedge Fund, Michael Burry Launches a Substack to Speak ‘Freely’ on the A.I. Bubble

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    Michael Burry attends “The Big Short” New York screening at the Ziegfeld Theater on Nov. 23, 2015 in New York City. Astrid Stawiarz/Getty Images

    Michael Burry, the famed “Big Short” investor who predicted the 2008 housing crash, is once again warning of an emerging market bubble. Nearly two decades later, the hedge fund manager is now sounding alarms about the sky-high valuations of A.I. companies and is voicing them on a modern forum: Substack.

    Yesterday (Nov. 23), Burry launched a newsletter on the platform that will focus on his bearish views on the technology, among other topics. “The current market environment is contentious and running hot. Lots to talk about,” he wrote in the description accompanying his new Substack, which has already amassed more than 35,000 subscribers. Access costs $379 annually or $39 per month.

    One of his first posts draws parallels between the lead-up to the dot-com crash of the early 2000s and today’s A.I. boom. Burry compared Nvidia—which recently became the first company to reach $5 trillion in market cap—to Cisco, the tech company whose stock soared and then collapsed during the dot-com era.

    In an X post announcing his Substack, Burry expanded on the idea that the A.I. market may be echoing past bubbles. He cited former Federal Reserve chair Alan Greenspan, who assured investors in 2005 that a housing bubble “does not appear likely.” Burry then pointed out that Jerome Powell, the Fed’s current chair, has described A.I. companies as “profitable” and “different” from previous speculative manias.

    Michael Burry’s mixed track record

    Burry rose to prominence after spotting the warning signs of the subprime mortgage crisis—a bet that made him $100 million personally and earned more than $700 million for his clients. His prescient move was immortalized in Michael Lewis’ The Big Short and the subsequent film starring Christian Bale. After the global financial crisis, Warren Buffett told Congress that Burry was acting as a “Cassandra,” referring to the Trojan princess cursed to deliver true prophecies no one believed. His new newsletter pays homage to this feat through its name, “Cassandra Unchained.”

    In recent years, Burry has made several market calls that didn’t pan out, but his latest warnings about A.I. have sparked fresh attention online. The buzz began in October, when he returned to X after a two-year hiatus to post: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”

    Soon after, his hedge fund, Scion Asset Management, disclosed in regulatory filings that it had a short bet worth more than $1 billion against Nvidia and Palantir, another hot A.I. stock. Burry closed his hedge fund a few days later and returned capital to investors.

    In his Substack description, Burry said Scion’s closure was partially motivated by a desire to share investment ideas more freely. “Running money professionally came with regulatory and compliance restrictions that effectively muzzled my ability to communicate,” he wrote. “These constraints meant I could only share cryptic fragments publicly, if at all.”

    Burry told readers to expect one to two posts a week, along with occasional Q&As, videos and guest contributions. Rather than placing bets, he’ll be breaking down markets.

    “I am not retired,” said Burry. “There is still nothing I enjoy more than analyzing companies and markets each and every day.”

    After Shutting His Hedge Fund, Michael Burry Launches a Substack to Speak ‘Freely’ on the A.I. Bubble

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    Alexandra Tremayne-Pengelly

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  • Ex-hedge fund CEO defeats Senate Democrat in Pennsylvania

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    Republican David McCormick defeated Democratic Senator Bob Casey in Pennsylvania, according to the Associated Press, marking an upset that saw a former CEO of a hedge fund giant trounce a scion of a political dynasty in a year defined by appeals to the working class.

    McCormick’s victory effectively gives Wall Street a Senate seat ahead of major battles in Congress next year over expiring Trump-era tax cuts and extending the federal debt limit. The win, which is being contested by Casey’s team, also underscores how GOP’s electoral fortunes are surging in this closely divided swing state.

    “This race is within half a point and cannot be called while the votes of thousands of Pennsylvanians are still being counted,” Casey’s campaign said in a statement on Thursday. The Pennsylvania Secretary of State separately said there are at least 100,000 ballots that must be “adjudicated,” urging patience especially in contests where margins are very close.

    The former head of Bridgewater Associates, 59, rode a wave of enthusiasm for Donald Trump and a tide of money from out-of-state billionaires across rural counties and exurbs of battleground Pennsylvania, playing up his childhood roots while fending off Democratic charges of carpetbagging. Those years living outside the state included combat service in the first Gulf War, roles in the George W. Bush administration, and more than a decade as CEO of the Connecticut-based hedge fund.

    The GOP’s win in Pennsylvania adds to the party’s new Senate majority, following the defeats of incumbent Democrats Sherrod Brown in Ohio and Jon Tester in Montana, as well as Republican Jim Justice’s win in the open Senate seat in West Virginia.

    Read More: Republicans Win Control of US Senate Ahead of Critical Tax Fight

    Thanks to its critical status in the Electoral College, both presidential campaigns poured spending in Pennsylvania, flooding the state with direct mail and ads, criss-crossing with candidates and surrogates, and fielding small armies of door-knockers to try to bring out as many of its nine million registered voters as possible.

    Big Donors

    Casey held a persistent lead in public polls as the senator and his allies painted McCormick as one who lacks meaningful Pennsylvania connections, having bought a home in Pittsburgh only in 2021, just before he made his first, unsuccessful Senate run in 2022.

    Surrogates for Casey, including Senator Elizabeth Warren of Massachusetts, highlighted McCormick’s support from conservative billionaires, suggesting he had little in common with the state’s working-class voters. Citadel founder Ken Griffin gave at least $15 million to Keystone Renewal, a super political action committee affiliated with McCormick.

    Other donors to the super-PAC include Interactive Brokers Chairman Thomas Peterffy, Elliott Management Corp. founder Paul Singer, Uline Inc. leaders Elizabeth and Richard Uihlein, Antonio Gracias, founder of Valor Equity Management, Blackstone Inc. Chairman Stephen Schwarzman and Wynn Resorts Ltd. Founder Stephen Wynn.

    McCormick contributed at least $4 million of his own money to the campaign.

    In a flurry of TV and online ads, McCormick’s camp portrayed Casey as out of touch, hammering him in particular for his support of the Biden administration’s economic policies, and warning he would be an asset to Vice President Kamala Harris, whom they painted as an out-of-control leftist.

    The ad siege finally managed to undo what had been Casey’s solid edge: his family name. Prior to his Senate career, Casey served in statewide offices, including treasurer, since 1997. His father, Bob Casey Sr., was a two-term Pennsylvania governor, and political veterans of both parties considered his name recognition an overwhelming asset in close elections.

    (Updates with Casey and Pennsylvania state’s comments in third paragraph.)

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    Ted Mann, Bloomberg

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  • Citi: time to embrace volatility and take positions off ice

    Citi: time to embrace volatility and take positions off ice

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    Citi Private Bank's Toby Gresham lists sectors set to benefit as the interest rate cut cycle begins.

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  • Private equity, private debt and more alternative investments: Should you invest? – MoneySense

    Private equity, private debt and more alternative investments: Should you invest? – MoneySense

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    What are private investments?

    “Private investments” is a catch-all term referring to financial assets that do not trade on public stock, bond or derivatives markets. They include private equity, private debt, private real estate pools, venture capital, infrastructure and alternative strategies (a.k.a. hedge funds). Until recently, you had to be an accredited investor, with a certain net worth and income level, for an asset manager or third-party advisor to sell you private investments. For their part, private asset managers typically demanded minimum investments and lock-in periods that deterred all but the rich. But a 2019 rule change that permitted “liquid alternative” mutual funds and other innovations in Canada made private investments accessible to a wider spectrum of investors.

    Why are people talking about private assets?

    The number of investors and the money they have to invest has increased over the years, but the size of the public markets has not kept pace. The number of operating companies (not including exchange-traded funds, or ETFs) trading on the Toronto Stock Exchange actually declined to 712 at the end of 2023 from around 1,200 at the turn of the millennium. The same phenomenon has been noted in most developed markets. U.S. listings have fallen from 8,000 in the late 1990s to approximately 4,300 today. Logically that would make the price of public securities go up, which may have happened. But something else did, too.

    Beginning 30 years ago, big institutional investors such as pension funds, sovereign wealth funds and university endowments started allocating money to private investments instead. On the other side of the table, all manner of investment companies sprang up to package and sell private investments—for example, private equity firms that specialize in buying companies from their founders or on the public markets, making them more profitable, then selling them seven or 10 years later for double or triple the price. The flow of money into private equity has grown 10 times over since the global financial crisis of 2008.

    In the past, companies that needed more capital to grow often had to go public; now, they have the option of staying private, backed by private investors. Many prefer to do so, to avoid the cumbersome and expensive reporting requirements of public companies and the pressure to please shareholders quarter after quarter. So, public companies represent a smaller share of the economy than in the past.

    Raising the urgency, stocks and bonds have become more positively correlated in recent years; in an almost unprecedented event, both asset classes fell in tandem in 2022. Not just pension funds but small investors, too, now worry that they must get exposure to private markets or be left behind.

    What can private investments add to my portfolio?

    There are two main reasons why investors might want private investments in their portfolio:

    • Diversification benefits: Private investments are considered a different asset class than publicly traded securities. Private investments’ returns are not strongly correlated to either the stock or bond market. As such, they help diversify a portfolio and smooth out its ups and downs.
    • Superior returns: According to Bain & Company, private equity has outperformed public equity over each of the past three decades. But findings like this are debatable, not just because Bain itself is a private equity firm but because there are no broad indices measuring the performance of private assets—the evidence is little more than anecdotal—and their track record is short. Some academic studies have concluded that part or all of private investments’ perceived superior performance can be attributed to long holding periods, which is a proven strategy in almost any asset class. Because of their illiquidity, investors must hold them for seven years or more (depending on the investment type).

    What are the drawbacks of private investments?

    Though the barriers to private asset investing have come down somewhat, investors still have to contend with:

    • lliquidity: Traditional private investment funds require a minimum investment period, typically seven to 12 years. Even “evergreen” funds that keep reinvesting (rather than winding down after 10 to 15 years) have restrictions around redemptions, such as how often you can redeem and how much notice you must give.
    • Less regulatory oversight: Private funds are exempt from many of the disclosure requirements of public securities. Having name-brand asset managers can provide some reassurance, but they often charge the highest fees.
    • Short track records: Relatively new asset types—such as private mortgages and private corporate loans—have a limited history and small sample sizes, making due diligence harder compared to researching the stock and bond markets.
    • May not qualify for registered accounts: You can’t hold some kinds of private company shares or general partnership units in a registered retirement savings plan (RRSP), for example.
    • High management fees: Another reason why private investments are proliferating: as discount brokerages, indexing and ETFs drive down costs in traditional asset classes, private investments represent a market where the investment industry can still make fat fees. The hedge fund standard is “two and 20”—a management fee of 2% of assets per year plus 20% of gains over a certain threshold. Even their “liquid alt” cousins in Canada charge 1.25% for management and a 15.7% performance fee on average. Asset managers thus have an interest in packaging and promoting more private asset offerings.

    How can retail investors buy private investments?

    To invest in private investment funds the conventional way, you still have to be an accredited investor—which in Canada means having $1 million in financial assets (minus liabilities), $5 million in total net worth or $200,000 in pre-tax income in each of the past two years ($300,000 for a couple). But for investors of lesser means, there is a growing array of workarounds:

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    Michael McCullough

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  • US Accuses Famed Short-Seller Andrew Left of Securities Fraud

    US Accuses Famed Short-Seller Andrew Left of Securities Fraud

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    (Bloomberg) — US authorities accused famed short-seller Andrew Left of committing fraud through stock trades, social media posts and research reports — their biggest move yet in a yearslong crackdown against traders who tout their bearish bets.

    Most Read from Bloomberg

    The Securities and Exchange Commission alleged Friday that Left used his firm, Citron, to generate about $20 million in profits from illegal trading involving almost two dozen companies. The Justice Department also announced a criminal case against Left, accusing him of securities fraud and allegedly lying to investigators about compensation from hedge funds.

    The cases against Left stem from a wide-ranging US effort to examine relationships between hedge funds and skeptical researchers. The probes have rattled the industry for three years as investigators have sought information on dozens of money managers and activists, as well as transactions involving more than 50 stocks.

    According to the SEC, Left would use social media or television appearances to make recommendations about a stock, on which he had short or long positions, sometimes giving a target price at which he thought the stock would trade. The Justice Department said Left would create a false perception that his public comments on a stock were in line with his trading activity.

    “Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money,” the Justice Department said in its statement.

    James Spertus, a lawyer for Left, said in an email that the government’s case was “defective” and his client had no duty to disclose his personal trading intentions. Spertus said that the information Left published was “truthful information” which is needed for markets to be efficient.

    “The DOJ and the SEC threaten the integrity of the securities markets and put the health of our financial system at risk by trying to silence a publisher of truthful information who also trades in the securities he writes about,” said Spertus.

    Stock Trades

    Left, according to prosecutors, would also quickly close positions after releasing a research report or making comments. That would let him take advantage of short-term price movements.

    According to the SEC, Left’s misconduct touched stocks including Tesla Inc., Roku Inc., American Airlines Group Inc. and Nvidia Corp.

    “This fraudulent practice deceived investors and allowed Left to use his Citron Research reports and tweets as catalysts from which he could derive short-term profits,” the SEC alleged in the complaint.

    The mere appearance of research from a prominent bear can send a stock into a tailspin before the market has time to debate its merit — which can be especially hard on small investors who can’t react quickly. Companies and shareholders have increasingly cried foul, prompting US congressional hearings.

    Left profited from his advance knowledge that he was about to trigger movements in the market, according to the Justice Department indictment. For the his strategy to work, Left knew that investors needed to believe that the recommendations and positions he set forth were sincerely maintained, and not just vehicles for him to personally profit, prosecutors said.

    ‘Candy From a Baby’

    The SEC alleges Left bragged to colleagues that some of his statements caused retail investors to trade the way he wanted them to and that it was like taking “candy from a baby.”

    The SEC’s lawsuit documents dozens of social media posts, reports and comments from Left from March 2018 through December 2020.

    Left was charged in an indictment in federal court in California with one count of engaging in a securities fraud scheme, 17 counts of securities fraud and making false statements to federal investigators. If convicted, he could face more than 25 years in prison.

    Prosecutors claim that Left lied to law enforcement by stating that his firm never exchanged compensation with a hedge fund. US authorities allege Left received more than $1 million from two hedge funds.

    –With assistance from Katherine Burton.

    (Updates with Left lawyer’s comment in sixth and seventh paragraphs.)

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    ©2024 Bloomberg L.P.

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  • Bill Ackman’s US IPO Plan Solidifies His Shift Away From Traditional Hedge Funds

    Bill Ackman’s US IPO Plan Solidifies His Shift Away From Traditional Hedge Funds

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    Bill Ackman’s investment style has always been unique by hedge fund standards. Bryan Bedder/Getty Images for The New York Times

    Billionaire investor Bill Ackman’s Pershing Square Capital Management is setting the stage for an initial public offering of its new U.S.-based fund focused on retail investors, the Wall Street Journal reported today (May 31). With around 80 percent of his assets under management already tied up in a publicly traded closed-end fund in Europe, this marks another milestone in Ackman’s breaking from being a traditional hedge fund manager.

    The new fund, called Pershing Square USA (PSUS), was announced in February via Ackman’s X account and a fund prospectus. Ackman’s dipping into U.S. retail investors could be him trying to take advantage of his growing media spotlight—the 58-year-old investor has 1.2 million followers on X and gained significant press for his $2.3 billion victory from betting on a 2020 market crash. The fund prospectus stated that Pershing Square’s “brand-name profile and broad retail following will drive substantial investor interest.”

    Hedge fund IPOs are rare though not unusual; Man Group and Blue Owl are two known alternative asset managers that are publicly traded. Ackman’s PSUS IPO would likely be the largest and most prominent IPO of its kind in many years.

    Ackman founded Pershing Square LP in 2004 as a traditional hedge fund, which took concentrated equity bets and charged close to an industry-standard “2 and 20” fee (2 percent management fee on assets under management and 20 percent on investment returns).

    However, in 2014, Ackman introduced a new investment vehicle called Pershing Square Holdings (PSH), a closed-end fund based in Guernsey (an island in the English channel that has become a popular place of incorporation for high net-worth funds) and publicly traded in Amsterdam and London. Unlike traditional hedge funds, investors cannot simply pull their money out from a closed-end fund and the fund charges “1.6 and 16” rather than the traditional “2 and 20.”

    PSH’s success has been less than ideal, though. This fund, which raised $3 billion in its 2014 IPO, has consistently traded at a discount to its net asset value, currently managing about $14.6 billion with a market value of approximately $9 billion. This means Pershing Square cannot raise more capital efficiently in the fund, as selling or issuing shares at a price lower than the net asset value would dilute shareholders.

    As PSH holds around 80 percent of the assets Ackman manages, this is especially stressful for the company’s future. A 2024 presentation revealed, “In 2023, we thoroughly examined the options for a U.S. listing to increase the number of investors who can own PSH.” Essentially, Pershing Square’s leadership felt that, if U.S. retail investors could buy PSH shares, which they are currently not allowed to do, they would give the company a higher valuation.

    PSUS is a reflection of that sentiment; it’s essentially a U.S. version of PSH. It begs the question of why Ackman sought to introduce PSH in European markets in the first place; Bloomberg’s finance columnist Matt Levine believes the answer is likely that the U.S. has stronger regulations on how publicly traded investment funds are allowed to use hedge fund strategies, such as leverage, derivatives and short-selling.

    All in all, this would be Ackman’s third IPO. He previously launched Pershing Square Tontine Holdings, the largest-ever SPAC that went public in July 2020 with the intention to acquire privately-held businesses. It liquidated and shut down two years later.

    With PSUS, Ackman is further solidifying himself as more of an asset manager, overseeing mostly publicly traded closed-end fund investments, than a typical hedge fund manager. Ackman has always been unique in his style: while traditional hedge funds, like Citadel or Millennium, have become renowned for making dozens of investments, quickly opening and closing out of positions, Ackman prefers to hold long-term activist positions on only a handful of companies.

    Bill Ackman’s US IPO Plan Solidifies His Shift Away From Traditional Hedge Funds

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    Shreyas Sinha

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  • Norfolk Southern shareholders elect 3 directors nominated by activist, while CEO keeps job

    Norfolk Southern shareholders elect 3 directors nominated by activist, while CEO keeps job

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    Norfolk Southern’s CEO will be under more pressure to improve profits after the railroad’s shareholders voted Thursday to elect three of the board members an activist investor nominated, but he won’t be fired right away.

    Ancora Holdings had nominated seven directors as part of a bid to take control of the railroad’s 13-member board and overhaul its operations. The key support Ancora picked up from major investors, two major rail unions and proxy advisory firms wasn’t enough to persuade shareholders to elect Ancora’s entire slate.

    Ancora’s Jim Chadwick blamed passive investors for failing to support the investors’ nominees. Chadwick promised to hold CEO Alan Shaw accountable and keep fighting to improve the railroad.

    “For the passive investors. If anything should go wrong here and there’s another derailment and people die, this is on you,” Chadwick said. “You ignored the recommendation of the proxy advisors, the unions, the largest customer of the company. You gave us literally no support and we still won three board seats without you. What happens at Norfolk Southern now is on your firms and your conscience.”

    The board members voted out included Chair Amy Miles.

    Norfolk Southern’s stock price, which soared after Ancora announced its campaign to oust Shaw, immediately fell after the results of the vote were announced. It was trading down nearly 4% at $223.43 Thursday morning.

    Shaw had argued that Ancora’s plan would cut the railroad too deep and jeopardize the improvements in safety and service Norfolk Southern has seen since its disastrous February 2023 derailment in East Palestine, Ohio.

    Shaw’s plan calls for keeping more workers on hand during a downturn to make sure the railroad is prepared to handle the eventual rebound in shipments once the economy recovers and continuing to invest in safety improvements to prevent derailments. He received the backing of the rest of rail labor, several key regulators and a number of the railroad’s customers.

    “Norfolk Southern has persevered through several challenges over the last year. We have met every challenge and never lost sight of where we are taking our powerful franchise,” Shaw said. “We are keeping our promises and delivering tangible results, and there is more to do.”

    Ancora had argued that Norfolk Southern should implement the industry standard Precision Scheduled Railroading operating model that is designed to minimize the number of workers, locomotives and railcars a railroad needs.

    The Precision Scheduled Railroad operating model relies on running fewer, longer trains on a tighter schedule and switching cars between trains less often to streamline operations. Shaw had argued that running the railroad too lean would jeopardize the improvements in safety and service Norfolk Southern has seen since its disastrous February 2023 derailment in East Palestine, Ohio.

    Rail unions have said they believe Precision Scheduled Railroading has made the industry more dangerous and derailments more likely because inspections are so rushed and preventative maintenance may be neglected.

    For now, Shaw and the Chief Operating Officer he just hired in March, John Orr, will have more time to prove their strategy will work. NS paid CPKC railroad $25 million to get permission to hire Orr. But if they don’t bring Norfolk Southern’s profit margins in line with the rest of the industry, their jobs could still be in jeopardy.

    “Your CEO has missed earnings estimates for six quarters in a row and destroyed a town in our own state,” said Chadwick, whose firm is based in Ohio. “And if this underperformance continues, we will hold you accountable. But we will work with you for the mutual benefit of all stakeholders.”

    Ancora wanted to hire former UPS Chief Operating Officer Jim Barber to be the railroad’s next CEO and former CSX railroad operating chief Jaimie Boychuk as the chief operating officer. Barber has said keeping more workers on hand during slower times is wasteful and compared it to UPS keeping all its seasonal workers it hires for the holiday season on the payroll year round.

    The investors had projected their plan would cut more than $800 million in expenses in the first year and another $275 million by the end of three years. Ancora said say they didn’t plan layoffs, but wanted to use attrition to eliminate about 1,500 jobs over time.

    Norfolk Southern has said it’s own plan to make the railroad more efficient would generate about $400 million in cost savings over two years and improve its profit margin. But analysts have said its profits might still lag behind the other major freight railroads because they are all working to get more efficient too.

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    Josh Funk, The Associated Press

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  • Activist hedge fund Elliott bets $1 billion on British platinum producer

    Activist hedge fund Elliott bets $1 billion on British platinum producer

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    Elliott Investment Management has built a roughly $1 billion stake in Anglo American Plc, the UK-listed miner that’s received an unsolicited takeover approach from Australia’s BHP Group Ltd.

    The activist hedge fund led by Paul Singer has exposure to almost 33.6 million Anglo American shares via derivatives, according to a UK regulatory filing Friday that confirmed a report by Bloomberg News. The firm amassed the 2.5% holding over recent months, according to people familiar with the matter, who asked not to be identified discussing confidential information. 

    The investment puts Elliott among Anglo American’s 10 biggest shareholders, data compiled by Bloomberg show. Anglo American shares jumped as much as 6.3% in London after Bloomberg News reported the stake. 

    Elliott also has a 0.07% short position in BHP, a separate filing shows. Representatives for Elliott and Anglo American declined to comment.

    Elliott’s presence in Anglo American’s stock emerges with the mining company the subject of takeover interest from BHP. The Australian miner has proposed an acquisition that values its smaller rival at £31.1 billion ($38.9 billion) and would create the world’s top copper producer. Bloomberg News reported BHP’s approach on Wednesday. Anglo American said the proposal significantly undervalues the company. 

    Singer’s firm is known for stepping in to beaten-down stocks and then pushing companies to take measures ranging from share buybacks to outright sales of the business. 

    “We like to see value-driven investors in the register,” said Giuseppe Bivona, chief investment officer at another activist, Bluebell Capital Partners, which built a stake in Anglo American in February. The company “is surely worth much more than BHP is offering.” 

    Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. 

    But suitors have been put off by its complicated structure and mix of other commodities, as well as its deep exposure to South Africa. In February, Anglo American reported a steep drop in profit and lowered its dividend on the back of falling demand for diamonds and platinum group metals — commodities that are unique to its portfolio.

    BHP has proposed an all-share deal in which Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders.

    Shares in Anglo American closed 3.2% higher in London on Friday at 2,643.00 pence, giving it a market value of about £32.4 billion. The stock surged 16% Thursday after BHP’s approach. Even after this week’s rally, the stock is still down more than a third from its peak two years ago.

    Elliott took a sizable position in BHP in 2017 and pushed it to spin off certain oil assets. In 2021, the miner struck deals that extended its withdrawal from fossil fuels, including a sale of oil and gas operations to Woodside Petroleum Ltd.

    Singer’s firm has been involved with other metals companies as well. In 2022 Elliott held talks with Kinross Gold Corp. that resulted in the miner announcing a $300 million share buyback. And it’s the majority shareholder in Triple Flag Precious Metals Corp., which provides financing for mining companies. It’s also setting up a new venture, Hyperion, to invest in mining assets.

    Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up for free.

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    Crystal Tse, Dinesh Nair, Swetha Gopinath, Bloomberg

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  • Steve Cohen Predicts Golf Industry Will Boom When AI Enables the Four-Day Workweek

    Steve Cohen Predicts Golf Industry Will Boom When AI Enables the Four-Day Workweek

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    Steve Cohen at the SportiConference Invest In Sports 2023 in New York. Bryan Bedder/Sportico via Getty Images

    Billionaire Steve Cohen is betting big on golf. The hedge fund manager predicts that with the widespread adoption of artificial intelligence (A.I.), the normalization of the four-day workweek will cause a boom in leisure and give workers more time to hit the greens.

    Cohen, the media-shy head of Point72 Asset Management, discussed his prediction in a rare interview with CNBC Squawk Box. “My belief is the four-day workweek is coming,” he said. “I just think it’s an eventuality.”

    Despite being known for the owner of the New York Mets, Cohen has made moves in the golf world in recent months. In September, he acquired the rights to a New York team in TGL, a high-tech golf league formed by tiger woods and Rory McIlroy. And as part of a consortium that includes Boston Red Sox owner John Henry and former Milwaukee Bucks co-owner Marc Lasry, the hedge fund manager invested as much as $3 billion in the PGA Tour earlier this year.

    “We think it’s an interesting investment,” Cohen told CNBC of the golf industry, adding that “the way it’s been run, we can improve the operations and make it much more profitable.” Some of that profit could come from expanded leisure time. Between the rise of A.I. and the fact that “people are not as productive on Fridays,” Cohen is gearing up for four-day work weeks to become the norm in the future. With an extra day off, he believes industries around travel and experience will benefit. “I guess courses will be crowded on Fridays,” he said.

    Get ready for year-round three-day weekends

    Don’t expect Cohen’s employees at Point72 to be taking part as long as the markets remain open throughout the week. “If they’re taking off Friday and they have a portfolio, that’s a problem,” he noted. “Forgetting us, the vast majority of people will get an opportunity, I think at some point, to get a three-day weekend.”

    Cohen isn’t the only finance heavyweight to predict a move toward compressed work weeks. Fellow billionaire Ray Dalio made a similar point while speaking at the Milken Institute’s Asia Summit last year, where he claimed that A.I. will let humans work fewer hours and urged for policies to prevent a potential widening of the wealth gap. And back in 2018, business magnate Richard Branson predicted in a blog post that emerging technologies would transform the five-day workweek as we know it.

    While traditional working hours have remained largely steady across the U.S., some companies have been increasingly experimenting with work structures. The clothing reseller ThredUp, for example, has already embraced a four-day workweek, while New York City’s largest public employee union recently launched a compressed workweek pilot program that will run until May of next year.

    Beyond its effects on work structures, Cohen told CNBC that A.I. is poised to transform how companies operate. “My view is this is a very durable theme,” he said, noting that his firm could save $25 million by using large language models to improve efficiency. “Now, we’re a nice-sized firm; we’re not a huge firm. Imagine what big companies can do.”

    Cohen also discussed his plans for the New York Mets, which have recently had an unsuccessful run under his ownership despite a large injection of cash. Moving forward, he will continue overseeing strategy experts and prioritizing the development of young talent. These tactics parallel his approach towards running Point72, noted Cohen. “I’m used to operating in a very centralized way. I give people a lot of rope.”

    Steve Cohen Predicts Golf Industry Will Boom When AI Enables the Four-Day Workweek

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    Alexandra Tremayne-Pengelly

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  • Miami’s Hedge Fund Week is a January Coachella for ‘Wall Street South’ as Ja Rule headlines and Peter Thiel and Jared Kushner hold court

    Miami’s Hedge Fund Week is a January Coachella for ‘Wall Street South’ as Ja Rule headlines and Peter Thiel and Jared Kushner hold court

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    No one in New York or LA orders a Carlyle Fresco.

    But that’s what they were mixing the other night by the pool at the famed Fontainebleau Miami Beach – a sure sign the hedge fund set was back in town.

    The tequila and grapefruit spritz was named in honor of the Carlyle Group Inc., which was one of the sponsors of a conference in the hotel.

    And, like so many things in South Florida these days, it smacked of one oh-so-sweet ingredient: money.      

    At times Miami seemed as if half of American finance had flown in for what’s prosaically known as Hedge Fund Week, a sort of Coachella for the fast-money crowd. The rolling series of conferences and parties swaggers through this area each January, during the height of the Florida winter season.

    “Who’s going to close a deal this week? Make some noise!” the DJ at LIV, the thumping mega nightclub in the Fontainebleau, shouted into the mic late Wednesday night. The suits in the crowd went wild.

    Now more than ever, the old Wall Street of New York is sizing up what Miami promoters breathlessly refer to as Wall Street South. Even skeptics wonder whether there’s more to this than hype. The pandemic prompted wealthy financiers to flock here for the low taxes and good weather. For now, they’re staying. 

    Where money goes, politicians follow. As President Joe Biden and former President Donald Trump head toward a likely rematch in November, money and influence are snaking through Miami. Even the city’s annual hedge fund confab gives off a new vibe this election season. This is no longer merely a meeting of money managers. This feels like a gathering of kingmakers.

    And this may not be a one-off: Florida has eclipsed California and Texas as the nation’s single largest source of donations to Republican presidential campaigns, racking up $30 million for GOP candidates in 2023.

    “They’re all going to be down here raising money,” Nitin Motwani, a derivatives trader-turned-condo-developer, said of presidential candidates.

    They’re here already.

    As Wall Street partied beachside at the Fontainebleau, Biden raised $6.2 million at a fundraiser a few miles away. Hedge-fund billionaire Henry Laufer, who co-founded the Medallion Fund at Renaissance Technologies with Jim Simons, co-chaired the event. Ninety miles north, in Jupiter, Florida, a group of lawyers raised another $1 million for the president, not far from Trump’s home and private club, Mar-a-Lago.

    “Miami is the place where everyone comes out,” said Chris Korge, a prominent Democratic fundraiser and attorney.

    The money is flowing in all directions. Some major Republican donors who were previously resistant to Trump have begun to turn toward him. Scott Bessent, former chief investment officer at Soros Fund Management, initially backed Wall Street’s early pick, Florida Governor Ron DeSantis. Late last year, Bessent switched to Trump and donated $250,000 to the former president’s super PAC, according to federal campaign filings. 

    “Over the summer, I became convinced that Donald Trump can win,” Bessent said.

    Others are holding out hope for Nikki Haley since DeSantis dropped out and backed Trump.

    The same day Biden was heading to Miami, real estate billionaire Barry Sternlicht insisted America needs a third alternative come November. “We’re people who don’t like the path that the country is on and don’t like our two choices at the moment,” he said on the sidelines of the Fontainebleau conference. 

    A few miles south, Citadel founder and Miami transplant Ken Griffin said he’d supported Haley’s campaign — later disclosing a $5 million gift — but stopped short of saying he would contribute more to her long-shot challenge. (Other business figures who’ve supported Haley include Henry Kravis, Stanley Druckenmiller and Kenneth Langone). 

    A familiar line at the parties and conference sidelines is that financial professionals tend to be “socially liberal but fiscally conservative.” Of course, they said the same in 2016, which led to Trump’s presidency and a hard-right shift in the Supreme Court.

    A big question for the 2024 election, which both Democrats and Republicans say could determine the future of American democracy, is how the financial donor class will strike that balance now.

    No one wanted to talk politics aboard the SeaFair, a $40 million swanky yacht cruising the azure waters of Biscayne Bay.  

    The occasion: another hedge fund cocktail party. This time, the host was Universa Investments, where Nassim Taleb, of “Fooled by Randomness” fame, is an adviser. Universa founder Mark Spitznagel moved his firm to Miami from Santa Monica, California, years before all the talk of Wall Street South.  

    Sitting near the open bar, Brandon Yarckin, the chief operating officer, insisted that politics never figures into Universa’s strategy of trying to profit from out-of-the-blue Black Swan events. “We don’t talk about politics,” Yarckin said as the Miami skyline shimmered in the distance.

    Taleb avoided the topic altogether. “No, no, I’m not going to talk about that,” he concluded. 

    One of the 200-or-so guests, Francesca Federico, co-founder and president of Twelve Points Wealth Management in Boston, repeated the socially liberal/fiscally conservative line. As for who wins in November, she said: “A bond is still going to be a bond, a stock will still be a stock.”

    Joining them aboard the 222-foot SeaFair was Miami Mayor Francis Suarez, who’s shot to national attention since 2020 by relentlessly selling the idea that Miami might one day rival New York as the US financial center. 

    It landed him a job at a prestigious law firm and other lucrative side gigs, he launched a failed presidential bid and is facing multiple investigations. On Wednesday, the Florida Democratic Party called on him to resign.

    Wall Street South isn’t a dream, Suarez told the crowd. It’s a reality. 

    Motwani, the developer and another major Miami booster, said that to him, Wall Street South is a state of mind. “We’re running on all cylinders,” Motwani said over the salsa dun of Buena Vista Social Club.

    Back at the Fontainebleau, one of the week’s gatherings, Global Alts 2024, was wrapping inside the thronging LIV nightclub.

    For two days, conference-goers had sat quietly as the likes of Michael Novogratz, Peter Thiel, Jared Kushner and Shaquille O’Neal went on about how and where to make money. Now, hundreds of them flooded onto the dance floor.

    Quaffing gin and tonics, Johnnie Walker Black Label and mediocre white wine, the revelers moved to the beat laid down by the DJ and the evening’s headliner, the early 2000s hit rapper Ja Rule. Later, as Ja Rule (real name: Jeffrey Atkins) lamented his age (he’s closing in on 50), he pulled off his T-shirt to reveal a sculpted six pack.

    “Let’s hear it for Global Alts 2024!” he yelled.

    Smoke machines pumped. Confetti rained down. Wall Street South danced on.

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    Michael Smith, Bloomberg

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  • Etsy’s stock is having its best day in seven months after Elliott takes ‘sizable’ stake

    Etsy’s stock is having its best day in seven months after Elliott takes ‘sizable’ stake

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    Investors bought up shares of Etsy Inc. on Thursday after the online crafts marketplace added to its board of directors a partner of hedge fund Elliott Investment Management L.P., which recently acquired a “sizable” stake in the company.

    Etsy
    ETSY,
    +9.31%
    said Marc Steinberg, who is responsible for public- and private-equity investments at Elliott, has been appointed to the board, effective Feb. 5, and will also join the board’s audit committee.

    “Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community,” Steinberg said. “We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation.”

    Etsy’s stock shot up 8% in afternoon trading, to pare earlier gains of as much as 14.2%. The stock was headed for its best one-day gain since it climbed 9.2% on July 11.

    Elliott’s stake was acquired in recent months, as the fund’s disclosure of equity holdings through the third quarter did not list Etsy shares.

    “Marc’s appointment reflects our ongoing commitment to enhance the perspectives and expertise on the Etsy Board,” said Etsy Chairman Fred Wilson. “We look forward to benefiting from his voice in the boardroom as a seasoned and experienced investor as we continue our journey of creating a leading global e-commerce platform.”

    Etsy now has 10 board members.

    Etsy’s stock has run up 18.6% over the past three months, but has tumbled 48.5% over the past 12 months. That’s compared with the S&P 500 index’s
    SPX
    18.7% rally over the past year.

    Read (December 2023): Etsy to cut 11% of staff as CEO says company is on ‘unsustainable trajectory’

    At an investor conference in December, Chief Executive Josh Silverman said business has slowed since the post-pandemic boom, as people have “had enough of buying things” and are now spending primarily on eating out and travel. Inflation and the loss of government subsidies was also weighing on spending.

    Still, Silverman said, Etsy is now about two and a half times bigger than it was before the pandemic, and the company has more active buyers than it did at the peak of the pandemic.

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  • Apple, Microsoft, Nvidia—What Tech Stocks Hedge Funds Are Buying and Selling

    Apple, Microsoft, Nvidia—What Tech Stocks Hedge Funds Are Buying and Selling

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    It’s filing season for a string of major hedge funds, and big tech names like Apple, Microsoft, and Nvidia were among the most-traded equities in the third quarter.

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  • Inside James Comey’s Bizarre $7M Job as a Top Hedge Fund’s In-House Inquisitor

    Inside James Comey’s Bizarre $7M Job as a Top Hedge Fund’s In-House Inquisitor

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    As head of security, Comey reported to Dalio’s longtime deputy Greg Jensen, who seemed eager to prove that he took the protection of Bridgewater’s secrets as seriously as Dalio. With little evidence of actual offending behavior to snuff out, they created their own. Comey helped come up with a plan to leave a binder, clearly labeled as Jensen’s, unattended in the Bridgewater offices. It worked like a charm. Comey watched as a low-ranked Bridgewater employee stumbled upon the binder and began to peruse it. Jensen and Comey put the employee on trial, found him guilty, and fired him, with Dalio’s approval.

    During and after Comey’s era at Bridgewater, tens of thousands of hours of the firm’s internal deliberations, arguments and trials were uploaded into what was called the “Transparency Library” and available for playback for all at the firm.

    Lordy, there was plenty to watch.

    No doubt Comey’s most infamous internal case was his prosecution of Bridgewater co-chief executive officer, Eileen Murray, who stood out like a pimple in Bridgewater’s blue-blooded executive suite. She’d grown up in a housing project in Queens, rarely wore skirts, never married, never had children, and talked frequently about her dogs. A former Morgan Stanley executive, she sent emails off the cuff, all lowercase, with typos, suggesting she was too busy to give anything her full attention.

    The proximate cause of Murray’s lesson in the application of The Principles was innocuous enough. A job candidate mentioned to a Bridgewater executive that he was familiar with the hedge fund’s head of accounting, Perry Poulos, one of Murray’s hires. The job candidate evinced surprise—didn’t they know Poulos had been fired from Morgan Stanley?

    Comey grabbed a former FBI agent on the Bridgewater staff and went to intercept the unsuspecting Poulos. The duo pulled him into a conference room without warning.

    “Hi, guys,” Poulos said.

    “We just want to know, is there anything in your background we should know about?” Comey responded.

    “I had some things there, but it’s all cleared up now.”

    “You wouldn’t mind if we ask a few questions and look a little more?”

    There’s really nothing to find, Poulos said.

    Go ahead. He exited the room, heart racing, and soon found Murray. She knew, as he did, that he had been let go from Morgan Stanley after questions were raised about his expenses. But Murray sensed a larger target at play. “It’s not you,” she told Poulos. “It’s me. They are trying to get to me.”

    Comey called in Poulos for another interview.

    “Did you talk to anyone about this?” Comey asked.

    “No.”

    “Are you sure?”

    “No, I haven’t talked to anyone.”

    “You live with Eileen, don’t you?”

    Knowing Bridgewater’s reputation for intimate relationships, Poulos assumed Comey was sniffing for a romantic angle. During the week, Poulos said, he sometimes spent the evening at Murray’s place, in separate bedrooms.

    “Even that evening, after we spoke, you didn’t talk to her?” Comey asked.

    “I don’t remember saying anything in particular.”

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    Rob Copeland

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  • WSJ News Exclusive | Hedge Fund Two Sigma Is Hit by Trading Scandal

    WSJ News Exclusive | Hedge Fund Two Sigma Is Hit by Trading Scandal

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    A researcher at Two Sigma Investments adjusted the hedge fund’s investing models without authorization, the firm has told clients, leading to losses in some funds, big gains in others and fresh regulatory scrutiny.

    The researcher, Jian Wu, a senior vice president at New York-based Two Sigma, was trying to boost his compensation, Two Sigma has told clients, without identifying Wu. He made changes over the past year that resulted in a total of $620 million in unexpected gains and losses, according to people close to the matter and investor letters. Two Sigma has placed Wu on administrative leave.

    Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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  • Worst October for Stocks in Five Years Has Investors Exiting Market

    Worst October for Stocks in Five Years Has Investors Exiting Market

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    (Bloomberg) — The VIX is at 20, stocks are on the brink of their worst October in five years, and every other day the bond market throws a fit.

    Most Read from Bloomberg

    For equity bulls conditioned to dive in at any sign of weakness, it’s getting to be too much. Across investor categories, they’re pulling money out and hardening a posture that is by some measures the most defensive in over a year.

    Surveys of professional managers show big-money allocators have cut their equities to levels last seen at the depths of the 2022 bear market. Hedge funds just pushed up single-stock shorts for an 11th straight week. Models of investor positioning show everyone from mutual funds to systematic quants reducing equity exposure well below long-term averages.

    Among trading sins, few are as unanimously pilloried as market timing, but that doesn’t keep it from happening in times of stress. Whether the latest exodus is the precursor to a rebound or a protracted period of pain is the big question heading into November.

    “It’s troubling that a market setback as internally deep as the current one hasn’t resulted in more improvement” in sentiment, said Doug Ramsey, chief investment officer at the Leuthold Group. “The ‘wall of worry’ accompanying much of the 2023 market action has morphed into a ‘slope of hope.”’

    Dip buyers are hard to find, with the S&P 500 falling more than 1% five different times in October and pushing the index into a correction on Friday. A gauge of projected price swings in the Nasdaq 100 Index hovers near the highest level since March. Even after tech finally caught a break Friday on solid earnings from Amazon.com Inc. and Intel Corp., the Nasdaq 100 closed out the worst two-week drop this year and is poised for its steepest October loss since 2018.

    A poll by the National Association of Active Investment Managers shows money managers rolling back in exposures to October 2022 levels. Equity positioning has fallen below long-term averages for most investor categories, particularly hedge funds and mutual funds, according to Barclays Plc analysis of CFTC data. A nearly three-month ramping of short positions by professional speculators is the longest increase in the history of data, says Goldman Sachs Group Inc.’s prime brokerage.

    Wall Street’s “fear gauge,” the Cboe Volatility Index, held above 20 for a second consecutive week after staying below the threshold more than 100 days. Bond volatility gave investors more reason to worry as gyrations of more than 10 basis points on Wednesday and Thursday put further pressure on an earnings season where companies that miss estimates are getting whacked.

    “With yields much higher than they were six months ago, the stock market is going to have to fall to valuation levels that are more in line with historical levels,” said Matt Maley, chief market strategist at Miller Tabak & Co. “The most important issue is the very large divergence that has developed between the bond market and the stock market.”

    From a contrarian standpoint, all the gloom is a positive, suggesting latent buying power should sentiment ever flip. Several strategists see that happening. Big reversal in equities last year were closely correlated with changes in institutional and retail positioning. Gains came after investors slashed bullish bets, and declines occurred after buying sprees.

    Strategists at Barclays said lower exposure to stocks, bullish technical signals and seasonality are raising the odds of a year-end rally. It’s a message that was echoed earlier at Bank of America Corp. and Deutsche Bank AG.

    “Fear is uncomfortable, but it’s a healthy dynamic in markets,” said Callie Cox at eToro. “If investors are braced for the worst, they’re less likely to sell all at once if bad headlines do pop up.”

    Predicting market inflection points is impossible, of course. With investors digesting the Fed’s higher-for-longer message and key inflation metrics still showing signs of life, negative sentiment may prove justified. With the Fed shrinking its portfolio of government securities at a rapid pace, it puts pressure on investors looking for clues of how high can yields go.

    “The higher-for-longer message and recent inflation signs suggest that bonds will not be stabilizing any time soon,” said Peter van Dooijeweert, head of defensive and tactical alpha at Man Group. “Related equity weakness off the rate rise may persist — especially if earnings don’t deliver.”

    –With assistance from Lu Wang.

    Most Read from Bloomberg Businessweek

    ©2023 Bloomberg L.P.

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  • Activist Elliott makes inroads at Catalent to build value. Here’s what could happen next

    Activist Elliott makes inroads at Catalent to build value. Here’s what could happen next

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    Rows of glass vials in a biologics laboratory in Sweden. Photographer: Mikael Sjoberg/Bloomberg

    Bloomberg Creative | Bloomberg Creative Photos | Getty Images

    Company: Catalent (CTLT)

    Business: Catalent develops and manufactures solutions for drugs, protein-based biologics, cell and gene therapies, and consumer health products worldwide. The company operates through four segments. First, there’s Softgel and Oral Technologies, which provides formulation, development, and manufacturing services for soft capsules for use in a range of customer products. Biologics provides biologic cell-line, and it develops and manufactures cell therapy and viral-based gene therapy. This segment also handles the formulation, development and manufacturing for parenteral dose forms, including vials and prefilled syringes. The Oral and Specialty Delivery segment offers formulation, development and manufacturing across a range of technologies, along with integrated downstream clinical development and commercial supply solutions. Finally, the Clinical Supply Services segment offers manufacturing, packaging, storage, distribution and inventory management for drugs and biologics, as well as cell and gene therapies in clinical trials.

    Stock Market Value: $8.86B ($49.16 per share)

    Activist: Elliott Investment Management

    Percentage Ownership:  n/a

    Average Cost: n/a

    Activist Commentary: Elliott is a very successful and astute activist investor, particularly in the technology sector. Its team includes analysts from leading tech private equity firms, engineers, operating partners – former technology CEOs and COOs. When evaluating an investment, the firm also hires specialty and general management consultants, expert cost analysts and industry specialists. The firm often watches companies for many years before investing and have an extensive stable of impressive board candidates. Elliott has not disclosed its stake in this investment, but based on the firm’s history, we would expect it to be approximately $1 billion.

    What’s happening?

    On Aug. 29, Elliott and the company entered into a cooperation agreement pursuant to which Catalent agreed to temporarily increase the size of the board from 12 to 16 directors and appoint Steven Barg (global head of engagement at Elliott), Frank D’Amelio (former CFO and EVP, global supply, of Pfizer), Stephanie Okey (former SVP, head of North America, rare diseases, and U.S. general manager, rare diseases at Genzyme) and Michelle Ryan (former treasurer of Johnson & Johnson). The company will reduce the size of the board at the 2023 annual meeting; it agreed to nominate a slate of 12 candidates, including the four new directors. Catalent also agreed to establish a strategic and operational review committee, charged with conducting a review of the company’s business, strategy and operations, as well as its capital allocation priorities. This committee will include new directors Barg and Ryan. Further, John Greisch (former president and CEO of Hill-Rom Holdings) has been appointed executive chair of the board and will also chair the newly formed committee. Elliott agreed to abide by certain customary voting and standstill provisions.

    Behind the scenes

    Catalent is an outsourced manufacturer in the pharmaceuticals industry. This is a stable business in a growing industry operating in an oligopoly. It’s one of the three largest global contract development and manufacturing organizations, next to Lonza and a division of Thermo Fisher. The company was always seen as a market leader, but in the middle of 2022 the tides began to turn, largely due to two main factors. First, Catalent was negatively affected by a Covid cliff: During the pandemic, the government mandated that the company shut down much of its manufacturing and start producing Covid vaccines. This production led to $1.5 billion in revenue that recently went to zero. Second, Catalent had several self-inflicted wounds, including an acquisition that did not pan out like they expected and operational and regulatory issues. These are fixable issues that have sunk the stock from $142.35 in September 2021 to $48.82 this month, but they do not necessarily adversely affect the long-term intrinsic value of the company. That makes this situation an excellent opportunity for an activist.

    In its most simplistic form, there are two basic elements to an activist campaign: success in the activism (for instance, getting the company to adopt your agenda) and execution of the activist agenda. Elliott has already accomplished the former, having entered into the cooperation agreement for four board seats. There’s also the establishment of a strategic and operational review committee and appointment of Greisch as executive chair of the board and as chair of the newly formed committee. While this committee’s purview is business, strategy and operations, we expect it will put an emphasis on strategy.

    This is a very strategic asset, and there are likely to be several interested acquirers. In fact, on Feb. 4, Bloomberg reported that fellow life sciences conglomerate Danaher had expressed interest in purchasing Catalent at a “significant premium.” Catalent ended Feb. 3 at $56.05 per share, and the stock popped nearly 20% the following trading session. Ultimately, a deal with Danaher never materialized. Additionally, companies like Merck could be interested in buying the company or parts of it. Another possibility is an acquisition by private equity, of which Elliott’s PE arm could be an interested party. While as an activist Elliott will do whatever it feels is necessary to enhance shareholder value, in the past the firm has made significant use of the strategy of offering to acquire its portfolio companies as the best catalyst to enhance shareholder value. We would not be surprised to see that happen here. Catalent is the right size for Elliott, which recently partnered on buyout deals for Citrix Systems and Nielsen Holdings, each for roughly $16 billion. Elliott has also recently shown interest in this industry, partnering with Patient Square Capital and Veritas Capital to acquire Syneos Health (SYNH) for $7.1 billion. That acquisition is expected to close in the second half of 2023. Like Catalent, Syneos is an outsourced pharma solutions company: It outsources R&D for pharmaceutical companies, whereas Catalent outsources manufacturing.

    Elliott quickly got Catalent to pursue a strategic exploration agenda, which indicates to us that there was not a lot of pushback by management. We expect that this review will conclude with a sale of the company. However, it is worth noting that Catalent has a relatively new CEO at the helm, Alessandro Maselli, who was promoted from president and COO in July 2022. A lot of the operational issues happened during his watch. If this does turn from a strategic review to an operational review, there is no guarantee that he keeps his job.

    Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.

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  • The economy is doing better than anyone thinks, but these troubles are in the pipeline, says Bill Ackman

    The economy is doing better than anyone thinks, but these troubles are in the pipeline, says Bill Ackman

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    Stock investors are showing some hesitancy for Tuesday, with big signals on the economy coming this week via consumer prices and retail sales. Ahead of that, Apple is expected to tempt consumers with yet another new iPhone on Tuesday.

    How much should investors be worrying right now? Our call of the day from Pershing Square Capital Management manager Bill Ackman says that in the near term, we can relax a little, but it isn’t all roses.

    Read: Hedge funds have bailed on the U.S. consumer in a big way, Goldman Sachs data finds

    He told the Julia La Roche Show in an interview where he felt like he had a “crystal ball of what was going to happen,” starting in January 2020 with the COVID-19 outbreak, and that carried on through interest rates and the economy. Indeed, the manager reportedly made nearly $4 billion on a couple of pandemic-related bets.

    “I would say the crystal ball has clouded a bit in the last period. I think these are unusual economic times and perhaps we always say that, but I don’t think this is a pattern that has been repeated…or it hasn’t been for more than 100 years,” he said.

    But he remains near-term upbeat. “For two years, people have been saying that recession’s around the corner and you know we’ve had a very different view, and continue to have this view that I think people are coming around to, that the economy is actually still quite strong,” he said.

    And while those on lower-income rungs have burned through a lot of COVID savings, he thinks the economy has yet to really see impact from the big fiscal stimulus seen in recent years.

    Looking down the road though, Ackman has got a stack of concerns over the economy. He sees about a third of federal debt due to get repriced meaning that over a relatively short period of time, “interest expense will become a much bigger part of the deficit that is not going to be a contributor to the economy.”

    And while higher interest rates do help savers, ultimately that will be a big drag on the economy, he said, adding that rising inflation, mortgage rates, car payments and credit card rates, are all set to slow the economy.

    “We’re still in the midst of a war and there’s political uncertainty you know with an upcoming election,” he said. That partly explains Pershing Square’s hedge via a short position on the 30-year Treasury bond
    BX:TMUBMUSD30Y
    that he laid out in a tweet in early August.

    For roughly a year, long-term Treasury yields have been trading below short-dated ones, which is known as an inverted yield curve, a phenomenon that’s often seen as a precursor to recession.

    “I don’t see inflation getting back to 2% so quickly, if at all, and if in fact we’re in a world of persistent 3% inflation, you know it doesn’t make sense to have a 4.3%, 4.25% Treasury yield,” he said.

    Other risks? Ackman remains worried about regional banks following the spring crisis, as many have big fixed-rate portfolios of assets that have gotten less and less valuable as rates rise. “I would say the commercial real estate picture has not gotten better, if anything, you know, you’re going to start seeing real defaults, particularly with office assets,” he said.

    “Regional banks have the most exposure to construction loans so they are going to be a lot of construction loans that won’t be able to repaid. There will be a lot of restructurings, so either the investors groups are gonna have to put in a lot more equity or the banks are going to start taking some losses,” he said.

    Ackman says investors also face a presidential campaign that could add some stress. The hedge-fund manager said he’s surprised there have not been “more and better alternative candidates” for the 2024 campaign over President Joe Biden and former President Donald Trump.

    He’d like to see JPMorgan Chase & Co. CEO Jamie Dimon toss his hat in the ring and believes Biden is “beatable,” by a strong candidate.

    Ackman himself said it’s “possible,” he himself could run someday, but he’s more focused on having a better investment track record over Berkshire Hathaway Chairman and CEO Warren Buffett — and needs some 30 years to match the Oracle of Omaha.

    Read: Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

    The markets

    Stock futures
    ES00,
    -0.36%

    NQ00,
    -0.45%
    are tilting south, led by tech, with Treasury yields
    BX:TMUBMUSD02Y

    BX:TMUBMUSD10Y
    steady to a touch lower and the dollar
    DXY
    recovering some ground.

    Read: Watch this ‘canary in the coal mine’ for signs of trouble in markets, Neuberger Berman CIO says

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    Oracle shares
    ORCL,
    +0.31%
    are down 10% in premarket trading after disappointing guidance from the cloud database group.

    Apple’s
    AAPL,
    +0.66%
    big event kicks off at 1 p.m. Eastern, with the launch of the pricier iPhone 15 expected to be on the agenda.

    Hot ticket. Arm Holdings’ IPO is already 10 times oversubscribed and bankers will stop taking orders by Tuesday afternoon, Bloomberg reports, citing sources.

    Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years

    Upbeat results are boosting shares of convenience-store operator Casey’s General Stores
    CASY,
    -1.02%    .

    Packaging giant WestRock
    WRK,
    -1.48%
    and rival Smurfit Kappa
    SK3,
    -8.87%
    have announced a stock and cash tie up. WestRock shares are up 8% in premarket.

    Read: U.S. budget deficit will double this year to $2 trillion, excluding student loans

    Best of the web

    No better than gambling? Amateur investors are piling into 24-hour options.

    Demand for oil, coal, gas to peak this decade, IEA chief says

    U.S. takes on tech giant Google in landmark case.

    The chart

    Bank of America’s global fund manager survey for September sees investors still bearish, but no longer on the extreme side. Here’s the chart:

    Read: Fund managers just made their biggest shift ever into U.S. stocks — and out of emerging markets

    The tickers

    These were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern:

    Ticker

    		 Security name
    TSLA,
    +10.09%         		Tesla
    AMC,
    +2.23%         		AMC Entertainment
    CGC,
    +81.37%         		Canopy Growth
    NVDA,
    -0.86%         		Nvidia
    GME,
    -3.90%         		GameStop
    AAPL,
    +0.66%         		Apple
    ACB,
    +72.17%         		Aurora Cannabis
    NIO,
    +2.89%         		Nio
    MULN,
    +5.77%         		Mullen Automotive
    AMZN,
    +3.52%         		Amazon

    Random reads

    “Worst investment ever.” Brady Bunch fan buys original house for cut-price $3.2 million.

    And the house from the “Halloween” slasher films just sold for $1.8 million.

    China may ban clothes that hurt people’s feelings.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

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  • Private equity, hedge funds sue SEC over new disclosure rules

    Private equity, hedge funds sue SEC over new disclosure rules

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    A consortium of groups representing the private funds industry filed a lawsuit against the Securities and Exchange Commission Friday in an attempt to block new rules that would require private equity and hedge funds to disclose quarterly performance, fees and expenses.

    The rules, adopted last week, would also ban so-called side letters, or agreements between a fund and specific investors that give them preferential treatment, unless those arrangements are made available to all investors.

    Read more: SEC votes to require private equity and hedge funds to disclose performance and fees

    “The SEC has overstepped its statutory authority and core legislative mandate, leaving us no choice but to litigate,” said Bryan Corbett, president and CEO of the Managed Funds Association, one of the litigants in the suit.

    “The Private Fund Adviser rule will harm investors, fund managers, and markets by increasing costs, undermining competition, and reducing investment opportunities for pensions, foundations, and endowments,” he added.

    The MFA was joined by several other industry groups in filing the lawsuit, including  the National Association of Private Fund Managers, National Venture Capital Association, American Investment Council,  Alternative Investment Management Association and the Loan Syndications & Trading Association.

    An SEC spokesperson told MarketWatch that “the Commission undertakes rulemaking consistent with its authorities and laws governing the administrative process, and we will vigorously defend the challenged rule in court.”

    SEC Chair Gary Gensler argued in recent speeches and statements that the new rules are necessary to protect investors, including the pension funds and endowments that have increasingly turned to alternative investments in recent years to boost returns.

    He said in a May speech that private funds are of growing importance to the U.S. economy, noting that advisers report that they now manage $25 trillion in assets — up from $1 trillion in 1998 — surpassing the size of the U.S. banking sector.

    “The private fund industry plays an important role in each sector of the capital markets,” he said.

    “It also plays an important role for investors, such as retirement funds and endowments,” he added. “Standing behind those entities are a diverse array of teachers, firefighters, municipal workers, students, and professors.”

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