stocks

Citi's research move a good idea

Jim Kim — Wed, 13 Aug 2008 07:12:51 -0400

Citi has confirmed that it is indeed moving its stock research unit out of Smith Barney, where it was placed following the stock research scandals of yesteryear, and back into institutional clients' business. It will become part of a new research unit that will combine fixed income and economic and equities research, and lead to some cost savings. Breakingviews argues this is a good move. The Chinese Walls that the settlement with Eliot Spitzer brought forth will still be in place, and the analysts will not be reporting to banking heads. They'll report instead to chief operating officer Hamid Biglari. It will be interesting to see what kind of research emerges from this move. The bank may try to offer a blend of analysis that treats stocks, debt and other securities as a whole, along the lines of the savvy work at Creditsights. We'll see.

For more:
- here's the Breakingviews article

Ratings agencies' practices under more fire

Jim Kim — Wed, 09 Jul 2008 07:44:18 -0400

In its probe of credit rating agencies' practices, the Securities and Exchange Commission collected and reviewed more than 2 million emails and instant messages. Whew! It has uncovered a bevy of "evidence" that reveals some analysts to be very skeptical, even uncomfortable, with the ratings they were handing out. It recalls the probe into tainted Wall Street stock analysts, some of whom were against all those buy ratings on flimsy Net stocks. One email noted by the Financial Times: one product did not capture "half" of the deal's risk, but "it could be structured by cows and we would rate it". Another one referred to an "even bigger monster--the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters." The big three have agreed to remedial action. But you have to wonder if enforcement action is coming.

For more:
- here's the article

Institutions betting on 'core satellite on steroids'

Jim Kim — Tue, 08 Jul 2008 13:55:38 -0400

The notion of core-satellite investing seems to be regaining some of its old popularity, according to Pensions & Investments. More institutions, ever mindful of costs and ever in need of enhanced returns, are seeking to invest in funds that offer a core portfolio, essentially a passive-type product, coupled with various satellite investments in highly concentrated equity portfolios of perhaps 15 to 20 stocks each. Obviously, this is in keeping with the trend toward separating alpha and beta. All too many funds charge alpha-premised fees for beta-like returns. Not a good deal for investors. The risks may rise a bit but institutions know what they are doing, and what they are paying for.

For more:
- here's the article

Feds crack down on stock lending abuses

Fri, 23 May 2008 06:59:56 -0400

As the number of hedge funds willing to short stocks has grown in recent years, so has the complexity of finding enough shares to borrow. The stock-lending arena turned into a rough-and-tumble sort of market in which there were lots of whispers about dubious practices. Inevitably, regulators were forced to take a look. The result: Federal indictments have been handed up, charging eight individuals with various stock-lending crimes at investment banks, notably Morgan Stanley and Janney Montgomery Scott. The AP notes that the investigation found that stock-loan desk employee traders steered millions in fraudulent fees to so-called finders in exchange for bribes.

For more:
- here's the AP article

Related Article:
Controversial family business: stock lending

Citigroup to combine debt and equities units

Fri, 16 May 2008 06:59:54 -0400

Financial News Online reports that Citigroup has plans to combine its equity and debt capital markets origination divisions into a single unit. The move follows like-minded moves by JPMorgan Chase and UBS. The point is to unlock efficiencies that might result from integrated product offerings, and to provide customers a single point of contact. Companies have increasingly diverse capital markets needs, and an integrated sell that links debts, stocks and derivatives makes a lot of sense on paper. Of course, the key here is execution, stitching together a cohesive logical pitch to customers. Some might see this as an interesting test of how well Citigroup can adapt in this new era.

For more:
- here's the Financial News Online article

New era for Bill Miller opening up?

Mon, 12 May 2008 06:59:58 -0400

We tend to think of Bill Miller as the guy who manages the $12 billion Legg Mason Value Trust, famous for having beat the S&P 500 for 15 years straight--a streak that ended recently. But as the New York Times points out, he's also chairman of Legg Mason Capital International, which is taking its lumps right now. It had large stakes of Yahoo and Countrywide. But these are the times when talent really shines. Some may think he's lost his touch. Or maybe he was due for a drought. But he's also thinking of shifting strategies in a way that would focus the fund on more stocks, or just a few dozen. He has his team scouring for opportunities, and you get the feeling that if Legg Mason Capital continues to lag, it won't be because of a lack of trying.

For more:
- here's the New York Times article

Hedge funds and the new, new math

Wed, 09 Apr 2008 06:59:55 -0400

After the credit markets tanked, a good number of quantitative hedge funds tanked so much so, that some people started screaming the Emperor has no clothes. But Wall Street isn't giving up on quants. In fact, these funds are pressing ahead with even more radical concepts. According to Alpha magazine: "They are pressing into new realms of computational finance, applying concepts from molecular physics, mathematical linguistics, artificial intelligence and other scientific disciplines." Some firms are "pinning their hopes on machine learning - statistical methods that allow computers to identify relationships in financial data and make predictions from them." One big theme is the quant designers are trying to incorporate other assets classes into their models, not just stocks.

For more:
- here's the Alpha article

Related Articles:
Are quant funds really dead? Quant funds article
Some perspective on hedge funds. Hedge funds article
Man results hint at the future of hedge funds. Hedge funds article
Are smarter algorithms in the works? Algorithms article

Some perspective on hedge funds

Thu, 03 Apr 2008 07:59:55 -0400

Are we getting to the point that the number of hedge funds will inevitably rise past the number of stocks out there? Seems likely. Some new data from Crédit Agricole Structured Asset Management finds there now are nearly 10,000 hedge funds. That's twice as many hedge funds as there were in 2002 and three times as many as in 2000. Nearly 40 percent of those hedge funds are no more than two years old. Not even a massive credit crisis has put much of a dent in those numbers. What we're seeing is the kind of maturation that characterized the early days of the mutual fund industry. A lot of back office-like infrastructure work still needs to be done, but the industry is here to stay.

For more:
- here's an item from the Institutional Investor Web site

Related Articles:
More hedge fund failures this year? Article
Hedge funds turn away from sell-side research. Article
Big hedge funds get bigger. Article
Hedge fund activism shifts online. Article
Hedge fund boom moderating. Article

Another hedge fund in trouble?

Wed, 02 Apr 2008 07:59:55 -0400

Pardus Capital Management, a New York hedge fund, became the latest to halt redemptions, according to Financial News Online. The twist here is that the fund was not a credit fund--and it used no leverage. Rather, it invested in a small number of stocks, such as UAL and General Motors and Virgin. It remains to be seen if we'll see a wave of equity-oriented hedge funds take a fall. The move is another reminder of the extreme volatility that many funds face. Investors in this fund however, while unhappy, may be better off riding out the storm.

For more:
- here's the Financial News Online article

Related Articles:
More hedge funds shutting down redemptions. Article
Another Bear Stearns fund in trouble? Article
Another hedge fund to close. Article

SPOTLIGHT: Big withdrawals from stock funds

Tue, 01 Apr 2008 07:59:52 -0400

Equity mutual funds have seen about $100 billion pulled by investors in the first three months of the year. Ouch! For now, it seems people have soured on mainstream stocks. Money market funds and commodities--go figure--remain popular. Article