CNBC

The sunny side of hedge fund dislocation

Jim Kim — Tue, 11 Nov 2008 17:12:35 -0500

"There's going to be a lot less hedge funds in the industry--anywhere from 30% to 50%--and I tend to err on the 50% side." So said Peter Carey, senior investment officer for alternatives at the $153 billion New York State Common Retirement Fund at the Asset Allocation Forum. As if on cue, CNBC reported that hedge fund family Tontine Partners will shutter two of its funds. Tontine Capital and Tontine Partners are both suffering through rotten years; it will still operate Tontine 25 and Tontine Financial, however. Which brings us to the flip side of Carey's comments, "That's a healthy development, because there's a lot of folks out there that shouldn't be in this business, or at least be shouldn't be charging the fees that they're charging." He's not referencing any specific fund families. His general point is that he senses lower fees, better treatment, better access to top funds and "unique" partnering opportunities--"deals I don't think we've ever seen."

For more:
- here's more on Carey from FINalternatives
- here's more on Tontine from CNBC

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Navigating the Hedge Fund Maze - October 2008

Lots of rumors about Goldman Sachs

Jim Kim — Tue, 11 Nov 2008 09:42:33 -0500

Goldman Sachs' shares are at a five-year low and most people now assume that the bank will post its first quarterly loss as a public company. The talk now centers on whether a big capital raise is in the works. The Financial Times reports that Goldman executives have approached some big Japanese firms, notably Nippon Life and Mizuho Bank, about investment. Mizuho apparently took a "half-hearted" look at Goldman's books but then said no. Goldman also held talks in September with Sumitomo Mitsui Financial Group. CNBC has said that a secondary offering does not appear to be in the works, but who knows? There are lots of storm clouds looming, including some turbulence in the prime brokerage industry, which we've noted.

For more:
- here's the Financial Times article

Richard Fuld not punched after all?

Jim Kim — Fri, 17 Oct 2008 13:50:30 -0400

Were all the reports that Lehman Brothers CEO Richard Fuld was knocked out by an angry employee merely cases of wishful thinking? After the story was reported on CNBC, it really took on a life of its own. But New York Magazine seems to have gotten to the bottom of it. The bank denies it, as does does the gym manager. The incident was said to have happened on a Sunday, when the gym is closed. Article

New short derivative coming

Jim Kim — Wed, 24 Sep 2008 15:24:14 -0400

Single stock futures never really took off. They might have been useful this time out on shorting, but not to worry. CNBC reports that a new derivative is coming soon that will allow hedge funds to hedge long positions. They will not be used to take net short positions. Article

- see the SEC's list of banned short-sale stocks

Lehman Brothers closer to Neuberger Berman deal?

Jim Kim — Mon, 08 Sep 2008 13:00:38 -0400

CNBC.com reports that Lehman Brothers is moving quickly to sell prized fund company Neuberger Berman. The partners of the asset management unit were told by executives that they may even meet with potential buyers soon. What does such a sale mean? Well, as CNBC.com notes, it would suggest that other capital raising endeavors are not really working. But let's assume a deal goes through and Lehman is successful in creating a "bad" bank. What does leave for the new Lehman Brothers? CEO Richard Fuld basically envisions a boutique along the lines of Lazard Freres, a deal house. No longer a fixed income power. No longer a firm with aspirations of being another Morgan Stanley. Would Fuld run the shop? Not likely.

For more:
- here's the article

Lehman's latest worry: Neuberger Berman execs

Jim Kim — Sun, 24 Aug 2008 09:52:16 -0400

Lehman Brothers already has a lot to worry about, so what's one more thing? CNBC reports that Neuberger Berman executives, led by long-money manager Marvin Schwartz, are starting to agitate for a spinoff of the wealth management firm. If Lehman can't sell the unit--and it looks like it can't--perhaps the board will have to consider it seriously. The fall of Lehman's stock has hit many of them hard, as they were paid in Lehman shares. Many signed non-competes, which means they are stuck, or they can quit. Meanwhile, many of the firm's retail brokers are being recruited hard by other firms. Needless to say, they are dismayed. So the stakes are heading higher. If employees and Lehman execs ever lose confidence in CEO Richard Fuld, it could really complicate matters. Perhaps they already have.

For more:
- here's the article

Wells Fargo on a roll?

Jim Kim — Tue, 19 Aug 2008 21:13:05 -0400

On the institutional side, has anyone really sailed through the credit crunch? The conventional wisdom used to be that Goldman Sachs and JPMorgan Chase had, but that may be premature. Relatively speaking, of course, they've done better than their peers. On the consumer side, Wells Fargo seem a better un-caveatted answer. On CNBC, CEO John Stumpf said that "There's actually less competition. People are inwardly focused trying to fix their balance sheets. We're out trying to grow ours." Meredith Whitey has noted, however, that the company recently shifted the threshold to write off a soured home equity loan from 120 to 180 days. This reduces potential charges, but it also gives the bank more time to work things out.

For more:
- here's the CNBC article

Related Article:
Man bites dog: Wells Fargo boosts dividend

Ex-CNBC anchor still seeking hedge fund glory

Jim Kim — Wed, 13 Aug 2008 21:14:15 -0400

Remember Ron Insana, the one-time CNBC anchor. Recall that he left the network in 2006 to pursue a career in the hedge fund industry. He formed a fund-of-funds, aiming to capitalize on his knowledge of the hedge fund industry. His former network has reported that he is now winding down Insana Capital Partners. He reportedly managed to raise about $100 million for his Legends Fund, which is peanuts in the industry. But the effort was not a complete waste. He apparently has landed a job as managing director at SAC Capital, one of the industry's big boys. It's unclear what his role there will be. Media relations, perhaps?

For more:
- here's an article from HedgeFund.net

Lehman in talks with BlackRock again

Jim Kim — Sun, 03 Aug 2008 10:25:32 -0400

Back in June, it was reported that Lehman Brothers was in talks with BlackRock about various mortgage-related securities. No deal ever emerged. Now comes word from CNBC that the two are once again in talks. It may be that Lehman Brothers is yearning for a Merrill Lynch-like deal to get rid of its collateralized debt obligation exposure once and for all (whether Merrill's deal does that is a matter of debate). It may be that BlackRock is driving a hard bargain here. I think we can assume that CDO valuations are lower now than in June. If the Merrill deal ends up setting a precedent, that would be good for all potential buyers out there, given the the generous financing that Merrill Lynch extended to Lone Star. BlackRock maybe in a position to ask for something similar.

For more:
- here's the CNBC article

Tough situation getting worse for Lehman Brothers

Jim Kim — Tue, 15 Jul 2008 13:34:49 -0400

The conventional wisdom is that Lehman Brothers will not implode the way Bear Stearns did, thanks mainly to its access to the Fed credit facility. But as one Lehman short seller puts it via Seeking Alpha, "the expectations seem to anticipate that there will be an orderly, gradual unwinding of Lehman Brothers supported by the Fed promise [or actual supply] of liquidity, where shareholders likely get wiped out [or close to it], and senior lenders are likely to recover most of their money." Not a pretty picture. Given that there doesn't appear to be any real buyers out there, and that capital raising will be hard, some are suggesting that a management-led buyout may be the answer. The New York Post reports that CEO Dick Fuld is getting serious about such a move. The firm may be cheap enough, but it certainly cannot handle a whole lot more debt. There are also rumors that Lehman may sell money manager Neuberger Berman, which makes a lot of sense.

For more:
- here's the item on Seeking Alpha
- here's the New York Post item
- here's a CNBC article
- here's a bullish case for Lehman. Item