capital management

Tricky terrain: Distressed mortgage assets

Jim Kim — Wed, 12 Nov 2008 13:42:05 -0500

So is now the time to jump into distressed mortgage securities? A lot of funds thinks so, but some may have jumped a bit early. Fortress Investment Group has been lumped into the "a bit early" category. But for Bryan Caisse, an 18-year veteran of the mortgage markets, the time is now. He is launching Huxley Capital Management with backing from a United Arab Emirates-based investor, reports Fortune. Distressed mortgage asset-oriented hedge funds have been one of the few growth areas in a middling industry this year. No fund seems to have hit a home run going long on mortgage bonds. But at some point, a nadir has to be reached. Caisse tells the magazine that others have stumbled on overly aggressive use of leverage, improper hedging and failing to reckon with liquidity issues. Hopefully, he'll fare better.

For more:
- here's the article

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Mortgage Assets news from FierceFinance

Wachovia execs to get big payouts?

Jim Kim — Tue, 30 Sep 2008 17:40:56 -0400

Here's some grist for the political mills that are churning in high gear right now: Three of Wachovia's top executives have change-in-control agreements that could result in multi-million payouts if they leave after Citi buys the company, reports bizjournals. Ben Jenkins, head of Wachovia's general bank, would receive $13.3 million in severance payments and a pro-rated bonus of $3.7 million. Steve Cummings, head of corporate and investment banking, would get $12.8 million in severance and a bonus of $3.75 million. And David Carroll, head of capital management, would get $10.3 million in severance and a $2.75 million bonus. The government assisted in the deal. As for CEO Robert Steel, we applauded his move in July to use his own money to buy $16 million worth of Wachovia stock (in the $15 to $17 a share range). He's going to lose most of that, but he put his money where his mouth was. He deserves credit.

For more:
- here's the bizjournals article

Hedge funds line up behind Icahn on Yahoo

Thu, 22 May 2008 06:59:57 -0400

Yahoo may have been able to stare down Microsoft at the bargaining table, but we may yet see big M&A fees from a deal. The catalyst in all this remains Carl Icahn. Following his lead, an all-star cast of hedge funds managers have aligned themselves against Jerry Yang and Yahoo, which likely wasn't counting on this sort of shareholder response. T. Boone Pickens told the New York Post, "When I saw what he did, I jumped in behind him." Others include John Paulson, still basking in the glow of his stunning 2007 ($3 billion) and Dan Loeb of Third Point. The Post reports Farallon Capital Management, Appaloosa Management and Mason Capital Management are among those who have written Yahoo! board members to expressing their displeasure.

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

Oaktree raises massive distressed debt fund

Tue, 20 May 2008 06:59:54 -0400

We've noted that valuations have improved for some on-the-brink debts as of late, notably leveraged loans and some credit default swaps. The trading psychology seems to be improving in part because of the massive bets that private equity firms and hedge funds seem to be making on distressed debts. Case in point: Buyout firm Oaktree Capital Management now has raised a whopping $10.6 billion fund--the OCM Opportunities Fund VIIb--the largest-ever distressed debt fund, according to Financial News Online. Despite the bump in prices, lots of LBO debt may come under pressure if portfolio companies stumble. I do not think that they are late to the game at all. They're not making short-term bets; they expect real carnage.

For more:
- here's the article

Clear Channel trial to get underway

Fri, 02 May 2008 06:59:55 -0400

The court battle pitting six banks--including Citigroup, Deutsche Bank, Morgan Stanley, Wachovia--against private equity firms Bain Capital and THL Partners is expected to get underway next week. You can bet it will be closely watched. The private equity firms are aiming to compel the banks to go through with the deal they struck to finance the purchase of Clear Channel. Of course, the credit mess has put the banks in a bind. The latest twist is that two hedge funds seem to be interjecting themselves into the fray. The New York Post reports that Pentwater Capital Management filed suit for "tortuously interfering" with the deal. Highfields Capital is expected to follow suit.

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

Behind the scenes at UBS

Tue, 22 Apr 2008 06:59:57 -0400

UBS's "fall from grace," as the Financial Times puts it, was nothing short of stunning. The funny thing is, that it was bound and determined not to be undone like this. Way back in 1988, in the wake of the Longterm Capital Management crisis, the bank decided: never again. It adopted tough risk control, overseen by top executives, that worked from a reputation point of view; it came to be seen as prudent lender. But the controls were aimed at counterparty risk, not market risk. And it obviously did not prevent a headlong rush into CDOs and other products, or into risky credit oriented hedge funds.

For more:
- here's the Financial Times article
- here's an AP article on UBS letter blaming subprime risks

Search the web for: UBS | Longterm Capital Management

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One way to deal with the crunch

Fri, 21 Sep 2007 06:59:58 -0400

Absolute Capital Management is reeling. Redemption requests have poured into the $2.1 billion hedge fund complex. Unfortunately, like other funds, it is caught with a lot of illiquid securities and it will not be easy to sort it out. It has come up with a novel plan. According to FINalternatives, the firm is restructuring the funds to set up a "side pocket share class structure," transferring illiquid positions into separate portfolios. Investors will soon hold two types of shares: one for the liquid portfolio and one for the illiquid portfolio share. It would also require a 12-month lock up. Can it sell investors on the idea? Maybe. The fact is that it might represent the best way to salvage their investment. It all depends on how the two share fare. It's possible that the liquid shares could offset the illiquid shares a bit.

For more:
- here's the FINalternatives article

ALSO NOTED: More NYMEX buyout rumors swirl; Lehman to buy LightPoint Capital Management; and much more...

Thu, 12 Jul 2007 20:01:30 -0400

Company News:
> Lehman to buy LightPoint Capital Management. Article
> CME's buyout of CBOT to close. Article
> More NYMEX buyout rumors swirl. Article
> Lehman bullish on Discover. Article
> Countrywide CEO sells some stock. Article
> Man Group assets rise in first quarter. Article
> Cerebus optimistic about Chrysler. Article

Industry News:
> Trust banks' earnings could exceed forecasts. Article
> More on the end of the specialists. Article

And Finally... Manhattan parking spot selling for $225,000. Article

Hedge funds forced to short ETFs

Mon, 04 Jun 2007 20:01:34 -0400

There's a whole lot of hedge funds out there trying to short stocks. Add to that a growing number of mutual funds and even individuals as well as a rising market, and you've got a really tough environment in which to short. Just borrowing the shares is tough. That's one reason why hedge fund Keel Capital Management shuttered itself. The lack of short opportunities made it hard to stick to its parameters. So what to do? According to MarketWatch, more funds are experimenting with shorting exchange traded funds. Right now, there are no fewer than eight ETFs with short interest that exceeds the number of shares outstanding. My guess is that it will be hard to short ETFs pretty soon.

For more:
- here's the article from MarketWatch