Friday, July 17, 2009

Street Fighters: The Last 72 Hours of Bear Stearns, The Toughest Firm On Wall Street (Book Review)

We're going to be doing a few more book reviews here now that things have settled down a bit and we've actually had a chance to read some of the many books that have been released in the past few months. Previously, we reviewed Mebane Faber's The Ivy Portfolio which details the endowment model of investing and touches on our favorite subject: hedge fund tracking. This time around though, we're reviewing a book by Wall Street Journal Reporter Kate Kelly. And, it's a different kind of book.

Kate Kelly's Street Fighters: The Last 72 Hours Of Bear Stearns, The Toughest Firm On Wall Street reads almost like a movie or TV script timeline. If you want to feel like you were right there in the room when Bear's collapse occurred, then this is the book for you. The amount of detail portrayed in this book is both fascinating and almost appalling. If a documentary or movie was made about the fall of Bear Stearns, Kate Kelly would be both director and cinematographer of the final scenes, in charge of what you see and hear. In a financial world of secrecy and mystique, this book is the definition of behind the scenes. She does a remarkable job at painting a picture and making you feel like you are a part of the action.

At the same time, (depending on the reader) the book's greatest attribute might also be its biggest flaw. Street Fighters is detailed in that you read through 229 pages and only cover the span of 3 days. At times, it almost seemed as if the timeline was moving at a snail's pace in an attempt to cover every single little detail. After all, each section of the book is dated and timestamped within Bear's final days/hours with some flashbacks thrown in. Some of you out there will probably point out, "Well, duh, it's about the last 72 hours of the firm, a lot happened then!" And, that is very much the case. While I do think the events right before Bear's collapse are integral to the story, there is so much more behind their fall and I wanted more in this regard. But again, to be fair, this is a book about the last 72 hours, not about the entire timeline of their rise and fall. It is good for what it is: a story about the panicked last few days of the firm.

The book is captivating and definitely draws you in. You know the ending, yet you will still want to keep reading. And, in that regard, Kelly has done a fantastic job. While Street Fighters is not like the typical finance books we read, it is a great story. And, in the world of finance where so many people are concerned about numbers, not stories, this journey into what will be regarded as a historic event was refreshing. If you want to know what went down behind closed doors, if you want to relive history, or if you just love a good drama, then check out Kate Kelly's book, Street Fighters: The Last 72 Hours of Bear Stearns, The Toughest Firm on Wall Street. And, if it doesn't sound like your cup of tea, then we're sure you'll find plenty of other finance related books that will intrigue you in our recommended reading lists. We've selected our favorite reads on the topics of:

- Fundamentals
- Technical Analysis/Charts
- Market Gurus
- And good overall investing & trading books

Additionally, we presented a comprehensive series of hedge fund Blue Ridge Capital's recommended reading lists. Their list encompasses the following categories: Analytical, Economics, Historical, & Behavioral Finance. Lastly, as we mentioned above, this is the second book we've reviewed in our new ongoing series of book reviews. You can check out our past review of Mebane Faber's The Ivy Portfolio here. Look for more reviews in the near future!

What We're Reading (7/17/09)

Ken Heebner (CGM Mutual Funds) slumps for 2nd year [FundMyMutualFund]

What is Goldman Sachs? (A giant credit portfolio?) [The Big Picture]

Hatteras Funds to Acquire AIP Mutual Funds (first time a Fund of Funds has entered this space before, isn't it?) [BusinessWire]

Thursday, July 16, 2009

Hedge Fund Performance Numbers: June 2009 Update

We're back again with our monthly aggregation of hedge fund performance numbers and this one is going to be a doozy. Below you will find the June 2009 and year to date performance numbers for many prominent hedge funds along with portfolio composition metrics. Last month, we covered their May performances as well if you're interested. We would like to give a special shoutout to a reader, and then another to a reader in Toronto as well who helped us assemble all of this data. We sincerely appreciate it! Please note that if you are an RSS or Email reader you will need to come to the blog to view the post with all of the performance spreadsheets that are embedded. And with that, let's dive right in:

Hedge Funds in general were up 0.13% in June and are now up 9.41% year to date.

David Einhorn's Greenlight Capital: Greenlight is doing pretty well this year overall. Their Capital LP fund was up 16.3% for the 2nd quarter of '09 and is up 21.5% year to date. Their Capital Qualified LP was up 14.7% for the second quarter and is now up 19.7% for the year. Lastly, their Capital Offshore fund was up 11.9% for the second quarter of 2009 and is now up 17.3% year-to-date. Keep an eye out for a forthcoming post regarding Greenlight's investor letter where we'll examine their moves in detail. In the mean time, you can check out Greenlight's portfolio here.

Bill Ackman's Pershing Square Capital Management: Pershing was up 1.4% for the month of June and is up 11.3% year to date as of that timeframe. In terms of number of positions that are each greater than 0.5% of the portfolio, Pershing has 9 longs and 3 shorts. The vast majority of their longs are Large Cap names, while the same can be said for their shorts. Keep in mind that Pershing also has long CDS exposure (credit default swaps) to the tune of around $900 million. As with Greenlight, we will also be doing a separate post detailing the positions mentioned in their quarterly investor letter. When we covered Pershing's portfolio, we noticed they had a large EMC stake, among other things. Here's their performance sheet:

(click to enlarge)

Jim Simons' Renaissance Technologies: Rentec got back in the swing of things after an abysmal start to the year. For June, their RIEF fund was up 3.93%. Well, maybe they just 'kind of' got back in the swing of things since their RIFF fund was down 5.62% for the month of June. Simons is notoriously private, so we were happy to stumble upon a lengthy interview with the founder of Rentec.

D.E. Shaw & Co (David Shaw): Fellow quant player DE Shaw saw their Oculus fund flat for June and up 2.8% for the year as of the end of June. Their Composite fund on the other hand was up 1.6% for the month while being up 12.5% for the year now. Towards the end of June, we saw DE Shaw file a 13G on Medicis Pharma (MRX).

Balyasny Asset Management (Dmitry Balyasny): They were down 0.19% for June and are slightly up 3.05% year-to-date. We'll be covering their equity portfolio soon in our hedge fund portfolio tracking series so stay tuned. In the mean time, we just covered some of their thoughts on the market recently.

Dan Loeb's Third Point LLC: For the month of June, Loeb's Offshore fund was up 1.8% and is now up 7.2% year to date. Their Partners LP was up 1% for June and is up 5.6% ytd. Their Partners Qualified fund was up 1.4% for June and is up 5.6% for the year. Lastly, their Third Point Ultra fund was up 1.8% for June and is up 8.4% for 2009. We also see some other metrics updated as their Sharpe Ratio since inception is 1.2 while their correlation to the S&P500 since inception is 0.4. Breaking down their exposure by sector, we see that Third Point was net long financials and healthcare. Their largest short position was on the consumer. However, they had an equally large long position leaving them almost net neutral on the consumer. So, we don't see a whole lot of short exposure reflected. If you want to check out their holdings, we just recently covered Third Point's portfolio. Here is their breakdown:

Third Point June Monthly Report

Shumway Capital Partners (Chris Shumway): For the month of June 2009, Shumway was up 0.99% and they are now up 3.97% ytd. As you know, Shumway's portfolio has been replicated as part of our custom MarketFolly portfolio that is seeing 27.9% annualized returns. We created the portfolio with the hedge fund replicator tool Alphaclone, who currently has a free 14-day trial of their full package.

Sprott Asset Management (Eric Sprott): Their Hedge Fund LP has had a bit of a rough year as they were -4.46% for June of 2009 and find themselves down 1.55% for the year. However, they still have impressive historical metrics as they are seeing 22.76% annualized returns with a cumulative return since inception of over 489%. We've started to cover Sprott more on the blog and recently posted up an examination of their Canadian Equity Fund (both longs and shorts). Also, attached below is their hedge fund performance report where you can see the breakdown of all their other hedge funds:

Sprott Hedge Funds June09

Glenrock Global Partners LP: They were down 0.8% for June and are now up 2.8% for 2009. Like Sprott though, Glenrock has impressive historical metrics as they are seeing a compound rate of return of more than 12.5% annually since 2000 without a single down year. They are a long-short equity fund with a focus on bottom-up stockpicking while using macro evaluation. For the first half of the year, their largest winners were short positions in investment banks and another short position in a US medical equipment manufacturer. Additionally, their successful longs included plays in the US semiconductor market, real estate, and software markets. Based by country, they are net short North America (their largest regional short) and net long Japan (their largest regional long). By market cap, they are net short Large Cap and net long Small Cap. By industry, they are net short banks and restaurants/retail while they are net long precious metals, energy, and technology.

Salida Capital: They were up 7.51% for June 2009 and are now up 83.38% for the year. And no, that is not a typo. They were up 3.34% for January, 4.95% for February, 16.01% for March, 7.56% for April, and 26.04% for May. This is quite a strong year for them, but you also have to consider that they were down 66.5% for 2008. So, they are slowly climbing back to where they were before 2008 hit. Still, they have an annualized compounded return of 22.32% which is impressive and they have done so with a Sharpe ratio of 0.61. Currently, the largest percentage of their strategy allocations are in event driven and long/short equity. Sector-wise, they are net long energy and net short 'other.' Their gains in June were largely attributed to energy and gold exposure. Additionally, their position in Addax Petroleum paid off as the company received a cash bid from China's Sinopec. Their stakes in equities and corporate bonds were where the bulk of their gains came from. This Canadian hedge fund firm might also ring a bell because they recently won the auction for lunch with Warren Buffett for the cheap cost of only $1.68 million. And, for a historical snapshot, take a look at some of Salida's macro takeaways that we posted up back in August of 2008. It's interesting to read through them again after a year has almost elapsed since they released them.

Ken Griffin's Citadel Investment Group: Their main Kensington and Wellington funds were up 9.5% in June and are now up 32.19% for 2009. This of course comes after Citadel had a horrible year last year, so they are slowly clawing their way back. Also, back in March, we noted that Citadel would be starting new hedge funds (presumably to garner more fees since their main funds won't be nabbing performance fees anytime soon).

Steven Cohen's SAC Capital: They were up 2.12% for June and are now up 16.35% for the year. This comes after they had a sub-par year in 2008 by their standards.

John Burbank's Passport Capital: Passport had a mixed month as their newer Agriculture fund found success but their Global fund was weak. Their ag fund was up 0.4% for June and is now up 13.6% for 2009 (since inception in March). Their Global Fund, on the other hand, was down 6.4%. However, the fund is still up 24.4% for the year after they had an amazing performance in May. As of right now, they are net short Large Cap stocks, and net long Small Cap & Micro Cap plays. Regionally, they are net short the US and net long India and the Middle East. Sector wise, they are net long basic materials and healthcare while they are net short the consumer and 'other.' Their top 10 public long positions as of the end of June were Riversdale Mining (RIV.AU), Financial Technologies (FTECH.IS), Jordan Phosphate Mines (JPH.JR), Mosaic (MOS), Potash (POT), EFG-Hermes Holding (HRHO.EY), China Lotsynergy (8161 HK), Shuaa Capital (SHUAA.UH), London Mining (LOND.NO), and AK Steel (AKS). This just goes to show how important investor letters and performance breakdowns are to true hedge fund portfolio tracking. While we have looked at their 13F filing in the past, a ton of the positions above are not listed in the 13F filing since those only require the disclosure of US equity positions. As such, their top holdings are very different from what we saw when we looked at their portfolio. This is why only certain funds are good to clone a portfolio from, as you have to look for long/short equity managers that focus primarily on US equities. While Passport's 13F shows Mosiac and Potash as their top positions, they are in reality further down the list in terms of percentage of Passport's overall portfolio. Below you will find Passport's performance breakdown for their Global Fund:

Passport Global Performance Attribution 6.30.09

Paulson & Co (John Paulson): Their Advantage fund was down 1.09% for June but is still up 7.57% for 2009. Paulson recently revealed some portfolio activity which we will be detailing in a separate post, so keep a lookout for that. In the mean time, you can check out Paulson's portfolio here and read up on how Paulson has been buying distressed debt and assembling a large gold portfolio.

Tudor Investment Corp (Paul Tudor Jones): Global macro giant Tudor had a weak June as they were down 1.56% but they are still up 10.76% year-to-date. You can view Tudor's equity positions here.

Louis Bacon's Moore Capital Management: They were -0.4% for June and find themselves up 5.9% for 2009 now. We just recently covered Moore's equity portfolio during global macro week here on Market Folly.

Bruce Kovner's Caxton Associates: Fellow global macro player Caxton also was down for June as they were -0.52% for June and are barely up on the year at 2.21%.

Again, if you are an RSS or Email reader, make sure you come to the blog to view all of the documents we have embedded within this post. Lastly, for a .pdf download of more hedge fund performance numbers, head here. If you want more in regards to recent updates, check out our hedge fund news summary where we round-up all the major activity. And, as always, make sure you check back as we're in the midst of our hedge fund portfolio tracking series where we examine the holdings of some of the top hedge funds out there.

Wednesday, July 15, 2009

CHP Designation (Certified Hedge Fund Professional): Registration Now Open

Today, the Certified Hedge Fund Professional (CHP) Designation re-opened for registration and we wanted to let you know that all MarketFolly readers get an exclusive $50 discount. In order to receive more information, enter your info at the bottom of this page. The CHP is similar to that of the CFA (Chartered Financial Analyst) or CAIA (Chartered Alternative Investment Analyst), but it is geared specifically towards hedge funds. This is the perfect thing to bolster your background & employment profile if you are looking for a hedge fund job. Additionally, if you're already in the industry, this professional certification can boost your knowledge of the industry and further your credibility. There are only 200 spots available for this round of registration so sign-up fast! During the last registration period, there was a ton of interest generated with our exclusive MarketFolly $50 discount, so take advantage of it before it fills up.

If you want more information regarding the Certified Hedge Fund Professional Designation, we've done some in-depth posts in the past. We interviewed CHP founder Richard Wilson so make sure to check out Part 1 of our interview and Part 2 as well. All MarketFolly readers are eligible for the exclusive $50 discount that we've arranged with the CHP thanks to Richard. By entering your name & email in the form below, it will recognize that you are a MarketFolly reader and the discount will be automatically applied if you go on to register. Filling out this form will not sign you up for the program, but it sets you up to receive information and ensures you will get the discount, so enter your info below!

Enter your contact info below to learn more about the CHP designation:

(Email & RSS Readers: you have to come to the blog to enter your information)

Tuesday, July 14, 2009

Free 14 Day Trial of Alphaclone

Hey everyone, great news: Mazin the co-founder of Alphaclone has informed me that they are now giving out free 14-day trials to the full membership package. This is something you all cannot pass up as it will give you an inside look at how you can truly replicate a hedge fund portfolio. This free trial to the full membership gives you access to all the hedge fund portfolios, to unlimited clones, unlimited clone groups, and the ability to create custom groups like we did with our custom portfolio that is seeing 27.9% annualized returns!

Those of you who have been wanting to check it out now have a prime opportunity to do so with full access for free. And, for those of you who have gotten the basic membership, you can still get the free trial of the full access to see what you might be missing out on. You can get your free 14 day trial of Alphaclone here.

If you're unfamiliar with Alphaclone, then check out our introduction to this hedge fund portfolio replication tool and also check out our MarketFolly clone.

Soros Fund Management (George Soros) Discloses New Exar (EXAR) Position

In a new 13G filing made with the SEC, George Soros' hedge fund firm Soros Fund Management has disclosed a brand new position in Exar (EXAR). They have a 5.67% ownership stake in the company with 2,465,754 shares and the filing was made due to activity on July 2nd, 2009. This is a brand new position for them because when we last examined Soros' portfolio, they did not hold any shares of EXAR. Soros has been somewhat busy lately, as we also recently detailed their activity in Extreme Networks (EXTR). Additionally, we covered some of Soros' recent thoughts in our hedge fund news summary.

Soros is good to track because of his excellent macro sense and formidable track record as an investor. His thoughts on the current financial landscape are detailed in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you'll understand why

Soros is famous for his stellar returns with partner Jim Rogers when they ran their Quantum fund. (We just covered Jim Rogers' portfolio recently too). Nowadays, he employs his investment style at his own firm. Whether it be equities, bonds, currencies, debt, or commodities, Soros is more of a global macro player, seeking investments in whatever market they can gain an edge.

2008 was an interesting time to be investing, to say the least. Soros detailed his thoughts about his portfolio from 2008 and it makes for a good read. His fund finished 2008 up 8%. His success in 2008 came from making correct bets on the US dollar and betting that short term interest rates in the UK would decline. Interestingly enough, Soros was down for much of the year, until he fought his way back with overtrading. We just recently looked at his portfolio and noted that Soros likes bonds at this stage.

Taken from Google Finance, Exar is "a semiconductor company that designs, sub-contracts manufacturing and sells silicon, software and subsystem solutions for industrial, datacom and storage applications. The Company’s product portfolio includes power management and interface components, datacom products, storage optimization solutions, network security and applied service processors."

Crude Oil - Interview With CME Group's Joseph Ria

The guys over at MarketClub have sat down and interviewed Joseph Ria of the CME Group regarding crude oil and energy. They aimed at putting out some educational and trading material regarding crude oil since it is such a hot topic & commodity these days. Here's a transcript of part of the first interview,

"Crude Oil & Energy Update - Interview with the CME Group's Joseph Ria

When you hear the news reporters talk about the price of
crude oil in the marketplace, they're generally talking about
WTI, which is West Texas Intermediate crude oil. It's a very
light, sweet crude oil and the highest grade that's out there.
Crude oil is based on and priced on the amount of sulfur that's
in the oil. It makes it easier or harder to refine base on the
amount of sulfur. WTI being the lightest and sweetest, is the
highest priced crude oil in the marketplace.

It is a benchmark delivered in Cushing, Oklahoma.

In benchmarks for crude oil and global pricing of crude oil, WTI
probably prices about 50% of the global pricing of crude oil.
Brent being basically the other pricing benchmark. There's two
out there, Brent being a little of a mixture of three different
grades of crude oil; BF&O, Brent 40 and Ossenberg. They're
all produced in the North Sea.


That's the first part of the work transcribed and you can view the rest of the stream here. Keep in mind you'll have to do a free sign-up with them to see the material. We like to focus on educational content every once in a while seeing how we have a diverse reader base on the site. And, after all, everyone is a beginner at some point and you can never cease learning. You can check out their video series here.

We also wanted to point out that we have numerous other resources on the topic of crude oil. Some of the most popular articles on Market Folly in the past have been 2 crude oil related pieces by author Tradefast. Firstly, he examined How Contango Affects Crude Oil ETFs. Then, in a follow-up piece, he also examined How to Play Crude Oil via ETFs & ETNs in an article that examines the various crude oil investment vehicles. We highly recommend these pieces as they have received much praise due to their in-depth analytical nature.

Also, for those of you more concerned about where crude oil is heading in the near-term, check out the recent crude oil technical analysis video.

Harbinger Capital Partners Gains Stake in (ZPCM)

Philip Falcone's hedge fund Harbinger Capital Partners has made 4 filings of note with the SEC recently that are all related. Firstly, they've filed a 13D on Corp (ZPCM) where they now show a 99.5% ownership stake in the company with 49,730,165 shares. The filing was made due to activity on July 9th, 2009. What's interesting about this filing is that Harbinger only directly owns 757,907 shares of ZPCM. However, you'll remember that Harbinger also has a large position in Zapata (ZAP). Well, Zapata holds 97.9% of the outstanding stock of (ZPCM) and through their own direct ownership interests in Zapata, Harbinger now also has a large exposure to ZPCM. A little bit confusing with all the similar names and stock symbols, but hopefully everyone follows.

The 757,907 shares Harbinger owns directly were purchased on July 9th, 2009 at share prices between $0.66 and $0.67. In addition to the filings concerning, Harbinger has also filed a Form 4 with the SEC which details additional purchases of Zapata (ZAP) shares. On July 9th, 2009, Philip Falcone's firm acquired 3,312,654 shares of ZAP at a price of $7.50. And, as a result, they also amended their 13D filing which shows them now owning 51.6% of ZAP with 9,937,962 aggregate shares owned. This is up ever so slightly from their previous 51.3% stake.

Two main things to take away here: Harbinger now has a lot of exposure to (ZPCM) and they also bought a few more shares of Zapata (ZAP). End of story.

Harbinger has been quite busy with filings lately, as we also detailed their new position in Morgans Hotel Group (MHGC) last week. Also, they were selling a ton of Solutia (SOA) shares as well. But, if you want to see all the other positions they hold, you can just check out their portfolio. Last year, Harbinger ranked #1 in the top 10 asset losers, losing 60.8% on a year over year basis as their Offshore fund finished -22.7% for 2008. We then got word that Falcone would be returning to his roots in terms of investing style and would be opening a new fund. As always, we'll continue to monitor the developments regarding their holdings.

Taken from Yahoo Finance, "does not have significant operations. The company focuses on searching for assets or businesses that it can acquire so that it can become an operating company and it may also consider developing a new business suitable for its situaiton. Previously, it was engaged in internet operations business."