Money managers under the microscope
David Einhorn again sent markets scurrying last week when he told investors he was shorting Moody’s Corp, but the Greenlight Capital manager’s latest thumbs down packed a weaker punch than his past, celebrated broadsides.
To be fair, Einhorn had a tough act to follow. A year ago, he boldly said Lehman Brothers was in much worse shape than its management would admit. Four months later — the bank went bankrupt and the shares were wiped out. It took more than six years, but his warnings about business lender Allied Capital also proved accurate and ultimately very profitable.
Last week, the soft-spoken Einhorn turned his sights on the parent of credit rating agency Moody’s Investors Service. Investors dutifully followed Einhorn’s lead and sent Moody’s shares down as much as 8 percent before they closed at $26.89.
Yet in the three trading days since, Moody’s stock has recovered its Einhorn losses and more. The shares traded at $28.66 a share Tuesday.
As the credit crisis has unfolded, many banks have trimmed their prime brokerage units’ lists of hedge funds clients in an effort to reduce lending and risk as fast as possible.
After last year’s record poor performance, investors may view a warning that the quality of hedge funds could get worse with a certain degree of irony.
However, according to the Hedge Fund Standards Board’s chairman Antonio Borges, this is one of the negative effects on the industry that proposed EU laws could have.
from Global Investing:
For permabears who live on doom and gloom to make money this is just a blip which is going to end in tears.
Fraud is booming as financial pressures rise during the recession, according to PricewaterhouseCoopers, which last night hosted a meeting of its ‘Fraud Academy’, which aims to help companies share tips on spotting those up to no good.
Getting information out of secretive hedge fund firm TCI (The Children’s Investment fund) can be a difficult task — just ask the Treasury Select Committee, whose tough questioning of founder Chris Hohn in January was met with short responses.
However, it appears the activist firm has been on the move, hiring Masroor Siddiqui, head of the European business at Canyon Capital.
Puccini’s tragic opera Tosca ends with the heroine, realising she has been tricked by the evil Baron Scarpia and that her lover has been executed, hurling herself to her death from a castle parapet in despair.
However, despite last year’s tragic performance — an approximately 60 percent plunge in the flagship fund after holdings such as Redrow and Taylor Wimpey fell sharply — it would seem Martin Hughes has sidestepped such an unhappy ending at Toscafund, where redemptions have tailed off and fund performance is strong once again.