Unstructured Finance

Hedge fund manager Hempton on Herbalife

John Hempton is bullish on Herbalife but bearish on coal

By Jennifer Ablan and Matthew Goldstein

Hedge fund manager and frequent blogger John Hempton is a little bit like the Jim Chanos of Australia.

Over the years, he’s been a fairly prescient short seller. For instance he was an early skeptic on computer giant Hewlett Packard and travel services company Universal Travel Group, which recently agreed to pay nearly $1 billion to settle a U.S. Securities and Exchange Commission lawsuit alleging that the company defrauded investors by failing to disclose the transfer of $41 million from stock offerings to unknown parties in China.

But unlike Chanos whose Kynikos Associates almost exclusively goes short—makes a bet a company’s share price will plummet because of fraud, unsustainable revenue growth or simply an unrealistic valuation—Hempton’s Bronte Capital also makes a fair bit of money on the long side as well.

In fact, Hempton was a bull on Bank of America back when it wasn’t fashionable in 2011 and many were predicting the big U.S. bank would never get out from under a sea of litigation over its exposures to Countrywide’s mountain of bad mortgages and collapsed securitizations. Today, Hempton likes to say it was a good call (His most profitable bets include Fannie Mae preferreds, Maguire preferred securities, put options on Longtop Financial Technologies and puts on China Agritech).

So it’s always been a little surprising to find Hempton as one of the early hedgies to take the other side of Bill Ackman, who went public late last year with his big $1 billion bet that nutritional supplement maker Herbalife is an unsustainable pyramid scheme that will collapse and see its stock plunge to zero. It’s no secret that things haven’t gone well for Ackman with Herbalife as his Pershing Square Capital Management has rung up about $300 million in papers losses. Billionaire investors Carl Icahn and George Soros have lined up against Ackman on Herbalife and earlier this year, outspoken hedge fund manager Dan Loeb scored a big profit for his Third Point fund by betting against Ackman as well.  (we will link to our story here)

Deals wrap: Fund manager Soros ending career

Billionaire hedge fund manager George Soros will be returning capital to outsiders and ending his nearly four-decade long career. In a letter to investors, Soros’ two sons cited tougher impending regulations on the hedge fund industry being the reason for returning the money. Soros said he will now only manage money for himself.

A study has found more than one-fourth of the 94 U.S. securities fraud lawsuits seeking class-action status and filed from January to June were related to so-called Chinese reverse mergers. Despite this surge in lawsuits, investors may have trouble recouping their losses even if they win.

Walt Disney Co., the majority shareholder of India’s UTV Software Communications, is proposing to buy most of the shares it does not already own in the company and delist them from all bourses. The deal has a market value of $826 million.

Markets could be derailed again, warns Soros

CLIMATE-COPENHAGEN/Railway porter-turned-billionaire financier George Soros delivered a stark warning last night that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis.

The man who ‘broke’ the Bank of England (and who is still able to earn a cool $3.3 bln in a year) said the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned.

Soros, who worked as a porter to pay for his studies at the London School of Economics after emigrating from Hungary, warned us to heed the lesson that modern economics had got it wrong and that markets are not inherently stable.

And the award for best hedge fund goes to….

Take a bow George Soros, Trafalgar Capital, King Street, Credit Agricole and a host of others.

Oscar statuesThose lovely people at Lipper (wholly-owned by Thomson Reuters, I should note) have handed out the gongs for the top hedge funds in 2009. The awards pick out the managers delivering the best consistent returns over three years among participants the Lipper TASS database, divvying up the goodwill between strategies and regions to give a global snapshot of the leading performers.

Soros Fund Management is picked for best offshore multi-strategy fund while King Street gets the prize for best North American event-driven fund. Credit Agricole’s CAAM Invest VaR 20 I EUR fund wins for Global Macro in Europe.

Breaking down hedge fund billions

Four of the world’s top hedge fund managers took home 10-figure paychecks last year, even as the loosely regulated industry delivered its worst returns and hundreds of firms were forced out of business.

The industry’s 25 best-paid managers collected a total of $11.6 billion, which marked the third-best year on record, according to an annual survey released by Institutional Investor’s Alpha magazine. Top on the list was James Simons, a former mathematics professor who runs hedge fund group Renaissance Technologies, with estimated earnings of 2.5 billion.

The total number, however, marks a sharp decline from the $22.5 billion that the industry’s best performers took home in 2007. Analysts had expected the overall decline after the average hedge fund lost 19 percent and its size shriveled because investors pulled out roughly $150 billion in assets.

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