Unstructured Finance

Stevie Cohen Unplugged

By Jennifer Ablan

Steven A. Cohen, one of the world’s most successful and secretive billionaire hedge fund managers, shared some of his thinking on insider trading, something his worst critics have alleged SAC Capital knows a thing or two about.

Cohen in sworn deposition testimony earlier this year, an extended excerpt of which was obtained by my prolific colleague and partner-in-crime Matthew Goldstein, said: ”The way I understand the rules on trading on inside information, it’s very vague.”

Cohen added: “It’s my belief that the idea of material nonpublic informing could be interpreted differently, depending on which side of the transaction you’re on.” At one point, the 55-old-trader loses his cool a bit with Fairfax’s lawyer, Michael Bowe, commenting: “Well, you know, we’re having this conversation for about three hours about what’s material and whatnot. It’s pretty clear that you and I have a different view on it.” 

Cohen’s deposition testimony in February and April this year was part of a long-running civil lawsuit filed by Canadian insurer Fairfax Financial, which we reported on exclusively here.

The 600-plus pages of testimony makes for fascinating reading. Cohen goes on to define the term “edge” and provides a window into his web of contacts including DanielLoeb, the American hedge fund manager and founder of Third Point LLC.

Phil Falcone’s ray of sunshine

By Matthew Goldstein

Leave it to Phil Falcone to find a glimmer of good news to relay to the beleaguered investors in his Harbinger Capital Partners. A day after U.S. securities regulators threatened to sanction the billionaire hedge fund manger for alleged trading irregularities, Falcone told investors in his roughly $4 billion firm that not all is lost.

In a note emailed to investors the day after Falcone officially learned the U.S. Securities and Exchange Commission is considering charging him with a number of securities law violations, the former Harvard hockey star told them that nothing the SEC is looking at involves his beloved LightSquared.

Additionally, it is important to note that neither Harbinger Group Inc. (“HRG”) nor LightSquared were the recipient of a Wells Notice, nor was either involved in any of the events being investigated.  Moreover, the Wells Notices received by HCP and certain affiliates are not related to any of the HCP funds’ investments in HRG, LightSquared or their predecessors.

Steve Cohen’s forbidden transcript

By Matthew Goldstein

Hedge fund titan Steve Cohen is taking steps to appear more open these days.  Over the past year or so, he’s been showing up at industry conferences, charity events–even allowing himself to be photographed with his wife for a glossy spread in Vanity Fair magazine.

But there are some things the SAC Capital founder is drawing a line in the sand over when it comes to greater transparency, including some of his own words.

Cohen and his legal team are fighting hard to keep hours worth of deposition testimony that he recently gave in a civil lawsuit  under wraps. Last year, the billionaire trader sat for a deposition in the long-running stock manipulation lawsuit filed by Canadian insurer Fairfax Financial against SAC Capital and other hedge funds, including Dan Loeb’s Third Point and Jim Chanos’ Kynikos Associates.

A bank account free from political posturing?

By Matthew Goldstein

A measure aimed at protecting companies from community bank failures may be finding new life as a way to guard against the fallout from the political squabbling in Washington, D.C. over raising the debt ceiling.

Even though much of Wall Street believes that sanity will prevail in the end and the nation’s politicians will not allow a U.S. debt default to occur next week, the level of anxiety in the financial world has risen in the past few days. And that unease has led some money managers to begin looking at a post-financial crisis measure aimed at protecting non-interest bearing bank accounts as a potential safe haven.

One trader says he is aware of at least one manager who has moved some cash into a non-interest bearing checking account that that FDIC is providing unlimited insurance on in the event of a bank failure. The unlimited guarantee by the Federal Deposit Insurance Corp. runs through Dec. 2012 and was authorized under last year’s Dodd-Frank financial reform law.

John Paulson and his god-like status

By Matthew Goldstein

By most objective measures, hedge fund magnate John Paulson isn’t having a particularly good year.

His Paulson Advantage Plus fund lost nearly 6 percent in May. His Paulson & Co. fund empire is believed to have absorbed a $300 million paper loss when shares of Sino-Forest got hammered in the wake of a critical report from a noted short-seller, who claims the company has overstated the value of its lumber holdings. And the bullish bet he’s made on a rebound in the housing market appears to be several years too early.

Then again, this is John Paulson–the mastermind of the mega subprime housing bet, which bolted him to fame and riches and certified his rock star status in the $2 trillion hedge fund industry. Today, his New York firm controls about $37 billion in assets and seems to keep taking in new investor money every day.

David Einhorn’s nothing month

By Matthew Goldstein

If numbers told the entire story, one might conclude that hedge fund manager David Einhorn took the month of May off.

That’s because Einhorn flagship fund at his Greenlight Capital registered a big nothing for the month. In other words, Greenlight’s flagship fund registered a zero percent gain/loss, according to my colleague Svea Herbst-Bayliss.

Of course, May was a very big busy month for Einhorn. At the annual Ira Sohn charitable event, Einhorn unleashed a blistering attack on Steve Ballmer, in which the 42-year-old hedgie called for the ouster of the Microsoft chief executive officer. Then, the very next day, Einhorn announced he had reached a deal with New York Mets owner Fred Wilpon to buy a minority stake in the Major League Baseball team for $200 million.

The search for Einhorn’s gold

 

By Matthew Goldstein

These days, all anyone wants to talk about with David Einhorn is his tentative $200 million investment in the New York Mets. But baseball may not be the hedge fund manager’s only interest in Queens–the New York City borough where the Mets play their home games.

A person familiar with the hedge fund industry says a secured facility in Queens is where Einhorn’s Greenlight Capital stores some of the gold bullion it has invested in. An Einhorn spokesman declined to comment on the speculation about the location of the hedge fund’s so-called physical gold.

Greenlight began investing in gold bars in its main flagship fund in 2009. Last year, Einhorn launched a dedicated gold-only fund for investors wanting a more concentrated exposure to the precious metal. As of March 30, this dedicated gold fund had raised about $556 million from 130 investors. In all, Greenlight now manages about $7.8 billion.

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