WHO’S AFRAID OF HEDGE-FUND ADVERTISING?
In April, 2012, President Barack Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, which makes it far easier for companies to market their securities to investors. Next month, rules mandated by the JOBS Act and adopted in July by the Securities and Exchange Commission will go into effect that loosen the decades-old prohibitions on general solicitation efforts such as cold calling, mass mailing, and running certain commercials. The rules won’t only apply to, say, start-up tech companies. They’ll also apply to hedge funds, private-equity funds, and other alternative investment funds.
Will we soon see full-page advertisements for hedge funds in the Times, GQ, or Sports Illustrated? Maybe there will be smiling children and a line like “Invest in Cerberus: Your Future and Your Family.” Will they run commercials during the Super Bowl or the Sunday-morning talk shows? What about mass mailings to everyone in the tri-state area who bought a Mercedes-Benz or a Rolex last year? It’s all possible now.
Posted in Events, Finance, Hedge Funds, Opinion, Regulation
Tagged Barack Obama, hedge fund, Jumpstart Our Business Startups Act, Mercedes-Benz, Rolex, Sunday morning talk shows, Super Bowl, US Securities and Exchange Commission
SEC’s Hunt for Crisis-Era Wrongdoing Loses Steam
Securities and Exchange Commission enforcement officials have decided not to recommend filing civil charges against hedge-fund firm Magnetar Capital LLC, which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, according to people familiar with the situation.
The decision is a sign the SEC’s investigations into whether companies or individuals broke the law with their conduct ahead of the crisis are running out of gas. Despite last week’s courtroom victory in a civil trial against former Goldman Sachs Group Inc.GS -1.13% trader Fabrice Tourre over his role in a deal called Abacus 2007-AC1, securities regulators are quietly winding down some of their highest-profile investigations related to the crisis, these people said.
Magnetar is an Illinois hedge-fund firm that was started in 2005 and named after a type of neutron star, a remnant of a collapsed sun. The firm worked closely with some of the biggest banks and securities firms to create dozens of mortgage-bond deals called collateralized debt obligations.
The securities were linked to pools of mortgages and other debts and sold in slices of varying risk and return. Magnetar helped fuel the CDO machine by purchasing the riskiest portions of certain deals while at the same time betting some CDOs would decline in value.
Posted in Economy, Finance, Financial Crisis, Hedge Funds, Regulation
Tagged Collateralized debt obligation, Fabrice Tourre, Goldman Sachs, illinois, Magnetar Capital, SEC, U.S. Securities and Exchange Commission, Wall Street
Private-Equity Firm H.I.G. to Buy Spanish Real-Estate Assets
MADRID—Spanish officials managing soured assets from the country’s real-estate collapse announced their first big property deal, choosing Miami-based private-equity firm H.I.G. Capital to buy a majority stake in a package of 939 homes known as Project Bull.
Officials said the property deal, one of the most closely watched in Europe this year, priced the portfolio at €100 million ($133 million).
The properties were transferred to a Bank Asset Fund, which provides a favorable tax regime to investors, officials said. H.I.G.’s Bayside Capital agreed to take a 51% stake in the fund. Spain’s “bad bank,” the government-run asset-management firm known as Sareb, will retain a 49% stake.
H.I.G. Capital beat rival bids from Lone Star Funds, Apollo Global Management LLC,APO -0.70% Colony Capital LLC and a joint offer by Centerbridge Capital Partners LP and Cerberus Capital Management LP, people familiar with the transaction said.
Posted in Breaking news, emerging market, Equity Markets, Finance, Private Equity
Tagged Business, H.I.G. Capital, Lone Star Funds, Madrid, Miami, Private Equity, Private equity firm, Spain
Private-Equity Payout Debt Surges
Private-equity firms are adding debt to companies they own to fund payouts to themselves at a record pace, as fears mount that the window for these deals will close if interest rates rise.
So far this year, $47.4 billion of new loans and bonds have been sold by companies to pay dividends to the private-equity firms that own them, according to data provider S&P Capital IQ LCD. That is 62% more than the same period last year, which wound up being the biggest year on record, with $64.2 billion sold to fund private-equity payouts.
Buyout firms acquire companies with a combination of cash and debt, which the acquired companies aim to pay back with earnings. In dividend deals, private-equity-owned companies add more debt so they can pay dividends to their owners. Ultimately, the payouts are distributed to the buyout firms’ own investors, which include endowments, pension funds, wealthy families and the firms’ executives.
Posted in Breaking news, Events, Finance, Private Equity, U.S. Debt
Tagged $47.4 billion, $64.2 billion, Business, Company, Financial Services, Private Equity, Private equity firm, Venture Capital
Private-Equity Investors Take Profits on Bank Stakes
A handful of private-equity investors who poured money into banks during the financial crisis are cashing out, reaping billions of dollars in profits—in some cases doubling their money—even as many small lenders continue to struggle.
Their success stands in contrast to dozens of other big investors who scooped up failed institutions but are still stuck with far less profitable holdings.
The different outcomes show that, during banking crises, the lowest price doesn’t necessarily make for the best deal. The investors who do better “are the ones who bought good franchises cheap, not distressed franchises very cheap,” said Joshua Siegel, managing principal and chief executive of StoneCastle Partners LLC, a New York firm formed in 2003 to invest in banks.
Private investors pumped billions of dollars into more than 60 financial institutions from 2008 to 2012, according to data provider Dealogic. Those figures account only for deals for which public data are available. Many bank deals during the period were private and details weren’t disclosed.
Posted in Equity Markets, Finance, Opinion, Private Equity
Tagged Business, Dealogic, Financial Services, funds, Investor, New York, Private Equity, Private equity firm
Should You Use Venture Capital: Which America Are You In?
In my two previous blogs, I noted that 99.95 percent of you will not get venture capital, and that 99.997 percent of you may want to refuse VC, even if offered. Are these results universal or are there other factors that affect venture success?
One of the most enduring and influential beliefs of the last few decades has been that entrepreneurs need venture capital to build giant companies. This might be true – but only in Silicon Valley.
Silicon Valley has been the land of milk, honey, and money for entrepreneurs and venture capitalists. Arguably Silicon Valley VCs have helped to build perhaps the greatest assemblage of giant, non-financial companies the world has seen. Starting from around the early 1970s, using all types of venture-capital funding arrangements (rich individuals, family funds, small business investment companies, and VC limited partnerships), they have amassed a string of successes ranging from Intel INTC -1.42% to Facebook FB +2.76%.
Posted in Finance, Opinion, Venture Capita;, Venture Capital
Tagged Entrepreneur, finance, Intel, Limited partnership, Silicon Valley, Small Business Administration, Venture Capital, Victoria Cross
Hedge Fund’s Cancun Dream Explained in Junkiest Junk Deal
At a time when bond buyers are shunning junk, Hyatt Hotels Corp. (H) and Farallon Capital Management LLC are trying to drum up financing for 13 all-inclusive beach resorts from Cabo San Lucas to Cancun with Latin America’s riskiest debt in three years.
Playa Resorts Holding BV, a joint venture between Hyatt and the $19.2 billion San Francisco-based hedge fund, is planning to raise $300 million of seven-year bonds that Moody’s Investors Service rates Caa1, or seven levels below investment grade. If completed, the sale would be the first of such a low-rated corporate dollar bond in the region since now-defunct Brazilian meatpacker Independencia SA issued debt in 2010.
Posted in Breaking news, Equity Markets, Events, Finance, Hedge Funds
Tagged Brazil, Cabo San Luca, Cancún, Farallon Capital, Hyatt, Latin America, Moody's Investors Service, San Francisco
Aug 5 (Reuters) – In three years, global private equity firm KKR & Co has provided over $1.5 billion in loans to companies in India, a business traditionally handled by state-owned and private sector banks.
Encouraged by that success, KKR – which rose to prominence with its hostile $25 billion takeover of U.S. food and tobacco giant RJR Nabisco in 1989 – plans to expand the niche business in China and across Asia.
The move by private equity into lending comes at a time when buyout deals in Asia are few and far between and as traditional banks retreat. Apollo Global Management, KKR and Olympus Capital are raising credit funds as they seek out alternative sources of income. At least $6.6 billion is being raised by 12 funds for investment in Asia, according to Private Equity International and Thomson Reuters data.
Posted in China, emerging market, Equity Markets, Finance, Opinion, Private Equity
Tagged Apollo Global Management, Asia, China, India, Kohlberg Kravis Roberts, Private Equity, Reuters, Thomson Reuters
Blackstone Group buys private equity unit
NEW YORK (AP) — Private equity firm Blackstone said Monday that it has acquired a private equity unit called Strategic Partners from Swiss banking giant Credit Suisse.
Strategic Partners buys stakes in private equity funds. It has 29 investment professionals and $10 billion in assets under management. Blackstone has about 1,780 employees, according to its latest annual report. It has about $230 billion in assets under management.
Blackstone’s decision to buy Strategic Partners was first announced in April. The terms of the deal were not disclosed.
Posted in Equity Markets, Events, Finance, Private Equity
Tagged Blackstone, Blackstone Group, Credit Suisse, New York, Private Equity, Private equity firm, Strategic Partners, Switzerland
Trading firms would do well to heed lessons in testing and crisis management
What a book! Who knew that a trading error at a Jersey City firm could end up being so interesting? One year ago, the mother of all electronic trading debacles scared Wall Street, when sophisticated trading outfit Knight Capital erroneously launched thousands of orders that led it to accumulate an impossible $7 billion position.
After catastrophic incidents like the Flash Crash, the failed Facebook IPO led by Nasdaq OMX, and BATS, the IPO that just couldn’t get off the ground despite all the brainpower behind, this time was supposed to be different. Yet, as author Edgar Perez details, hubris and failed crisis management procedures made this incident particularly painful to shareholders and employees, who didn’t know if the company could survive.
It is interesting to read about the true reasons for top executives not to take decisive action when their CEOs are not present. It was less and less about investors and shareholders, and more about fear, egos, fees and prestige. Nasdaq? Knight? Next?
If the reader is not intensely interested in financial markets, he or she will likely not make it through this book. If the reader skips CNBC or FOX Business Network or Bloomberg TV when flipping through the channels, then this book probably isn’t for him or her. It would be very interesting, but the reader probably won’t make it to the juicy chapters.
Perez makes a compelling case about the need for trading firms to rethink their technology management. Does anyone on Wall Street will ever really learn anything from this debacle? While all eyes are focused on SEC’s new regulations that force companies to show the impossible, the next trading debacle is probably lurking around, ready to storm Wall Street at a time when nobody will expect it.
The book goes into great detail when it analyses the backstories of the main characters involved in the company starting with founders Ken Pasternak and Walter Raquet, CEO Tom Joyce (known as T.J. since his Harvard days) and vulture bidders Daniel Coleman from GETCO and Vincent Viola from Virtu. While other books lose many people early, Perez whets readers’ appetites early by hitting the ground running in chapter one focusing on the chaos that ensued Knight’s infamous trades at the opening.
Perez does a tremendous job in making the histories of all of the people and companies involved as easy to digest as possible; peg orders are arguably not an easy concept to explain. Again – excellent book, but readers have to invest some time slogging through the first 25% of the book to get back to the action. As soon as Joyce comes back to the office after surgery and realizes the extent of the challenges ahead, all hell breaks loose and things start to get very exciting again.
Posted in Breaking news, Equity Markets, Hedge Funds, High-Frequency Trading, Regulation, Spread Trades
Tagged $440 million, Algorithmic Trading, August 1, Barbarians at the Gate, BATS, Chris Concannon, Citadel, Daniel Coleman, Dave Cummings, Den of Thieves, Direct Edge, Duncan Niederauer, Edgar Perez, electronic trading, facebook, financial markets, GETCO, Harvard University. Bob Greifeld, High-Frequency Trading, IBM, investors, IT department, Jersey City, KCG, KCG Holdings, Ken Pasternak, Knight Capital, Knightmare on Wall Street, Liar’s Poker, Michael Tobin, NASDAQ, New York Stock Exchange, NYSE, operational risks, Pricewaterhouse Coopers, Retail Liquidity Program, RLP, shareholders, software, Steven Sadoff, T.J., The Speed Traders, Thomas Joyce, traders, trading disaster, Vincent Viola, Virtu Financial, Wall Street, Walter Raquet, When Genius Failed