One year ago
»» Tiger cub Phillippe Laffont’s Coatue Management reported strong performance after closing the fund to new investors in January 2010.
The firm’s flagship long/short tech-focused fund (onshore) produced a net return of 11.9% for 2010. After ending the year up 18.09%, the fund rode through 2011 on a streak of 11 consecutive months of positive returns before turning in negative performances in June and August. Still, it remains up 16.32% in 2011, well above the 2.41% benchmark return of the AR Technology Index.
This year, Coatue has begun to selectively raise capital from both new and existing investors, according to a person familiar with the firm’s operations. Those inflows combined with the firm’s investment performance have propelled its assets to $4.6 billion in the flagship fund, up from $2.6 billion a year ago.
See also: Tech funds lead the pack in tough year, The new tech boom?, Are the Tigers losing their stripes?
»» Skybridge Capital founder Anthony Scaramucci received a sharp rebuke from President Barack Obama during a live town hall-style meeting broadcast on CNBC. Scaramucci, a Harvard Law School classmate of Obama’s, told the President that his clients “have felt like a piñata … We certainly feel like we’ve been wacked with a stick.”
If he was expecting an offer for a friendly horchata summit, however, he was sorely mistaken. “If you’re making a billion dollars a year after a very bad financial crisis where eight million people lost their jobs, you shouldn’t be feeling put upon,” Obama shot back, referencing AR’s Rich List of the top 25 highest-earning hedge fund managers.
Obama also noted the preferential tax treatment of earnings from carried interest, which he tried to change in tax law this year only to be rebuked in budget negotiations with Republicans. “There are complicated economic arguments as to why this isn’t really income, this is more like capital gains, and so forth, which is a fair argument to have,” Obama said. “But the notion that somehow me saying, 'Maybe you should be taxed more like your secretary when you’re pulling home a billion dollars or one hundred million dollars a year,' I don’t think is me being extremist or anti-business.”
Scaramucci survived the interaction with his reputation intact. A dapper, flamboyant Patti Stanger-type who links investors with managers, he continues to draw elite guests to his over-the-top SALT conference in Las Vegas each spring. As Bloomberg News dryly put it in an article that described him fist pumping his way through a Bellagio pool party, Scaramucci “catapulted himself into the center of the hedge-fund world through unabashed self-promotion.”
He also reportedly mulled a bid for partial ownership of the New York Mets.
See also: Senate Banking chair Tim Johnson discusses hedge funds, The hedge funds that aced the midterm elections, MFA disputes hedge fund tax in letter to New York governor
Five years ago
»» John Paulson launched a small credit fund to short the subprime U.S. residential housing market. Having founded his own firm in 1994, Paulson was still known (though not yet outside of Wall Street) as a talented merger arbitrage investor with an impressive performance record (data here).
The fund went on to produce famously eye-popping returns: 589.62% in 2007 alone as the U.S. housing market cratered. One dollar put into the fund at its inception would have been worth $13.45 at the end of last year (the fund has fallen 6.79% in 2011). John Paulson was the subject of a book lauding his sub-prime bet as “The Greatest Trade Ever.” At last year’s AR Awards, he was awarded the prize for best long-term performance for his $3.8 billion Paulson Advantage fund.
But 2011 has not been kind to Paulson, who has held firm on high-profile long bets on the U.S. financial sector. The Paulson Advantage Plus fund is down 34.16% for the year through the end of August, while the Advantage fund fell 23.24% during the same time period. The firm managed $35.2 billion at midyear, down 2.2% from six months earlier.
Paulson told The Wall Street Journal this week that he was still confident in his bets on a U.S. economic recovery. "Many investors make the mistake of buying high and selling low while the exact opposite is the right strategy,” he said in a statement, without offering further details.
»» DKR Capital prepared to launch a quantitatively-driven long/short equity fund, its fifteenth product. Then-managing $3.8 billion, the Stamford, Conn. multistrategy firm said the new fund would employ a market-neutral strategy driven by statistical models that analyze behavioral dynamics.
The DKR Neutrino program launched in November 2006, gaining 1.42% in its first two months and another 7.12% the following year. It did not suffer a dramatic fall in 2008, gaining 0.03% but was down 5.51% in the first three months of 2009 before liquidating (data here).
The financial crisis of 2008 took a severe toll on DKR. Chairman Gary Davis decided to liquidate the firm’s International Relative Value fund and two related funds, which held about $520 million at the start of 2008. He blamed the collapse of Lehman and the ensuing broad retrenchment by prime brokers that had provided less restrictive financing to hedge funds. "We believe it is unlikely that lenders will be rushing back to provide the leverage necessary for a number of relative value strategies to function profitably,” Davis wrote to investors.
In 2010, DKR fell beneath $1 billion and was cut from AR’s Billion Dollar Club. Now, it manages just $40 million in its two quantitatively-driven funds, down from $530 million three months ago following redemptions, according to a person familiar with the situation. This year, the DKR Quantitative Strategies Program was down 4.54% through August (data here).
Several DKR executives declined to comment on the firm's redemptions. "DKR continues to operate as usual and has no plans to shut down," the company's COO and general counsel Antonio Peguero said in a statement.