The Morning Brief: Old Steven Cohen Testimony May Haunt Him

December 04, 2012  

Steven Cohen may wish he never gave testimony in a case a year ago, as his words may wind up being used against him as federal regulators continue to investigate his $14 billion hedge fund firm, SAC Capital. According to a report in the New York Post, Cohen said in sworn testimony in another legal case that insider-trading laws are "vague" and that compliance rules at his firm are merely "guidelines." SAC has received a so-called Wells Notice from the Securities and Exchange Commission warning that it could face civil charges. Meanwhile, SAC disclosed a 5.6 percent passive position in Arthrocare, which makes surgical instruments.

Dyal Capital Partners said it has closed its new private equity fund designed to make minority investments in the management companies of established hedge fund firms after raising $1.28 billion. Dyal, managed by Neuberger Berman Group, has already made two investments. It holds stakes in Mast Capital Management, a $1.5 billion hedge fund firm in Boston that invests in credit-related strategies, and Capital Fund Management, a $5.1 billion quant fund group based in Paris, according to an earlier report by Dyal plans to purchase minority interests in a portfolio of about 12 to 15 hedge fund management companies. The New Jersey State Investment Council recently committed $200 million to the fund.

Eddie Lampert’s ESL Partners continues to prune its positions in its major holdings. The hedge fund firm reported that it reduced its stake in Sears Holdings to around 36.3 million shares from nearly 43 million shares. But Lampert lifted his personal stake in the struggling retailer to nearly 23.5 million shares, from approximately 22.7 million shares.

Ken Griffin’s Citadel Advisors LLC disclosed it owns a 5.2 percent passive stake in Halcón Resources, an independent energy company.

Leon Wagner, co-founder, Goldentree Asset Management, says collateralized loan obligations are very attractive. "Leverage is underpriced," the hedge fund manager asserted Monday morning on Bloomberg TV. He concedes that liquidity could still be a problem if you want to sell them tomorrow. But he says CLOs — which are a pool of high yield bank loans — are in the top 10 percent of great investment ideas today. He stresses that the average CLO has 100 positions, and not one CLO defaulted during the 2008 financial crisis.

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