Preqin reports that the top 100 hedge fund managers have combined assets under management of $1.4 trillion, which accounts for 61 percent of total hedge fund capital. This compares with the recently published Hedge Fund 100 ranking by Institutional Investor’s Alpha, which counted total assets among the 100 largest firms at $1.3 trillion. That figure represents roughly 58 percent of the $2.25 trillion in total hedge fund assets worldwide at the start of 2013. Preqin, a London-based collector of data on alternative investments, also counts 176 institutions that have allocated at least $1 billion to hedge funds, 26 more than last year. These investors account for more than $550 billion invested with hedge funds, according to Preqin.
In its report, Preqin notes that over the next two months, the $7.2 billion Arizona Public Safety Personnel Retirement System, which now allocates about 20 percent of its total assets to various hedge fund strategies, plans to make six new hedge fund investments. Preqin says the pension system is targeting direct investments in commingled multistrategy hedge funds and will consider managers on a case-by-case basis. Dutch asset management firm MN, which allocates 5 percent of its 90 billion euro assets under management to 27 hedge funds, plans to make four new investments over the next year. Strategies under consideration include managed futures/CTA, macro and equity market neutral.
An excerpt from a soon-to-be-published book by a former hedge fund manager highlighting rampant use of cocaine, booze and prostitutes could rock the hedge fund industry like "Liar’s Poker" celebrated the over-the-top antics of Wall Street traders during the 1980s. The book, “The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess,” was written by Turney Duff, who worked for the hedge fund firm Galleon Group years before its founder, Raj Rajaratnam, went to prison for insider trading.
Steve Cohen’s SAC Capital Advisors has taken a 5.1 percent passive stake in Macquarie Infrastructure, which owns a portfolio of infrastructure businesses.
Macro traders were rocked again Thursday when the Japanese stock market slumped more than 5 percent. This was the third huge drop in the Nikkei 225 in a week. The big question, of course, is whether this big trend — as the managed futures players like to call it — is over and will go down in history as just a fleeting rally, or will it resume its rapid runup?
By Ben Baris
The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund
(Hachette/Business Plus; $29)
The arrest of Galleon Group founder Raj Rajaratnam in 2009 sent a shock wave through the South Asian community in the U.S. Even more shocking was the conviction of prominent businessman Rajat Gupta for passing insider information to Rajaratnam. Nine years Rajaratnam’s senior, Gupta, now 64, had been a trailblazer for South Indian expatriates in business and finance as head of McKinsey & Co. and later a Goldman Sachs and Bill & Melinda Gates Foundation board member. Rajaratnam himself used to refer to Gupta as a “rock star.”
Journalist Anita Raghavan says she wanted to write a book about the South Asian diaspora in the U.S., and the Galleon arrests provided the perfect impetus. The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund is a gripping narrative that is partly an examination of the culture of entitlement that influenced Rajaratnam, Gupta and the various associates who became ensnared in the Galleon web. But Raghavan’s writing is at its most engaging when she dissects the personalities involved in the scandal.
Raghavan depicts a Mad Men –like workplace drama with Rajaratnam as a driven financier who knew that as a foreigner he couldn’t crack the Wall Street club, so he set out to build his own. Early on, as investment banker to a number of high-tech entrepreneurs at Needham Asset Management, he figured he could also manage those entrepreneurs’ new wealth in a hedge fund. Some of Needham’s brokerage clients expressed concern that “he was president of the company, he was a banker and he managed money for the very same executives whose companies he covered as a banker…he was in a position to get information from his banking clients that he could then use to trade on for his hedge fund.”
Those concerns led to his departure from Needham. Rajaratnam took many of the same clients with him to Galleon. He was a tough taskmaster — at Galleon he charged analysts and portfolio managers $25 fines if they were late to meetings — but he played as hard as he worked. Raghavan relates that Rajaratnam would sometimes offer $5,000 to any employee who could drink 10 tequila shots and gives an account of a birthday party involving much marijuana and Rajaratnam in a cowboy shirt that “only Jimmy Buffett could love.”
Gupta became involved with Galleon reluctantly, according to Raghavan. As Gupta’s lawyer pleaded in trial: “He has lived a life of probity. Why would he do this in the seventh decade of his life?” The book doesn’t really try to explain why a man of Gupta’s stature would pass along securities secrets — or for that matter why a skilled technology stockpicker like Rajaratnam would take the chances he did. But some clues seem to lie in the way he approached his business from early on: as a fiefdom in which he was free to tap all the connections and authority he had to do as he pleased.
By Ben Baris
Jim Rogers, Quantum Fund co-founder and commodity wizard, wrote extensively about his global circumnavigations in his books Investment Biker and Adventure Capitalist . Now, in Street Smarts: Adventures on the Road and in the Markets (Crown Business, $26), Rogers does what he most loves to do: explain why he’s right and others are wrong about the global outlook.
In 2007, Rogers uprooted his family to Singapore, a place he believes makes New York look almost third-world when it comes to education, health care and infrastructure. His new home offers proximity to ground-floor investment opportunities in Asia, along with a setting in which his two young daughters can hone their Mandarin, a language he believes will be essential to their futures. He has harsh words for the future of the U.S., which he fears is winding down its term as global superpower just as the past empires of Rome and England did.
In praising China for its willingness to make deals with no propaganda attached, while admonishing America for corruption from within, Rogers comes across as rather short on Eastern street savvy — especially for an investor who has always taken pride in his real-world observations. Maybe someday his Mandarin-speaking daughters will tell him about China’s internal shortcomings.