Hedge-fund billionaire Falcone agrees to SEC ban

By James O'Toole @jtotoole May 9, 2013: 5:11 PM ET
Article from http://money.cnn.com/2013/05/09/investing/falcone-ban/index.html

NEW YORK (CNNMoney)

Hedge-fund mogul Phil Falcone has agreed to a two-year ban from serving as an investment adviser after the Securities and Exchange Commission charged him with fraud last year.

The SEC accused Falcone, the head of hedge-fund firm Harbinger Capital Partners, of manipulating bond prices, playing favorites with clients and borrowing $132 million from a Harbinger fund to pay his taxes. In announcing the allegations last year, former SEC enforcement director Robert Khuzami said the charges "read like the final exam in a graduate school course in how to operate a hedge fund unlawfully."

 In an SEC filing Thursday, Harbinger Group (HRG) -- a holding company that owns a number of businesses and is also headed by Falcone -- said he and Harbinger Capital had reached an agreement in principle to settle with the SEC without admitting or denying the allegations, as is common in the agency's cases.

Under the proposed settlement, which requires a judge's approval, Falcone would be barred for two years from raising new capital or making new investments, and Harbinger would be required to comply promptly with redemption requests from investors. Falcone -- whose net worth Forbes Magazine pegged at $1.2 billion as of March -- would be obliged to pay a $4 million penalty, while Harbinger Capital would pay $14 million.

Spokesmen for the SEC and Harbinger Group declined to comment.

Falcone can still manage Harbinger Capital and remain head of Harbinger Group. The latter firm owns several insurance- and finance-related companies, and holds a majority stake in Spectrum Brands, which produces consumer products, including Remington razors.

Harbinger Capital is the main backer for upstart wireless carrier LightSquared, which filed for bankruptcy last year shortly after U.S. regulators barred it from turning on its network, citing concerns about interference with GPS devices.

LightSquared, which is in the process of crafting a reorganization plan, says it will "continue to work with both government and industry to address legal and technology issues" related to its network.

James O'Toole @jtotoole May 9, 2013: 5:11 PM ET
Article from http://money.cnn.com/2013/05/09/investing/falcone-ban/index.html

Hedge Fund's Hottest Investment Ideas: Gundlach, Chanos and Ackman

By Chris Ciaccia,  May 10, 2013, 10:43:52 AM EDT
Article from: http://www.nasdaq.com/article/hedge-funds-hottest-investment-ideas-gundlach-chanos-and-ackman-cm245189#ixzz2SxcfIlOd

The Ira Sohn Conference offers some of the best ideas the hedge fund world has to offer, and this year was no different, with luminaries such as Jeffrey Gundlach, Bill Ackman, and Jim Chanos offering ideas to the investing community.

Jeffrey Gundlach, who last year said he was to short the high-flying Apple (AAPL), took a shot at another high-flier, Chipotle Mexican Grill (CMG). DoubleLine Capital's Gundlach said that Chipotle is a good short, due to the fact he hates the chart. He noted he loves the product, but increased competition from taco trucks, Taco Bell(YUM), and other fast-food companies moving into higher-end products will impact Chiptole in the future.

Gundlach, who has been dubbed the "Bond King" by Barron's, recommended other short ideas, as he believes the Fed's quantitative easing is going to end badly. He said that insurance companies have not factored in low interest rates into their models, and should be avoided as long as we're in a low interest rate environment. He also said to short French bonds, noting the French are a basket case." Gundlach also said avoid bank deposits, and gold, as quantitative easing has changed the game, and investors should play by the new rules.

World famous short-seller Jim Chanos took a shot at the PC space, saying the hard disk drive makers are likely to see sharp share price declines in the next twelve months.

Chanos, who runs Kynikos Associates, believes PC sales are only just starting to decline as tablets, especially Apple's iPad take wallet share. In tune, the hard disk drive decline will be more pronounced than the PC decline. The two largest players in the space, Western Digital(WDC) and Seagate Technologies(STX) appear to be cheap, but are "value traps." The two companies have vastly outperformed the likes of HP and Dell over the past three years, aided in part by the Thailand flood, which caused prices to spike. Chanos believes this is unsustainable, and all you have to do is look at the industry to see why. Toshiba (TOSBF), the third largest hard disk drive maker, expects its margins to be cut in half, and Samsung (SSNLF) exited the business, selling it at .5 times revenue to Seagate.

If the declining business prospects weren't enough, there's also accounting issues at Seagate, especially with the Samsung purchase. The company took a $1 billion in goodwill on the purchase, something which Chanos questioned openly. The company is also seeing sizable drop in insider holdings from the executive suite, and the company's chief technology officer, Bob Whitmore, stepped down abruptly, though he still remains with the company.

Pershing Square's Bill Ackman has been in the news regarding his battle with Herbalife, but the noted hedge fund manager took the chance to speak about something much less newsworthy: Procter & Gamble (PG).

Pershing Square, who owns 29 million shares of the Cincinatt-based conglomerate, believes P&G is vastly under earning its potential. With strong profitability, high barriers to entry, exciting global growth opportunities, and limited private label competition, P&G could earn as much as $6 per share by 2016, up from $4 per share today. The company is embarking on a $10 billion cost savings measures to help this, but Ackman believes it could do more.

The company never fully integrated its Gillette purchase, it has suboptimal manufacturing, an inefficient organizational design, its marketing investments are not reaching the appropriate returns, and pricing is not optimized. P&G should generate consistent 5% organic growth. as its key competitors are doing 4-7% organic growth. The company should have a 24% EBIT margin, up from 19% today, just via cost savings, with gross margins between 52% and 54%.

If P&G can earn $6 per share, it deserves a 20 multiple by 2016, trading at $120 per share.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Chris Ciaccia,  May 10, 2013, 10:43:52 AM EDT
Article from: http://www.nasdaq.com/article/hedge-funds-hottest-investment-ideas-gundlach-chanos-and-ackman-cm245189#ixzz2SxcfIlOd

Taveras invests 20% in hedge funds, more than Raimondo

May 8th, 2013 at 4:20 pm by Ted Nesi under Nesi's Notes, On the Main Site
http://blogs.wpri.com/

It turns out that the Democratic gubernatorial hopeful who has the biggest chunk of pension money invested in hedge funds isn’t Treasurer Gina Raimondo – it’s Providence Mayor Angel Taveras.

Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.

Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.

Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.

Ortiz said the city was already investing nearly 20% of its money in hedge funds when Taveras succeeded now-Congressman David Cicilline in January 2011. Raimondo, by contrast, moved to add hedge funds to the state’s portfolio a few months after she took over from Frank Caprio that same year.

“The asset mix in Providence’s pension portfolio has remained essentially static since we took office,” Ortiz said. “We relied on the advice of Wainwright. They’ve managed the city’s portfolio for many years, and the fund has performed well relative to peers.”

Providence’s pension investments earned an 11.2% return during 2012, less than the 12.5% that the state’s investments earned, according to Ortiz and the State Investment Commission. Providence expects to earn an average return of 8.25% on its investments over the long term, while the state expects to earn 7.5%.

Ortiz said the Taveras administration didn’t have information available about the amount of fees it pays to hedge funds, although city officials “asked a while ago” for Wainwright to provide details.

“We’re awaiting reply,” he said.

Raimondo’s investment strategy has come under withering criticism over the last month from Forbes.com contributor Edward Siedle, president of Benchmark Financial Services, who argued in one post that “the smart pension money would steer clear of hedge funds, not pile into them.”

Robert Walsh, executive director of the National Education Association Rhode Island teachers union and a frequent Raimondo critic, quipped recently that the treasurer’s defense of her hedge-fund strategy might as well rely on “magic beans,” tweeting: “Top corporate pension funds have 2% in hedge, not 20%+.”

Taveras is now planning to review Providence’s heavy investment in hedge funds, according to Ortiz.

“Recently, compelling questions have been raised about hedge funds and other nontraditional investments by public retirement systems,” he said. “We’ve asked Wainwright for more information about those kinds of investments in Providence’s pension fund, including the fees paid to investment managers.”

Coincidentally, Raimondo said during her 2010 campaign that Providence’s pension fund invested $1 million in Point Judith Capital, the venture capital firm she co-founded, after Wainwright approached Point Judith and then recommended the investment to the Board of Investment Commissioners.

Providence’s pension fund is significantly smaller than the state of Rhode Island’s. Their assets totaled $326.5 million and $7.2 billion, respectively, as of June 30. Following the adoption of separate overhauls pushed through by Taveras and Raimondo, the city’s pension plan is 36% funded and the state’s plan is 59% funded.

by Ted Nesi under Nesi's Notes
http://blogs.wpri.com/