9.21.2009

Corzine and TPG-Axon - Casino Connection?

New Jersey Governor Jon Corzine's investment in hedge fund TPG-Axon is accused of being a conflict of interest. The charges relate to TPG-Axon's parent, multi billion dollar private equity firm, Texas Pacific Group.

There is plenty of information available on the web with regard to the actual allegations, but since little useful information is provided we will provide a little background.


Texas Pacific Group
Contact Info (Primary):
301 Commerce Street, Suite 3300
Fort Worth, TX 76102
(817) 871-4000 phone
(817) 871-4010 fax
www.tpg.com

Firm Type: Private Equity

AUM: $45 billion

Key People:
Founding Partner: David Bonderman
Founding Partner: James G. (Jim) Coulter
Partner, Operations: Richard W. (Dick) Boyce

Principal Competitors: Kohlberg Kravis Roberts & Co.; Hicks, Muse, Tate & Furst Incorporated; Clayton, Dubilier & Rice, Inc.

Other Info: TPG is headquartered in Fort Worth, TX and San Francisco, CA. The firm also has offices in 8 countries. Texas Pacific Group's largest private equity fund is TPG Partners VI, an almost $20 billion global buyout fund launched in 2008.


TPG-Axon Capital Management
Contact Info:
888 Seventh Avenue, Floor 38
New York, NY 10106-3899
(212) 479-2000 phone

Firm Type: Hedge Fund

Founded: 2005

2009 AUM: $10.7 billion

Key People:
  • Dinakar Singh - Founder and CEO
  • 31 Employees
Other Info: TPG-Axon is a global macro hedge funds ranks as the 25th largest US hedge fund by assets under managerment as of August 2009.

Largest Holdings (as of June 30, 2009):
Hewlett Packard - $429 million
Pepsico - $312 million
Oracle - $304 million
Microsoft - $278 million
JP Morgan - $277 million



9.17.2009

2001 Interview with Madoff Betrayed Fraud

Suspicious 2001 Interview with Madoff
We have often heard that there were a good many financial professionals who were suspicious of Madoff's hedge fund, based on the low volatility and almost complete lack of a month with negative returns. However, in an interview Madoff gave in 2001, there were many clues, certainly in retrospect, that something was amiss.

Here are a few quotes from that article by MarHedge in May of 2001 that are certainly interesting in hindsight:

"Those who question the consistency of the returns, though not necessarily the ability to generate the gross and net returns reported, include current and former traders, other money managers, consultants, quantitative analysts and fund-of-funds executives, many of whom are familiar with the so-called splitstrike conversion strategy used to manage the assets."

"What is striking to most observers is not so much the annual returns—which, though consider somewhat high for the strategy, could be attributed to the firm’s market making and trade execution capabilities—but the ability to provide such smooth returns with so little volatility."

"The best known entity using a similar strategy, a publicly traded mutual fund dating from 1978 called Gateway, has experienced far greater volatility and lower returns during the same period."

"And in a face-to-face interview and several telephone interviews, Madoff sounds and appears genuinely amused by the interest and attention aimed at an asset management strategy designed to generate conservative, low risk returns that he notes are nowhere near the top results of well-known fund managers on an absolute return basis."

"The apparent lack of volatility in the performance of the fund, Madoff says, is an illusion based on a review of the monthly and annual returns. On an intraday, intraweek and intramonth basis, he says, 'the volatility is all over the place,' with the fund down by as much as 1%."

"But as whole, the split-strike conversion strategy is designed to work best in bull markets and, Madoff points out, until recently 'we’ve really been in a bull market since ‘82, so this has been a good period to do this kind of stuff.'"

"As for the specifics of how the firm manages risk and limits the market impact of moving so much capital in and out of positions, Madoff responds first by saying, 'I’m not interested in educating the world on our strategy, and I won’t get into the nuances of how we manage risk.'"

"He won’t reveal how much capital is required to be deployed at any given time to maintain the strategy’s return characteristics, but does say that 'the goal is to be 100% invested.”

"Indeed, says Madoff, the firm itself has received numerous buyout offers but has so far refused any entreaties because he and the many members of his immediate and extended family who work there continue to enjoy what they do and the independence it allows and have no desire to work for someone else."

"Similarly, he adds, another firm could duplicate the strategy in an attempt to get similar results, but its returns would likely be unmatched because 'you need the physical plant and a large operation' to do it with equal success. However, many Wall Street firms, he says, do use the strategy in their proprietary trading activities, but they don’t devote more capital to such operations because their return on capital is better used in other operations."

"Madoff, who believes that he deserves 'some credibility as a trader for 40 years,” says: “The strategy is the strategy and the returns are the returns.' He suggests that those who believe there is something more to it and seeking an answer beyond that are wasting their time."


Those are chilling quotes knowing what we do now.

Read the full article here

9.16.2009

World's Most Stable Hedge Funds

Below is a list of the most stable hedge funds in the world. The majority of hedge funds meeting the criteria are fixed income / arbitrage funds. The stability rating is based on 5 year returns, 5 year standard deviation of returns, and worst 3 mo. returns. All funds below had positive cumulative 5 year returns and had returns of no worse than -2% in the fund's worst 3 mo. period. Of course, just because a fund has stable, positive returns, does not necessarily indicate it is a safe investment. Recall that Bernard Madoff Securities posted positive monthly returns for 10 straight years with very low volatility. Had Madoff's fund still been active, it would have rated at or near the top of this list.

Most Stable Hedge Funds:

Fund Name

Firm Name

City

State

Stability Rating

Fund Type

Fletcher Income Arbitrage Fund

Fletcher Asset Management

New York

NY

99.45

Debt Arbitrage

Talisman Partners

Envision Capital Management

Scottsdale

AZ

99.35

Distressed Debt

Coast Enhanced Income Fund II

Coast Asset Management

Santa Monica

CA

99.15

Debt Arbitrage

Equity Income Partners

Envision Capital Management

Scottsdale

AZ

98.91

Debt/Fixed Income

AlphaBridge Fixed Income Fund

AlphaBridge

Greenwich

CT

98.69

Fixed Income

YA Global Investors

Yorkville Advisors

Jersey City

NJ

98.22

Debt Arbitrage

FAMA Sniper

FAMA Investors

Grand Cayman

GT

97.99

Emerging Markets

Kassirer Market Neutral

Toronto

ON

97.8

Convertible Arbitrage

DB Equilibria Japan Fund USD

DB Advisors

New York

NY

97.63

Absolute Return

Glazer Offshore Fund

Glazer Capital Management

New York

NY

97.38

Merger Arbitrage

Blackthorn Fund

Blackthhorn Group

Overland Park

KS

97.2

Multi Strategy

Durban Capital

Durban Capital

New York

NY

97.02

Equity Arbitrage

Loch Capital I

Loch Capital

Boston

MA

96.84

Equity

Tuscan Investments

Tuscan Group

San Francisco

CA

96.63

Equity

Winbeldon Fund

Weston Capital

Westport

CT

96.4

Global Equity

Gabelli Associates

Gabelli

Rye

NY

96.22

Equity

Blue Rock Capital Fund

Blue Rock Advisors

Minneapolis

MN

96.05

Fund of Funds

Culross Arbitrage Fund

Culross Global Management

London

UK

95.83

Fund of Funds

MKP Opportunity Offshore

MKP Capital

New York

NY

95.64

Debt Arbitrage

Haberman Value Fund

Haberman Capital

New York

NY

95.45

Equity

AlphaGen Capella Fund Limited

Gartmore Investment Services

Frankfurt

Germany

95.26

Equity

Mac Sentinel Cdn Managed Yield

Mackenzie Investments

Toronto

ON

95.01

Equity Arbitrage

Dexia Double Alpha

Dexia Asset Management

Paris

France

94.81

Fixed Income

Aktie-Ansvar Graal

AktieAnsvar

Stockholm

Sweden

94.68

Equity

BBVA & Partners Eq Arbitrage

Madrid

Spain

94.5

Equity


The above chart is based on our proprietary formula for hedge fund stability. The formula is based on 5 year returns, 5 year standard deviation of returns, and worst 3 mo. period as well as return/volatility ratio. Stable hedge funds do not necessarily indicate safety of investments. The above figures are subject to error and should not be used for making investment decisions under any circumstances.

The World's Riskiest Hedge Funds

Below is a list of the riskiest hedge funds for the trailing 5 years. Risk ratings are based on a proprietary volatility formula based on 3yr and 5yr standard deviation of returns, as well as the worst 3 month returns. The list of riskiest/most volatile funds includes US as well as Non-US hedge funds. Commodity/Managed Futures and Trend Following hedge funds compose the majority of the riskiest hedge funds due often to the volatility and high correlation of their underlying investments.

Most High-Risk Hedge Funds:

Fund Name

Firm

City

State

Overal Risk

Fund Type

World Grain & Oilseeds Fund

DEC Capital

Lincoln

NE

99.69

Commodities

CFP IQS Fund

CFP Funds

London

UK

99.38

Multi Strategy

Fletcher Aggressive Fund

Fletcher Asset Management

New York

NY

99.06

Arbitrage

Global Partners

Global Partners LP

Chicago

IL

98.75

Multi Strategy

ICL Managed Account Program

Frontier

Fort Dodge

IA

98.44

Trend

AIS Futures Fund

AIS Group

Wilton

CT

98.13

Leveraged Long/Short

Di Tomasso Equilibrium Fund

Di Tomasso Group

Victoria

BC

97.81

Commodities

Dynamic Power Hedge

Dynamic Funds

Toronto

ON

97.50

Equity

LSGI Technology Venture

LSGI Advisors Inc

Duncanville

TX

97.50

Equity

Gerbino Gold Group

The Gerbino Gold Group

Beverly Hills

CA

96.88

Commodities

Legacy Futures Fund

Hawksbill Capital

Chicago

IL

96.56

Managed Futures/Commodities

Liberty Global Fund LP

Liberty Funds Group

Dallas

TX

96.25

Commodities

RAM Aggressive

RAM Futures

New Canaan

CT

96.25

Commodities

TMS Managed Futures Program

TMS Trade

Houston

TX

95.63

FX

Fort Orange Capital GL Strategic

Fort Orange Capital Management

Albany

NY

95.63

Trend

XT-99 Diversified

Pardo Capital

Kenilworth

IL

95.00

Trend

Permal Media & Technology

Permal Capital

New York

NY

95.00

Equity

Harmony Capital LTD Class A

Harmony Capital

London

UK

94.38

FX

Firebird Fund

Firebird Management

New York

NY

94.06

Emerging Markets

BP Capital Energy Equity

BP Capital

Dallas

TX

93.75

Energy



Overall Risk is determined based on worst 3 mo returns, 3 year standard deviation, and 5 year standard deviation based on funds with 5+ years of available returns. There are many definitions of risk and we have developed this measure simply for informational purposes. High levels of risk does not necessarily indicate a poor investment. Many riskier hedge funds have outperformed their peers in total returns. You should not make any investment decisions based on the above information.

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