Richard Perry’s Perry Capital sued the Treasury Department in an attempt to prevent Fannie Mae and Freddie Mac from being liquidated. Perry, who along with Paulson & Co. and other hedge fund investors is said to own a senior class of preferred stock in the two mortgage finance companies, asserts that the government’s seizure of all of the two companies’ profits is illegal. The government wants the two mortgage companies to be liquidated as originally planned when they were seized by the government in 2008, while the investors want them to remain in business and be privatized. The dispute is over a so-called third amendment to the preferred stock purchase agreements.
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The firms that keep score of the hedge fund industry issued press releases Monday telling us something we already knew: the average hedge fund lost money in June. For example, The HFRI Fund Weighted Composite Index fell 1.3 percent last month, snapping a seven month profitable streak. All four of HFRI’s main strategy indices posted losses in June, led by macro, down 1.5 percent. “Risk-off sentiment dominated June hedge fund performance as investors and fund managers positioned for curtailment of stimulus efforts by the U.S. Federal Reserve, resulting in increased volatility and pressuring emerging market, interest rate-sensitive and commodity-focused funds,” said Kenneth Heinz, President of HFR, in a press release. “Trends of the previous six months across most asset classes were reversed as bond yields posted a sharp increase.” Heinz pointed out that many hedge funds continue to be actively and conservatively positioned “for the complex impacts of stimulus extraction.”
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Meanwhile, the Lyxor Hedge Fund Index posted a loss of 1.63 percent in June, trimming its year-to-date gain to 1.85 percent. Every Lyxor index lost money in June, led by the CTA long term index, down 2.64 percent, the Lyxor long-short equity market neutral index, off 2.45 percent, and the long-short equity credit arbitrage index, down 2.40 percent. “Hedge fund performance in June was hurt by de-risking and a re-pricing of all assets due to higher bond yields,” Lyxor explained in its monthly report. “Most asset classes declined in value and hedge funds were hurt by a lack of safe haven and higher correlation among assets.”
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Office Depot, which is trying to defend itself from a proxy fight with activist hedge fund Starboard Value, Monday filed its preliminary proxy statement. It also announced that Michael Massey, a former chief executive and president of Collective Brands, has been nominated to join the board to fill the vacancy created by current director Brenda Gaines, who said she has chosen not to stand for reelection at this year’s annual meeting scheduled for August 21. Meanwhile, shares of the office products retailer have risen for the past five trading sessions, climbing more than 7 percent during that period.
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Goldman Sachs points out in a new report that 26 of the 50 Russell 3000 stocks with a market cap of at least $1 billion and the most short interest as a percentage of market cap rose more than 20 percent during the first half of the year.
