Hedge funds gained an average of 1.1 percent in November and are up 8.2 percent for the first 11 months, according to industry tracker eVestment. The data provider says the industry is poised to beat last year’s average return by 1.5 percentage points. It does not mention that also means the average hedge fund barely did one-third as well as the major market indices. Even the best performers — long-short equity hedge funds — are on pace for an average return of 15.8 percent, only around half as well as the major indices.
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Small wonder, then, that a Citi Prime Finance survey found that hedge funds fees are falling. Instead of the traditional 2 percent management fee and 20 percent performance fee, the average management fee is now closer to 1.58 percent for all but the largest managers, which average 1.76 percent. As a result, Citi finds there is a growing gulf between the biggest and smallest hedge funds. The report concludes that emerging hedge funds are having trouble covering their high management company expenses based solely on the management fees they earn and do not achieve comfortable operating margins at any point below $1 billion assets under management. “Fee compression continues to reshape the business of hedge funds, lowering fees even as expenses rise, all but eliminating fee-only operating margins, and raising the level of assets needed for a hedge fund business to succeed,” states Alan Pace, global head of prime brokerage and client experience, in a press release.
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John Paulson remains on a roll. The New York–based firm’s Paulson Advantage fund, which posted heavy losses in 2011, is up 30 percent through November, while its Recovery fund has jumped 55 percent, according to Bloomberg. As we noted earlier in the year, Paulson in cashing in big-time on several merger deals, especially in telecommunications.
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Herbalife is going on the offensive to discredit hedge fund manager William Ackman, whose New York–based firm Pershing Square Capital Management has a big negative bet against the multi-level marketer of nutrition products. Herbalife has hired investment bank Moelis & Co. to convince investors to yank their money out of Ackman’s hedge fund firm, charging that its short position is big, risky and irresponsible, according to Bloomberg. In fact, Moelis has already arranged a meeting with Cliffwater, widely regarded as a very influential adviser to investors in hedge funds. Herbalife’s stock was down slightly on Monday.
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Hologic has agreed to place two of Carl Icahn’s people on its board of directors, which was expanded to 11 people, ten of whom are independent. The two new board members are Jonathan Christodoro and Samuel Merksamer, managing directors of Icahn Capital, a subsidiary of Icahn Enterprises. Separately, Hologic, which makes diagnostic and medical imaging systems geared toward women’s health, also announced that Stephen MacMillan has been named president and chief executive officer and a member of its board. MacMillan succeeds Jack W. Cumming, who was named CEO in July and previously served in this role from 2001 to 2009. “We are enthusiastic about and supportive of the appointment of Steve MacMillan as the new CEO of Hologic,” Icahn stated in a press release issued by Hologic. Icahn entities own 12.5 percent of Hologic’s outstanding shares. Icahn also agreed to vote the shares he controls in support of the company’s slate of director nominees at the company’s 2014 annual meeting.
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John Griffin’s Blue Ridge Capital disclosed it owns 6 percent of Zulily, inc., an online discount retailer geared toward women. It was filed as a passive investment.
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Steve Cohen’s SAC Capital Advisors disclosed a 5.1 percent passive position in Move, Inc., an online real estate company.
