Michael Zimmerman’s Hedge Fund Anticipates 2014 Mobile Shopping Revolution

Michael Zimmerman of hedge fund Prentice Capital Management LP believes mobile shopping will change the way we shop, an evolution that is already happening. Online sales on Christmas Day were up 16.5 percent over last year while mobile sales formed nearly 29 percent of total online sales, an increase of over 40 percent compared to 2012, even though the number of people walking into stores fell 14.6 percent this year.

Prentice Capital’s Zimmerman believes that despite fewer shoppers instore, sales are increasingly driven by sofa shoppers wielding tablet computers. Considering that an estimated 50 million new iPhones and iPads are already in consumers hands during the last quarter of 2013, the new year could be a breakthrough year for mobile shoppers, particularly if businesses continue to adapt to mcommerce, engaging their client base with new and innovative methods.

Apple’s iPhone and iPad represented the vast majority of U.S. online shopping and sales during Christmas, accounting for more than an 83 percent take of sales compared to Android. Despite having minority market share in the U.S., Apple’s iOS is being used to do the most mobile shopping and placing the most sales by a wide margin, according to IBM’s Digital Analytics Benchmark Hub (1).

The group notes that smartphones drove 28.5 percent of all online traffic, leading the 18.1 percent traffic share tied to tablet devices, however tablets composed 19.5 percent of all online sales, significantly larger than the 9.3 percent share of sales connected to smartphones.Tablet users also placed higher value orders: $95.61 per order on average compared to the $85.11 average order placed on smartphones.

“It’s a result of more and more technology in the hands of the consumer, which allows them to virtually window-shop,” ShopperTrak founder Bill Martin told Reuters. Approximately 33% of Smartphone users look for product reviews, coupons and reductions prior to purchasing anything, frequently while in-store – a consumer trend being labelled “click and mortar” shopping, fueled by Social networking. Intelligent utilization of the latest social media and Smartphone data allows forward thinking companies to analyze customer behavior and quickly address needs and concerns, a field being pioneered by Apples iBeacon instore engagement technology.

US consumer retail growth will probably continue to do well in 2014 likely driven by the rapid growth of mcommerce. And Zimmerman is backing his opinions: his pattern of investing as indicated through Prentice Capital’s regulatory disclosures shows the Zimmerman hedge fund favors stocks with powerful brands and well-conceived mobile and online commerce strategies.

Scott Galloway, an NYU Stern professor of marketing and creator of L2, stated “Given the evidence, we seem to be entering the start of a persistent mobile age… Brands ignore this shift at their own peril.”

Hedge Fund Strategy, Hedge Funds

UCITS HFS Index finishes year on a high, up +0.27% in December 2013

The UCITS HFS Index continues in the same vain as in November and reports gains of 0.27% again for December 2013. The broad index started negatively into the month with losses of -0.29% in week one. The second week of December brought additional losses of -0.14%. Things turned around in the second half of the month though: the UCITS HFS Index gained 0.37% and 0.33% in week three and four respectively to see the UCITS HFS Index finish the year on a high. Of all funds tracked 65.00% reported profits in December 2013.

From a sub-strategy perspective ten of the twelve sub-strategies reported positive results in December, the best performing being L/S Equity (0.76%), Event Driven (0.74%) as well as Global Macro and Convertible (both 0.46%). All four strategies experienced losses in the first half of the month, but were able to realise profits in the second half that outweighed the losses by far. The two strategies in the red were Arbitrage (-0.26%) and Fixed Income (-0.17%). While the latter took losses in week one and four that were bigger than its mid-month gains, Arbitrage was struggling primarily in the first half of December and could not add any meaningful gains in the second half of the month. Commodity finishes 2013 as the worst performing strategy (-4.15%), but both Fixed Income (-1.03%) and Arbitrage (-0.93) stay in the red as well due to a weak year-end performance. The UCITS HFS Index finishes 2013 on a high with a performance of +3.29% for the year.

Hedge Funds

Hedgie Jeffrey Epstein Backs The Elton John AIDS Foundation

Hedge fund founder and science and education philanthropist, Jeffrey Epstein, has put his support behind the Elton John AIDS Foundation (EJAF) to combat HIV resistance to drugs.

“The next great advance in HIV treatment will be the ability to foresee viral resistance and to avert it before it develops,” Jeffrey Epstein remarked.

In 2003, Jeffrey Epstein established the Program for Evolutionary Dynamics at Harvard University which, over the past three years, collaborated with John Hopkins University to develop a database to predict the effect of drugs on the HIV virus and notably HIV resistance. Using data from thousands of blood tests on more than 20 anti-HIV drugs, the Program’s model factors in different drug combinations and dosages, as well as blood type, viral genotype, viral load, HIV stage, treatment history, age, sex and a host of other variables to arrive at the most precisely engineered predictor of results for future patients.

Founded in 1993, the Elton John AIDS Foundation (EJAF) is one of the world’s leading nonprofits in the field of HIV/AIDS. Since its inception, EJAF has raised more than $300 million to fund worthy projects across the globe.

One of those programs is the outstanding HIV Drug Resistance Database at Stanford University’s Clinical Virology Laboratory in California. The database provides the largest HIV drug resistance surveillance, interpreting HIV drug resistance tests, and new antiretroviral drugs. Obtained from nearly 40,000 patients, the database uses more than 90,000 HIV sequences from approximately 80,000 distinct virus isolations. When presented with an HIV sequence, the genotypic resistance interpretation algorithm considers hundreds of factors including: genotypic data, treatment history, in vitro drug susceptibility and clinical response to a new treatment regimen.

Since its discovery, AIDS has caused an estimated 36 million deaths. Today, approximately 35.3 million people live with HIV globally. AIDS is still considered a pandemic and is actively still spreading.

Jeffrey Epstein is the founder of the Program for Evolutionary Dynamics and a former member of the Mind, Brain and Behavior Committee at Harvard University. He is one of the largest sponsors of individual scientists including many Nobel Laureates. He is a former board member of Rockefeller University, the Trilateral Commission and the Council for Foreign Relations. His foundation, the Jeffrey Epstein VI Foundation was established in 2000 to support cutting edge science research around the world.

Hedge Fund Philanthrophy, Hedge Funds, hedge fund research, hedge fund technology

Hedge Fund Trends And Predictions For 2014

Steve Nadel, partner in the Investment Management practice of law firm Seward & Kissel LLP, has put together some trends and predictions for th2014_moneye hedge fund industry in 2014.

Nadel’s 2014 Hedge Fund Industry Predictions:

· While the last couple of years saw an influx in pension money coming into the industry, the expectation is that this year will see a big increase in inflows from family offices, especially starting in Q2.

· Based on conversations with many managers and various experts on the economy, given the changes in the Fed’s view about maintaining low interest rates, the economy should really start feeling the impact of this by Q2/3. This could have adverse consequences for traditional long only products and real estate, and could benefit alternative investment strategies.

· For many managers, the AIFMD rules shouldn’t have a major impact as they alter how they accept European money and some of the more hedge fund-friendly EU countries soften their regulations.

· By the second half, as the JOBS Act’s Rule 506(c) approaches its first anniversary, we can anticipate some proposed rules concerning performance advertising for hedge funds seeking to market in a public manner. We can also expect some very creative profile-raising public advertising campaigns to be undertaken by a number of managers.

· The number of new funds with founders share classes will rise dramatically in 2014, especially as funds look to attract more institutional capital.

· As private equity-like investments become more popular in many hedge funds, don’t be surprised to see a return in popularity of the two year incentive allocation (with clawback) concept.

· With the increased complexity in executing trades brought on by Dodd Frank, many managers running side by side structures will explore converting to the more operationally-efficient master-feeder structure.

· Driven again by institutional requirements, it is expected that there will be even more “funds of one” created in 2014 than last year.

· With much pressure from the industry, the CFTC will likely finally pass harmonizing legislation making it possible for Rule 4.13(a)(3) exempt funds to rely on Securities Act Rule 506(c) and thus advertise.

· While insider trading will continue to be on the SEC’s radar, the SEC will look more closely at other areas such as valuation as well as conflicts between the manager and the fund.

Events, Hedge Fund Strategy, Hedge Funds

Hedge Fund Giant Blackstone To Sell Almost 9 Million Class A Shares

Hedge fund investor Blackstone hopes to raise $227.4 million in a public offering of eight and a half million shares of its class A common stock.  Blackstone Mortgage Trust, Inc., wants to buy up additional commercial mortgage loans and use the money for other general corporate purposes, the company said.

Underwriters have been given a 30-day option to purchase up to an additional one and a quarter million shares which will bring the total to $261.5 million. The offering is expected to close on January 14, 2014.

BofA Merrill Lynch, Citigroup, J.P. Morgan and Wells Fargo Securities are acting as joint book-running managers for the offering.

Also in Blackstone news, Blackstone Advisory Partners, an affiliate of the group, has hired James (“Jim”) Schaefer as Senior Managing Director of its Energy, Power and Renewables Advisory Practice in New York.

The investment giant will host a conference call for the media on Thursday, January 30, 2014 at 9:30 am ET to review fourth quarter and full year 2013 results.

Hedge Fund Strategy, Hedge Funds

The Top 100 Hedge Funds In 2013

Bloomberg Markets Magazine has compiled a list of the top hedge funds in 2013 with three lists of top performers: 100 funds with assets greater than $1 billion; 25 funds with assets of $250 million to $1 billion; and the 20 most-profitable large funds. Assets and returns were for the 10 months ended on Oct. 31.

Larry Robbin’s $1.8 billion Glenview Capital Opportunity Fund ranked #1 in the annual Bloomberg Markets ranking of the best-performing large hedge funds with a 84.2 percent gain through October 31.

Some highlights include:

Steve Cohen’s SAC Capital International was actually the most-profitable fund in 2013, according to Bloomberg data, however Cohen isn’t on the most-profitable list this year because he is returning investors’ money as his firm settles criminal charges from the U.S. government.

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Some of the biggest managers were the biggest disappointments in 2013. Ray Dalio, who runs Bridgewater Associates LP, returned just 6 percent through October in his $63 billion Pure Alpha II fund, according to data compiled by Bloomberg. The full lists are available here.

Hedge Fund Strategy, Hedge Funds, hedge fund research

The SEC’s 2014 Hedge Fund Examination Priorities

The SEC has published its 2014 NEP examination priorities for hedge funds, private equity funds, investment advisers and other self-regulated organizations.

Priorities specific to hedge funds:

  1. Annual exams mandated by the Dodd-Frank Act;
  2. The NEP will continue its assessment of funds offering “alternative” investment strategies, with a particular focus on: leverage, liquidity and valuation policies and practices;
  3. the staffing, funding, and empowerment of boards, compliance personnel, and back-offices; and
  4. the manner in which such funds are marketed to investors. The staff will additionally review the representations and recommendations made regarding the suitability of such investments.

The priorities listed for 2014 were selected based on a variety of information and risk analytics, including tips, complaints and referrals, including from whistleblowers and investors.

Other priorities include:

“We are publishing these priorities to highlight areas that we perceive to have heightened risk,” said Andrew J. Bowden, Director of the SEC’s Office of Compliance Inspections and Examinations. “This document, along with our Risk Alerts and other public statements, help us to increase transparency, strengthen compliance, and inform the public and the financial services industry about key risks that we are monitoring and examining.”

The full text can be accessed here (11 pages).

Administrators, Hedge Funds, hedge fund research

JP Morgan Pays $1.7 Billion To Put Off Fraud Charges

In as settlement that defers criminal charges against JP Morgan until 2016, a US Judge has agreed to settle for a fine of $1.7 billion, Reuters reports.

JP Morgan was being charged by the prosecution for it’s involvement in the Bernard Madoff hedge fund ponzi scheme. The charges being settled are, according to Reuters, “..the bank violated anti-money laundering laws by failing to alert authorities to warning signs its employees encountered in dealings with convicted Ponzi schemer Bernard Madoff.”

The prosecution says that JP Morgan cut its exposure to Madoff’s hedge fund at the time in order to minimize losses, however, the mega-bank never informed US authorities about what turned out to be a $17.3 billion Ponzi scheme.

“The agreement would be the second time in a month that JP Morgan has been forced to acknowledge wrongdoing,’ The Guardian reports, “On November 19 the bank paid a record $13 billion to settle charges that it routinely bundled poor quality home loans into securities that were billed as high-quality to investors.”

The charges can be dismissed if the mega-bank pays its due and meets all the terms of the agreement.

The bank will pay a total of $2.6 billion, settling all criminal, civil and regulatory actions related to its business with Madoff.

Fraud, Hedge Funds

Hedge Fund Investor Blackstone Buys Up $200 Million In Crocs Shares

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An affiliate of hedge fund investor giant Blackstone has acquired $200 million in newly issued series A convertible preferred stock in innovative casual footwear company Crocs, Inc.

In connection with the investment, Crocs announced that it intends to revise its capital structure to accommodate a $350 million stock repurchase program approved by its board of directors.

Blackstone will be entitled to two seats on the Crocs board of directors.

“We expect Blackstone to contribute a great deal of value to our board through its financial, consumer, retail and brand experience and its global footprint,” Thomas J. Smach, Crocs chairman of the board, said. “While Blackstone’s investment will represent only 13% as-converted ownership at closing, we believe our company, shareholders, and employees will benefit.”

In its fourth quarter 2013 outlook, Crocs says revenue stands around $220 million. The CEO, John McCarvel, also announced his intention to retire in April, 2014.

“Blackstone sees tremendous opportunity in the Crocs brand and global franchise. The company has the infrastructure and products to enable continued growth across the wide range of geographies and channels through which it operates. Prakash Melwani, Senior Managing Director and Chief Investment Officer of Blackstone’s Private Equity Group said, “We believe our consumer and retail investing experience coupled with the network of value-added resources within Blackstone will make us a strong partner for Crocs. We look forward to working with the Crocs Board to deliver compelling long-term value to the company’s shareholders.”

Hedge Fund Strategy

Hedge Fund Regulation: Banks Want CDO Exception To Volcker Rule

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The SEC and other federal regulars are reviewing whether or not certain CDOs backed by trust preferred securities should be subjected to new regulation under the final Volcker rules.

Reuters reports that this would be the first “tweak” to the new legislation known as the “Volcker rule,” which prohibits banking entities (and their investments in hedge funds) from making risky bets that solely benefit the banks and not the investor. The legislation comes into effect April 1, 2014.

The American Bankers Association filed a lawsuit warning of heavy losses if banks are forced to sell certain complex CDOs, Reuters reports.

“At stake are so-called collateralized debt obligations backed by trust preferred securities — or TruPS CDOs — which have hybrid characteristics of both debt and equity and can get a favorable tax treatment…. The regulators have to reply to the banks in court before 9 a.m. EST Monday [Dec. 30], but it was unclear whether the statement would alter the course of the lawsuit, in which the banks had asked for a stay of the relevant part of the rule,” Reuters says.

The SEC said it intends to address the matter no later than January 15, 2014.

The Volcker Rule is a specific section of the Dodd–Frank Wall Act originally proposed by economist and former Federal Reserve Chairman Paul Volcker to restrict banks from making certain kinds of speculative investments that do not benefit their customers.

Volcker argued that such speculative activity played a key role in the financial crisis of 2007–2010. The rule is often referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank’s own accounts, although a number of exceptions to this ban were included in the Dodd-Frank law.

Hedge Fund Strategy