CNBC’s Jim Cramer To Speak To NJCU Students


Retired hedge fund manager Jim Cramer, the host of CNBC’s Mad Money is hosting a broadcast event sponsored by the New Jersey City University (NJCU).

A magna cum laude graduate of Harvard College, Cramer earned his J.D. from Harvard Law School. He worked in sales and trading at Goldman Sachs before starting his own hedge fund, which produced an annualized return of 24 percent.

The event, entitled Get Rich Carefully, will be held on Tuesday, February 11, 2014, 6:00 – 9:00 p.m., in the Margaret Williams Theatre of Hepburn Hall on the NJCU campus at 2039 Kennedy Boulevard in Jersey City and is free.

Cramer will discuss how students with college debt can have a chance at financial success. Then, he will explain the value of the stock market and low-risk vs. high-risk investing. Lastly, he will focus on how anyone can make money work for themselves.

Cramer retired from his hedge fund in 2000 to embrace radio and television to help educate people about the financial markets. He is the founder of and chief markets columnist at TheStreet, Inc., a multimedia financial news organization. He also manages his charitable trust’s real-time portfolio product Action Alerts PLUS. Cramer’s charitable trust portfolio has distributed more than $1.8 million to well-known charities since its inception.


Hedge Fund Trader Mathew Martoma Found Guilty

Former SAC Capital trader Mathew Martoma has been found guilty of insider trading in what is being called the most lucrative hedge fund insider trading cases ever prosecuted.

“As the jury unanimously found, Mathew Martoma cultivated and purchased the confidence of doctors with secret knowledge of an experimental Alzheimer’s drug, and used it to engage in illegal insider trading.” Preet Bharara said in a statement following the conviction.

“Martoma bought the answer sheet before the exam – more than once – netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him. In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty. Mathew Martoma becomes the 79th person convicted of insider trading after trial or by guilty plea in this District in the last four years.” Bharara concluded.

Martoma, a former portfolio manager for a division of a group of SAC-affiliated hedge funds, allegedly used inside information that he received from a doctor who served as an adviser to Elan Corporation PLC on the clinical trial of an Alzheimer’s Disease drug to make profits and avoid losses for the hedge fund. Martoma and his then-employer, SAC Capital Advisors, liquidated holdings in two companies after receiving insider information, the prosecution said.

Fraud, Hedge Funds

Warren Buffett’s $1 Million Hedge Fund Bet

Billionaire philanthropist Warren Buffett made a decade long bet with hedge fund manager Protégé Partners that funds that invest in hedge funds couldn’t beat the stock market , profit wise.

The prize, Berkshire Hathaway stock worth almost $1.3 million as of the end of 2013, will go to the winner’s chosen charity. Buffett’s designee is Girls Inc. of Omaha, and Protégé’s is Absolute Returns for Kids.

Fortune reports that after six years, Buffett’s fund, a S&P index fund, Vanguard 500 Index Fund Admiral Shares, was up 43.8%.  For the same period, Protégé’s five funds of funds, on the average, gained only approximately 12.5% .

A campaign specifically focusing on billionaires was made public in 2010 by Warren Buffett and Bill Gates. The Huffington Post reported in April 2012 that “81 billionaires committed to giving at least half of their fortunes to charity”. As of July 2013, 113 billionaire individuals and couples and one family group have signed the pledge.

Hedge Fund Philanthrophy, Hedge Fund Strategy, Hedge Funds

Hedge Fund Launch: QCP Alpha Source

The emergence of social trading websites has opened up unique new sources of unexploited market intelligence, and a fund started by industry veterans is positioned to profit.

“Like most investment managers, we are always on the lookout for original new sources of investment wisdom and great trade ideas” said Fabrice Queguineur, CEO of QCP Partners Limited.

“After the GFC in 2008 we recognized two key things. The first is the dichotomy between high-net-worth individuals’ risk expectations and Private Bankers’ vision of assets’ diversification. Non-directional investment funds or alternative assets still represent a marginal weight in bank’s allocations; hence the emergence of Family Offices to increase the transparency and control over investments. The second thing we recognized was that the internet is at a stage where an entirely new universe of collective trading wisdom is now available, not just at the advice level, but at the trading level, instantaneously. For the first time we could select individual trades that represented the collective judgment of millions of market participants, not just a select few.”

The QCP Alpha Sources strategy, launched in June 2011, uses 10 or more independent, uncorrelated “Trading Signal Sources” or “TSS” across investment styles, markets, timeframes, and strategies. The fund is the culmination of QCP’s 3-year research program to discover, analyze, test, construct, and manage a portfolio with tightly-controlled risk/reward characteristics. The underlying trading signals each have between 1-10 years live, realtime trading track records.

“We think our approach is unique for several reasons,” continued Queguineur. “Our researchers have examined trading signals from every corner of the web, from London to India, everything from mathematicians to trading software developers to brilliant aerospace engineers who trade part-time and of course, investment professionals. We evaluate them without bias: if we judge a signal is credible, repeatable, profitable, robust, and technically strong, we will look at it. The fact we can then take individual trades into a single account structure in realtime means we can blend, adjust, and monitor the overall risk characteristics of the fund however we wish. Our design goal has been a stable high-return profile regardless of the overall market direction.”

“Each day we ask ourselves the same question: are we comfortable committing money long-term to markets hitting all-time highs with deteriorating fundamentals and unprecedented debt levels, or would we rather take smaller, shorter, opportunistic bets that don’t depend on the moods of politicians or central bankers. Most days that question answers itself as far as we’re concerned.”

QCP Alpha Source Fund opened a class A share to external investors in September 2013. Since inception in June 2011, the strategy returned nearly +80%. QCP Partners is currently looking for a Strategic Partner to broadly promote its current fund and managed accounts.

QCP Partners Limited is a boutique investment company founded by veteran managers from CitiGroup, Microsoft, JP Morgan, and UBS Investment Bank.

Hedge Funds

Hedge Funds Go After Bankers For “Aiding And Abetting” Petters’ Ponzi Scheme


A group of six hedge funds led by Ritchie Capital Management are suing  J.P. Morgan, Bank of America, Wells Fargo, UBS, Merrill Lynch and 7 other entities. The hedge funds claim that the banks “aided and abetted Thomas Petters’ $3.7 billion Ponzi scheme.” Courthouse News reports.

Petters was convicted for turning his hedge fund, Petters Group Worldwide into a $3.65 billion Ponzi scheme and received a 50 year federal sentence.

The group of hedge funds claim they lost $177 million in the scheme. They put two dozen major banks on notice in a summons.

“Among other things, J.P. Morgan Chase Bank N.A. entered into a ‘Blocked Accounts’ agreement with J.P. Morgan Europe Limited and Polaroid Consumer Electronics Europe B.V., an entity created by Petters to perpetuate his criminal activity, which established highly suspicious accounts in London that Petters used to illegally launder money,” the plaintiffs say in the notice.  ”Allowing defendants to retain the funds would constitute an unjust enrichment,” they say.

The six hedge funds listed as plaintiffs–Ritchie Capital Management LLC, Ritchie Special Credit Investments Ltd., Ritchie Capital Structure Arbitrage Trading Ltd., Ritchie Capital Management Ltd., Rhone Holdings II Ltd., and Yorkville Investment I LLC–claim that the financial institutions conspired with Petters in the criminal actions. The complaint cites that Chase allowed Petters to established “highly suspicious accounts in London that Petters used to illegally launder money.”

The plaintiffs want the $177 million back, plus interest, and court costs, and damages for fraud, conspiracy, negligence and unjust enrichment.

In 2010, Ritchie Capital Management filed a petition for a Writ of Certiorari, asking the U.S. Supreme Court to review decisions of the Minnesota Federal District Court and Eighth Circuit Court of Appeals denying restitution to the victims of Thomas Petters’ $3.5 billion hedge fund Ponzi scheme.

Hedge Funds

Conifer and Vastardis Merge To Form Global Hedge Fund Administration Firm

Hedge fund administrators Conifer Group, LLC, and Vastardis Capital Services Holdings LP. have signed a definitive merger agreement combining the two companies to form Conifer Financial Services, LLC.

At inception, Conifer Financial Services will have combined assets under administration of more than $70 billion and offer trade execution services to over 200 clients worldwide, the firms said in a joint statement.

Jack McDonald, currently CEO of Conifer Group, will become President and CEO. William Vastardis, Founder and President of Vastardis, will be named Chairman.

“Combining our two firms will yield significant benefits for our clients and employees and allows us to realize scale in an industry that increasingly demands it,” McDonald said. “The merger brings together Conifer’s clients in the hedge fund industry with Vastardis’ clients in the fund of fund, endowment/foundation, private equity, and venture capital spaces. It also dramatically increases the scale and scope of services that both Conifer and Vastardis will be able to provide their clients, creating a larger global footprint with offices in San Francisco, New York, the British Virgin Islands, Singapore, and Toronto.”

The merger is expected to close at the end of the first quarter of 2014, following regulatory approvals and customary closing conditions.

Hedge Fund Strategy

Manhattan Private Equity Manager Charged With Stealing $9 Million

A Manhattan-based private equity manager, Lawrence E. Penn III and his firm Camelot Acquisitions Secondary Opportunities Management, have had their assets frozen in a case put forward by the SEC. Three entities and one other person were also implicated in the fraud.

The SEC alleges that Penn and his longtime acquaintance Altura S. Ewers concocted a sham due diligence arrangement where Penn used fund assets to pay fake fees to a front company controlled by Ewers.  Instead of conducting any due diligence in connection with potential investments by Penn’s fund, Ewers’ company Ssecurion promptly kicked the money back to companies and accounts controlled by Penn so he could secretly spend investor funds for other purposes.

“Penn held himself out as an ultra-sophisticated and well-connected investor in the private equity world,” said Andrew M. Calamari, director of the SEC’s New York Regional Office.  “Behind the scenes, Penn disregarded his obligations to the fund’s investors and treated their assets as his own personal and professional slush fund.”

According to the SEC’s complaint filed in federal court in Manhattan, Penn tapped into a network of public pension funds, high net worth individuals, and overseas investors to raise assets for his private equity fund Camelot Acquisitions Secondary Opportunities LP, which he started in early 2010.  Penn eventually secured capital commitments of approximately $120 million. The fund is currently invested in growth-stage private companies that are seeking to go public.

The SEC alleges that Penn has diverted approximately $9.3 million in investor assets.

The SEC’s complaint charges Penn, two Camelot entities, Ewers, and Ssecurion with violating the antifraud, books and records, and registration application provisions of the federal securities laws.  The complaint seeks final judgments that would require them to disgorge ill-gotten gains with interest, pay financial penalties, and be barred from future violations of the antifraud provisions of the securities laws.  The SEC’s complaint also charges another company owned by Ewers – A Bighouse Photography and Film Studio LLC – as a relief defendant for the purposes of recovering investor funds it allegedly obtained in the scheme.

Fraud, Hedge Fund Strategy

Justice Department Probes Hedge Fund Dealings in Libya

The US Justice Department has started looking at banks, hedge funds and private equity funds that may have broken anti-bribery laws in their dealings with the Libyan sovereign wealth fund, which is run by Libya’s government, WSJ reports. The Libyan fund says the US bankers knew the country was weak and took advantage of them.

The same fund is currently suing Goldman Sachs for more than $1 billion in London’s high court, alleging that the investment bank exploited the lack of financial expertise at the Libyan investment fund. The Guardian reports that the Libyan sovereign wealth fund is accusing Goldman Sachs of causing approximately $1 billion in losses between 2007 and 2011, while making $350 million in profits for itself.

The Foreign Corrupt Practices Act of 1977 makes it illegal for entities to make payments to foreign government officials to assist in obtaining or retaining business. “Specifically, the anti-bribery provisions of the FCPA prohibits payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.” The DOJ states.

Besides Goldman Sachs, the Justice Department and other investigators are looking into Credit Suisse, J.P. Morgan, Société Générale, Blackstone Group and hedge fund operator Och-Ziff Capital Management, the WSJ reports.

Hedge Funds

Rhode Island Pulls Hedge Fund Allocations

The Rhode Island State Investment Commission has voted to pull its $50 million allocation out of  hedge fund Third Point.

“The commission’s decision was simply part of the usual monitoring and managing of the retirement portfolio and a step toward reducing risk in the portfolio’s equity hedge fund allocation,” Joy Fox, spokeswoman for Rhode Island General Treasurer Gina Raimondo, said, according to the Providence Journal.

The commission had also voted to liquidate two other hedge funds, Gracie Credit Opportunities Fund LP last January, 2013, and Wexford Spectrum Fund LP last month.

The most recent valuation confirmed the following: (Full Investment Meeting Agenda)

Hedge funds represent about 15 percent (of about $1.15 billion) of the $8.042-billion retirement portfolio in Rhode Island, the Journal reports.

Hedge Fund Strategy, Hedge Funds

Oppenheimer Fund Manager Agrees to Settle Fraud Charges

Former Oppenheimer & Co. portfolio manager has agreed to be barred from the securities industry and pay a $100,000 penalty for making misrepresentations about the valuation of a fund consisting of other private equity funds. Last year, Oppenheimer agreed to pay $2.8 million in a settlement of related charges.

The SEC announced administrative proceedings against Brian Williamson last August based on allegations that he disseminated information falsely claiming that the reported value of the fund’s largest investment came from the portfolio manager of the underlying fund. Williamson, who managed the fund of funds, actually had valued the investment himself at a significant markup to the value estimated by the underlying fund’s portfolio manager. Williamson sent marketing materials to potential fund investors reporting a misleading internal rate of return that failed to deduct the fund’s fees and expenses. Williamson also made false and misleading statements to investor consultants and others in an effort to cover up his fraud.

“Investors rely on truthful and complete disclosures about valuation methodologies and fund fees and expenses, especially when committing to a long-term private equity investment,” said Julie M. Riewe, co-chief of the SEC Enforcement Division’s Asset Management Unit. “Williamson misled prospective investors by marking up the fund’s interim valuations and concealing his role in enhancing its reported performance.”

Hedge Fund Strategy, Hedge Funds