Shaw Capital Management August Newsletter: Financial Markets Focusing Europe

Seoul, South Korea -- (SBWIRE) -- 02/08/2011 -- The big fall in the euro in recent months is clearly having a significant impact on the performance of the
euro-zone economy.

Shaw Capital Management, Korea - Investment Innovation & Excellence. We provide the information, insight and expertise that you need to make the right investment choices. Shaw Capital Management Korea typically offers its clients such services as asset allocation and portfolio design; traditional and non-traditional manager review and selection; portfolio implementation; portfolio monitoring and consolidated performance reporting; and other wealth management services, including estate, tax, trust and insurance planning, asset custody, closely held business issues associated with the establishment or expansion of a family office, the formation of family investment partnerships or LLCs, philanthropy, family dynamics and inter-generation issues, etc.

Factory output expanded at a record pace in April, helped by investment spending associated with the export effort, and overseas demand for European capital equipment, and the trend appears to be continuing. The major beneficiary has been Germany, but other northern member countries are also involved.

However the situation is much less encouraging in Greece, Spain, and Portugal, because they are less competitive in export markets, and are being forced to introduce austerity measures to reduce their fiscal deficits.

Domestic demand across the entire euro-zone remains weak, and so, despite the export performance of some member countries, it seems unlikely that the overall growth rate for the zone this year will reach 2%. The European Central Bank remains reasonably optimistic about prospects; but fortunately it has not moved towards an “exit strategy” that might involve reversing the measures that were introduced to counter the recession.

Short-term interest rates have been left unchanged and close to zero, the programme to provide unlimited three-month loans to the banking system is continuing, and the bank is also still intervening in the markets to buy the bonds of weaker member countries that had been sold heavily because of fears about debt defaults. The bank is therefore continuing to provide support for the system; but it is not really doing enough to offset the concerns about the debt crisis.

Greece remains in the eye of the storm; but there have been increasing concerns about the situation in Spain; and the situation has been made worse by the latest warning from the Fitch Ratings agency that it may take further massive asset purchases by the European Central Bank to prevent the sovereign debt crisis in the area escalating out of control.

Shaw Capital Management August 2010: Financial Markets Focusing Europe - There are fears that Spain will need to follow Greece in requesting help from other member countries and the IMF to enable it to avoid a default, and that Portugal, and perhaps even Italy, may also need to be rescued.

The pressures on the euro will therefore be intense; and whilst there may well be further support from the Swiss National Bank and others, the future of the single currency system clearly remains very uncertain. The latest modest rally in the euro must therefore be treated with great care.

Sterling has recovered from the weakness that developed in May, and is ending the month higher. The economic background in the UK has not provided any real support, and the Bank of England is clearly intending to maintain short-term interest rates at very low levels; but there has been some movement of funds out of the euro into sterling, and the new coalition government in the UK has introduced measures to reduce the massive fiscal deficit that have been well received in the markets and led to an improvement in sentiment.

There is clearly a risk that these latest measures in the Budget will depress the level of activity still further, and fail to solve the fiscal problems; but for the moment it seems that the new government is being given the benefit of the doubt.

The evidence on the performance of the economy ahead of the Budget announcement was still pointing to a very slow recovery in activity.

The manufacturing sector is reasonably buoyant, with exports expanding rapidly; and retail sales also increased more quickly than expected.

But unemployment rose again to 2.47 million, and the latest survey from the CBI indicated that the value and volume of business in the services sector fell, and that further weakness was expected in the second half of the year.

However the situation has obviously been changed significantly by the latest Budget measures, and the latest estimates from the newly-formed Office for Budget Responsibility are that growth will now only be 1.2% this year, rising to 2.3% next year, and improving slightly in succeeding years.

The Bank of England has welcomed the decision by the new government to introduce measures to address the problems created by the huge fiscal deficit. The governor, Mervyn King, argued recently that they would “eliminate some of the downside risks…and are desirable to remove the risk of an adverse market reaction.”

shaw capital management: Hedge Fund Born in Senator's Basement After Son Has D.E. Shaw Internship

U.S. Senator Ron Wyden has a new hedge fund in his basement. That doesn’t mean he’s getting in on the ground floor.
His son, Adam, started a fund under the name ADW Capital Partners LP that he runs from the Wyden family’s residence in Washington, according to a private placement notice filed last month with the U.S. Securities and Exchange Commission. The fund is modeled after the investment partnership billionaire Warren Buffett ran in the 1950s and 1960s before acquiring Berkshire Hathaway Inc., Adam Wyden said in an interview.
The younger Wyden, whose father hasn’t invested in the fund, is among the first generation of post-crash money managers, many of whom must keep a lid on expenses in the face of a difficult money-raising environment. Before graduating last year from Columbia University’s business school in New York with a master’s degree, Adam Wyden worked as an intern at the $19 billion hedge fund founded by David Shaw, a Democratic fundraiser who backed Ron Wyden’s campaigns in 2004 and 2010.
“Right now it’s just me,” Adam Wyden, 26, said when reached at the Wydens’ house in the Palisades neighborhood of Washington, from where he’s been running his $3 million fund since September. “I am the CEO, I am the secretary, and I am the chief marketing officer.”
Ron Wyden, a Democrat from Oregon who serves on the tax- writing finance committee, moved to Washington after winning a seat in the House of Representatives in 1980. Wyden, elected to the Senate in 1996, said that while he hasn’t invested in the new fund, he supports his son’s career choice.

‘Conservative’ Investing

“I just want my kid to be happy,” the 61-year-old Senator said in a telephone interview. “If this is the career he wants, I am all for it.”
ADW seeks to produce high risk-adjusted returns through “conservative equity investing” in small, under-followed businesses in the U.S., Canada and Western Europe, according to an investor presentation. The fund, modeled after the philosophy and structure of Buffett Partnership Ltd., will charge the standard management fee of 2 percent a year along with 20 percent of profits, according to the presentation.
The number of hedge-fund start-ups shrank to 715 during the first nine months of 2010 from a peak of 2,073 in all of 2005, according to Chicago-based Hedge Fund Research Inc. The industry lost $131.2 billion to net redemptions in 2009 in the wake of the global financial crisis, then took in $55.5 billion of new capital last year, still below the high of $194.5 billion added in 2007, HFR said.

Best Trade

Wyden’s best personal trade last year was an investment in IDT Corp. starting in February, when the Newark, New Jersey, telecommunications company traded at an average of $4.84 a share, he said. IDT now is at $23.90.
Adam Wyden, a self-described “serial entrepreneur” with office space in the basement and second floor of the family home, began trading stocks for his own account while attending the University of Pennsylvania’s Wharton School as an undergraduate from 2002 to 2006, where he earned degrees in economics and management. In 2005, he landed a paid summer internship at D.E. Shaw & Co., working as an analyst on what he described as a $700 million long-short fund that bet on and against media, technology and telecommunications stocks.
“Not many college kids get to intern on a D.E. Shaw portfolio for the summer,” Brian Marshall, who ran the D.E. Shaw fund and now works as a senior analyst in the San Francisco office of investment bank Gleacher & Co., said in an interview.

‘Rigorous Vetting’

Kari Elassal, a spokeswoman for New York-based D.E. Shaw, confirmed in an e-mail that Adam Wyden worked there as a stock analyst during his internship. While Wyden was the only intern that summer in D.E. Shaw’s long-short technology group, the firm had a number of paid interns in other departments that year, Elassal said. It has hired about 160 interns to date, she said.
“Adam went through the same rigorous vetting and interview process as all other D.E. Shaw group interns,” Elassal said.
David Shaw, who is no longer active in day-to-day operations, lent $100,000 to the Presidential Inauguration Committee for Bill Clinton in 1993, the Center for Public Integrity reported in 2000. He and other D.E. Shaw employees ranked third among hedge-fund donors last year with $569,049 in campaign contributions, 97 percent going to Democrats, according to OpenSecrets.org and the Center for Responsive Politics.
Ron Wyden received contributions totaling $9,600 from Shaw and his wife, Beth, during 2009, with each giving the maximum $4,800 that individuals are allowed to donate for any election cycle, OpenSecrets.org said. Shaw gave $5,000 last year to Holding Onto Oregon’s Priorities, a political action committee set up by Wyden to help other Democratic candidates, and $33,500 to the party’s senatorial and congressional campaign committees.
Shaw, 59, didn’t respond to a telephone request for comment. He now works as chief scientist at D.E. Shaw Research laboratory in New York, in the field of computational biochemistry.
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

shaw capital management: After Internship At DE Shaw, Senator's Son Starts One-Person Hedge Fund In His Basement

Oregon Senator Ron Wyden has a new hedge fund in his basement. And on the second-floor of his Washington home.
But the fund isn't his -- it's his son Adam's.
Adam, who's 26, just launched ADW Capital Partners from the family home after an internship with D.E Shaw's $700 million long-short tech group in 2005, Bloomberg reports.
Apparently it's extremely rare for college kids to "get to intern on a D.E. Shaw portfolio for the summer,” said Brian Marshall, who used to run the fund.
But a D.E Shaw spokesperson assured Bloomberg, "Adam went through the same rigorous vetting and interview process as all other D.E. Shaw group interns."
The reason observers might think otherwise is because David Shaw has donated thousands of dollars to Senator Wyden's election and re-election campaigns in 2004 and 2010. Shaw and his wife each gave the maximum $4,800 each that they're allowed to donate for any single election cycle, to Wyden.
Shaw also contributed $5,000 in 2010 to Holding Onto Oregon’s Priorities, a political action committee established by Wyden, according to Campaignmoney.com
But Adam is well-qualified. His resume resembles that of a ton of hedge fund whiz kids.
He has an MBA from Columbia Business School, and before that, attended Wharton. At Penn, while he was earning degrees in economics and management, he was also already trading stocks for his own account. After his stint at Shaw's $19 billion fund, he worked for two years at SMH Capital.
According to his Facebook page, he likes The Powder Kegs (music-wise); Forbes (media-wise); Carl Icahn (investor-wise); and Theory (clothing-wise).
He also seems to like basements. He was once quoted in the Daily Pennsylvanian talking about a party that goes on everynight in the basement of Penn's Van Pelt library, where the reserve collection is held, called "The Rosenparty."

[S]pending considerable amounts of time in Rosengarten is anything but boring. Wharton junior Adam Wyden calls the atmosphere "quasi-cultish." Wyden and his friends don't just go there to study at night. They go to be seen.

His new $3 million firm is modeled on the investment partnership that Warren Buffett ran prior to buying Berkshire Hathaway, both in terms of "philosophy and structure" and will charge annual fees of 2 percent, with 20% of profits.

ADW seeks to produce high risk-adjusted returns through “conservative equity investing” in small, under-followed businesses in the U.S., Canada and Western Europe.

Wyden’s best personal trade last year was an investment in IDT Corp. starting in February, when the Newark, New Jersey, telecommunications company traded at an average of $4.84 a share, he said. IDT now is at $23.90.

“Right now it’s just me,” he told Bloomberg. “I am the CEO, I am the secretary, and I am the chief marketing officer.”

shaw capital management career: 2nd UPDATE: Bridgewater Largest US Hedge Fund Manager--Magazine

By Amy Or 
   Of DOW JONES NEWSWIRES 
 

Ray Dalio's Bridgewater Associates LP has once again been named the largest U.S. hedge fund manager, according to trade publication AR magazine, with assets having grown last year by $15.3 billion.
Westport, Conn.-based Bridgewater, which was also named the nation's largest hedge fund manager for 2009, managed $58.9 billion or about 5% of the $1.3 trillion assets held by American hedge funds as of Jan. 1.
"The strong performance of Bridgewater's Pure Alpha Fund II, which gained 44.8% during 2010, powered much of this growth," AR said. Hedge funds gained 10.4% on average last year, according to Hedge Fund Research, trailing the 15.1% total return of the Standard & Poor's 500 Index.
Pure Alpha Fund II is a global macro fund that trades on a wide variety of themes and markets, including currencies, debt, equities and commodities.
Dalio, whose firm has more than 900 employees, made a series of bearish bets on the U.S. economy last year, including trades anticipating continued low interest rates, and bullish investments in the Japanese yen and gold.
J.P. Morgan Asset Management, which ranked second among 225 hedge fund managers with over $1 billion assets or more, had $45.5 billion at the beginning of the year. Paulson & Co. managed $36 billion.
Total assets managed by American hedge funds rose 10% last year, accounting for 60% of world hedge fund assets, and the number of funds with over $1 billion in assets also rose by around 6% as of Jan. 1, 2010, helped by a median 9.15% gain last year.
While assets under management have rebounded strongly, they were still short of the $1.68 trillion peak reached in July 2008.
"Industry assets haven't yet reached their peak, but hedge funds continue to recover from the 2008 crisis," said Amanda Cantrell, a managing editor of AR. "The industry is also consolidating, with an entrenched leadership of firms managing more than $5 billion."
An exception, however, was D.E. Shaw & Co.
The firm, which was once the giant in the industry and charged the highest fee, dropped to 20th place from 5th last year. It lost 40% of its hedge funds assets in 2010, ending with $14.23 billion, AR said. Firm-wide assets, including those not in hedge funds, dropped 24% to $19 billion as of Jan. 1.
"Most of that loss came from redemptions," AR said. "The firm allowed investors to fully redeem from its D.E. Shaw Composite fund last year after suspending redemptions in that fund in 2008 and allowing only partial redemptions until last summer, when it lifted the gate for that fund." AR said D.E. Shaw Composite returned just 1.7% in 2010 after gaining 19.9% in 2009.
D.E. Shaw is trailing behind managers like Soros Fund Management, Och-Ziff Capital Management Group LLC (OZM), BlackRock Inc. (BLK) and Baupost Group.
The firm slashed 150 jobs or 10% of its work force, including some senior executives as well as back-office employees, a person familiar with the situation said in September.
On Wednesday, a person familiar with the situation said D.E. Shaw planned to cut its management fee to 2.5% from 3% of assets, and its incentive fee, charged on profits its investments earn, to 25% from 30%.
Other firms that lost large amount of assets, according to AR, included Max Holmes's Plainfield Asset Management, whose assets fell by 62.1% to $1.25 billion because of the liquidation of several large privately held positions; Bill Hwang's Tiger Asia, which lost 48.7% of its assets, possibly related to investigations by both Hong Kong and U.S. securities regulators on allegations of insider dealing and market manipulation; and Shumway Capital Partners, where investors pulled assets after Chief Investment Officer Chris Shumway announced he was stepping down. Shumway announced last month it would return all external capital to investors by the end of March.
Diamondback Capital Management, run by Richard Schimel and Larry Sapanski, and one of a handful hedge funds raided by Federal Bureau of Investigation agents in November as part of an insider-trading probe, was recorded by AR as having a 28.9% jump in assets last year. However, investors applied to redeem a total $1.32 billion by the end of the quarter, out of the firm's $5.8 billion in assets.

-By Amy Or, Dow Jones Newswires; 212-416-3142; amy.or@dowjones.com

(END) Dow Jones Newswires
March 02, 2011 17:19 ET (22:19 GMT)
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