The hundreds of hedge funds that have been trailing the S&P for the better part of a year may want to take a hint from a firm that continues to pull in the double-digit returns: SAC Capital. And no, we’re not advocating insider trading.
An eye-opening piece in the Wall Street Journal unveils a simple, effective and legal strategy that some hedge funds like SAC have been using to gain an edge on the market. They’re calling the federal government and asking for help.
Recently, more hedge funds have been relying on the Freedom of Information Act to gather information on companies they’re considering investing in. Take SAC for example, which asked the Food and Drug Administration in December if there were any adverse event reports surrounding a new Vertex drug. After collecting a $72 fee, the agency handed over the material, giving the drug a clean bill of health, according to the Journal. SAC bought tens of thousands of Vertex shares, which then ballooned by 62% in a single day in April.
Other firms are tapping the SEC, the Department of Energy and the EPA for market-moving data. Just how prevalent has the strategy become? FOI Services Inc., a third party organization that sends requests to the FDA on behalf of clients, accounted for 10% of the 50,000 information requests during a five year period, according to the report. That’s just one third-party firm.
Meanwhile, hedge funds desperate for new assets can take a bold new approach starting this week. For the first time in 80 years, hedge funds can now advertise their services to the general public. It will be interesting to see how many actually do.
FICC Units Down But Not Out (eFinancialCareers)
FICC revenues have been down sharply across the board, but there is a general sentiment on the Street that banks experienced a bit of a turnaround in September and fixed income layoffs may be avoided.
‘A Magnet of Market Cheaters’ (BBW)
SAC Capital Advisors and founder Steven Cohen are looking to settle civil and criminal insider trading cases against the firm. A fine of up to $1 billion is being talked about.
New York Life has fired the chief executive of its lending unit, Trevor Clark, and senior managing director Christopher Williams for failing to disclose certain personal investments and business activities. The insurer suspended the two last week but decided to cut each loose after a company probe.
Lois Lerner, the former director of exempt organizations at the Internal Revenue Service, has retired. Lerner was the key figure in the IRS controversy surrounding undue scrutiny of right-wing Tea Party groups.
RIP (Business Insider)
Doug Millett, a former COO and partner at hedge fund Kynikos Associates, has died of complications from cancer.
No More Free Rides (Dealbook)
Real estate investment trust CommonWealth, under fire for its more-than-generous compensation packages, has yielded to activist investors demanding change. The firm has agreed to tie the compensation of its executives to the performance of the company’s stock.
Lawsuit Looming (Reuters)
Prosecutors are expected to file suit against J.P. Morgan for misleading investors over mortgage bond deals from 2005 to 2007. Just another legal woe for J.P. Morgan.
Buzz Around the Office
Car Funeral (The Daily Mail)
A Brazilian with too much time and money on his hands doesn’t want to be impoverished in the afterlife, so he buried a brand new Bentley worth over $500,000 so that he can enjoy a nice ride into the other side. He was apparently inspired by the Pharaohs.
List of the Day: Making Friends
Feeling isolated at work? Try these tips for making friends at the office.
1. Actually attend social office events.
2. Join cross-departmental teams.
3. Lend a hand to co-workers in need.
(Source: The Daily Muse)