Seth Wunder, the cofounder of $1.4 billion Contour Asset Management, has left the firm and is in the early stages of planning a new hedge fund.

Wunder left Contour in June, and cofounder David Meyer has taken over his duties, according to a regulatory disclosure.

The New York hedge fund focuses on long and short stock investments in tech, media, and telecom companies.

Wunder is in the early stages of prepping a new hedge fund, Black and White Capital, in Los Angeles, according to three people familiar with the matter who declined to be named because the info is private. Wunder did not immediately respond to requests for comment.

Contour's assets have recently dropped by about 6.7%, from $1.5 billion at the start of 2015 to $1.4 billion as of January 1, according to Hedge Fund Intelligence's Billion Dollar Club ranking.

A spokesman for Contour declined to comment.

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NOW WATCH: TONY ROBBINS: Here’s the secret to investing like hedge fund billionaire Paul Tudor Jones

A star investor at a $3 billion hedge fund is going it alone with the backing of his former employer.

Joe Cornell, a managing director at Chilton Investment Co., has left to launch an equity fund making long and short bets, according to three people familiar with the matter. The fund will use a generalist, fundamental strategy.

Richard Chilton and his firm are backing the New York-based startup, which is set to be called "Bluegrass Capital Partners."

"I have a lot of confidence in Joe's abilities," Chilton told Business Insider in an email.

Chilton launched his Stamford, Connecticut-based firm in 1992 with a focus on fundamental equity research.

Cornell worked at Chilton from 2011 up until this spring, and was promoted to managing director in January 2014, one of the people said. Before that, he was an investment analyst at Shumway Capital Partners from 2010 to 2011.

Morgan Stanley and Goldman Sachs are set to be prime brokers on the launch, according to one of the people. Prime brokerage is a bank service that helps facilitate trades for hedge funds.

Cornell joins other hedge fund alums that are prepping new stock funds, including Seth Wunder of Contour Asset Management and Samantha Greenberg of Paulson & Co.

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NOW WATCH: TONY ROBBINS: Here’s the secret to investing like hedge fund billionaire Paul Tudor Jones

On Wednesday, Bill Ackman held a quarterly conference call for investors in his fund, Pershing Square.

And since his private funds are down 14% year to date and Pershing Square Holdings is down 18%, he didn't have that much good news to share.

Except for one thing: a new psoriasis drug from Valeant Pharmaceuticals called brodalumab. A Food and Drug Administration advisory panel recently recommended the drug be approved.

This was a "big week for the company in terms of drug developments," Ackman said, lauding the company for having one of the "most productive R&D developments of any company in the country."

You'll recall that Valeant's low R&D spending and high drug prices, combined with accusations of malfeasance from a short seller, has brought the stock down around 90% since October.

Since then, Ackman has basically taken control of the company, stacking the board and installing a new CEO, Joe Papa. The Valeant position makes up 6% of Ackman's portfolio and is down 23.5% for the quarter.

Side effects may include...

So you can imagine that any news about new revenue streams for the company should be welcomed with gusto. And that's what Ackman did. He said that brodalumab was almost killed by its original creator, Amgen, "despite its efficacy." Valeant then bought it for $100 million and partnered with AstraZeneca to take it to market.

The advisory panel, he said, unanimously voted to recommend approval of the drug — though there "was some disagreement about how to deal with some of the safety issues dealing with the drug," Ackman said.

Yeah, you bet there were. That's because the FDA's Division of Psychiatric Products found that brodalumab patients had a higher rate of suicide or suicidal ideation than patients taking other psoriasis drugs. Psoriasis is a dermatological condition — a bunch of red bumps on your skin.

Wells Fargo published a report on Wednesday morning discussing what the FDA division discovered:

"Four of the patients that completed suicide in the brodalumab trials had no history of anxiety, depression, or other psychiatric symptoms. The FDA's Division of Epidemiology found a three-fold higher completed suicide rate in brodalumab clinical trials compared to other psoriasis biologics. Potential risk management options suggested included a potential for a blackbox warning and/or mandatory participation in a registry with psychiatric symptoms being monitored."

That is why 14 of the 18 members on the advisory panel actually decided to "approve brodalumab but only if certain risk management options for suicidal ideation and behavior (SIB) beyond labeling are implemented."

Only four "approve[ed] brodalumab with labeling alone to manage the risks."

Wells Fargo thinks this may limit the number of people who would want to use the drug because it will require a risk evaluation and mitigation strategy and a restricted label.

So there's your good news.

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NOW WATCH: Billionaire private-equity CEO David Rubenstein says Britain will almost certainly go into a recession and the US may follow

A big hedge fund transaction is hanging in the balance.

Visium Asset Management, a hedge fund at the heart of an insider-trading scandal that has outlined plans to shut down, in June inked a deal to sell one of its funds to AllianceBernstein.

Visium told investors on Wednesday that it will now unwind that fund, according to a person familiar with the matter, putting that transaction in doubt.

The firm is also changing its auditor to PKF O'Connor Davies from KPMG, the person said.

Visium Asset Management said that it would shut down after regulators said last month that several Visium employees had allegedly committed fraud and insider trading.

AllianceBernstein, which manages $487 billion, had been planning to buy one of Visium's main hedge funds, a global equity-focused fund that is not the target of regulators' inquiries.

Questions had been swirling around the proposed deal for some time. One person familiar with the matter said that the global fund is expected to drop significantly in assets as investors yanked their money from the fund. It managed more than $2 billion as of earlier this year.

Several of its key portfolio managers also had left even before the proposed deal was announced, including Rohit Shah, who is moving to Caxton Associates, and Arnaud Saint-Sauveur, who is set to move to Lombard Odier, people familiar with the matter previously told Business Insider.

Visium previously had a stringent non-compete policy for its employees who wished to work at competing firms, but had been loosening those terms ever since the firm came under fire, people familiar with the matter said.

That's a departure from last year, when Michael Kestenbaum, a portfolio manager on the global fund, looked to move to competitor Folger Hill and filed a suit against Visium to get out of his non-compete, according to public filings.

On Wednesday, Rob Copeland and Sarah Krouse at The Wall Street Journal reported that Ken Griffin's Citadel has hired 17 portfolio managers from Visium. They could start as early as August, according to the report.

Visium's global fund has been down this year, alongside the firm's flagship healthcare hedge fund. Through June 30, the global fund is down 4.85%, according to an investor update seen by Business Insider. The healthcare fund, Visium Balanced, which is the target of the insider-trading investigation, is down 10.75% over the same period.

Business Insider also reported this week that someone is trying to sell an investment in Visium Balanced's fund.

Representatives for Citadel and Visium did not immediately respond to requests for comment.

A representative for AllianceBernstein declined to comment on the state of the deal.

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NOW WATCH: TONY ROBBINS: Here’s the secret to investing like hedge fund billionaire Paul Tudor Jones

It may be tough to run a hedge fund, but that isn't stopping senior-level folks from trying to branch out on their own.

Here's a short and nonexhaustive list of some of the top new funds to have come across our radar.

The competition to raise assets is steep, particularly for startups that don't have long performance track records to woo investors. Instead, new managers often rely on the pedigrees of their previous employers and the backing of high-and-mighty investment titans to sway potential investors to open their checkbooks.

Recent data is not the most promising, however, with more hedge funds closing than opening. In 2015, 979 hedge funds closed their doors while 968 opened. This year through the first quarter, 291 have shut while 206 opened, Hedge Fund Research data shows.

But the glory of raising assets, running one's own proper business and investment strategy, and the (potentially very lucrative) benefit of charging high fees are alluring. At the moment, the global hedge fund industry is managing close to its peak in assets, at about $2.9 trillion, HFR says.

To the new startups, bon courage.

SEE ALSO: The hedge fund at the heart of an insider-trading scandal is winding down a key fund

Samantha Greenberg — Margate Capital

Samantha Greenberg, one of the hedge fund industry's most senior women, left Paulson & Co. and is starting Margate Capital, a long/short equity fund. She recently hired Jared Weisfeld from Balyasny Asset Management as a partner and is targeting $500 million when the firm launches later this year.

Ben Melkman

Ben Melkman, a former partner at Brevan Howard Asset Management, is launching a macro hedge fund in New York. The fund is targeting $400 million and a launch date in the first quarter of next year. The firm is bringing on Joe Mauro, a former Goldman Sachs partner.

Melkman was the lead manager on Brevan's $500 million Argentina fund, which has delivered 18% since its inception.

Josh Donfeld and Dave Rogers — Castle Hook Partners

Legendary investor Stan Druckenmiller is backing duo Josh Donfeld and Dave Rogers in their new launch. It will be Druckenmiller's second-largest investment in a new hedge fund since he backed PointState Capital with $1 billion in 2011.

Donfeld and Rogers previously worked at George Soros' family office as portfolio managers. They are planning to launch New York-based Castle Hook Partners later this year or in the first part of next year.

Castle Hook will invest in equity, credit, commodities, interest rates, and foreign exchanges.

Steve Cohen has a new mantra: better to be safe than sorry.

Cohen's Point72 Asset Management is taking extra precautions to guard against wrongdoing after Cohen's predecessor hedge fund, SAC Capital Advisors, was shut down for insider trading.

Vincent "Vinny" Tortorella, a cheery Italian-American and former federal prosecutor, is the man charged with the task, having taken over as head of Point72's compliance and surveillance unit in 2014.

Cohen has given Tortorella a blank check to do whatever it takes to keep the firm straight, including an investigative team of more than 50 staffers, including ex-federal agents who track any potential rumors of wrongdoing – both at Point72 and at competitors.

It's a proactive, rather than reactive, strategy, Tortorella told Business Insider in an interview over lunch in Manhattan. Tortorella was accompanied by two of Cohen's in-house public relations pros, also another key to his firm's makeover.

Before the insider trading investigation at Visium Asset Management became public earlier this year, for instance, Point72 put a ban on hiring those who'd recently worked there on the investment side.

Visium isn't the only firm Point72 has banned, either. Tortorella declined to say who else made the list and when exactly the Visium ban came into effect.

Point72's Visium ban contrasts with its hedge fund rivals. Ken Griffin's Citadel, for instance, recently swooped up about 17 traders from one of Visium's funds. Lombard Odier and Caxton Associates also hired Visium traders. The portfolio managers appear to have worked at Visium's global fund, a multisector equity fund that wasn't named in regulators' charges.

Reps for Citadel declined to comment, and Lombard Odier and Caxton didn't respond.

Point72 has good reason to keep strict protocol. The Securities and Exchange Commission in 2013 shut down its $16 billion predecessor, SAC Capital, banning the hedge fund from managing outside money. Cohen pleaded guilty to securities fraud and launched Point72 a year later as a family office to run his billions of wealth. A Cohen-led organization can accept outside investors' money again in 2018.

Since then, Cohen's firm has been beefing up its compliance.

"This can't ever happen again," Cohen told Tortorella when he hired him in 2014, Tortorella said.

The effort hasn't come cheap.

Cohen gave Tortorella veto powers on any potential hire, and Tortorella has used it on potential staffers who would likely have made major money for Point72. The cost of running Tortorella's team, which has grown by about 50% in the last two years, also comes to tens of millions of dollars a year, Tortorella said.

Point72's in-house surveillance team has, on occasion, fired employees who fell out of line, too. For instance, Point72 has restrictions on trading in personal accounts, and requires disclosure. Point72 fired an employee who hid a secret account.

Many in the industry scorn personal trading for the conflicts of interest that arise when traders make investments for themselves rather than for the firm.

Coincidentally, this was also an issue at Visium, where the founder, Jake Gottlieb, made a lucrative bet for himself on a trade the flagship fund also made, Business Insider reported last month. It's unclear if regulators are looking into that trade.

Other measures narrow the flow of info that Tortorella and his team have to sort through in tracking its traders. Tortorella banned instant messaging for analysts and portfolio managers, for instance. Data spying software also helps his team pick through huge flows of information.

Tortorella's team also watches how traders source their investments, such that a trader needs to back up how he or she got every piece of info leading up to a decision, Tortorella said.

Point72 isn't the first hedge fund that Tortorella has been tasked with monitoring.

He spent three and a half years at New York hedge fund Coatue Management as head of proprietary research and general counsel. Before that, he was the chief operating officer and general counsel at Guidepoint, an expert network, and a federal prosecutor in the Department of Justice's criminal division from 2004 to 2008.

The experience has given him a theory about who tends to commit insider trading.

It's not the best investors who are cheating, he said. It's those who are trying to keep their heads above water.

Correction: An earlier version of this story said Point72 had banned trading in personal accounts. It has not. It has restrictions in place, and requires disclosure. 

SEE ALSO: Here are the star traders trying to become the hedge fund honchos of tomorrow

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NOW WATCH: We tested an economic theory by trying to buy people's lottery tickets for much more than they paid

Greenlight Capital founder David Einhorn placed an interesting quote about Tesla at the end of this second-quarter investor letter.

He said:

"'We believe that Tesla's most valuable asset may be the trust it has built with its providers of capital,' — Adam Jonas (not one of the Jonas Brothers)"

Jonas is Morgan Stanley's most colorful auto analyst. He's been a big Tesla bull for years, though he's wavered a bit recently.

Last month, Jonas downgraded Tesla stock to equal weight on the news that it would acquire SolarCity, a flailing solar energy company cofounded by Elon Musk and helmed by his cousin, in an all stock deal. Musk said that this purchase was another step in his master plan to make Tesla a vertically integrated auto company.

Jim Chanos, of Kynikos Associates who is short Tesla stock, called the deal "shameful." Business Insider said it was a kick in the teeth to Tesla shareholders, who would have to take on SolarCity's problems as well as its $600 million in quarterly costs.

Because of that cash burn, analysts have posited that Tesla would have to return to the capital markets for cash.

And perhaps that's what Einhorn is getting at here. Perhaps he thinks that Tesla will have to call upon its generous friends in the market to survive, and that's a sign of weakness.

Or perhaps he means those friends can carry the company through. It's still very difficult to make money in this low-yield world, and Tesla stock or debt may continue to be a place where people want to park their money.

Musk has, after all, presented the world with a new plan for the next phase of his company. It's very ambitious and envisions a future where Tesla is constantly innovating the machines that make its machine. It sees a company of self-driving cars, Tesla trucks, and Tesla public transportation.

That takes a lot of cash, though.

For the full letter, head to ValueWalk >>

SEE ALSO: Elon Musk just kicked his shareholders in the teeth

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NOW WATCH: We tested an economic theory by trying to buy people's lottery tickets for much more than they paid

The hedge fund industry is struggling.

Poor performance,insider trading investigations, and the winding down of some marquee funds have marred the industry as of late and dominated headlines.

There is another problem, too, and it's one fewer people are talking about: all the money is going to a handful of funds, it is harder than ever to set up a new fund, and there is less diversity in the industry as a result.

Rory Hills, founder and partner of Hilltop Fund Management, touched on this in an interview with Raoul Pal of Real Vision TV.

Here's the relevant passage from the transcript:

Pal: "One of the things I notice ... is that new managers, people who have a specific expertise, they can't raise any money, and so they die off not because they aren't very good at what they do — it is because they have to last five or six years to build a track record running $10 million, and they can't pay their bills. It is almost impossible to survive unless you come from pedigree or you knock the ball out of the park immediately and maybe do it two years in a row."

Hills: "It is a real problem, a real problem for the industry. What we need is more platforms, the old-school kind that existed before the crisis but don't exist so much anymore. Cheyne is still going. That type of platform I think we need more of. More people who have the apparatus, particularly in this increasingly regulated world — it is so expensive for people to set up a new fund. I think there is a real role for new platforms, who have all the regulatory stuff, all the compliance, all the infrastructure, all of that set up so people can come in and switch on a Bloomberg. That has to be combined with a decent seeding level."

There are a couple of reasons why this is happening. Investors tend to be more comfortable investing in vanilla funds that have already reached a certain size. Hills said this was partly a result of funds of funds, which invest in a variety of hedge funds, putting manager selection in the hands of junior analysts.

"I really believe that's the center of the problem," he said. "Junior analysts gravitate toward plain-vanilla-type strategies, relatively easy to understand, easy therefore to explain to investment committees. Sometimes these smaller, more niche managers are more complicated and not as easy to understand."

Hills has a reason to make this argument. He runs a fund of funds that avoids the big names and looks to put money in the other 90% of funds that don't get as much attention.

Still, the shift he is describing has long-term implications for the industry. Pal and Hills share the fear that the industry will "die" as people continue to allocate to the big managers and new managers with specific expertise can't survive.

"One household name over here," Hills said, "is of the view it will just go back to the way it was 30 years ago — 100 hedge funds with mostly high-net-worth-type individuals as investors."

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NOW WATCH: 50 Cent will pay $23.4 million to creditors over the next 5 years — here's how he made and lost millions

In his second-quarter letter to investors, Greenlight Capital's David Einhorn disclosed that he is long Chemours.

The stock is up 7% on the news.

Andrew Left, the short seller from Citron Research whose questions brought Valeant Pharmaceuticals to its knees last October, disclosed a short position in the company in June.

So we have ourselves a bit of a tiff here.

First, a little about Chemours: It's a chemicals company that DuPont spun off into its own company. Greenlight started buying it during the fourth quarter of 2015, right before its stock price fell to $3 a share in January (down from $16). Then it started to recover.

Left says the stock is a loser because a class-action lawsuit could bankrupt Chemours. He also said that the company is levered up too high and lacks the cash to pay for its defense.

From Left (emphasis ours):

"No one has an exact dollar figure yet on the extent of the liabilities of this debacle. While Chemours only accounts for $20 million of overhang on its balance sheet, most Wall Street analysts estimate the liability to fall more inline with the $500 million figure.

"But we always hear the value $5 billion being thrown around by social activists like the 'Keep Your Promises DuPont' campaign, which has pegged environmental costs just for Parkersburg WV at $1 billion. After speaking in depth with community activists, Citron believes that even $5 billion may be a low number ..."

Einhorn and Greenlight disagree. In his letter, Einhorn pointed out that the richer parent company, DuPont, is the defendant in this case, not Chemours.

And the letter threw a little shade at Left, too.

"We inquired about the $5 billion estimate, and the author of the report acknowledged that there was no math to justify the figure. After considerable work and engaging our own outside experts, who estimate the liability to be only several hundred million dollars, we believe [Chemours'] debt and liability to be manageable," Einhorn wrote.

This should be fun to watch.

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NOW WATCH: MALCOLM GLADWELL: ‘Anyone who gives a single dollar to Princeton has completely lost their mind'

Shame. Ostracism. A shift to food stamps.

This is a harsh reality for the families of white-collar criminals — hedge fund managers convicted of insider trading, or bankers nabbed for embezzlement.

Sure, these are some of the world's most privileged people, and incarceration certainly ruins lives across the economic spectrum.

So these "one-percenters" garner no public sympathy. But that also means their families are left with few resources and little guidance on how to face the jarring change of losing — very often — a sole source of income and an entire social network.

In Greenwich, Connecticut, one of the US's richest cities, a ministry is trying to provide that help.

Jeff Grant, a former corporate lawyer who served nearly 14 months in prison after pleading guilty in 2006 to wire fraud and money laundering, launched Progressive Prison Ministries with his wife. The two work with hedge fund managers, corporate lawyers, doctors, and their spouses across the country.

"They're coming in droves," Grant told Business Insider, adding that he received at least one inquiry a day. "People need help."

Practical guidance

That help can range from financial support to emotional support. And sometimes it's just practical guidance on how to obtain help that is already available — but perhaps was once unthinkable.

The ministry helped one Connecticut wife who could no longer afford food or have her driveway plowed in the winter, pointing her to food stamps and subsidies for the heating bill, Grant and his wife, Lynn Springer, said. Regulators froze the wife's bank accounts after her husband was charged with a crime, they said.

The ministry offers an uncommon service, given that white-collar criminals and their families have little social support other than online forums.

Lisa Lawler, a blogger who runs a support site called the White Collar Wives Club, highlighted the misconceptions surrounding the wives of criminals.

"The truth is that white collar crime knows no professional or economic boundary,"she wrote on her blog. "Nonetheless, white collar wives are mostly seen as entitled, spoiled and undeserving of pity and in most cases, are not considered victims at all."

But the cases she describes are harrowing, like that of a woman in her mid-70s, whom she calls Susan, whose husband's conviction left her homeless and estranged from her only daughter. Lawler wrote that she couldn't locate Susan, ever since she was kicked out of a motel she was living in.

"White collar wives are blindsided by their husband's criminal activity and often have little opportunity to get our from under the fallout unless they act quickly," she wrote. "Susan's husband may be incarcerated, but he has a roof over his head."

Springer works with the wives and families of the mostly male white-collar criminals, while Grant organizes weekly call-in video sessions for the men, some of whom have recently returned from prison.

Though the ministry has a Christian bent, Grant, a Jewish convert, says he accepts anyone. Some attendees are Jewish, one participant said. They discuss rejection, loss, and how to move forward.

Returning to a previous career is often not an option, so Grant helps attendees find new routes. In one case, he helped a former hedge funder go to school for social work to become a drug counselor.

"This is not an atypical situation," Grant said.

Grant was barred from practicing law, and he opted to become a minister.

'Painfully alone'

Reentering old social circles is often not an option, either. And that requires adjustment, according to Bill, one of Grant's participants who, before going to prison, headed a New York investment firm. He spoke with Business Insider on the condition that we use only his first name.

"I walked with the wealthiest people on the planet," Bill said as he sat on a park bench across 15 Central Park West, one of Manhattan's toniest addresses. "All of a sudden, that just evaporates ... Everybody knows one another. There's no anonymity in New York City."

Bill returned from a 20-month prison sentence in Pennsylvania last year, and he said he felt fortunate. His wife stayed with him, though they rarely take part in what they once loved about the city, like dining out, he said.

"Your identity is wrapped up in what you do and who you know," he said. "That's all gone."

The ministry's group video meetings have helped. Bill says he finds the meetings therapeutic.

"You realize you're not the only one traveling on this highway," he said.

A wife of a Connecticut hedge fund manager who is in prison said she wished she had found support sooner. She also requested anonymity.

"You are painfully alone when this happens," she told Business Insider in an email.

Time has helped the shock of having her husband go through the legal process — from the day the federal investigation was announced up until the guilty verdict.

"The shock was unreal," she said. "At some point, though, survival instincts took over. With having had close friends bury their children and other friends fighting cancer, I knew that no matter how horrible it may have seemed my life had become, we all were healthy and had an unshakable love for one another."

She became the sole breadwinner for her family. Working with Springer at the ministry has helped with the shame.

"You only feel shame if you let yourself," she said.

"I've never been a big fan of public prayer," she added, "but Lynn has an incredible gift and prays with me when we meet."

Grant has also helped her prep for when her husband returns from prison, she added.

Indeed, prison is often just the first step in a new chapter.

"It wasn't the beginning of the end," Bill said of his time served. "It was the end of the beginning."

SEE ALSO: The hedge fund at the heart of an insider-trading scandal is winding down a key fund

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NOW WATCH: 1 YEAR LATER: Here’s what may come next for 'El Chapo' Guzmán

Leon Cooperman's Omega Advisors released a 48-page investment outlook last week.

And for all the fiddling over post-Brexit markets and the risks of a Chinese currency devaluation, Omega doesn't think there's much to worry about, according to the note, which was co-written by Omega's vice chairman, Steve Einhorn.

The bulk of Omega's assets are invested in US equities. As of year-end 2015, the New York hedge fund managed about $6.7 billion, a decrease of about a quarter from the year before, according to the Hedge Fund Intelligence Billion Dollar Club ranking.

"Though a short-term correction in US shares would not be surprising, nor would a several month pause, we remain okay with US shares," the letter said.

Omega has forecast that the S&P 500 will deliver a total return of 5% to 8% this year. The actual performance so far this year is a little over 6%. Still, Omega isn't cutting its bets.

It added:

"Even though the year-to-date S&P 500 total return is within a few percent of our expected return for this year, we continue to believe that the S&P 500 outlook will be a friendly one, even as US shares may pause for a while. Why? Because we expect that the in-place US equity market advance can last for quite a while longer than this year. Though we understand the difficulty in offering up a longer-term market outlook, particularly given the geo-political uncertainties and challenges surrounding the US and other regions, our assessment of fundamentals suggests that US shares should grind higher through 2017 and, perhaps, in the years thereafter."

The letter then addressed multiple potential problems, ranging from inflation to exogenous shocks triggered by Brexit and China. In every case, the letter said the market would be just fine.

Here are some relevant excerpts from Omega's note (emphasis ours):

No bear market in sight

"Critical to our view that US shares can grind higher for quite some time is our assessment of our US bear market checklist. We introduced this bear market checklist quite some time ago. The arrival of a bear market in US shares typically requires:

• Accelerating and problematic inflation.
• Very tight/hostile monetary policy.
• The prospect of recession.
• Investor exuberance.
• Speculative equity market pricing relative to interest rates and inflation.

"None of the items of this bear market checklist are with us currently nor do we expect their arrival anytime soon."

Little inflation on the horizon

"The current inflation landscape in the US is benign and we expect inflation (core personal consumption deflator) to range between 1.5% - 2.5% over the coming year; we define this range of inflation as sweet-spot because it is sufficient to underpin moderate corporate revenue growth but not so rapid as to frighten the Federal Reserve or the bond market.

"We do not expect a problematic rate of inflation nor any sharp acceleration in it."

The strong dollar should help S&P 500 revenue

"We entered 2016 believing that the dollar would be in a trading range and experience a flat-like trend for most of the coming year. So far, this has been a correct view. If sustained, this dollar outlook should benefit S&P 500 revenue and earnings growth, China/emerging market economies that have borrowed in dollars, oil and other commodity prices, and US GDP growth via better export growth."

Brexit will have a limited impact

"We do not see Brexit impacting US/Euro area/global economic growth in an important way and regional financial conditions indices are supportive of this. We expect a forceful response of monetary policy in the U.K./Euro area/U.S. in response to the Brexit vote and some of this has been implemented already. ...

"The UK economy accounts for approximately 3% of global GDP. With respect to the US, the impact of Brexit on our GDP growth is minimal, estimated at just .1% - .2% over the coming four quarters. This should be of no relevance to our equity market. More importantly, the UK accounts for under 4% of S&P 500 earnings per share and we estimate that the Brexit dent to earnings growth over the coming year is a minor 1% - 2%. Brexit, in our view, is not an exogenous shock that is particularly relevant to US shares or the US economy."

The threat from China has been exaggerated

"We are not all that concerned by yuan weakness to the dollar and do not think yuan devaluation is an exogenous shock that can derail the in-place advance in US share prices. First, countries experience currency depreciation and appreciation all the time. These currency fluctuations have not historically derailed developed-economy equity markets ...

"Even though a slowing in Chinese economic activity has been widely expected as this transition unfolded, the slowing, at times, has frightened global investors because of its supposed big impact on US economic activity. We believe this concern of global investors is exaggerated and unwarranted.

US earnings will improve

"We have the following observations with respect to earnings and profit margins. First, we believe that the growth in year-over-year S&P 500 earnings per share bottomed in the first quarter and year-over-year growth should accelerate over the next year aided by a developing recovery in the manufacturing sector, higher commodity prices, and less dollar headwind. We expect S&P 500 earnings per share growth this year of between 3% - 5%; second, the widespread commentary of an earnings recession in the US is an exaggeration."

SEE ALSO: Billionaire investor Steve Cohen has a new mantra, and this is the guy enforcing it

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Bridgewater Associates has fired back at The New York Times for its recent story on the company's culture, "At World's Largest Hedge Fund, Sex, Fear and Video Surveillance."

"Although we continue to be reluctant to engage with the media, we again find ourselves in the position of being left with no choice but to respond to sensationalistic and inaccurate stories, both to make clear what is true and to do our part in fighting against the growing trend of media distortion," the company said in a statement.

"To let such significant mischaracterizations of our business stand would be unfair to our hard-working employees and valued clients who understand the reality of our culture and values," the statement added.

It said that New York Times reporters Alexandra Stevenson and Matthew Goldstein "never made a serious attempt to understand how we operate," and that they weaved together disparate stories in order to create a sensationalized image of the $154 billion investment firm.

The New York Times story, which was published on Tuesday, drew from a complaint with the Connecticut Commission on Human Rights and Opportunities, in which a 34-year old Bridgewater employee named Christopher Tarui, who is currently on leave, accuses a superior of sexual harassment.

Bad things happen behind closed doors

Tarui says that the company, which has a culture of "radical transparency" in which every meeting is recorded, tried to get him to withdraw his complaint. Intimidation is a focal point of the NYT story, which also includes interviews with seven former employees and a filing with the National Labor Relations Board.

What seemed clear from the story was that Bridgewater's constant surveillance actually acted as a form of enforcing self-censorship.  Bridgewater does not see it that way.

"The New York Times portrayed our taping of meetings as creating 'an atmosphere of constant surveillance . . . that silence[s] employees who do not fit the mold.' It is well known that Bridgewater's taping of meetings is instead done to enable employees to hear virtually all discussions happening at the firm for themselves," the firm said in its statement.

It continued: "We make these tapes available to employees because we believe strongly that in order to have a real idea meritocracy, people need to see and hear things for themselves rather than through the spin of others.  We also believe that bad things happen behind closed doors so that such transparency is healthy."

It also touted a recent anonymous employee survey in which "employees rated their agreement with the statement 'I believe that Bridgewater's culture and principles are key to its success" a 4.4 out of 5."

Bridgewater also said that parts of the NYT report were patently false. Specifically, it said that employees are not sometimes asked to lock away their personal cell phones, unless they are on the trading floor, in which case that is standard practice for the industry. It also said that the firm had not lost billions due to performance.

Bridgewater sent us the full statement, originally published on LinkedIn:

Although we continue to be reluctant to engage with the media, we again find ourselves in the position of being left with no choice but to respond to sensationalistic and inaccurate stories, both to make clear what is true and to do our part in fighting against the growing trend of media distortion. To let such significant mischaracterizations of our business stand would be unfair to our hard-working employees and valued clients who understand the reality of our culture and values.

While we all would hope that we could count on the Times for accurate and well-documented reporting, sadly, its article "Sex, Fear, and Video Surveillance at the World's Largest Hedge Fund" doesn't meet that standard. In this memo we will give you clear examples of the article's distortions. We cannot comment on the specific case raised in the article due to restrictions we face as a result of ongoing legal processes and our desire to maintain the privacies of the people involved for fear that they too will be tried in the media through sensationalistic innuendos. Nonetheless, we can say that we are confident that our management handled the case consistently with the law and we look forward to its successful resolution through the legal process.

To understand the background of this story, you should know that the New York Times reporters never made a serious attempt to understand how we operate. Instead they intentionally strung together a series of misleading "facts" in ways they felt would create the most sensationalistic story. If you want to see an accurate portrayal of Bridgewater, we suggest that you read examinations of Bridgewater written by two independent organizational psychologists and a nationally-renowned management researcher. (See An Everyone Culture by Robert Kegan; Learn or Die by Edward Hess; and Originals by Adam Grant.)

Rather than being the "‘cauldron of fear and intimidation'" the New York Times portrayed us as, Bridgewater is exactly the opposite. Bridgewater is well known for giving employees the right to speak up, especially about problems, and to make sense of things for themselves. Everyone is encouraged to bring problems to the surface in whatever ways they deem to be most appropriate. To be more specific, our employees typically report their business problems and ideas in real time through a public "issue log" and a company-wide survey that is administered quarterly. More sensitive matters are reported through an anonymous "complaint line," and all employees have access to an Employee Relations team charged with being a closed, confidential outlet outside of the management chain for handling issues of a personal nature.

The New York Times portrayed our taping of meetings as creating "an atmosphere of constant surveillance . . . that silence[s] employees who do not fit the mold." It is well known that Bridgewater's taping of meetings is instead done to enable employees to hear virtually all discussions happening at the firm for themselves. We make these tapes available to employees because we believe strongly that in order to have a real idea meritocracy, people need to see and hear things for themselves rather than through the spin of others. We also believe that bad things happen behind closed doors so that such transparency is healthy.

While we acknowledge that this culture of openness is not for everyone, our employees overwhelmingly treasure this way of operating. In our most recent anonymous survey, employees rated their agreement with the statement "I believe that Bridgewater's culture and principles are key to its success" a 4.4 out of 5. Many of our employees say they wouldn't want to work anywhere else because they so appreciate our unique idea meritocracy in which meaningful work and meaningful relationships are pursued through radical truth and transparency. The New York Times article doesn't square with common sense. If Bridgewater was really as bad as the New York Times describes, then why would anyone want to work here?

The New York Times said that some employees "are required to lock up their personal cellphones each morning when they arrive at work" which made it sound like employees can't carry their phones around with them like employees at other companies do. This is wrong. The truth is that the vast majority of our employees freely carry around their cell phones; the only place they can't is on our trading floor, where cell phones are prohibited. This policy is to protect the confidentiality of trades in order to protect our clients' money.

The New York Times said that the company's culture makes it impossible for employees to have matters handled confidentially. That is also wrong. As stated above, we have clearly defined channels for reporting private matters that have been utilized by many employees over the years. These matters have always been kept confidential.

The New York Times said "over the last two years, the firm has lost billions of dollars for investors as a result of mixed performance." That is wrong as well. In 2015, our Pure Alpha fund had its 15th consecutive year of positive returns. This year, year-to-date, we have made $1.3 billion for our clients across our strategies. While that is less than expected, it is within our stated range of expectations. Notably, our clients who know us well have demonstrated their confidence in us by investing $12 billion in new assets over the last seven months.

Concerning legal matters, because Bridgewater is culturally committed to the pursuit of truth, we have always had a strong preference to not "settle" claims but rather to be judged by the appropriate legal or regulatory system, even though that is not the expedient thing to do. Like many organizations, we encounter frivolous claims made in an effort to extract financial gain. Most companies prefer to settle them because it saves time and legal costs—and avoids the sort of distorted publicity that we are now encountering. We choose to contest them instead. At the same time, we have clear policies and standards of behavior, and when we discover behavior inconsistent with them, we act decisively. We are proud to say that in our 40 year history we have had no material adverse judgments.

We are far from perfect and we like to raise our imperfections to the surface so that we can deal with them honestly and transparently, while also protecting personal privacy. This approach is controversial and gives the media a lot of material to pick from to mischaracterize, but we believe that in the long run it is the best way for improving. It has been the biggest reason for our success. We look forward to continue being judged by our employees, our clients, and the legal and regulatory parties who are responsible for overseeing our behaviors, rather than by the media.

SEE ALSO: Ray Dalio, head of the world's largest hedge fund, explains his succession plan for Bridgewater and how its 'radically transparent' culture is misunderstood

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NOW WATCH: MALCOLM GLADWELL: ‘Anyone who gives a single dollar to Princeton has completely lost their mind'

People have been talking about Bridgewater Associates and its culture of surveillance for years, and in general it has been met with skepticism and derision.

That has been the case again over the last few days. The $154 billion investment firm helmed by Wall Street legend Ray Dalio has yet again been confronted with decidedly bad press about its corporate culture.

In a New York Times story published on Tuesday called "At World's Largest Hedge Fund, Sex, Fear and Video Surveillance," reporters detail the firm's efforts to squash a sexual harassment claim now making its way through the Connecticut Commission on Human Rights and Opportunities.

Bridgewater called this story a "distortion of reality"— but only part of it. The firm has always proudly owned the part of its culture where everything is recorded, either on audio or video, in the name of what its founder calls "radical transparency."

According to the "principles" Dalio has also set out for the company, this is also supposed to encourage an environment in which people challenge each other's ideas and feel that there's an open dialogue.

Here's an example, from the New York Times report:

"It is routine for recordings of contentious meetings to be archived and later shown to employees as part of the company’s policy of learning from mistakes. Several former employees recalled one video that Bridgewater showed to new employees that was of a confrontation several years ago between top executives including Mr. Dalio and a woman who was a manager at the time, who breaks down crying."

Dalio has argued that this allows problems and weaknesses to rise to the surface and be dealt with objectively.

To me, the use of this logic is even scarier than the surveillance itself.

In the last few years researchers have learned more and more about the powerful connection between surveillance and silence, minority opinions, and self-censorship. For that we can thank Edward Snowden, the former NSA employee who leaked details about Prism, a far-reaching clandestine surveillance program designed to ensnare terrorists.

What the program's leak did was bring a crucial discussion about the nature of privacy in America — a discussion about what is and what is not acceptable within our values construct — to the the forefront of public discourse.

Had Bridgewater's culture been thrown into that conversation, it would have undoubtedly been judged outside of acceptable American privacy norms.

Bridgewater is not what we are; it's what millions of Americans fear we might become.

Silence scholarship

The selling point of the NSA's Prism program was simple — it's meant to keep us safe. In exchange for an invasion of privacy, Americans are supposed to believe that their lives may be spared from violence.

Yet according to Pew research, only 40% of Americans back the program. Being spied on is something we just don't like. Those that are OK with it, though, tend to take the "nothing to hide" argument. They don't care if the government is watching them because they don't care what the government sees.

This line of thinking was tackled in the San Diego Law Review in 2007 by DJ Solove. He said that people need privacy not because they have things they want to hide, but because they are concerned with "concealing information about themselves that others might use to their disadvantage."

That can include anything from when your kids will be with a babysitter to when you plan on going the dentist's for a root canal.

But again, 40% of Americans are willing to set this fear aside because they feel their lives are in danger. At Bridgewater, the rationale for surveillance is obviously thinner. It's sold as a part of a corporate culture — one that pays very handsomely.

More research tells us that this dedication to surveillance does not breed a culture of openness, but rather one of fear and suppression.

In a study published earlier this year called "Under Surveillance: Examining Facebook’s Spiral of Silence Effects in the Wake of NSA Internet Monitoring," Elizabeth Stoycheff examined what surveillance does to speech.

"Theoretically, it adds a new layer of chilling effects to the spiral of silence," Stoycheff wrote. "This is the first study to provide empirical evidence that the government’s online surveillance programs may threaten the disclosure of minority views and contribute to the reinforcement of majority opinion."

Asymmetrical information and asymmetrical power

Now consider the power dynamics at Bridgewater. Instead of the government watching you, it's your boss. Stoycheff's subjects silenced their opinions because they perceived there may be retaliation. But in reality, the government was/is far more disconnected from these people than, say, their employers.

Your employer can really mess with you.

Stoycheff's study found that people don't speak up for fear of two things. One is social isolation. Applied to Bridgewater, in the gentlest way, think of this as being afraid no one will hang out with you at the office holiday party.

The other fear is one Bridgewater can conjure far more easily than the government can.

"Fear of isolation, as traditionally measured, taps an individual's concern of being alienated from other members of society, but does not address fear of alienation or prosecution from the government. Csikszentmihalyi (1991) argues that social isolation is a minimal concern compared to material sanctions that government is capable of enacting, like losing one's job or instigating legal consequences," Stoycheff writes (emphasis ours).

It goes without saying that the powers that be at Bridgewater have their employee's livelihoods hanging directly in the balance. Legal consequences are also on the table. Radical transparency serves as a reminder that what is being said is also being judged, and judgments have consequences.

This is how fear, though it is often imperceptible to the naked eye, is silently passed from one person to another like a message sent through a cold tin can. This is fear dancing on an invisible wire, regulating every employee with the same subliminal message.

It says: "Do not speak unless you agree."

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NOW WATCH: 5 of the most successful 'Shark Tank' stories of all time

Howard Marks, cofounder of Oaktree Capital Management, just splashed some cold water on the hedge fund industry.

The alternative-investment giant, which manages $98 billion, reported earnings on Thursday.

During the call, Goldman Sachs analyst Alex Blostein asked about how Oaktree's limited partners are allocating their money to hedge funds relative to other alternative investment firms.

Marks' reply put a whole bunch of hedge fund managers in their place.

He said (emphasis ours):

"There was never anything about the term 'hedge fund' that produces instant magic. A hedge fund is just a form of delivery, and maybe a form of compensation. But all investment accomplishments still go back to superior judgments.

"You may not know, Alex, that I wrote a memo on hedge funds in 2004, and what I said then was when I first learned about hedge funds, which is probably in the '70s, there are 10 hedge funds ran by 10 geniuses. And in 2004, I said today there are 5,000 hedge funds, and I don't think they're run by 5,000 geniuses. Today we're probably up to 10,000.

"The performance of the greatest hedge funds run by geniuses, and their closing, created a big umbrella over this industry, which permitted the other 9,990 hedge fund managers to start hedge funds and command hedge fund fees."

In other words, the hedge fund industry was launched by a handful of genius investors (Marks could be referring to people like Jim Simons), and the rest of the industry has followed in their path, despite not being as smart or as profitable as their forebears.

In a 2004 client note dubbed "Hedge funds: a case for caution," Marks asked investors to give up on their "irrational dreams" and provided colorful analogies on the scability of hedge funds.

"I do not expect a debacle, just a disappointing experience. The sad fact is that, on average, hedge funds may go down as just another former silver bullet," he wrote.

The industry has been having a particularly hard time of it this year, with poor performance and insider trading investigations. Overall, the industry's return was at 1.6% through June, according to Hedge Fund Research. That's less than half the gains in the S&P 500.

Here's Marks again (emphasis ours):

"But I dare say that the average hedge fund performance since I wrote that memo has not warranted the average hedge fund compensation. I think it is fair to say that. By the way, I said in that memo that the average hedge fund would make about 5% or 6% in coming years, and eventually people would give up on paying 2 and 20 to get 5% and 6%. And the report on that 10th anniversary memo said the average return has been 5.2%, but at that time assets were still screening upwards, and now people have caught up in reality, I think.

"And so at the margin, the appetite for hedge funds has been correcting. That has no impact on us. And in fact, you can't do it in stocks and bonds and you think less in hedge funds, I think that bodes well for the kind of things that we and our peers do."

Oaktree's competitors have also been vocal on hedge funds. Blackstone's COO, Tony James, for example, had provided a perfect summary of why the industry has been struggling, while billionaire Steve Schwarzman showed little sympathy for them.

SEE ALSO: A Wall Street investor is trying to cash in on one of China’s most pressing problems

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NOW WATCH: MALCOLM GLADWELL: ‘Anyone who gives a single dollar to Princeton has completely lost their mind'

A top-performing $8.5 billion hedge fund has sounded the alarm.

The markets are in a "historic" situation, according to Carlson Capital, an $8.5 billion Dallas-based hedge fund.

The hedge fund highlighted numerous concerns in a recent investor letter viewed by Business Insider.

These include:

• "US treasuries are the wrong price."
• Investors have "bypassed growth and moved to risk-parity, frankly a shameless abrogation of any equity-fundamental analysis replaced by the bond proxy."
• "The valuation of the stock market is being set by unreliable price indicators such as bonds."
• "We have witnessed mania around helicopter money, the recession, and the fatuous concept of negative rates."

The June letter was written by Richard Maraviglia and Matt Barkoff, who are portfolio managers on Carlson's Black Diamond Thematic fund.

The fund, which makes long and short stock bets, is beating competitors. The fund was up 9.9% net of fees in the second quarter, bringing year-to-date returns through June to 10.97%, according to the letter.

Other stock-focused hedge funds fell 0.09% on average through June, according to the Hedge Fund Intelligence US equity index. Carlson managed $8.5 billion firmwide at the start of the year, according to HFI's Billion Dollar Club ranking.

The firm, through a spokesman, declined to comment.

Here are some of the major takeaways from the letter (emphasis ours).

"US treasuries are the wrong price"

Over the last two quarters, we have hinted that we have seen poor risk reward in bonds. Now, we are saying it outright: US treasuries are the wrong price. Generally, being the cynics that we are, we have always had a problem with something or some type of bubble. Since 2013, when the momentum phase of the stock market kicked in, excess liquidity has found its way into a series of similar but ultimately end-game bubbles. If 2013 and 2014 was characterized by an insatiable appetite for ultra-growth predicated almost exclusively on concept versus reality in industries such as clean power and biotechnology, and 2015 was about mega-cap domination crowding and quantdriven price momentum (FANG), then 2016 has been the year when investors just bypassed growth and moved to risk-parity, frankly a shameless abrogation of any equity-fundamental analysis replaced by the bond proxy. The new acronym is now TINA – “there is no alternative” and more potently, STUD – “Staples, telecom, utilities, and defense.” A bell is ringing.

...

The valuation of the stock market is being set by unreliable price indicators such as bonds.

A "literally historic" situation

The Fed has typically hiked and should hike when one-third of the United States have unemployment below the NAIRU, when the ECI rises this much, two years after a trough in employment, or when Unit Labor Costs have risen sharply or when overtime hours rise or when job openings reach twenty-year highs.

Alas, not this time. Instead, we have witnessed mania around helicopter money, the recession, and the fatuous concept of negative rates. As investors, we look for anomalies and the above discussion seems literally historic in proportion.

Additionally, the Bank for International Settlements (BIS), the world’s largest international financial organization owned by sixty of the world’s central banks, recently produced a report on demography and inflation. In its opening abstract, it notes in its conclusion that “in particular, a larger share of dependents (i.e. young and old) is correlated with higher inflation, while a larger share of working age cohorts is correlated with lower inflation”. Demography accounts for about one-third of the variation in inflation with the rest being other factors we have regularly discussed such as the Taylor Rule, the Phillips Curve, productivity, and other cost push factors such as oil. “Furthermore, our results suggest that ageing might eventually lead to higher, not lower, inflationary pressures – contradicting the prevailing view.” In other words, there is a positive correlation between the dependency ratio which could be young and old. In this case, it is old, but the birth rate has also increased, so it is both. Interestingly, even the central banks comprehend that the prevailing view has a flaw. Prevailing views generally do. With the sixty-five and older cohort growing by a staggering thirty-seven percent over the next ten years and by seventy-five percent over the next thirty years, BIS concludes:

“Given that in the future the share of the very old is expected to grow fast, the predictions should be treated cautiously. In contrast, estimates for past inflationary pressures rely more on the cohorts in the middle of the distribution, where our estimates are the most stable. Taking our estimates at face value, the demographic pressure on inflation would be expected to reverse almost fully over the coming decades, from benign to more challenging.”

More inflation to come

On the heels of massive monetary policy, Japan and Europe have introduced the idea of fiscal stimulus. As it relates to the US, after several years of austerity, the tide has turned. The Affordable Care Act has set the stage for a huge increase in fiscal spending for major healthcare programs (primarily Medicare) as well as Social Security.

Combining this with our assessment of the output gap and productivity about which we have written extensively and this current update on the US economy, we largely rest our case. The budget deficit has declined every year since its peak of nearly ten percent of GDP and the CBO expects it to begin an inexorable rise. Higher government spending is both inflationary and additive to GDP. Economic expansions do not die of old age like humans do. They come unstuck from excess investment imbalances or from aggressive tightening.

...

Higher inflation expectations or higher rates should cause a stronger dollar and a reversal in commodity stocks whose fundamentals remain tied to a disastrous China. Low volatility stocks have extreme tail risk. We have a barbell short across both styles and sectors.

Consider gold in light of Trump

We noted that gold offered two ways to win at the end of last year; as the 2000’s deflationary/fear hedge or the actual logical classical reason as a hedge: to inflation. Finally, the rise of anti-globalism and populism such as Brexit, Trump, and others supports the inflation cycle.

Expect a big Fed impact

In spite of all of this, the Federal Reserve is expected to never hike. As the world goes anti-global, Yellen seems to pay ever more attention to potential exogenous world risks. A China devaluation, a small stock market correction, the US election and Brexit have offered a series of excuses to hold back. Her repeated hesitations have led to a view that the Fed is “constitutionally dovish.” It will take three to six years to sort out a British exit from Europe, during which time its consequences will have been forgotten, remembered and forgotten again many times. It seems inappropriate for the Fed to wait until they know for sure especially in the context of sentiment that remains unscathed post-Brexit. Importantly, however, the constant delays mean the impact of a Fed Funds hike on financial conditions now will be much larger than before. The ultimate irony surely is to complain about hike-tightening conditions; is that not the point?

SEE ALSO: Leon Cooperman published an epic 48-page note to investors explaining why everything is fine

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NOW WATCH: MALCOLM GLADWELL: ‘Anyone who gives a single dollar to Princeton has completely lost their mind'

Investors have begun pulling money from Pershing Square, the hedge fund helmed by billionaire investor Bill Ackman.

According to numbers released by Pershing, its public fund's net asset value went up from June to July. However, the fund's total assets under management went down.

You can contrast the two months here. With a little math, you can see that redemptions totaled about $430 million in the second quarter.

June:

July:

Earlier this month Ackman addressed a Fortune story about his redemptions, saying that they were relatively low. He said they were 37% lower than the average of the last eight years.

"My guess is that our redemption that we've received as percentage of capital are probably among the lowest in the industry, and that's really because we benefit from a very stable capital base, and that's because our investors have been incredibly supportive of us and we appreciate that support had enabled us to, I think, to be very effective and to take a long-term view," Ackman said on his second-quarter call to investors.

Pershing Square had the worst year in its history in 2015, down 20% against the S&P 500. This was mostly because of the firm's long position in Valeant Pharmaceuticals, a stock that has lost 90% of its value since last October. Ackman's very public short crusade against Herbalife didn't help matters either.

Pershing Square would not comment on this story.

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NOW WATCH: There’s a glaring security problem with those new credit card chips

The stock market bull run is crushing hedge funds that can’t figure out why stocks keep rising, despite indicators that they should be falling.

Caerus Investors, a small New York-based equity hedge fund, just released its second quarter letter, which provides some insights into what's going on.

Business Insider viewed a copy, and here are some of the more interesting points:

• "Never can we remember a stretch in the market with as many people fighting the bull. The wall of worry is as treacherous as we have seen."
• "At every troubled juncture, the market has confounded its participants, successfully shrugged off bad news and galloped triumphantly to a new high. This bull is learning, adjusting and becoming harder to predict."
• "The greatest bullfighter of all time, Manolete, was gored to death by a Miura bull, an event that left Spain in a state of shock in 1947. Many contemporary hedge fund managers can probably relate."

The firm’s Caerus Select Strategy, which focuses on consumer stocks, returned 8.8% annualized since it launched in July 2011. The strategy is roughly flat for the year, rising 0.63% through July 29, according to the letter. The firm managed $181 million, including trading allocations from separate accounts, as of June 1. 

Here are some excerpts from the letter (emphasis ours).

Fear the bull market

"Never can we remember a stretch in the market with as many people fighting the bull. The wall of worry is as treacherous as we have seen.

The rise of Donald Trump and global political populism, turmoil at the major party conventions in the United States, escalation of radical Islamic terrorism, the coup attempt in Turkey and related fallout, China’s debt crisis, yuan weakness and related economic slowdown, the EU’s troubled bank sector, negative interest rates throughout much of the developed world, the renewed bear market in oil, and, last but not least, Brexit, could individually or collectively upend the global economy and yet equities markets continue to rise.

All of these concerns have justifiably kept most participants conservatively positioned. Yet, at every troubled juncture, the market has confounded its participants, successfully shrugged off bad news and galloped triumphantly to a new high. This bull is learning, adjusting and becoming harder to predict.

...

The greatest bullfighter of all time, Manolete, was gored to death by a Miura bull, an event that left Spain in a state of shock in 1947. Many contemporary hedge fund managers can probably relate.

While we at Caerus have largely stayed away from this fight, we admit to being somewhat confounded by the run in many consumer stocks. Fundamentals within the broader consumer discretionary universe remain somewhat muted, as evidenced by many second quarter earnings reports. Lodging Revenue per Available Room ("RevPar"), apparel spending and meals away from home continue to exhibit weak trends. More recently, Ford threw cold water on the recent rally in the auto sector with dismal second half guidance."

SEE ALSO: Leon Cooperman published an epic 48-page note to investors explaining why everything is fine

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NOW WATCH: We tested an economic theory by trying to buy people's lottery tickets for much more than they paid

Schonfeld Strategic Advisors, a multibillion-dollar family-office hedge fund, is expanding its reach in quant trading.

The New York-based firm is backing a new quant fund from Eric Tavel, who previously worked at Goldman Sachs Asset Management and the Canadian bank RBC.

Schonfeld is seeding its new quant investment with $100 million. The new firm, Masa Capital, plans to launch in the first half of next year with as much as $150 million under management, including Tavel's own cash.

Tavel headed RBC's quant proprietary trading group, GAT, from 2010 through last year, according to a LinkedIn page. He oversaw Goldman's quantitative investment strategies group and comanaged the Global Alpha Fund from 1996 through 2010, according to a Schonfeld press statement.

The new fund will focus on quant trading in futures and currencies, among other strategies, Tavel told Business Insider.

While Schonfeld already runs quant strategies in its book, chief investment officer Ryan Tolkin said the new addition would help the firm diversify.

"Many of our strategies are statistical arbitrage strategies," Tolkin said. "That basically means relying or using historical pricing information to help predict future price movement of stocks. Many of them are equity based, and what Eric is doing differently is trading different asset classes from a quantitative perspective."

Schonfeld managed about $4 billion at the start of the year excluding leverage, according to a regulatory filing. That means Masa will make up a tiny bit of the firm's overall portfolio when it launches, but the move to back Masa coincides with Schonfeld's backing and acquisition of more talent, Tolkin said.

The launch comes as more asset managers push into quant investing.

Steve Cohen, for instance, is investing $250 million in a Boston-based quant firm, Quantopian, which makes trades based on algorithms sent by thousands of traders. Cohen's family office, Point72 Asset Management, which manages his billions, already has a separate quant arm called Cubist Systematic Strategies.

SEE ALSO: Hedge fund managers are being 'gored to death' by the bull market

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NOW WATCH: No one wants to buy this bizarre house in a wealthy San Francisco suburb

A new hedge fund that has the backing of legendary investor Stan Druckenmiller has made a big hire.

Castle Hook Partners hired Sean Rhatigan as its chief financial officer, and he started this week, according to two people familiar with the matter.

Rhatigan worked at Och-Ziff Capital for 16 years and left in December as its executive managing director responsible for accounting and operations, according to a LinkedIn profile.

Och-Ziff is one of the hedge fund industry's major players and manages about $39 billion, according to its website.

David Rogers and Josh Donfeld, who left George Soros' family office earlier this year, are launching Castle Hook, based in New York. Druckenmiller is planning to back the launch in his second-biggest investment in a hedge fund.

His biggest investment was in Zach Schreiber's PointState Capital, with $1 billion. Druckenmiller, through a spokesman, has previously declined to say how much he would be backing Castle Hook.

The firm plans to launch in the fourth quarter of this year or first quarter of 2017, Business Insider previously reported. It's one of several highly anticipated launches on the horizon competing in a difficult fund-raising environment.

SEE ALSO: A star quant trader is launching his own firm with the backing of a $4 billion hedge fund

SEE ALSO: 'A bell is ringing': A top-performing $8.5 billion hedge fund has sounded the alarm

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NOW WATCH: TONY ROBBINS: Here’s the secret to investing like hedge fund billionaire Paul Tudor Jones

The world's biggest hedge fund thinks that the next radical change in central-bank policy is almost upon us.

Bridgewater Associates sent a note to clients on Wednesday written by Greg Jensen, Jason Rotenberg, and Jeff Amato. Jensen is Bridgewater's co-CIO and former co-CEO.

The note said that central-bank policies up until now — such as dropping interest rates and quantitative easing — haven't boosted economies enough. Policy makers need to try something radical: putting money directly into consumers' hands.

Here's the key passage from the note, which was obtained by Business Insider (emphasis added):

"The world is not transpiring as most central bankers had expected. They have had to consistently adjust their thinking about what interest rates and monetary policies are appropriate, and they have had to be more accommodative than they had expected and buy more 'risky' assets. We believe that at this stage either fiscal stimulation that is monetized or putting money directly into the hands of spenders (i.e., MP3) is the logical next move."

The note cites central-bank policy in Japan as an example of monetized fiscal stimulation. Here is the passage:

"Japanese policy makers, while being technically careful to not break the rules of independence between the [Bank of Japan] and the [Ministry of Finance], have moved forward in a practical way to create de-facto MP3 with fiscal stimulus indirectly financed by the BoJ and increased purchases of riskier assets. These moves should help on the margin in getting money into the hands of entities that will impact the real economy, but markets have been underwhelmed by the details."

Westport, Connecticut-based Bridgewater manages about $150 billion, excluding leverage.

The Wall Street Journal earlier this year wrote about tensions between Jensen, one of the authors of the note, and billionaire founder Ray Dalio. Dalio later told Business Insider that he believed that Bridgewater's culture is misunderstood.

Rotenberg is a Bridgewater analyst, according to a Bloomberg Terminal profile. Amato's position was not immediately clear. A representative for Bridgewater at external PR firm Prosek Partners declined to comment.

SEE ALSO: A hedge fund backed by Stan Druckenmiller has made a big hire

DON'T MISS: Billionaire investor Steve Cohen has a new mantra, and this is the guy enforcing it

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NOW WATCH: Here are all the big banks that paid Hillary Clinton for speeches in 2013