A hot new hedge fund says it has found a way to beat competitors by parsing info about the stock market that few are looking at.

Manoj Narang of MANA Partners told Business Insider that his New York hedge fund would process data from the options market.

"There are certain areas, because of the nature of our business, where we have a proprietary edge in data collection,"Narang told Business Insider in a recent interview. "So for example, we have a very strong infrastructure for both high-frequency trading and for options trading, and that allows us to collect and manipulate data that arises from those markets very effectively."

The data is technically available to anybody but is hard to access unless the firm is already set up to trade options, according to Narang. He said:

"The options market generates more than 10 times the data as the equities market does, and same with micromarket structure. You're talking about over a dozen exchanges with their own direct feeds, and you have to properly collect the data and synchronize and time-stamp it. And it's just a massive amount of data. That kind of data is, we feel, very differentiated. There aren't that many firms that have the ability to incorporate signals from those markets into their strategies.

It is possible to collect this data on the options market from OPRA, or the Options Price Reporting Authority, but few firms do, Narang said. He added:

"The options market definitely contains information about the equity market. The options market is all about how investors are pricing in risk. That's why there's this notion of implied volatility. Implied volatility is essentially how investors are pricing their estimates of risk into the market. There's definitely information there about the underlying stocks. We think that that is very fertile ground for alpha."

Read the full interview with Narang here.

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On Wall Street, the end of the year is a race to balance portfolios and finish crucial business.

This has especially been the case for Valeant Pharmaceuticals and its billionaire investor, Bill Ackman.

Over the last week they've covered a lot of ground, including getting through a few well-paid departures and a substantial stock stale by Ackman's fund, Pershing Square.

First, the goodbyes.

The company is saying farewell to three key executives, Anne Whitaker, head of Branded Rx;  Dr. Ari Kellen, the head of Basuch & Lomb; and CFO Rob Rosiello are all leaving the company.

They are, however, not leaving without some parting gifts, according to Wells Fargo analyst, David Maris:

We are surprised that Valeant's CEO provided Rosiello and Kellen with consulting agreements on an ongoing basis, as despite these outgoing executives being very highly compensated while at Valeant, the company has lost nearly $80 billion in market value.

Shortly after Valeant's new CEO came onboard, these same executives also received special retention awards, enhanced severance benefits equal to 2x each's annual base salary and target bonus, and continued employment despite Valeant's missed earnings and poor business performance. Additionally, the new CEO and board awarded former CEO Michael Pearson a $9 million severance and a consulting contract. We are unaware on what Pearson is being paid to consult.

Former Valeant CEO Michael Pearson's consulting contractalso includes a non-disparagement agreement.

Valeant's stock crashed over 90% starting last October after accusations of accounting malfeasance from a short seller combined with government scrutiny over drug pricing to drag the company down. Since then, several government agencies have opened numerous investigations into the company.

A day after Valeant announced the departure of these executives, Ackman's fund Pershing Square sold $3.47 million worth of Valeant shares. The WSJ reports that this was done in order to help generate a loss for tax purposes.

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Hedge funds have historically marketed themselves as a prestige investment, promising an exclusive group of investors higher returns in exchange for higher fees.

The higher returns haven't been there of late, though. Now the high fees are starting to budge, too.

Tricadia Capital Management has lowered its management fees for existing investors who opt into a new share class, according to a September investor letter viewed by Business Insider. The letter didn't specify the new fees. 

The letter said that existing investors could add money to the fund at reduced minimum amounts up until March 1. For one class, for instance, existing investors can add just $5 million, as opposed to $25 million for new investors. 

Meanwhile, Valinor Management, a long-short equity Tiger fund launched by David Gallo, is dropping it management fee, according to a person familiar with the matter. A spokesman for Valinor declined to comment.

Both Tricadia and Valinor have seen their assets fall by nearly a quarter in recent months. They both managed $3.1 billion each as of mid-year, according to the Hedge Fund Intelligence Billion Dollar Club ranking.

For Tricadia, that was a 24% drop in assets from mid-2015, and for Valinor it was a 23% drop, according to the ranking.

Tricadia's flagship credit fund was down 1.7% through the end of November, according to a person familiar with the matter.

Hedge fund critics have long complained about high fees, which are traditionally priced at 2% management and 20% performance on assets. The fees are some of the highest in asset management. But as fund performance has slumped, investors have been less willing to pay the fees.

Other big hedge funds have also reduced their charges in recent months.

Caxton Associates, Och-Ziff Capital Management and Tudor Investment Corp have also all dropped their fees this year, Reuters reported. Moore Capital has also cut fees on its biggest fund, according to a Wall Street Journal report.

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Chipotle has named four new people to its 12-person board of directors, including two people who work with the activist firm Pershing Square Capital, which took a stake in the company earlier this year.

The appointments are Paul T. Cappuccio, Robin S. Hickenlooper, Ali Namvar and Matthew Paull.

Namvar is a partner at Pershing Square, and has worked there since 2006, according to a Chipotle press statement. Paull currently sits on the Pershing Square's advisory board.

Cappuccio is Time Warner's executive vice president and general counsel, and Hicklooper is the senior vice president of corporate development at Liberty Global.

"We are pleased that Chipotle has taken the important step of refreshing its Board which will position the company for continued growth and long-term success," Bill Ackman, founder of hedge fund Pershing Square, said in the statement.

Ackman's $11 billion Pershing Square took a 9.9% stake in Chipotle in September. The firm's performance has dropped since last year. Pershing Square Holdings, a proxy for the firm's flagship hedge fund, is down about 12% through December 13.

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A small short-seller that says its reports have led to the resignations of several CEOs has a new big short.

Ben Axler's Spruce Point Capital Management, a stock-focused hedge fund, has released a new report on Ultimate Software, a tech company that provides cloud-based human resources software. Short-sellers bet that a company's stock will go down.

Among Spruce Point's reasons for betting against the company: Ultimate Software is "in denial about changes in its competitive landscape" and has the "worst governance" Spruce Point has ever seen, according to a presentation sent to Business Insider.

Axler has been managing his own money for the past few years, but in August he started trading with outside money.

A person familiar with the fund declined to provide exact performance figures but said the fund is up since August.

The New York-based firm, which has about $25 million under management, is a tiny player in the world of activist hedge funds. By comparison, as of midyear, Bill Ackman's Pershing Square Capital managed about $11.5 billion, and Jeff Ubben's ValueAct Capital managed about $16.2 billion, according to the Hedge Fund Intelligence Billion Dollar Club ranking.

Still, the firm has drawn attention for its short bets. SumZero, a website for buy-side investors, previously ranked Spruce Point the No. 1 short-seller on its platform.

Spruce Point has previously released reports on several companies, including Greif, Caesarstone, and the Intertain Group. Spruce Point says its reports helped prompt the resignations of those firms' CEOs.

Greif CEO David Fischer resigned in October 2015, Caesarstone CEO Yos Shiran resigned in May, and Intertain CEO John Fitzgerald resigned in June.

Spruce Point has also targeted stocks that have subsequently dropped in value. Greif, for instance, dropped last year after Spruce Point posted its report in February 2015 (though the stock has since rallied). Caesarstone is down from its 2015 highs, as is Intertain.

You can view a sampling of the firm's 314-page presentation on its new short below.

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LONDON — Lobby groups representing Britain's hedge funds is going to outline their wish list for Brexit talks between the UK and European Union to mitigate the damage a "hard Brexit" could have on the City.

That's according to the Financial Times, which saw the draft document from the Alternative Investment Management Association, Managed Funds Association and the Alternative Credit Council.

A "hard Brexit" is the UK leaving the European Union without unfettered access to the single market, in exchange for full control over immigration.

However, for financial services, this is the worst possible outcome as it would mean the loss of passporting rights.

The loss of passporting rights following Brexit is one of the biggest fears in the City of London. If the passport is taken away, then London could cease to be the most important financial centre in Europe, costing the UK thousands of jobs and billions in revenues. Around 5,500 firms registered in the UK rely on the European Union's passporting rights for the financial services sector, and they turn over about £9 billion ($11.2 billion) in revenue. 

According to the FT, citing AIMA figures, 85% of European hedge fund assets are managed from the UK.

The hedge fund document is allegedly going to point out that the industry contributes nearly £4 billion annually in tax while also providing more than 40,000 jobs.

On top of that, the document will also say that if Britain does decide to opt out of the Freedom of Movement act — and therefore stop the free movement of EU citizens into the UK — this could hit the industry hard because 20% of its employees in London come from the EU.

Read the full story here.

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NEW YORK — The founder of the New York-based hedge fund Platinum Partners was arrested Monday as prosecutors unveiled an indictment charging him and six others with participating in an approximately $1 billion fraud.

Mark Nordlicht, Platinum's founding partner and chief investment officer, was taken into custody at his New Rochelle, New York, home in connection with charges contained in an indictment filed in federal court in Brooklyn.

Others arrested included David Levy, Platinum's cochief investment officer, and Uri Landesman, the former president of the firm's signature fund, FBI spokeswoman Adrienne Senatore said.

Platinum is liquidating its hedge funds, two of which have received bankruptcy protection.

The indictment said that since 2012, Nordlicht, Levy, and Landesman schemed to defraud Platinum investors by overvaluing illiquid assets held by its flagship fund.

This caused a "severe liquidity crisis" that Platinum at first tried to remedy through high-interest loans between its funds before selectively paying some investors ahead of others, the indictment said.

Nordlicht, Levy, and Jeffrey Shulse, the former chief executive officer of Platinum's majority-owned Black Elk Energy Offshore Operations LLC, also defrauded the Texas energy company's bondholders, the indictment said.

A Platinum spokesman declined to comment. Nordlicht's lawyer did not immediately respond to a request for comment. Michael Sommer, Levy's lawyer, said he looked forward to clearing his client's "good name."

Lawyers for Shulse and the other defendants could not be immediately identified.

Founded in 2003, Platinum Partners until this year had more than $1.7 billion under management, the indictment said. The flagship fund reported returning profits of more than 8% in 2015 and 7% from January to April 2016, it said.

But this year, a series of investigations tied to Platinum came to a head, leading a Cayman Islands court to place its two main funds into liquidation in August.

In June, Murray Huberfeld, a Platinum associate who prosecutors say was a founder, was charged in Manhattan federal court with orchestrating a bribe to the head of the New York City prison guards' union, Norman Seabrook, to secure a $20 million investment. Both have pleaded not guilty.

Two weeks later, the FBI raided Platinum's Manhattan offices in a separate fraud investigation that culminated in Monday's indictment.

Others indicted include Joseph Sanfilippo, the former chief financial officer of flagship fund Platinum Partners Value Arbitrage Fund LP; Joseph Mann, a former Platinum marketing employee; and Daniel Small, a Platinum managing director.

The case is US v. Nordlicht et al, US District Court, Eastern District of New York, No. 16-cr-640.

(Reporting by Nate Raymond in New York; Additional reporting by Lawrence Delevingne; Editing by Chizu Nomiyama and Lisa Von Ahn)

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Several employees of troubled New York hedge fund Platinum Partners were arrested Monday on charges of participating in a $1 billion fraud.

These are the seven employees whom authorities charged, according to the indictment. (A copy of the 49-page indictment is published below.)

• Mark Nordlicht, Platinum's chief investment officer.
• David Levy, a senior executive.
• Uri Landesman, who the government says was "heavily involved in marketing Platinum's funds" and investors' contact.
• Joseph Sanfilippo, who was the chief financial officer for one of Platinum's funds and a member of its valuation team.
• Joseph Mann, who marketed Platinum from 2013 to 2016.
• Daniel Small, who was a co-portfolio manager for one of Platinum's strategies, Black Elk.
• Jeffrey Shulse, who was Black Elk's chief financial officer, and later its CEO.

Here are some of the key allegations made in the indictment:

• "Platinum reported that PPVA had returned profits of more than eight percent in 2015 and more than seven percent for the period from January 2016 through April 2016."PPVA refers to Platinum's value arbitrage fund, which the indictment says was invested "primarily in highly illiquid Level 3 companies despite representations to investors...that PPVA was a relatively liquid fund."
• "In or about and between 2011 and 2016, the defendants Mark Nordlicht and David Levy, together with others, engaged in two separate schemes: (i) a scheme to defraud investors and prospective investors in funds managed by Platinum; and (ii) a scheme to defraud third-party holders of the BE Bonds." BE Bonds are bonds issued by Black Elk, a energy company that was controlled by Platinum from 2010 to 2015.
• "In or about and between November 2012 and December 2016, the defendants Mark Nordlicht, David Levy, Uri Landesman, Joseph Sanfilippo and Joseph Mann, together with others, engaged in a scheme to defraud investors and prospective investors in Platinum through material representations and omissions relating to, among other things: (i) the performance of some of PPVA's Level 3 assets; (ii) PPVA's liquidity; (iii) the purpose of PPNE and the use of PPNE's proceeds; (iv) PPVA's preferential redemption process; and (v) related party transactions involving PPVA and PPCO."
• "Specifically, Platinum fraudulently overvalued some of PPVA's Level 3 assets in order to, among other things, boost performance numbers, attract new investors, retain exiting investors and extract high management and incentive fees."
• "Platinum's overvaluation of some of its Level 3 assets precipitated a severe liquidity crisis, which Platinum initially attempted to mitigate through high-interest loans between its hedge funds... When the...loans proved insufficient to resolve PPVA's liquidity problems, Platinum began selectively paying some investors ahead of others, contrary to the terms of its governing documents."
• Beginning in at least early 2014, Nordlicht, Levy, Landesman, Sanfilippo and Mann "began relying almost exclusively on new investments and inter-fund loans to pay redemptions to PPVA's investors."
• "Based in large part on Platinum's consistent overvaluation of PPVA's largest Level 3 assets, the defendants...extracted significant management and incentive fees from PPVA. In fact, from approximately 2012 through 2014, Platinum Management received more than $91 million in management and incentive fees." The firm charged investors a 2% management fee on assets and a 20% performance fee, according to the indictment, which is a standard fee model for hedge funds.
• "Platinum never disclosed to investors and prospective investors that it was using new investments to pay redemptions."

Platinum managed about $1.7 billion as of March 2016, the indictment says.

An external spokesman for Platinum declined to comment. Michael Sommer, Levy's attorney, said in an email that "we look forward to responding to these charges in court and clearing David Levy's good name."

Lawyers for the other defendants could not immediately be reached.

The case is US v. Nordlicht et al, US District Court, Eastern District of New York, No. 16-cr-640.

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Employees of a troubled New York hedge fund, Platinum Partners, were arrested Monday on charges of participating in a $1 billion fraud.

Mark Nordlicht, Platinum's chief investment officer, Uri Landesman, a Platinum marketer, and another coconspirator sent emails about fleeing the US, according to a government indictment out Monday.

This is how it went down, according to the charges. On or about December 13, 2015, Nordlicht, Landesman, and an unnamed coconspirator sent emails "that contemplated Nordlicht and Co-Conspirator 1 fleeing from the United States and illustrated their knowledge and awareness of the fraudulent scheme perpetrated on Platinum's investors and prospective investors."

The unnamed coconspirator sent the following email to Nordlicht, the indictment said:

"Don't forget books. Assume we are not coming back to ny[.] Just to be safe. Depends on Miami[.] We can fly straiggt [sic] to europe from miami on Tuesday[.] Take passport."

In response, Nordlicht asked for $2.5 million to pay off the firm's brokers and said he was ready to take $7.5 million from a second mortgage on his house to deal with the hedge fund's liquidity crisis, the indictment added.

Later, he sent another email to the unnamed conspirator.

"Am on my way to jfk with kids for their 6 pm flight to Israel," Nordlicht's email read, according to the indictment. "[My wife] is literally making me get on Israel flight if we don't connect and agree what we are doing."

Nordlicht then forwarded the email exchange to Landesman, according to the indictment. Landesman responded: "You should get on the flight if there is no bridge [loan], probably even if there is...We need to go through the mehalech of how we are going to share this with clients and employees, going to be very rough, big shame."

The Hebrew word "mehalech," roughly translated, means "overview" or "process."

About two months later, Landesman told an investor by email that Platinum was "sound" and that he "hope[d] to be beyond liquidity concerns forever by end of May, we welcome your further investment."

A representative for Platinum declined to comment. Lawyers for Landesman and Nordlicht could not immediately be reached.

Platinum managed about $1.7 billion firm-wide as of March 2016, according to the indictment.

You can read the relevant excerpt from the indictment below.

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Ray Dalio, the founder of Bridgewater Associates, the world's biggest hedge fund firm, says people should expect a major shift under President-elect Donald Trump.

"Regarding economics, if you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset," he wrote in a LinkedIn post on Monday. "This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers."

The post continued:

"It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power. The shift from the past administration to this administration will probably be even more significant than the 1979-82 shift from the socialists to the capitalists in the UK, US, and Germany when Margaret Thatcher, Ronald Reagan, and Helmut Kohl came to power." 

Dalio also suggested that those interested in this shift read Thatcher’s “The Downing Street Years.”

Dalio described Trump as a "deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around." He added that the president elect had picked a team of people who are "bold and hell-bent on playing hardball" to enact change in economics, foreign policy, education and environment policies. 

"It is increasingly obvious that we are about to experience a profound, president-led ideological shift that will have a big impact on both the US and the world," he said. 

Dalio also notes that Republicans in Congress have shifted farther to the right on economic issues in recent years.
"Trump’s views may differ in some important ways from the Congressional Republicans, but he’ll need Congressional support for many of his policies and he’s picking many of his nominees from the heart of the Republican Party," he wrote. "As the chart below shows, the Republican members of Congress have shifted significantly to the right on economic issues since Reagan." 

By comparison, Trump's cabinet is also very conservative economically. "Trump’s administration is the most conservative in recent American history, but only slightly more conservative than the average Republican congressman," Dalio wrote.

This isn't the first time Dalio and Bridgewater have opined on Trump. The day of the election, Bridgewater predicted markets around the world would tank if Trump won, according to an investor note viewed by Business Insider. Markets have since rallied, hitting all time highs. 

Then, in mid-November, Dalio said that "we are at one of those major reversals that last a decade." Building on that thesis on his note December 19, he said Trump's shift in policy could do more for the economy than is easily estimated through tax cuts and spending plans.

Trump's policies "could ignite animal spirits and attract productive capital," the billionaire investor said.

He added: 

"A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money."

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Blackstone Group is winding down its "big bet" hedge fund Senfina Advisors LLC after it faced mounting double-digit losses on its investments this year, a spokeswoman confirmed on Tuesday.

It is a rare setback for the private equity titan, which invests roughly $70 billion in hedge funds, and launched Senfina, which means "everlasting" in Esperanto, to great fanfare in 2014.

The fund was one of last year's top performers, gaining 20 percent, but is down 24 percent this year through November after wrong-way bets in its so-called center book where declines were most pronounced.

"The market environment in 2016 for long/short hedge funds was unprecedented. We did what was in the best interest of our investors to preserve their capital," said Paula Chirhart, a Blackstone spokeswoman.

A number of Senfina's nearly one dozen portfolio managers, including Parag Pande, who joined Blackstone in 2014 and now heads Senfina, will be leaving the firm, said a source familiar with the decision who asked not to be named because the discussions are private.

Pande ran Senfina's so-called center book, featuring fund managers' best ideas.

Some Senfina managers are expected to stay on at Blackstone and much of the $1.8 billion that Senfina invests for large clients, including state pension funds, is expected to stay at Blackstone, the source said.

Blackstone's Alternative Asset Management arm (BAAM), headed by J. Tomilson Hill, saw inflows of $1.65 billion this year and overall performance for BAAM has been positive, Chirhart said.

BAAM began laying the groundwork for Senfina years ago as demand for multi-manager funds picked up. Blackstone started hiring fund managers, including Pande, who came from Ziff Brothers, in 2014.

By the end of last year, Senfina was one of Blackstone's crown jewels. But after 2015's strong gains, some Senfina managers struggled early in 2016 as worries about slower growth in China and the pace of U.S. rate hikes sent stocks spiraling lower. Losses at the start of the year were deepest in the center book. 

In the January-June period, Senfina lost 15 percent after a 12 percent gain in the second half of 2015. Things appeared to stabilize some in the second quarter with a 2 percent gain. Adjustments were made in the center book.

Losses mounted anew in November with a 6 percent drop. Again the majority of losses were seen in the center book which was caught off guard by Donald Trump's unexpected White House victory and the ensuing stock market rally. Some managers betting on industrial and consumer companies were also hurt as markets repositioned.

Since its launch Senfina's performance has slightly negative but redemption requests have been minimal, the spokeswoman said.

Senfina isn't the only multi-manager hedge fund to struggle this year. Folger Hill Asset Management, founded by former SAC Capital Advisors chief operating officer Sol Kumin, is off 15.3 percent through November.

Managers like Senfina use large numbers of small investment teams and centralized risk oversight to keep bets on securities increasing in value, or long positions, roughly in balance with those on them declining, or shorts.

The strategy also uses leverage, or borrowed money, which can exacerbate losses if risks are not properly controlled. The so-called market-neutral approach is supposed to preserve client money in any market environment.

(Editing by Carmel Crimmins and James Dalgleish)

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A 27-year-old has raised $10 million for an unusual hedge fund — with the support of venture capitalists like Andreessen Horowitz and Union Square Ventures.

The 27-year-old in question is Olaf Carlson-Wee, and he's launching a strategy that invests in cryptocurrencies.

To be clear, the $10 million managed by Carlson-Wee's Polychain Capital is peanuts in the hedge fund world. But Polychain's strategy is rare, with few other funds trading in cryptocurrencies. Most hedge funds trade stocks, bonds, and currencies, with variations of different strategies.

So what is a cryptocurrency?

A cryptocurrency is basically a digital, encrypted currency that is decentralized, so no one power oversees its value. Bitcoin is the most famous of cryptocurrencies — nobody knows who created it — and it's divorced from any government. It's considered a secure, private currency, drawing the attention of antigovernment and privacy-minded folks.

But it's not the only one — several other cryptocurrencies exist and are being developed.

Transactions for these currencies are recorded in blockchain, a private and encrypted ledger.

Carlson-Wee is betting that he can choose the cryptocurrencies that will increase in value — and he expects hundreds of them to enter the market.

"The challenge for someone running a hedge fund is how to build a portfolio across that spectrum of risk and how to choose which of the new issues are going to become important and which are not," said Brad Burnham, partner at Union Square Ventures, which is investing in the fund.

Polychain, based in San Francisco, will be small, hiring only a handful of people. And Carlson-Wee is not looking for traditional Wall Street types.

"An amateur trader in the cryptocurrency market may have a more relevant background than someone who has had a traditional background on Wall Street," Carlson-Wee said.

Carlson-Wee, a Vassar College grad, wrote his undergrad thesis on bitcoin.

"I was immediately enamored and sort of obsessed," he said. "I thought the prospect of [bitcoin] had massive implications."

He then went to Coinbase, a digital asset exchange, and headed risk, overseeing things like fraud prevention and account security, he said.

Not only is his background unusual for hedge funds — so is his strategy. For instance, the normal research avenues for common hedge fund trades are unavailable, though there are some parallels.

Qualitative research

Instead of talking with sell-side researchers or looking at credit agencies (there are none), Carlson-Wee spends his time reading through the white papers that describe the protocols, interviewing the lead developers, and looking at a protocol's machinations in the GitHub repository.

"This qualitative research is supplemented by market data such as price and trading volume as well as network data such as transactions per day, dollar value transacted per day, and the estimated cost of a network-scale attack," he said.

He also embeds himself within the groups that are using the protocols to get a sense of how they are interacting with them, he said.

That model is similar to other funds that have launched in the space. MetaStable, another small hedge fund based in San Francisco, launched in 2014 with a handful of employees. The firm manages a few million, said Lucas Ryan, one of MetaStable's staffers.

Its investors tend to be those who are already sold on blockchain but "aren't necessary sold that bitcoin has solved all the problems," so they are seeking to invest in other cryptocurrencies, Ryan said.

Ryan, who has a programming background, says his job is to evaluate the protocols that people are developing and the problems they are trying to solve.

"The market is so immature and requires a high degree of technical understanding to wade through the stuff that isn't bull----," Ryan said. "A lot of stuff I couldn't do if I wasn't a programmer with a cryptography background. There's not, like, a ratings agency for any of these."

Still, like with Polychain's strategy, there are parallels. Ryan meets with protocol developers and tries to get a sense of how serious they are and whether their source coding is legit.

To be sure, this world of funds is very young. Until recently, Ryan was working on the fund part time, he said.

And it's unlikely these kinds of funds would grow to be large. Bitcoin, the most popular cryptocurrency, has about a $13.7 billion market cap.

"Bitcoin is like 80% of the total market of coins," Ryan said. "It would give someone pause to start a $50 million fund."

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The money management industry has a diversity problem.

Morningstar's global study out earlier this year showed that one in five mutual fund managers is a woman – a rate that hasn't budged since 2008.

In the US, that number drops to one in 10. The US is a laggard, far behind countries like Singapore (30%), Portugal (28%) and France (21%). 

For hedge funds, the numbers are similar: only 15% of hedge fund CEOs are women. For minorities, the figures are just as lackluster, with only a handful of Latino and African-American managers.

There are a lot of reasons for the gap – among them, biases, cliquey hiring, and weaker professional networks for women.

Given the dire numbers, I wondered what it's like to be a woman, minority – or both – working in the industry. So I started asking around. 

Some spoke of annoying biases – one woman who launched her own fund said she stopped wearing her wedding ring at investor meetings because she grew tired of questions about what her husband did. Others spoke of being ignored for the investment ideas they presented, or hearing crass talk about female colleagues.

Most said their experiences had, on the whole, been otherwise positive. Investing proves a quantifiable measure on which to be measured, something other careers lack, several people mentioned. There are fewer gray areas on which to be measured, the thinking goes, if you can point to a number that proves your performance for the year.

Everyone asked to be kept anonymous so to not jeopardize their careers. Here are their stories.

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"There's a general theme of being discounted"— Female investor on an otherwise all-male investment team

"I have developed a lot of thick skin. It's not uncommon when we discuss an investment idea, I'll raise my hand, the question will be dismissed and then a [male] colleague will ask the same question and there will be a thirty-minute conversation."

"When I travel, when I’m in boardrooms, people will direct questions to my [male] boss and not me, even though I presented ... There's a general theme of being discounted almost or doubted and a general assumption of 'she must be the IR [investor relations rep].'"

"It's a delicate line. I want to be treated equally and be one of the boys. Sometimes they say lewd comments, and it goes in one ear and out the other. I want it to be a natural environment where they feel they can speak freely." 

"There’s a certain approach to conversation that comes out of knowing what is expected in a conversation"— Female minority hedge fund investor who studied engineering

"I’ve always operated in an environment where the distribution was highly skewed... There’s a certain approach to conversation that comes out of knowing what is expected in a conversation. Sticking to a need to say basis. Speak about what’s relevant. The content matters... being to the point."

"If you're in the minority, being the only woman on the team, your voice is heard more. I think of it like a parent with 10 kids and you think you have an underdog in the family. You think you need to call out the weakest link, the quietest child so you can hear what the quietest child has to say ... The fact that you are the only one on the team makes you more visible in many ways. And the reason you made the team is because you met certain criteria and you deserve to be on the team. And you have a level of credibility that you get to be heard, and amplified."

"He was surprised I wasn't pitching a more 'girly' name"— Female hedge fund analyst

"It has always been a more uncomfortable game of numbers where the ratio of male to females in any event is 10 to one and the men huddle together and the women are sort of separated. In one instance, I was meeting with an analyst from a hedge fund in the city and he asked whether I had any names I could pitch him. I began to talk about a semiconductor company when he interrupted to say he was surprised I wasn't pitching a more 'girly' name." 

Hedge funders dominated Forbes' most recent "30 Under 30" list for finance.

Twelve of them are on the 2017 list, including Michael Buckley, who works at Stanley Druckenmiller's Duquesne Capital, and Anthony Massaro, who works at Bill Ackman's Pershing Square Capital Management.

The list for finance was chosen by a pool of judges comprising Sonia Gardner, the cofounder of Avenue Capital Group; Thomas H. Lee, the founder of Lee Equity Partners; and Jennifer Fan, a portfolio manager at Millennium Management.

The acceptance rate to the list is under 4%, according to Forbes.

The twelve hedge fund staffers who made it to the list were: Anish Abuwala (29), Raja Bobbili (29), Michael Buckley (29), Ben Friedman (29), Dhruv Maheshwari (28), Anthony Massaro (29), Alex Nomitch (29), Daniel Rasmussen (29), Ben Solarz (29), Andy Stafman (29), Colter Van Domelen (29), and Franklin Zhao (29).

Abuwala, a portfolio manager at Caxton Associates, works with Joshua Berkowitz, who made his name as a trader working with George Soros. Abuwala started in the hedge fund business at Berkowitz's Woodbine Capital, and he moved to Caxton with Berkowitz and other former Woodbine colleagues. He graduated with a degree in finance and international business from New York University and has worked at Morgan Stanley, Lehman Brothers, and BlackRock, according to his LinkedIn profile.

Bobbili is an investment analyst at Abrams Capital, a Boston-based investment firm founded by David Abrams. According to Forbes, he manages "one of Wall Street's most concentrated and successful portfolios." He is a graduate of MIT and Harvard Law School and holds an MBA from Harvard Business School.

Buckley is an analyst dealing with global stock investing at Duquesne Capital, the hedge fund of investing legend Stanley Druckenmiller. He holds a bachelor's degree in applied mathematics from Harvard.

Friedman is a portfolio manager at CQS, a London-based asset-management firm, focused on investing in high-yield and distressed securities. According to his LinkedIn profile, he was previously a high-yield trader at Bank of America Merrill Lynch. He holds a bachelor's degree in political science from the University of Pennsylvania.

Maheshwari is a research analyst in the quantitative arm of hedge fund manager Steven Cohen's Point 72 Capital Management, according to Forbes. Previously, he was a vice president at Goldman Sachs Asset Management.

Massaro is a partner at Pershing Square Capital Management, where he, according to Forbes, is involved in the firm's investments in Mondelez and Chipotle. According to his LinkedIn profile, Massaro previously had a two-year stint with the investment-banking division of Goldman Sachs and holds a bachelor's degree in economics, finance, and accounting from the University of Pennsylvania.

Nomitch works as a stock trader at Viking Global Investors specializing in energy names, according to Forbes. Previously, he worked as an investment banker at Goldman Sachs' natural resources division. He is a double major in economics and mathematics from Dartmouth College, and he graduated with "nine academic citations: five in economics, two in mathematics and one each in computer science and chemistry."

Rasmussen is the founder of Verdad Fund Advisers, a fund that aims to deliver private-equity-style returns in the public market. He is the author of "American Uprising: The Untold Story of America's Largest Slave Revolt" and holds a bachelor's degree from Harvard and an MBA from Stanford. He previously worked at Bain Capital and Bridgewater Associates.

Solarz is a principal at the $6 billion hedge fund SPO Partners working on "technology, media and communications equities,"according to Forbes. He is a Yale graduate who worked as an analyst in the Yale Investments Office before joining Blackstone and then the hedge fund Eton Park.

Stafman is a partner at Sachem Head Capital Management. He was earlier an associate at Silver Lake Partners, after graduating from the Wharton Business School with a degree in finance.

Domelen is a partner at Chase Coleman's Tiger Global Management, where he oversees technology investments "including billion dollar stakes in Amazon and Priceline,"according to Forbes. He was previously "trained by Mary Meeker while a research analyst at Morgan Stanley," Forbes said, and he lists Morgan Stanley's Mobile Internet Report as a publication on his LinkedIn profile. He is a Duke University graduate in economics.

Zhao is a macro trader at Commonwealth Opportunity Capital. His "winning 2016 trades included a bet on US inflation, Yen rates, Eurozone stress and volatility in the Chinese yuan,"according to Forbes. Previously, he was an options and fixed income trader at Deutsche Bank Securities. He graduated from Harvard majoring in physics.

Click here for the Full Forbes 30 Under 30 list.

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The financials sector led the stock market to new highs after President-elect Donald Trump won the election, on optimism that fewer regulations and higher interest rates would benefit banks. 

Goldman Sachs' gain in the month after the election made up one-third of the points that the Dow Jones Industrial Average increased by. 

But Wall Street's so-called smart money — hedge funds and other large money managers — are pulling out of the sector as Trump prepares to take office in 10 days.

"UBS' proprietary flow data indicates that both hedge funds and managed funds especially have recently become sellers of financials even as "retail" flow, especially into ETF products, remains positive," said Julian Emanuel, a US equity and derivatives strategist, in a note January 9.

"In light of financials' recent outperformance, we ask whether such returns indicate the presence of "Long Legs" to the rally, or is the action more like a "Last Hurrah"? The move higher since the election coupled with high earnings expectations leave financials vulnerable to a near-term pullback," Emanuel said. 

According to FactSet, the financials sector is expected to report year-over-year earnings growth of 13.8%, the second highest of all eleven S&P 500 sectors. JP Morgan, Bank of America and Wells Fargo will report fourth-quarter earnings on Friday, kicking off the peak reporting season for the sector.  

Beyond financials, some other strategists have cautioned about a near-term retreat from the sharp post-election move.

Jeff Gundlach, the founder of DoubleLine Funds, cautioned clients in December about a sell-off around inauguration day. He cited a pattern in the S&P 500 since 1952: stocks tend to rise after the election, but drop in the weeks after inauguration as the reality of the new president's task ahead sets in.  

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DAVOS, Switzerland — SkyBridge Capital cofounder Anthony Scaramucci said that he has sold the firm days before he is expected to join President-elect Donald Trump's incoming administration.

"I sold my firm today," he said at the World Economic Forum before correcting himself because of the six-hour time difference with New York.

"Well, almost sold," he said. "By noon."

SkyBridge is a fund of hedge funds, meaning it invests in other funds. It was founded in 2005 by Scaramucci and has about $12 billion in assets under management.

Trump last week named Scaramucci as an assistant to the president. Scaramucci served as an adviser to Trump during his campaign and had said earlier this month that he had received bids for SkyBridge.

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RON Transatlantic, the investment firm led by George Hornig, and HNA Capital, a part of the Chinese conglomerate HNA, are taking a majority stake in SkyBridge Capital, the investment firm founded by Anthony Scaramucci, an adviser to President-elect Donald Trump.

Scaramucci announced earlier Tuesday at the World Economic Forum that he was about to sell the firm, but he didn't name the buyer.

Hornig is the former chief operating officer at Credit Suisse Asset Management and PineBridge Investments. He was also a key fundraiser for outgoing President Barack Obama.

HNA Capital is a part of HNA Group, a Chinese conglomerate with over $90 billion in assets.

SkyBridge is a fund of hedge funds, meaning it invests in other hedge funds. It was founded in 2005 by Scaramucci and has about $12 billion in assets under management, catering to rich dentists and doctors who wouldn't otherwise be able to invest in hedge funds.

SkyBridge has lower investment minimums than direct hedge funds.

The sale comes at a tough time for the fund-of-hedge-funds industry, which has been criticized for fees that are often higher than the costs for direct hedge funds. Aurora Investment Management and Carlyle Group's DGAM shut down their operations last year.

The first half of 2016 saw the biggest outflows of assets from the fund-of-hedge-funds industry in seven years, according to the InvestHedge Billion Dollar Club. SkyBridge's assets fell by $1.1 billion over that period, to $11.7 billion, according to the ranking.

Trump last week named Scaramucci as an assistant to the president. Scaramucci served as an adviser to Trump during his campaign and had said earlier this month that he had received bids for SkyBridge.

Here's the statement:

"New York, NY (January 17, 2017) — SkyBridge Capital ('SkyBridge'), a leading global alternative investment firm, announced today that it has signed a definitive purchase agreement with RON Transatlantic EG ('RON Transatlantic') and HNA Capital (US) Holding ('HNA Capital US') for a majority stake in the firm. Financial terms of the transaction were not disclosed.

"SkyBridge's investment offerings include commingled funds of hedge funds products, customized separate account portfolios, hedge fund advisory services and a long-only mutual fund. SkyBridge managed or advised approximately $12 billion in assets as of November 30, 2016. SkyBridge has an exceptional retail distribution platform which brings its alternative and other asset management products to the mass affluent investor channel. The firm also hosts the SALT Conference, one of the world's leading thought leadership and investment forums that convenes global leaders across business, finance and public policy to discuss economic trends, geopolitical events and investment strategies.

"SkyBridge will continue to be led by its current senior management team and its full investment team will remain intact. SkyBridge founder, Anthony Scaramucci, will step down from his role as co-managing partner and will no longer be affiliated with SkyBridge or SALT, effective immediately.

"The SALT Conference will be spun out as a standalone entity. This year's SALT Conference, scheduled to be held May 16-19, 2017, in Las Vegas, will continue as planned.

"'It has been an honor and privilege to help build SkyBridge and work alongside some of the most talented individuals in the asset management industry who day in and day out demonstrate an unrelenting passion and commitment to helping our clients fulfill their long-term financial goals,' said Anthony Scaramucci. 'While I am moving on to a new chapter in my career, I am truly excited about what the future holds for SkyBridge and the opportunities that RON Transatlantic and HNA Capital US will bring to serving the firm's clients. SkyBridge and SALT are in great hands and will continue to thrive.'

"George Hornig, CEO of RON Transatlantic Financial Holdings, and former chief operating officer of Credit Suisse Asset Management and PineBridge Investments, will be joining the board of SkyBridge to work with its senior management on initiatives to grow SkyBridge's product offerings and distribution platforms. 'We are very excited for the opportunity to continue to expand the business that Anthony and his team have created and built,' said Hornig. 'Now, together with the world-class resources and networks of HNA and Transatlantic, we feel the "sky" is the limit for how far we can take SkyBridge.'

'"SkyBridge is a unique and innovative investment platform with a powerful brand that is well positioned to provide retail investors and their financial advisors with one-stop access to sophisticated alternative investment products,' said Guang Yang, CEO of HNA Capital US. 'Our investment in SkyBridge is an important step in HNA Capital's strategy to build a global asset management business. We look forward to working with the world-class management team of SkyBridge and our partners at RON Transatlantic to accelerate SkyBridge's long-term growth and development.'

"The transaction is expected to close in the second quarter of 2017."

About RON Transatlantic

"RON Transatlantic is a diversified holding company with interests in the financial services, logistics, energy and brewing/beer sectors."

About HNA Capital US

"HNA Capital US is the New York-based subsidiary of HNA Capital, the financial services unit of HNA Group, a Fortune Global 500 company focused on tourism, logistics and financial services. A full service financial solutions provider, HNA Capital includes a diverse set of global businesses in equipment leasing, insurance, investment banking, securities and credit services. HNA Group is a global company with over $90 billion of assets, $30 billion in annual revenues and an international workforce of nearly 200,000 employees, primarily across North America, Europe and Asia. For more information, please visit www.hnagroup.com."

About SkyBridge Capital

"SkyBridge Capital is a global alternative investment firm with approximately $12 billion in assets under management or advisement as of November 30, 2016. Addressing every type of market participant, SkyBridge's investment offerings include commingled funds of hedge funds products, customized separate account portfolios, hedge fund advisory services and a long-only mutual fund. The firm is headquartered in New York and has offices in Palm Beach Gardens, London and Seoul."

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The Securities and Exchange Commission has fined 10 investment firms for violating pay-to-play rules.

Bill Ackman's Pershing Square Capital Management is among them and has agreed to pay $75,000 over a $500 political donation, the SEC said on Tuesday.

Here's what happened, according to the SEC: In 2013, an employee at Pershing Square made a $500 campaign contribution to a candidate for governor of Massachusetts. Such a donation was not allowed because that candidate, if elected, had the ability to influence the selection of investment funds for the state's pension plan, PRIM.

Pension plans often invest in hedge funds and other investment funds, and PRIM had been an investor in Pershing Square at the time.

After the employee made the donation, the person asked to get the money back and did, according to the SEC. The donation was $350 in excess of the limit, Pershing Square noted in a statement.

"Pershing Square has determined that agreeing to this settlement is in the best interest of the firm," the company said, adding that it was unaware of the contribution at the time it was made.

After learning of the $500 donation, Pershing Square filed an exemption application with the SEC last year, the firm said.

The employee in question is Paul Hilal, who was an analyst at the time, according to a Reuters report from last year about the exemption application. Hilal left Pershing Square earlier last year to start his own hedge fund. He declined to comment for this article.

At the time, Pershing Square called the donation "an unintended violation," Reuters reported.

The other nine firms that the SEC fined include Adams Capital Management, Aisling Capital, and FFL Partners, and they are paying $35,000 to $100,000 each, the SEC said. None of them, including Pershing Square, have admitted or denied liability.

Here's the full SEC statement:

Washington D.C., Jan. 17, 2017 —

The Securities and Exchange Commission today announced that 10 investment advisory firms have agreed to pay penalties ranging from $35,000 to $100,000 to settle charges that they violated the SEC’s investment adviser pay-to-play rule by receiving compensation from public pension funds within two years after campaign contributions made by the firms’ associates.

According to the SEC’s orders, investment advisers are subject to a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence. The SEC’s orders find that these 10 firms violated the two-year timeout by accepting fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates with the potential to wield influence over those pension funds.

“The two-year timeout is intended to discourage pay-to-play practices in the investment of public money, including public pension funds,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit. “Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates.”

Without admitting or denying the findings, the 10 firms consented to the SEC’s orders finding they violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-5. The firms are censured and must pay the following monetary penalties:

• Adams Capital Management– $45,000
• Aisling Capital– $70,456
• Alta Communications– $35,000
• Commonwealth Venture Management Corporation– $75,000
• Cypress Advisors– $35,000
• FFL Partners– $75,000
• Lime Rock Management– $75,000
• NGN Capital– $100,000
• Pershing Square Capital Management– $75,000
• The Banc Funds Company– $75,000

The SEC’s investigations were coordinated by Louis A. Randazzo, who conducted them along with Kevin B. Currid, Brian Fagel, Natalie G. Garner, William T. Salzmann, and Monique Winkler of the Public Finance Abuse Unit and Kelly Gibson and Benjamin D. Schireson of the Philadelphia Regional Office.

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BOSTON (Reuters) - One of President-elect Donald Trump's top liaisons to Wall Street's business elite launched a mutual fund three years ago for mom-and-pop investors that lags most of its peers.

Hedge fund impresario Anthony Scaramucci, 53, has secured a top White House job as an adviser and public liaison to government agencies and businesses. He said on Tuesday he would sell his stake in SkyBridge Capital after growing the investment firm to more than $12 billion in assets in little more than a decade.

Known affectionately as the "Mooch" in the financial industry, Scaramucci joins former Goldman Sachs mortgage bond trader Steve Mnuchin and distressed investor Wilbur Ross as they are picked a Trump cabinet members and pause their pursuit of private wealth for government service.

SkyBridge's $480 million SkyBridge Dividend Value Fund has lagged 80 percent of its peers over the past year, with its A-class shares posting an 18.83 percent total return, according to Lipper Inc, a unit of Thomson Reuters. It ranks 433rd out of 519 funds.

Peer funds, on average, have done much better with a 1-year total return of 23.94 percent.

The fund, which pays investment management fees to SkyBridge, also is more expensive than peer funds. Its net expense ratio of 1 percent of net assets compares to a median ratio of 0.78 percent for the group, according to Morningstar Inc.

At SkyBridge, Scaramucci proved to be one of the best hedge fund industry salesmen, getting wealthy clients into the hottest funds as they clamored for the services of prominent managers such as John Paulson.

Scaramucci, who is attending the World Economic Forum in Davos, Switzerland, and SkyBridge were not available for comment.

As hedge fund returns began to lag and investors began complaining about hefty fees some years ago, Scaramucci capitalized on the investor frenzy for higher yields amid historically low interest rates by launching the SkyBridge Dividend Value Fund in April 2014.

With a $100 minimum initial investment for individual retirement accounts, the fund courted regular people, compared to some of the SkyBridge hedge funds that required minimums between $25,000 and $25 million for direct investors.

A Harvard Law School graduate, Scaramucci has frequently said one of his best skills was knowing when to get out of the way and letting other people do their jobs.

Brendan Voege has managed the dividend value fund since its inception under the supervision of SkyBridge Chief Investment Officer Raymond Nolte.

(Additional reporting by Ross Kerber in Boston; Editing by Richard Chang)

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A hot new hedge fund says the tech industry is up for a wave of deals worth billions of dollars — and it is betting big on companies that could benefit.

Margate Capital, a New York fund launched last year by former Paulson & Co. partner Samantha Greenberg, lays out the thesis in its fourth-quarter investor letter, a copy of which was obtained by Business Insider.

"We believe we are in the early innings of a substantial wave of consolidation in the technology industry, specifically within semiconductor and software verticals," Greenberg wrote. "We jokingly say that each month we read about a 'new hundred billion dollars' raised to pursue technology assets."

Here are three examples, as per the letter:

"(1) the recently announced $100Bn Softbank Vision Fund, backed by Softbank and Saudi Arabia’s Public Investment Fund; (2) a November Wall Street Journal article noting that technology-focused private equity firms have raised $100Bn from 2015 to 2016 (on top of $50Bn in 2014) to pursue technology deals; and (3) China’s announcement that it is dedicating $100Bn to purchase and invest in semiconductor assets."

Margate, which manages about $200 million, is "particularly bullish on software consolidation as the universe of software buyers continues to expand," the letter added, noting the emergence of "a new category of software company acquirers"— industrial conglomerates.

Here's Greenberg:

"This is illustrated by two marquee transactions in Q4: Siemens' acquisition of Mentor Graphics for $4.5Bn and Koch Industries' $2.5Bn investment in Infor (at >$10Bn valuation). We similarly expect General Electric to pursue software acquisitions, in furtherance of its GE Digital business strategy and to achieve its stated target of growing its revenue base from $6Bn to $15Bn."

In line with its investment thesis on tech, Margate is investing in Cornerstone OnDemand, which has received takeout offers. "With CSOD’s current stock price 20% below where it traded in September and its fundamentals poised to accelerate, we continue to be excited about the position," the letter said.

Margate's strategy launched August 1 and returned 5% net of fees through the end of 2016 compared with 4% for the S&P 500, according to the investor letter.

Greenberg is one of very few women managing their own hedge fund. As a partner at Paulson & Co., she headed the group that invests in the media/cable/satellite and consumer sector.

Last year Greenberg pitched a bet on the Walt Disney Company at the Robin Hood Investors Conference in New York.

Her latest letter adds to the thesis, describing the company as a "logical acquisition target" for Apple. "Apple has talked about the benefit Apple sees when it owns exclusive content, and owning Disney would reduce Apple’s exposure to product cycles, expanding AAPL's valuation multiple," Greenberg wrote. "It would also be an accretive use of Apple's cash and even more so if Apple's $200Bn of offshore cash can be repatriated favorably."

Disney, along with Cornerstone, is among the firm's top five long positions, according to the letter.

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