The Daily Alpha: Real Talk on Dan Loeb, Gary Brinson, Man Group and Insider Trading

May 25 2017 | 10:09am ET

Today we discuss Dan Loeb’s chemical peel-ing away of the Dow-DuPont deal, Gary Brinson’s beef with hedge funds, Google’s talent grab and another insider-trading scheme.

Hair of the Dog

Shot: Republican candidate 'body-slams' Guardian reporter in Montana

Chaser: “@Bencjacobs caught Gianforte investing $250,000 in Gazprom and Rosneft."

Quotes of the Day

“We believe this portfolio reshuffling will lead to a more appropriate fit between assets and will unlock significant value for shareholders.”

Teen Heart Throb… Activist manager Daniel Loeb’s shop Third Point is back at it.

His hedge fund is now taking aim at the merger between Dow Chemical and DuPont. 

Why have one mega company, Third Point asks, when you can have six companies?

Loeb’s shop said in a presentation that the deal could leave $20 billion on the table and that shareholders would benefit from a split of its units. Compelling.

Once again, it’s a great time to be working in activist defense.

“Interest rates are priced at a level where free markets would not price them.”

During the CFA Chicago Society luncheon yesterday, Gary Brinson went “Warren Buffett” on hedge fund investors. He called investors of hedge funds who think that active managers can regularly beat the market “delusional.”

But that’s just the red meat and why ValueWalk used the quote in the title.

His talk yesterday covered a wide array of topics, including the Fed’s balance sheet, why 3% growth isn’t likely, and the importance of patience as a value investor.

ValueWalk has a nice recap.

“Google has got more money than I have. I can’t compete with Google just on that.”

That’s Luke Ellis, CEO of Man Group PLC. The hedge fund executive doesn’t like the fact that Silicon Valley is coming in with their shiny gadgets and big briefcases of money and taking all the talent away from the financial services industry.

The Wall Street Journal points out that Alphabet and Facebook are winning the battle for quantitative talent. And it’s not going to slow down any time soon. 

“Just like trading on material nonpublic corporate information can be a federal crime, so can trading based on secret government information.”

Another day, another insider-trading scheme.

This time, a Washington consultant and four hedge fund employees were arrested for using government secrets to trade. Those accused allegedly used insight obtained from political intelligence analysis that told them “how changes in government reimbursement rates would affect publicly traded healthcare-related companies.”

Deerfield Management partner Theodore Huber, 55, has been charged with conspiracy, securities fraud and other counts and faces up to 25 years in prison.

His biography states that he “provides extensive research and analysis on individual companies operating in the health care industry.”

And by “extensive” his biographer means that Huber just contacted a guy named David Blaszczak who regularly bragged that he had access to insider information. In fact, the SEC has a copy of one of his e-mails in which he says that he knows people at Centers for Medicare and Medicaid Services, the government arm that spends about $1 trillion a year on medical services, drugs and care for millions of Americans.

They generated about $3.5 million on illegal trades.

Happy retirement…

Hedge Fund Reading List:

WSJ: This Old School Hedge Fund Is Going Quant

DealBook: Insider Trading Scheme Ensnares Hedge Fund

Information Management: Tudor's Jones said to back AI hedge funds CargoMetrics, Numerai

Institutional Investor: Alternative Asset Managers Have Poor Showing in Client Service Survey

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Garrett Baldwin is the voice of the The Daily Alpha, the features editor for Modern Trader magazine, and the author of The Man with The Big Red Balloon.  

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