Continue reading Managed Account Allocations to Surge in 2010

Managed Account Allocations to Surge in 2010 originally appeared on BloggingStocks on Wed, 10 Feb 2010 14:45:00 EST. Please see our terms for use of feeds.

About a year ago, when Blackstone (NYSE: BX) went public, investors were scrambling to get shares of the top-notch private equity firm.

Well, the IPO was certainly a mark of savvy timing (hey, isn't that what private equity firms are supposed to be good at?). But the stock price has steadily declined since, going from $38 to $15.25.

Yet, the fact remains that Blackstone continues to raise capital (a new $20 billion fund); has operations around the globe; has dealt with various market cycles since the mid 1980s; and has avoided problems such as subprime securities.

So, is this a time to buy the stock? According to a piece in the FinancialNews.com, it might be.

In fact, it looks like a variety of major pension funds, such as the Washington State Investment Board, are taking a look at the stock. They realize that there is still lots of money to be made from alternative investments. Keep in mind that sovereign wealth funds are also funneling their billions into the sector.

This is not to imply that there will be a quick turnaround in Blackstone's stock, but looking at the long term -- which is what pension funds do -- it seems that optimism is starting to bubble up.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Time to load up on Blackstone stock? originally appeared on BloggingStocks on Thu, 06 Mar 2008 11:19:00 EST. Please see our terms for use of feeds.

There was lots of trepidation on the eve of Fortress Investment Group (NYSE: FIG)'s Q3 earnings report yesterday. After all, Blackstone (NYSE: BX) disappointed the Street.

Well, there was some relief (it also helped that there was a big rally in equities). The company, which operates private equity and hedge funds, posted a net loss of $38 million, or $0.52 per share in Q3. Although, if you strip various elements -- such as certain tax and compensation -- the firm earned $111 million, or $0.19 per share (which is known as pretax distributable earnings).

It was a relief that Fortress indicated there was little exposure to the subprime mess. If anything, the firm sees opportunities in the sector.

In fact, Fortress has some big plans. The firm is in the process of raising funds, with assets of $10 billion to $15 billion. The initiatives will range from infrastructure, commodities, emerging markets and Asian real estate.

What's more, Fortress had a nice realization on its Crown Castle investment. The original investment came in 2002, which involved an initial $120 million stake. The total proceeds since then? A cool $1.7 billion.

Yes, it's a reminder that the private equity business can be very enticing indeed.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Fortress beats back the bears originally appeared on BloggingStocks on Wed, 14 Nov 2007 11:00:00 EST. Please see our terms for use of feeds.

The future of alternative investments: wine and art? originally appeared on BloggingStocks on Mon, 23 Jul 2007 08:45:00 EST. Please see our terms for use of feeds.

The Wall Street Journal is reporting on the development of the hedge fund clone concept being created by big Wall Street firms. These clones basically try to earn the returns of hedge funds without paying the normal 2/20 fee structure.

For those unfamiliar with it, 2/20 refers to an annual "management fee" of 2% and a performance ("incentive") fee of 20%. When compared to any index fund, and even mutual funds, these fees seem ridiculous. However, there are many funds in the hedge fund industry that do in fact justify these fees.

The goal of these funds is basically to mirror the hedge fund index, or a group of hedge funds pooled together to be more diversified than investing in a single hedge fund. While this strategy has its benefits in reducing volatility and the chance of a blow-up, it also has its downsides. According to my friend James Altucher, fund of funds manager and president of StockPickr.com:

"Hedge fund clones are fine because they are all mediocre (i.e., like the average hedge fund). The real reason to go into hedge funds is to find the next SAC."

Basically, the returns of the "clones" will not match the returns of the best and brightest hedge funds on the street, such as SAC, Moore, or Tudor.

While this seems like an interesting proposition, the minimum investments remain very high at this point so the concept doesn't really bring much to the table for investors who are not accredited. As the WSJ said, this seems like another investment for the yacht-club set.

Hedge fund clones: Who are they for? originally appeared on BloggingStocks on Sat, 21 Jul 2007 13:40:00 EST. Please see our terms for use of feeds.

Everything's big in Texas. Look at the state's Teacher Retirement System (TRS). In all, it has about $112 billion in assets.

Interestingly enough, the pension fund wants to devote about a third of its assets to alternatives, such as hedge funds and private equity funds. This is according to a story in the Wall Street Journal [a paid service].

Yes, when you take a look a the SEC filings of the Blackstone Group (NYSE: BX), Fortress (NYSE: FIG), and KKR, you will see that alternative investment can post strong returns.

Despite this, the TRS strategy is certainly gutsy. Keep in mind that alternative investments can be fairly illiquid. What if it gets tougher to do IPOs or get sound exits on these investments?

Or, what if there is a meltdown, as seen with the subprime hedge funds at Bear Stearns (NYSE: BSC)?

Even the pros can make big blunders. And it could be bad news for pensioners.

On the other hand, TRS's move is certainly good news for the private equity world. Simply put, there's likely to be many more assets under management -- and that means lots of juicy fees.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Teacher Retirement System doubles down on private equity originally appeared on BloggingStocks on Sun, 15 Jul 2007 11:10:00 EST. Please see our terms for use of feeds.

Tiger 21, the world's richest investment club, is cutting back on stocks. Comprised of 123 members with combined assets of $7 billion, the club is focused on investment education for high net-worth individuals (although one one might assume they already know a thing or two about money). The group sports an unusual portfolio:

• 30% stocks
• 28% real estate
• 15.6% fixed-income
• 8.8% private equity
• 9.6% alternative investments (e.g. hedge funds)
• 8% cash

While this may seem bizarre, the portfolio's construction is a result of the unique needs of rich investors, who rely on their investments for income. Very few are still working. It will be interesting to see whether smaller investors follow the lead of the wealthy in moving out of equities. If they do, the next few months could be a doozie for financial markets.

Big bucks investment club cuts back on stocks -- others to follow? originally appeared on BloggingStocks on Sat, 31 Mar 2007 15:10:00 EST. Please see our terms for use of feeds.