Legg Mason Hands Bill Miller Increased Responsibilities
It looks like we will have Bill Miller to kick around for another year. The famous manager, whose ten-year track record is nearly the worst in his style box, is getting a new gig handed to him, lending a hand to managers running a Legg Mason All-Cap strategy that has posted horrific numbers.
The product is sold, partially at least, through managed account platforms, which should spread Bill's expertise to new distribution channel's that were previously spared the pain of his handiwork.
Bill Miller, the Legg Mason Inc. money manager whose two funds have each lost more than half their value this year, will help run a third fund as the firm tries to reverse record outflows.
Miller will be added to the Legg Mason Partners All Cap Fund on Jan. 1, Mary Athridge, a spokeswoman for Baltimore-based Legg Mason, said in an interview today. David Nelson will also be added to the management team, led by Jay Leopold. Bloomberg
Miller's bad decisions have not been limited to leading his fundholders to slaughter. I would guess Miller played a role in hiring Brian Posner to run the Clearbridge unit Legg bought from Citigroup/Smith Barney several years ago. Miller was chummy with the washed up fund manager/homewrecker, and clearly did not know who he was getting in bed with.
Disaster du jour: Oppenheimer Funds
Oppenheimer Funds, the BuySide operation that is no relation to Meredith Whitney's employer, has been a revolving door over the years. And while money managers come and go, the clients continue to live in a world of pain.
CEO John Murphy would be finished If I called the shots, but since I refuse to put money with these clowns I don't have much say in the matter. Murphy has headed the shop since June 2001, a period that has witnessed erosion in the brand. His transformative deal, the acquisition of Tremont Capital Management, has not worked out so well, and they are having a bad week:
Tremont’s Rye Investment Management unit had $3.1 billion, virtually all of its assets, invested with Madoff, said the person, who declined to be identified because the information is private. Tremont had another $200 million invested through its fund of funds group, Tremont Capital Management.
Tremont, which manages a total of $5.8 billion, is the second hedge fund company to report that more than half its assets were invested with Madoff.... Bloomberg
Oppenheimer acquired Tremont in October 2001, and on Murphy's watch was able to accomplish little more than shovel money at Madoff. But that was yesterday's story, and today Murphy has another PR nightmare to deal with, given the implosion of mutual funds run by Oppenheimer's fixed income team:
Mustique and Mystique Ends at Fairfield Greenwich Group
Nepotism on Wall Street is nothing new, but some people know how to perfect the art.
Fund of funds were one of the last bastions of Lucky Sperm Clubs on Wall Street; but the days of paying lip service to due diligence while cashing in on fat fees is now over. These Emperors had pretty offices and creased khakis, but ultimately no clothes.
Brad Alford of Alpha Capital Management says it best:
“It’s mind-boggling that people like Tremont and Fairfield Greenwich had been doing this for so long,” said Brad Alford, who runs Alpha Capital Management LLC in Atlanta, which helps clients choose hedge funds. “It’s the job of these funds of funds to be doing due diligence. That’s why they get paid.”
Walter Noel employed three of his son-in-laws in crucial marketing roles at Fairfield Greenwich Group, which is probably not that shocking or appalling, although Fairfield Greenwich’s pathetic due diligence efforts were.
“We are shocked and appalled by the news,” said founding partner Jeffrey Tucker in a Dec. 12 statement. Tucker was an attorney in the enforcement division of the U.S. Securities and Exchange Commission before starting Fairfield Greenwich with Noel in 1983. Thomas Mulligan, a spokesman for Fairfield Greenwich, declined to comment.
Noel built a marketing machine that covered the globe. His son-in-law, Yanko Della Schiava, is based in Lugano, Switzerland, and is responsible for selling Fairfield Greenwich funds in Southern Europe, according to the firm’s Web site. Another son-in-law, Andres Piedrahita, is head of Fairfield Greenwich’s European and Latin American businesses and is based in London and Madrid. A third son-in-law, Philip Toub, markets the group’s funds in Brazil and the Middle East. Bloomberg
While the scandal will put an end to Madoff’s mystique, the Noel family will probably continue to gather in Mustique.
The island getaway could be a good place to hide from irate investors, although the Shopping Safari’s are probably a thing of the past.
Noel’s Mustique home is named Yemanja, after the goddess of the sea, and has separate children’s quarters with nanny suites.
Sweeping views of sea and mountain from every side of the house, decorated in shades of coral, perfect for outdoor living where African wooden furniture and comfortable sofas, big as beds, dot the vast outdoor living space where guests recline under a huge thatched palapa, more common in Mexico than Mustique, add to the fun, cooling the air all day, sheltering the guests at night. Infinity pools seem to merge with the cornflower blue sky.
I don’t know if the lawyers will take it away, but you can rent it for 7k a day.
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Fairfield Sent Madoff $7.3 Billion as Funds Took Fees
Bloomberg
Yemanja, Mustique
Rental Info
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The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
60 Minutes: Whitney Tilson’s Publicist Strikes Again
I have to had it to Wall Street’s Tres Amigos...the boys know how to market themselves.
Whitney Tilson was hardly the first talking head to warn about the dangers building in the housing market, and based on his performance (in this strategy - Tilson Focus Fund), has not capitalized on it.
But, along with Bill Ackman and David Einhorn, he continues to put himself front in center, stealing the spotlight tonight on CBS’s 60 Minutes.
Whitney seems to be a pretty stand up guy, but if he wants a little love from this site he will at least have to beat 50% of his peers. And after seeing him lay out his case, I came to a conclusion that is less bullish as Whitney.
He seems to be able to connect the dots, but not capitalize on his legwork.
Check out his contribution to 60 Minutes tonight, and see if you reach the same conclusions. Yes, stocks are on sale, but I am not sure most most investors will exhibit the patience of Whitney.
With the Alt-A and option ARM loans getting ready to reset, it is hard to get terribly constructive on this market. At least for a while.
And while Scott Pelley said that Tilson made a name for himself warning about the subprime storm, I would argue that James Melcher of Balestra Capital, the well known John Paulson or even Wayne Nef of Nef Value Research beat Whitney to the thesis, and are a bit less promotional to boot.
Enjoy the spotlight, Whitney. We could do worse than have you represent us, I suppose.
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Intervention Time For Hedgistan
The saga today with Madoff pretty much throws a cherry on 2008...it has been brutal.
Hedge fund of funds are proving to be the biggest losers from the events of the past few months. Yes, there are some that earn their keep, but the days of many khaki-wearing lemmings that populate the industry are over. Fairfield Greenwich epitomized the worst of the bunch; it is remarkable how many of these funds piggybacked each other into funds, assuming someone else's due diligence sufficed. They passed on many great up and comers, using excuses not to allocate money to them because of operational issues, etc.
If some of the feeder funds did not lose enough money with Madoff to put them out of business, the fact they had placed money with him might be enough to do them in. David Faber is reporting that even Sandra Manzke had money with Madoff; which is the last thing I would expect.
Many will be toast by this time next year, as the alternative industry goes "back to basics". Citadel is retrenching, and might soon resemble an old-style $10 billion long/short fund more than Goldman Sachs circa 2006. Other managers are pulling back as well, keeping it simple in a return to their roots:
