The Average Price Definition | What is the Average Price?

Average Price Definition

The Average Price Definition

The average price is the mean price obtained in the exchange of a stock through averaging.

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Petters Group Worldwide | Hedge Fund Fraud?

Petters Group Worldwide

Petters Group Worldwide Under Fire

Asset-based lending hedge fund firms are organizing to try to get their money back from a company executive who was tossed into jail for allegedly masterminding a $2 billion fraud.

Tom Petters, the founder and former head of Minneapolis-based Petters Group Worldwide, was sent to jail Friday to await a hearing on Tuesday, after the FBI raided his business and home last week. Petters was charged with taking investment dollars to back a venture where expensive retail items, like wide-screen TVs, were bought from wholesalers and sold to discount chains. The whole thing turned out to be a fake, according to the charges.

The FBI, working with a confidential informant, got one of Petters’ co-conspirators on tape saying that the fraud could amount to more than $2 billion.

In court papers asking the judge to deny bail for Petters, the U.S. Attorney’s office claimed that he was going to flee. Petters also encouraged someone who might be a potential witness against him to leave the country, the government charged.

A group of investors that had about $3 billion in loans to various Petters entities went into state court in Illinois Friday and had a receiver appointed to sort out the mess, according to a report in the Star Tribune. It remains to be seen, however, how the Illinois court can claim jurisdiction over Petters companies, which are based in Minnesota. Source.

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Hedge Fund RFP Announcement | Ohio Highway Patrol Retirement System

Hedgee Fund RFP

Hedge Fund RFP Opportunity

The Ohio Highway Patrol Retirement System has issued a request for proposals for funds of hedge funds to manage a $30 million mandate.

The $750 million plan is looking for a fund of funds shop with a well-diversified portfolio of hedge funds across sectors and strategies. The RFP specifies that, while underlying managers may employ modest leverage and engage in short-selling, the fund should not use leverage to magnify returns.

Interested firms must be a registered with the Securities and Exchange Commission, have at least $1 billion in assets under management and at least $500 million in the fund of funds product offered, and have been in business for at least five years. The deadline for the RFP, which can be accessed on the plan’s Web site, is Oct. 10. Source

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Hedge fund profits, challenges attract exceptional employees

Why Work at a Hedge Fund?

Why is Working a Hedge Fund So Desirable?

While recent market problems mean many in the financial sector will be out of work or taking home smaller bonuses, there’s still wealth waiting for those in hedge funds. That wealth attracts many entrepreneurs, workers and students to hedge fund employment. Why work for a hedge fund?

- Working at a hedge fund requires varied skills and abilities. Whether involved in designing a fund, it strategies or its sales, hedge fund work can be challenging and invigorating. Not only will you manage or oversee a portfolio, you’ll have to make sure you’re serving the interests of you clients while ensuring your corporate practices are tight, legal and profitable.

- Hedge funds can cater to your type of experience. Funds require people skilled in accounting, investment banking, economic analysis and business. There’s room for everyone.

- Unique corporate cultures. The smallest funds may be run by one or two busy traders; the largest by hundreds. Seek the one that’s best for you.

- A base salary will start around six figures.

- And the best is yet to come: the real money’s in the bonus, which can reach another six figures.

The downside? If your fund doesn’t earn, you’ll miss out on a large part of your wages. But that incentive is probably the ideal thing for someone skilled in business, dedicated to performance and eagerly seeking profit.

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By John Krudy

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Hedge Fund People | Masters of the Universe?

Hedge Fund People

Hedge Funds | Masters of the Universe?

Where are the Masters of the Universe now? As the financial tsunami rolls out across the world, crushing seemingly invincible institutions in its path and threatening the livelihoods of millions, the blame game has begun.

But there's a problem. The most obvious candidates for pillorying have disappeared. Lehman Brothers and Bear Stearns have gone up in smoke. Merrill Lynch has been consumed. Morgan Stanley and Goldman Sachs have been turned into high street banks, the kind with plastic pot plants in the corner and bowls of sweets to entice the kids. In short: how can you vent your spleen at a ghost? As Bill Clinton, out on the campaign trail for Barack Obama this week, summed up the conundrum: "The Wall Street you are mad at doesn't exist anymore. It vanished."

But there is one man who may have the answer to the riddle. Tom Wolfe is one of the shrewdest observers of the world of money. His novel, The Bonfire of the Vanities, first published in 1987, is a magnificent evocation of its era. Central character, Wall Street bond trader Sherman McCoy, personified the avariciousness and self-aggrandisement of the Reagan years. He dubbed himself a Master of the Universe, borrowing the branding from a toy he saw a child playing with. The name fitted: after all, McCoy had the power to make $50,000 in a single phone call, just like that. McCoy's self-description - alongside "greed is good", the motto of the fictitious trader Gordon Gekko from Oliver Stone's film of the same year, Wall Street - became the catchphrase of the decade.

Over the past two weeks Wolfe has been bombarded with questions: Where are the Masters of the Universe now? Who is left to take the blame? "The mood of the country is resentment," he says. "People want to gloat over the fate of the erstwhile Masters of the Universe. 'Those rascals! They did this to us! We must get them for this!'"

But Wolfe believes the revenge-seekers are looking in the wrong place. They are no longer to be found in the towering skyscrapers of Wall Street. They haven't worked for the moribund investment banks for years. If you want to find the modern Masters of the Universe you need to jump in a car, drive out of New York city, and head for the leafy suburbs of Greenwich, Connecticut.

Round Hill Road begins its snaking path into what they call the backcountry of Greenwich quite modestly, without a hint of the extravagance that lies ahead. The road passes quaint wooden cottages tucked into ancient oak woods, but as it rises so does the scale of the real estate. Lawns start to appear, perfectly groomed, behind ever taller granite walls. Wrought iron gates pop up, some bearing coats of arms and aspirational titles such as Dunnellen Hall. Farther along the road, gravel driveways make their entry, policed by security cameras and warnings to trespassers. By now the abodes have grown to the size of English manor houses. Gables, Doric columns, turrets and elaborate topiary abound. It is as if all the stately homes of Northumberland had been relocated, brick by brick, along this one road.

Round Hill Road is one of three billionaire’s rows that Wolfe has identified as being the new Centre of the Universe, with more Masters in each of its square miles than anywhere else in the world.

They are the hedge fund managers, or “hedgies,” as they are colloquially known, who run enormously lucrative private investment firms collectively handling $1.9tn of business. They are largely free of any regulation and deploy a range of financial wizardry to make their institutional and super-rich clients big returns on their money. Many used to work for the investment banks but were smart enough to get out five or six years ago and set up on their own.

Greenwich is the liver

And Greenwich, Connecticut, is their capital. To quote a recent New Yorker description: “If New York city is the heart of the marketplace, Greenwich is the liver, where toxins are processed and rich bits collect.” There are thought to be about 200 major hedge funds in the area, though that’s a guestimate, as the first rule of these operators is deepest secrecy. They share some of McCoy’s attributes. They take huge risks with other people’s money, though often hedge their bets — hence the name, partly to cover themselves but more often than not to double their profits. They are hugely wealthy, with annual incomes of $500m not unusual. Nor are they averse to enjoying the fruits of such spoils.

Take the home of Paul Tudor Jones, one of the first hedge fund managers to move his residence and his business, Tudor Investment, to Greenwich in the early 1990s. He built himself a vast pile on the waterfront. It sits on top of a mound and towers over the old yacht club next door, much to its members’ discomfort.

Then we take a spin past Steve Cohen’s house. The son of a dress manufacturer, he used to pore over baseball scores in the New York Post as a child, and used his lifelong love of figures to build a $16bn hedge fund, SAC Capital Advisors. In 1998 his family moved into a $15m, 30-room Greenwich mansion, then spent many more millions on renovations. Its grounds include an ice rink, a basketball court and the ubiquitous swimming pool, enclosed in a bubble.

Then there’s the home of Julius Gaudio, located at the end of a cul-de-sac. It seems to stretch on for ever, its layer upon layer of masonry giving it the look of a wedding cake. A suitable home, perhaps, for the man who once spent $780,000 on two items in a charity auction — a round of golf with Clinton and a pair of Manolo Blahniks for his wife.

More recently, a second intake of hedgies has rolled over Greenwich, causing a spate of house-building on such a gargantuan scale that it has left veteran Greenwich residents dumfounded. They call them McMansions, or, as Bernie Yudain, former editor of the local paper Greenwich Time prefers to call them, “bad manors.”

Being a dab hand at short selling does not necessarily mean you have good taste. Several of the properties we drove past can only be described as monstrosities; they had all the subtlety and lightness of touch of Gormenghast. Many owners appear to think that size is all. In recent months the town authorities have turned down permission for two new homes, one that was to be 10,000 sq. metres, the other 15,000 sq. metres.

“With each new wave of Wall Street types they demand bigger and bigger houses,” says my guide to the neighbourhood, Chris Fountain, a real estate agent who writes a wry blog deriding the excesses of the local housing market called For What It’s Worth. “It makes you wonder how many of the properties are going to turn into white elephants.”

It would be wrong to blame all of this on the hedgies. Some of the worst crimes against aesthetics have been committed by new Russian or media money. One extraordinary edifice, a pastiche of a French chateau with conical slate roofs spouting all over it like bristle, was designed for Judge Judy.

Wolfe sees an important difference between the modern Master of the Universes and the crude exhibitionism of Sherman McCoy. For a start, they are the smartest of the smart and he thinks McCoy would struggle to be a hedgie were he in the market today. Compared with the late 1980s, they are also relatively discreet about their wealth. Their homes may be the size of football stadiums, but they are at least largely hidden from view behind those high walls.

“You don’t have work in a huge glass silo like those off Wall Street to operate billion-dollar hedge funds, and there’s nothing higher than five or six storeys in Greenwich,” Wolfe says. “They have small staffs - 25 people in a huddle will do - and they dress down. One of them is known for going to meetings with investors bare-footed.”

The question now on everybody’s minds, in Greenwich and beyond, is whether these Masters of the Universe will be smart enough to ride out the crisis, or whether they will be sucked down by the collapse of their old employers, the investment banks. The answer is hard to come by. But they are certainly suffering, with 2008 their worst year in recent memory. They are recording losses - not spine-chilling ones like the banks but losses none the less - and they are being forced to make adjustments to keep their clients from bolting.

Roger Ibbotson, the chairman of the Connecticut-based hedge fund Zebra Capital and a professor at Yale School of Management, says returns are negative this year but most hedge funds’ losses are in single digits so far. “In some senses they are having a good year relative to the markets,” he says.

But these are troubled times, and change — to use an Obamaism — is in the air. Already the hedge funds have had emergency restrictions placed on them preventing them from short selling, or betting against declines, in the financial markets. Much heavier limitations are likely to follow from any new occupant of the White House. Steve Fraser, author of Wall Street: America’s Dream Palace, believes the days of largesse, which he considers America’s second Gilded Age, are coming to an end. “There’s such anger all across the country — an overwhelming sense that these people need to be reined back in. Regulation, which for decades has been a cuss word in American life, is now in good odour.”

Future looks tough

So the future looks relatively tough for the new Masters of the Universe — though there is a limit to the amount of sympathy that is likely to arouse. Consider Richard Fuld, who had the distinction, and the fabulous riches that went with it, of being the longest-running CEO on Wall Street. He received a $22m bonus last year. Then Lehman Brothers went belly up. Since that day last month he has rarely been seen. Where is he? Slumming it in his Greenwich mansion.

Wolfe isn’t shedding any tears. Most of the top players, he points out, are far too smart not to have already laid down their “nut” — weather-free investments that provide enough interest on the capital to ensure their Round Hill Road lifestyles can be sustained no matter what. Source

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Salida Capital Management Corporation | Hedge Fund Notes

Salida Capital

Salida Capital Corp | Hedge Fund Notes

The following piece on Salida Capital Management Corp. is being published as part of our daily effort to track hedge funds in the industry. To review other hedge fund research notes please see our Hedge Fund Tracker Tool.

Salida Capital Corp. on Thursday became the latest hedge fund to announce its money is in limbo at its erstwhile prime broker Lehman Bros. Toronto-based Salida Capital has $275 million at its account at the bankrupt Wall Street firm. Salida Capital launched in 2001 and has $830 million under management. In the past month, Amber Capital, Bay Harbor Management, Harbinger Capital, MKM Longboat, Oak Group, RAB Capital and Ramius Capital have said they have client money still at Lehman Bros. Source.

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Hedge Fund Straight Talk - Why Are They Called Hedge Funds?

Hedge Fund Straight Talk

Hedge Fund Straight Talk Question

Many people are starting to ask why hedge funds are still called hedge funds if they sometimes appear to be banks, private trading groups or private equity firms. I think the name will stick around but here's an article arguing that it should be done away with:

It is time to lay hedge funds to rest. Not the vehicles themselves, that is, but the name.

Hedge funds get blamed for all manner of ills, including the current crisis in financial markets. They are a convenient scapegoat – partly through their own determination to cloak their activities in secrecy and operate in a kind of nether world that few people outside select financial circles are privy to or understand.

They may have contributed to the crisis, although they undoubtedly did not cause it. And they were definitely playing the leverage game that has been a big part of the problem, making use of cheap credit to gear returns. But the real point is that the way hedge funds seek to make money is fast becoming the preferred investment approach for mainstream investors.

There has been talk of convergence between the hedge fund industry and traditional asset management for some time. Many traditional managers now run their own hedge funds or have loosened the constraints on mutual fund managers so they can use some of the same tools as hedge funds. Hedge fund managers, meanwhile, have made inroads into the institutional investor landscape and widened their range too.

But some industry practitioners argue there is still a fundamental difference of approach in terms of investment philosophy and risk management. Hedge fund managers are active managers of risk, while the traditional industry manages risk relative to a benchmark, leaving it fully exposed to boom and bust cycles. That is largely the difference between absolute return and relative return investment approaches. Read more...

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Wall Street Market | The New Wall Street

Wall Street Market

The New Wall Street | A Changing Market

Here is a short excerpt from an article by Andy Kessler, one of my favorite hedge fund managers turned authors:

Before the last of Wall Street gets sold off as day-old fish on Fulton Street or washed into the East River altogether it's worth asking, what is Wall Street these days anyway?

Thanks to Dick Grasso and CNBC, most of us think of Wall Street as balding men in ugly solid-colored suits yelling at each other and throwing litter on the floor of the New York Stock Exchange. Not even close. They might as well be holograms from Disneyland's Haunted Mansion, just a hangover of years gone by. Or maybe Wall Street is stockbrokers, calling you at dinnertime, trying to put you into a few shares of some hot IPO. Or sleek bankers, guys (mostly) in gray Armani suits, blue shirts with white collars, and Herm├Ęs ties, jetting off to London to close some important deal. Not anymore.

So what is it? From 40,000 feet, Wall Street is about access to capital. The stock market trades every weekday, and sometimes slowly, sometimes violently, picks the economy's winners and losers. Actually, it's not the market, it's you and me, our mutual funds and pension plans, the collective "we," that do the picking via our buying and selling. It's nice to be needed. You may not even realize it, but magically, the value of companies with great prospects goes up, meaning they can raise capital much more cheaply to hire smart programmers or build another solar-panel factory. The flip side is that the price of companies doing all the wrong things (think General Motors and
now Lehman Brothers) goes down, starving them of capital, a punishment for screwing up, until they disappear or do something to turn themselves around. The stock market, which is really you and me, does the dirty work of hiring and firing managers and green-lighting or killing projects. Pretty cool.

On the street level, of course, Wall Street is a lot nastier. After 20 years in the business, when I think of Wall Street, I think of alpha dogs generating revenue however they can: getting deals done, fighting for market share against all the other firms, and then at the end of the year, on the inside of their firms, unsheathing the political knives to carve up the ever growing bonus pool, and maybe also carve up each other. Wall Street is really just a compensation scheme. Firms generate sales, and employees get half the money. Yes, half. The rest, after expenses goes to shareholders. Sweet deal. Read more...

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Salida Capital | Hedge Fund Notes, Performance & News

Salida Capital

Salida Capital Hedge Fund Notes

The following piece on Salida Capital Managementl is being published as part of our daily effort to track hedge funds in the industry. To review other hedge fund research notes please see our Hedge Fund Tracker Tool.

Resource #1: Salida Capital Corp., a Toronto-based hedge-fund manager with assets of about C$900 million ($834 million), halted hedge fund redemptions on three of its funds after the bankruptcy of Lehman Brothers Holdings Inc.

Lehman acted as prime broker for Salida's C$157 million Global Opportunity Fund, the C$85 million Global Prospector Fund and the C$64 million Global Arbitrage Fund, Managing Director Courtenay Wolfe said in an interview.

Salida is one of dozens of investment managers worldwide whose Lehman prime-brokerage accounts were frozen when the New York-based company filed for protection from creditors on Sept. 15. Large securities firms such as Lehman typically offer prime brokerage services to hedge funds and professional investors that borrow stock and cash to invest.

``The Lehman issue is something we are navigating through,'' Wolfe said today in a telephone interview from Toronto. ``We are working very hard to get the securities back for our firm and our investors because we believe they are rightfully and legally ours.''

Canada's Globe and Mail newspaper reported the redemptions freeze earlier today.

Founded in 2001, Salida runs two Canadian hedge funds and six offshore funds domiciled in the Cayman Islands. The firm, which employs about 10 investment professionals, started marketing its C$25 million Global Macro Fund to Canadian investors yesterday as it waits for a resolution of the Lehman problem. Source.

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