Saturday, December 15, 2007

Tudor Investors Pull More Than $1 Billion From Raptor

A little red flag* went up when I first heard the name Raptor**.

From Bloomberg:

Tudor Investment Corp. clients pulled more than $1 billion from its Raptor hedge fund after manager James Pallotta lost 8.5 percent this year, mostly on U.S. equities, according to two of the firm's investors.

Raptor, which Pallotta runs from Boston, had about $8 billion in assets before the withdrawals. The fund dropped 3.1 percent in November.

Tudor's biggest fund, BVI, rose about 5.5 percent through November, about half the industry average. Paul Tudor Jones, who founded the Greenwich, Connecticut-based firm in 1980, considered reducing BVI's $10 billion in assets to help improve performance, according to an Oct. 25 client letter obtained by Bloomberg.

``There is an intense focus here on posting a better 2007 return than our current level,'' Jones wrote in the letter.

Jones, 53, had about $19 billion in assets before the recent redemptions. Raptor has posted an average annual return of 19.2 percent since opening in October 1993, almost double that of the Standard & Poor's 500 Index. BVI has increased 24.2 percent a year on average since 1986.

``It's a question of evaluating the validity of their stock-picking themes in this environment,'' said Mathieu Klein, chief executive officer of Paris-based investment adviser Darius Capital Partners, which isn't a Tudor client. ``This isn't necessarily a vicious circle, because if returns pick up, investors will stick with them.''...MORE

Hurricane flag image

** Enron and the Raptors

SPEs that Flourish in Loopholes

Many of Enron’s troubles can be traced to a number of special purposes entities (SPE), dubbed the Raptors, that Enron established to shield itself from mark-to-market losses in its growing equity investment business. When these investments went south, Enron’s attempts to shore the Raptors up with its own stock proved to be a temporary solution at best.

The presence of Enron’s CFO on the board of directors of the SPE that funded the Raptors, LJM2, probably ensured that the entire house of cards would eventually come down. The authors detail the byzantine structures of these SPEs and demonstrate how existing GAAP requirements, though somewhat ambiguous, should have led to different treatment....MORE

From the New York Society of Certified Public Accountants