Term Sheet
Beware of that hedge fund in the window
May 23, 2013: 3:29 PM ET
When hedge fund managers advertise, performance dips.
FORTUNE -- Hedge funds soon will be allowed to advertise their wares to potential clients, thanks to a provision in last year's JOBS Act (which had no direct relation to actual jobs). As will private equity funds, venture capital funds and other alternative investment vehicles that heretofore were prohibited from general solicitation.
Former SEC Commissioner Mary Shapiro opposed the change, so she basically sat on it (apparently believing her personal opinion trumped the directive of federal legislation). New SEC Commissioner Mary Jo White has suggested that she'll move this and other JOBS Act provisions along shortly.
So in a few months expect the pages of your favorite financial rag and website to contain advertisements for investment opportunities that you probably can't afford (since you'll still need to be an "accredited investor" to actually participate). For the 1%, however, a word of warning: Future performance is likely to be worse than past performance.
That's the finding of a new academic paper that examined the results of mutual fund advertising by companies also manage hedge funds. These advertisements don't specifically mention the hedge funds -- that still would be illegal under current law -- but they do compel wealthy individuals to ring the parent organization, which then does a classic up-sell.
The researchers learned that such advertisements generally follow a lull of hedge fund inflows, and result in a monthly bump of 0.5%. Not too shabby, considering that they were technically advertising for something else.
At the same time, however, the researchers found that monthly hedge fund performance post-advertisement fell by 0.1%. There isn't a specific explanation for the post-advertising performance dip, except perhaps that performance is negatively correlated to inflows (something that venture capital and private equity firms often talk about).
To be sure, a 0.1% decrease is not the end of an investor's world -- particularly if we're talking about a fund that had strong performance to begin with. But it also means that when these opportunities become more widespread, investors should consider that they'll likely be paying full price for items that ultimately will be discounted.
Sign up for Dan's daily email newsletter on deals and deal-makers: GetTermSheet.com
-
The 4 hedge funders losing big in the Japan rout
There's one big winner, too.
FORTUNE -- The "Abe Trade" just hit a major bump.
Toward the end of last year, a number of large hedge funds began piling into Japan. Driving the bet was the country's new prime minister Shinzo Abe, who said he favored flooding Japan's markets with cash from its central bank in order to finally pull its economy out of its perpetual slump. And hedge funds, for all MORE
Stephen Gandel, senior editor - May 23, 2013 1:35 PM ETPosted in: dan loeb, Hedge Funds, japan, Kyle Bass, Louis Bacon, Paul Tudor Jones, Stan Druckenmiller -
Solar subsidies don't merit costly trade war with China
Who will win a solar trade war? Coal, gas, oil, and rival green energy sources.
By Kevin Allison and Christopher Swann, Reuters Breakingviews
FORTUNE -- A trade war is brewing over solar panels but the casus belli looks shaky. Western manufacturers probably exaggerate the impact of cheap Chinese kit on the industry's health. Panel profits need to rise, but punitive tariffs and possible Chinese retaliation may just make solar energy less competitive.
Europe's MORE
May 23, 2013 12:29 PM ET -
Why Andreessen Horowitz gave a $60 million Lyft
FORTUNE -- Ride-sharing service Lyft today is announcing $60 million in new venture capital funding led by Andreessen Horowitz. So I spent some time on the phone with Andreessen Horowitz partner Scott Weiss to learn why the firm is putting so much money into a company that faces so many challenges.
What follows is an edited transcript of our conversation:
FORTUNE: There is a lot of money going into this general space MORE
Dan Primack - May 23, 2013 12:02 PM ET -
Can KKR dance the Saks two-step?
Merging Saks with Neiman Marcus may make sense, but it won't be easy.
FORTUNE -- Kohlberg Kravis Roberts (KKR) reportedly is considering a massive luxury retail consolidation move: Buying both Saks Inc. (which just went on the block) and Neiman Marcus (being sold by a PE group that includes TPG, Warburg Pincus, Leonard Green and Credit Suisse) -- and then merging the two companies together.
To be sure, there are some good MORE
Dan Primack - May 23, 2013 10:58 AM ET -
M&A and IPOs
Pfizer Inc. (NYSE: PFE) said that it will split off its remaining 80% interest in its former animal health unit Zoetis Inc. (NYSE: ZTS), which completed a $2.2 billion IPO back in February. The split will be done via an exchange offer. www.zoetis.com
Adobe Systems (Nasdaq: ADBE) has acquired mobile app design agency Thumb Labs for an undisclosed amount. www.adobe.com
BTG PLC (LSE: BTG) has agreed to acquire the Targeted Therapies division of Nordion Inc. (TSX: NDN) for approximately US$200 million. www.btgplc.com Google (Nasdaq: GOOG) has acquired Makani Power, MORE
Dan Primack - May 23, 2013 10:11 AM ET -
Private equity deals
Apax Partners has agreed to acquire specialty apparel retailer Rue21 (Nasdaq: RUE) for approximately $1.1 billion, or $42 per share (23% premium to yesterday's closing price). Apax previously owned Rue21 before taking it public in 2009, and still retains nearly a 30% equity position. Its two directors on the Rue21 board recused themselves from board discussions and votes related to the deal. www.rue21
Del Monte Foods has acquired Natural Balance Pet Foods for an undisclosed amount. Del Monte shareholders MORE
Dan Primack - May 23, 2013 10:10 AM ETPosted in: Private Equity -
Venture capital deals
Interactions Corp., a Franklin, MA-based provider of conversational virtual assistant applications for customer service, has raised $40 million in new VC funding. SoftBank Capital led the round, and was joined by return backers Sigma Partners, Sigma Prime Ventures, RED LLC, Cross Atlantic Capital Partners, North Hill Ventures and Updata Partners. www.interactions.net
Skyhigh Networks, a Cupertino, Calif.-based provider of cloud visibility and control solutions, has raised $20 million in Series B funding. Sequoia Capital led the round, MORE
Dan Primack - May 23, 2013 10:08 AM ETPosted in: Venture Capital -
Pre-Marketing: Too big to jail?
* Brad Stone: Inside Google's secret lab
* Untested: Why does DoJ believe "too big to jail?"
* Irish finance minister: We will not be U.S. "whipping boy"
* Morning Call: Global shares stumble on Bernanke comments
* No ceremony: How Congress quietly undid its insider trading rules
* Duane Stanford: Herbalife's CEO fights back
* DoE joy: Tesla pays back loan early
* Be your own Tim Cook: How to dodge taxes like Apple
* An actual job: Helping hedge funders MORE
Dan Primack - May 23, 2013 7:03 AM ETPosted in: Pre-marketing -
6-step guide to dodging taxes just like Apple
Tax avoidance works beautifully -- and legally -- for Apple and other multinationals. Why not make it work for you?
FORTUNE -- It's faddish -- and fun -- these days to talk about the income taxes that Apple does or doesn't pay. Hey, as we learned this week from a Senate report and hearings, Apple's tax strategems are even slicker than its products are. Many of them involve the "intellectual property" MORE
Allan Sloan, senior editor-at-large - May 23, 2013 5:00 AM ET
