Alternative thinking on management fees, Brexit reactions and Bill Ackman’s blues

June 28, 2016 11:41 AM

Alternative Thinking on Management Fees, Brexit Reactions, and Bill Ackman’s Blues

“…a Bermuda-based reinsurer whose investment portfolio is run by Loeb, is cutting its management fee to 1.5% per year from 2%...”

It continues…

That’s Barrons talking about a decision by activist investor Dan Loeb’s Third Point to reduce fees for one of its funds. The Third Point Reinsurance (TPRE) – a retail vehicle – has slashed its management costs by 25%. 

Management fees remain a critical topic for the industry. As Bloomberg explained, the company is on its way to its third-straight yearly decline. It’s also trading below its 2013 IPO level and continues to experience increased competition from other hedge funds in the insurance space. 

“We are entering a new regime of higher volatility where prices are vulnerable to sharp reversals and breakout of new trends.”

That’s Nigol Koulajian, founder and CIO of Quest Partners.

While trillions were shed from the global markets in the wake of the surprise Brexit win, it turns out that one group of traders made out with much bigger gains: The machines.

“It’s not clear why Ackman’s portfolio is doing worse than others in the wake of Brexit.”

Blame the culprit…

A dive into the portfolio of Bill Ackman, CEO of Pershing Square Capital Management, shows that the powerhouse Pershing Square Capital lost more than a half billion on paper in the two trading days since the Brexit. 

“Overall, Ackman appears to have lost just over $711 million since the Brexit vote, or a drop of 9% in the value of his portfolio,” Fortune writes.

It was tough sledding for Valeant Pharmaceuticals, Restaurant Brands, Canadian Pacific, and Mondelez. But they’re all showing some signs of life on Tuesday.

It’s certainly traffic-bait for Fortune Magazine, but it shows that Ackman’s struggles continue to accelerate. 

"It's not fine, we are heading towards a disaster."

Richard Branson, an English business magnate and the founder of Virgin Group, said that the British departure from the U.K. led him to end a large deal that would have produced 3,000 jobs. Meanwhile, Virgin has shed roughly one-third of its value, according to the billionaire. The worst damage can be found in its financial arm – Virgin Money – which has seen its stock fall by 41%. 

Branson was part of the Remain campaign and put a lot of money behind it. He is now pushing for a second vote on the matter… That’s not likely to happen any time soon.


"Well, I have to say… you’re not laughing now.”

Finally, Nigel Farage, leader of the UK Independence Party, takes his victory lap in Brussels this morning in a brutal takedown of the European Union and charges the EU of being “in denial” of its failings. 

The highlight comes around the four-minute mark when he calls for – to laughs – to a “grown up” approach to executing Article 50. From there, he says that virtually no one in the room “has ever done a proper job” in their lives, “or worked in business or worked in trade or ever created a job.” 

That was a pretty grown-up approach… Yeesh.

Farage then explains how mutually beneficial trade works… and demands a tariff-free agreement between the EU and UK – to which they bulk of the room laughs at him.

It’s very clear that the EU wants to punish the UK for leaving. Otherwise, they effectively allow Britain to walk away without any level of consequence. But they seem to be ignoring the consequences of their own action, as the problems cut both ways. Farage says that the lack of a deal will hurt the EU more than it will Britain – to which they all again laugh. 

This is candy for Brexit supporters as he predicts England is not the first country to leave.

If anyone is looking for a simple primer on European trade in a post-Brexit world, this has been the best example that we’ve seen. It’s from the Guardian, and offers a pretty easy guide.

That’s all for today.

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About the Author

Garrett Baldwin is the Managing Editor of the Alpha Pages and the Features Editor of Modern Trader. An author and Baltimore native, he earned a BS in journalism from the Medill School at Northwestern University, an MA in Economic Policy (Security Studies) from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University.