Hedge funds expect to hold $310 billion in cryptocurrencies within 5 years – more than 7% of their assets

2021 02 12T200045Z_2_LYNXMPEH1B1K1_RTROPTP_4_CRYPTO CURRENCY ETF.JPG
Institutional interest in cryptocurrencies like bitcoin has jumped in 2020.

  • Hedge funds plan to ramp up their crypto holdings to more than 7% of assets by 2026, a survey showed.
  • That would equate to around $313 billion of cryptocurrency holdings, Intertrust Group said.
  • Hedge funds have been drawn to the volatility and huge price rises in cryptocurrencies such as bitcoin.
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Hedge fund bosses are planning to ramp up their holdings of cryptocurrencies, predicting that an average of 7.2% of their assets under management will be held in digital tokens by 2026, a survey has found.

That would equate to around $313 billion of cryptocurrency holdings, based on an estimate of the future size of the hedge fund industry, according to Intertrust Group, which carried out the research.

The finding is a sign that many potential institutional buyers are not being put off by bitcoin’s recent plunge, but see cryptocurrencies as a long-term strategy.

“Certain cryptocurrencies, such as bitcoin and ethereum, have delivered incredible – albeit volatile – performance in recent years,” said Jonathan White, global head of fund sales at Intertrust, a Netherlands-based professional services group.

“Inevitably, they have drawn growing interest from hedge funds as well as institutional and retail investors.”

Intertrust’s survey, first reported by the Financial Times, found that one in six respondents expect their funds to have more than 10% in cryptocurrencies in five years’ time. Just shy of all respondents said they expect to have at least some crypto investments by then.

The company polled 100 chief financial officers at hedge funds around the world, with average assets under management of $7.2 billion.

North American hedge funds were the most bullish on crypto, predicting that they would hold around 11% of their assets in digital tokens by 2026.

Given the secretive nature of the hedge fund industry, it’s unclear how much crypto exposure these institutions currently have. Yet most hedge funds that have moved into the space have only committed a small amount. For example, Brevan Howard plans to invest up to 1.5% of its main $5.6 billion fund in cryptocurrencies, it said in April.

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A hedge fund lost 10% in just a few days after a sudden spike in AMC stock derailed an options trade, new report says

A person rides his bicycle past the closed AMC movie theaters in Times Square on October 22, 2020.
  • Hedge fund Mudrick Capital lost 10% in just a few days amid a recent surge in AMC Entertainment’s stock price, the Wall Street Journal reported.
  • The fund announced earlier this month that it purchased millions of AMC shares and sold them at a profit shortly after.
  • The fund is still up 12% year-to-date, while shares of AMC are up more than 2,000%.
  • See more stories on Insider’s business page.

Hedge fund Mudrick Capital lost 10% in just a few days of trading as shares of meme stock AMC Entertainment spiked to record highs, the Wall Street Journal reported, citing people familiar with the matter.

The losses were driven by call options sold by firm founder Jason Mudrick, according to the WSJ. The position, intended to serve as a downside hedge, ended up backfiring as the stock surged too much, too fast.

The runaway share spike occurred on June 2, when AMC shares rose as much as 127%, to $72.62, well beyond the strike price of $40 for Mudrick’s options.

Just one day prior, Mudrick had disclosed a $230.5 million purchase of new AMC stock, then immediately sold those shares at a profit, according to a Bloomberg report. Despite the success of that leg of the overall AMC trade, Mudrick’s calls on the stock were still held short, leaving them vulnerable to the June 2 surge, the WSJ found.

Mudrick did close out all options and debt positions on June 2, albeit too late to avoid the squeeze. While the fund did earn a roughly 5% return on the debt, it ended up absorbing a net loss of 5.4% because of the options trade.

Though the fund took a hit amid the surge, it’s still up about 12% for the year, the Journal said. Meanwhile, AMC, the world’s largest movie theater chain, is up more than 2,000% year-to-date.

Retail traders have been dealing blows to short sellers and hedge funds this year as they’ve poured into stocks with high short interest rates in order to force a short squeeze. Earlier this year, investors on Reddit’s Wall Street Bets led a share price surge in GameStop, which caused short sellers to lose billions.

Amid the renewed meme-stock interest in recent weeks, short sellers have continued to lose money in retail-trader favorites like AMC and GameStop. The meme stock trade has scared off many short sellers from heavily betting against certain stocks.

Read more: Goldman Sachs says these 40 popular stocks can be used to play the meme trade as surging retail volumes create huge money-making opportunities for investors who know when to get out

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A Danish biotech stock surged 1,387% during US trading hours for no apparent reason amid chatter that it’s getting the meme-stock treatment

Science research in laboratory
Peter Dazeley/Getty Images

  • Orphazyme, a Copenhagen, Denmark-based biotech company, surged 1,387% in US trading Thursday.
  • The small biotech firm said it wasn’t aware of any material changes to the company.
  • Orphazyme was the eighth most-mentioned stock on Reddit’s Wall Street Bets Thursday.
  • See more stories on Insider’s business page.

Shares of a small Denmark biotechnology company surged as much as 1,387% in US trading hours Thursday as chatter about the stock jumped on Reddit’s Wall Street Bets.

Orphazyme, which is researching treatment for rare diseases, closed the day 302% higher in the US. In Denmark Friday it continued to rally as much as 88%, according to Bloomberg data.

On Thursday, the stock had about 450 mentions on the Wall Street Bets subreddit, making it the eighth-most mentioned company for the day, Quiver Quantitative data show. By comparison, AMC Entertainment had about 1,400 mentions and came in second.

Even so, the stock fell out of popularity on the subreddit Friday. On another thread, r/Stocks, several Redditors, confused at the stock move, questioned if it was a hedge-fund pump and dump. The company’s American Depository Shares fell more than 50% in early morning trading Friday.

In a statement about the share surge, the Copenhagen, Denmark-based company said it’s not aware of any material change in its programs, finances, or operations that would explain the stock move.

“Investors who purchase the company’s ADS or shares may lose a significant portion of their investments if the price of such securities subsequently declines,” the statement said.

Per Hansen, an investment economist at Nordnet in Copenhagen, told Bloomberg there’s not a logical explanation for the move, adding that GameStop and AMC aren’t the only culprits of “strange, sudden, and inexplicable” price developments.

Meme stocks have seen a surge of interest in recent weeks amid renewed interest in movie-theater chain AMC Entertainment. As of June 9, retail traders had poured $1.27 billion into meme stocks over two weeks, matching the GameStop-craze inflows from earlier this year.

This time around, the frenzy has expanded from meme-stock classics like GameStop, AMC, and BlackBerry, and extended to new and often lesser-known names, like e-commerce company ContextLogic, which was the most talked about stock Thursday, and iron-ore mining company Cleveland Cliffs.

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Wall Street brokers are reportedly limiting short bets against meme stocks by hedge funds

AMC Entertainment
  • Major Wall Street brokers are tightening rules over who can bet against meme stocks that are popular with retail traders, according to Bloomberg.
  • Goldman Sachs, Bank of America, Citigroup, and Jefferies Financial are among the firms that have adjusted risk controls.
  • Jefferies Prime Brokerage will no longer offer custody on naked options in AMC Entertainment, GameStop, and MicroVision, the report said.
  • See more stories on Insider’s business page.

Some of Wall Street’s largest brokers are quietly tightening rules on who can bet against meme stocks popular among retail traders in an effort to protect themselves against the fallout from sharp price surges and falls, according to a Bloomberg News report.

Firms that have adjusted risk controls at their prime-brokerage operations include Goldman Sachs, Bank of America, Citigroup, and Jefferies Financial Group, the Friday report said, citing people familiar with discussions about internal policy decisions.

With the adjustments, some hedge funds and other institutional investors now face higher collateral requirements or are limited from shorting certain stocks.

Jefferies Prime Brokerage will no longer offer custody on naked options in AMC Entertainment, GameStop, and MicroVision, the firm told clients in a memo seen by Bloomberg News. Naked options allow investors to short a stock without owning the underlying securities. Jefferies will not permit short sales of those securities and other stocks may be added to its list.

The changes come during a new wave of rallies among so-called meme stocks including AMC GameStop as retail investors on social media sites such as Reddit’s Wall Streets Bets forum band together to force short squeezes on hedge funds that betting shares of the companies will fall. AMC has been the key focus of the latest rally, similar to GameStop’s role during a trending frenzy in January.

It’s not unusual for banks to make risk-control adjustments as market conditions change, the report noted.

A number of brokerages have been looking over their risk controls after some large prime brokers in March were forced to liquidate at a discount the multibillion-dollar portfolio of Bill Hwang’s Archegos Capital Management. The family office collapsed after making wrong-way bets on media and technology companies. Bank of America and Citigroup were not hurt by the Archegos matter, Bloomberg said.

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Billionaire investor Bill Ackman told a story about his song-writing grandfather that won over Universal Music’s bosses

bill ackman
Bill Ackman.

  • Bill Ackman’s SPAC is close to buying 10% of Universal Music Group for $4 billion.
  • Ackman told a story about his grandfather, a songwriter, to win over UMG’s bosses.
  • UMG executives gifted Ackman two records and the sheet music for his grandfather’s hit song.
  • See more stories on Insider’s business page.

Bill Ackman’s special-purpose acquisition company (SPAC) is close to buying 10% of Universal Music Group for $4 billion. The billionaire investor might have his grandfather’s musical talents to thank if he manages to seal the deal.

The Pershing Square chief began his first meeting with UMG executives by regaling them with a story about Herman Ackman, The Wall Street Journal reported, citing people involved in the transaction.

Ackman’s grandfather wrote a song called “Put Your Arms Where They Belong (For They Belong to Me)” in 1926, which he sold to music-publishing group Tin Pan Alley for $150. The ditty sold more than 750,000 copies, Ackman told the bosses of the world’s biggest music company, according to The Journal.

The UMG executives later discovered that their company owned the elder Ackman’s recording. They dug up two records of the song and the accompanying sheet music, mounted and framed them, and gifted them to Ackman, The Journal reported.

Read more: A 29-year-old crypto billionaire shares how investors can use Tesla or Apple stock as collateral to buy bitcoin or ether

Vivendi, UMG’s parent company, met with multiple private-equity firms and other investors interested in buying a piece of the division. Ackman’s clear passion for the music business – rooted in his grandfather’s legacy – along with his relationship with management and his vision for growing the company, helped him stand out from the crowd, The Journal said.

Ackman’s SPAC, Pershing Square Tontine Holdings, is the vehicle looking to acquire the UMG stake. PSTH, which joined the stock market last summer, would remain a public company and could have nearly $3 billion to pursue another deal, even if the UMG transaction is successful.

Pershing Square also hopes to launch a new take on SPACs called a SPARC, which won’t lock up investors’ capital while it searches for a deal, and won’t have the pressure to close a deal within two years. Ackman’s proposed SPARC would be armed with up to $11 billion to pursue a business combination.

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The power players of the booming litigation finance industry

Headshots of Ralph Sutton, Aviva Will, Brandon Baier, and Stuart Grant on a background of gavels and dollar bills
From left: Ralph Sutton, Aviva Will, Brandon Baer, and Stuart Grant.

  • Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation.
  • Heavy-hitting players include hedge funds like Fortress Investment Group and D.E. Shaw & Co.
  • Insider interviewed dozens of experts to find out the people and firms supercharging the industry.

Paying for someone else’s lawsuit used to be illegal. Now it’s a multibillion-dollar opportunity.

Today, litigation funders have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors. Westfleet estimates there are at least 46 litigation funders active in the US market.

Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.

Insider spoke with dozens of funders, lawyers, and finance professionals to find out who’s shaping the booming litigation finance industry.

Read the full list of power players here:

The bankers, brokers, and big money transforming litigation finance from a lawyer’s hustle to a multibillion-dollar asset class

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Meet the power players of the booming litigation finance industry

Headshots of Ralph Sutton, Aviva Will, Brandon Baier, and Stuart Grant on a background of gavels and dollar bills
From left: Ralph Sutton, Aviva Will, Brandon Baer, and Stuart Grant.

  • Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation.
  • Heavy-hitting players include hedge funds like Fortress Investment Group and D.E. Shaw & Co.
  • Insider interviewed dozens of experts to find out the people and firms supercharging the industry.

Paying for someone else’s lawsuit used to be illegal. Now it’s a multibillion-dollar opportunity.

Today, litigation funders have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors. Westfleet estimates there are at least 46 litigation funders active in the US market.

Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.

Insider spoke with dozens of funders, lawyers, and finance professionals to find out who’s shaping the booming litigation finance industry.

Read the full list of power players here:

The bankers, brokers, and big money transforming litigation finance from a lawyer’s hustle to a multibillion-dollar asset class

Read the original article on Business Insider

The bankers, brokers, and big money transforming litigation finance from a lawyer’s hustle to a multibillion-dollar asset class

Headshots of Ralph Sutton, Aviva Will, Brandon Baier, and Stuart Grant on a background of gavels and dollar bills
From left: Ralph Sutton, Aviva Will, Brandon Baer, and Stuart Grant.

  • Litigation finance is growing, with a reported $11 billion invested or ready to invest in lawsuits.
  • What was once a niche industry is now swarmed with consultants, bankers, and public companies.
  • We spoke to over 25 funders, lawyers, and finance professionals to learn who’s shaping the field.
  • See more stories on Insider’s business page.

Paying for someone else’s lawsuit used to be illegal. Now it’s a multibillion-dollar opportunity.

Commercial litigation funders make money by advancing money to businesses that lack the resources or the patience for a lawsuit. In return, they get a multiple of what they invested (often double or triple) or a return anchored to an interest rate. Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors.

The original litigation financiers in the US were often plaintiffs’ lawyers, whose contingency-fee model – “no fee unless we win” – is a form of self-funding. A simple slip and fall might net just a $10,000 fee, but complex and risky cases can be lucrative; the lawyers hired by states to sue tobacco companies in the 1990s made billions.

Today, litigation finance is much more specialized, even corporate. While funders still back large groups of little guys, like drivers who bought a dirty diesel from Volkswagen or shops that say Visa and Mastercard charged excessive fees, they also cut deals with big businesses, like supermarket chains that overpaid for broiler chickens and manufacturers that believe their trade secrets have been stolen.

“This asset class is growing and maturing and becoming an accepted part of the litigation industry,” said Bill Farrell, a managing director at Longford Capital, a private-litigation funder.

Westfleet Advisors, the source of the $11.3 billion estimate, has said there are at least 46 litigation funders active in the US market.

Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.

Commercial-litigation finance is fraught with risk. In many cases, the money is nonrecourse, meaning that if a case is unsuccessful, investors suffer a total loss. But many funders have made investments in portfolios of cases, in which a win against one adversary can offset a loss against another. And some companies specialize in making loans to law firms that are backed by guarantees, though such companies aren’t the focus of this article.

Since 2020, Insider has spoken with dozens of funders, lawyers, and finance professionals about the commercial-litigation finance industry, with a focus on the US and on investments in categories other than patent litigation. Below are some of the companies and individuals they singled out for their influence and savvy.

Billion-dollar behemoths

Aviva Will, co-chief operating officer of Burford Capital.
Aviva Will, co-chief operating officer of Burford Capital.

Burford Capital, which reported a $4.5 billion portfolio in its last annual report, is one of the top dogs in litigation finance. It pursues a mix of strategies, funding single cases and groups of cases while also cutting deals directly with corporations that might have large legal claims but lack the bandwidth to pursue them. Its co-chief operating officer Aviva Will is involved with underwriting major deals, with support from a large staff with expertise in insurance, IP, and other areas.

One of Burford’s biggest cases is the so-called Peterson case, which started as a claim against the Argentinian government that Burford paid €15 million ($18 million) to acquire. Its value has risen as the case has progressed, and the company sold 10% of the claim for $100 million in 2019. Burford has also been targeted by the short-seller Muddy Waters.

Omni Bridgeway, with locations around the globe, manages about AU$2.2 billion ($1.7 billion), according to its most recent annual report. With roots in Australia, it still has major cases there, like a firefighting-foam contamination case that settled for AU$213 million ($167 million) last year. But it also has dozens of employees in the US, including Jim Batson in New York and Matthew Harrison in San Francisco. Chief Investment Officer Allison Chock gets involved in big deals.

Eric Blinderman of Therium Capital Management.
Eric Blinderman of Therium Capital Management.

Therium Capital Management is another major funder, though unlike Burford and Omni, it isn’t publicly traded. It says it’s raised $1.1 billion, including a £325 million ($460 million) raise in 2019 from institutional investors and an unspecified sovereign wealth fund. While its work in the US is somewhat under wraps, it has worked on several major cases in Europe, including funding claims against Volkswagen in its 2015 emissions scandal.

Neil Purslow runs the group, and Eric Blindermann runs the Therium Inc. team in the US. He said the US investments run the gamut, from a recent $5 million investment in an antitrust lawsuit to a $10 million-plus investment in a portfolio of insurance cases brought by a major international law firm.

Ellora MacPherson of Harbour Litigation Funding.
Ellora MacPherson of Harbour Litigation Funding.

Harbour Litigation Funding is well known in its base in Europe, but it has been looking for opportunities in the US, which amounts for about 10% of its investment portfolio, according to Chief Investment Officer Ellora Macpherson. The company, which is privately held, says on its website that it has raised more than $1.5 billion and has financed litigation against Uber in Australia, arbitration against Italy’s government and numerous shareholder lawsuits around the world. Its US representative is Kory Parkhurst.

Longford Capital is another major player and has made headlines with an effort to team up with schools like the University of California, Santa Barbara to monetize the patents developed by its researchers. Longford has raised more than $1.1 billion, including $435 million earlier this year. A recent regulatory filing lists a Fund P with more than $119 million in gross assets whose existence hasn’t previously been reported. Bill Farrell, Tim Farrell and Michael Nicolas are its leaders.

Pure-play private funders

Stuart Grant of Bench Walk Advisors.
Stuart Grant of Bench Walk Advisors.

Bench Walk Advisors was cofounded in 2018 by Stuart Grant, a former lawyer at Skadden who also cofounded Grant & Eisenhofer, a top firm for shareholders litigation. Grant said in an interview with Reuters that he shifted focus to litigation finance after a few adverse court rulings because “I don’t like losing.” His litigation-funding shop claimed a 93% win rate as of the end of last year. It says it’s invested more than $300 million.

Brandon Baer of Contingency Capital
Brandon Baer of Contingency Capital.

Contingency Capital was launched in November by Brandon Baer, an experienced lender who co-led the legal-assets group at Fortress. While the firm is still new and not much about its activities are known, it’s minority-owned by TFG Asset Management, which manages $30.7 billion, and has coinvesting commitments from Fortress and an undisclosed fixed-income manager totaling $1.4 billion.

The team has recently grown with hires including Jeff Cohen from Southpaw Asset Management and Kacey Wolmer, who joined from FirstKey Mortgage.

From left to right, Adam Gill, Jamison Lynch and David Spiegel of litigation funder GLS Capital.
From left: Adam Gill, Jamison Lynch and David Spiegel of GLS Capital.

GLS Capital is a relatively new firm run by familiar faces. Adam Gill, Jamison Lynch, and David Spiegel, its three managing partners, got their start at Gerchen Keller Capital, which was sold to Burford for $160 million in 2016. Several people listed on the firm’s website have backgrounds in pharmaceuticals and life sciences, where disputes involving licenses, patents, and other intellectual-property matters are common.

“We review deals anywhere between $1 million and $50 million in size,” Spiegel said. “Our sweet spot is between $5 million and $10 million.”

Lake Whillans, founded by Lee Drucker and Boaz Weinstein, is also cited as a major player. Said by one observer to be “comfortable with more distressed, hairy situations,” the company raised $125 million in late 2017. At least one of its cases has been publicly disclosed: a $5 million stake in a case brought by Cel-Sci, a drug developer.

Eva Shang of Legalist.
Eva Shang of Legalist.

Legalist has funded commercial claims and mass-tort litigation. The company, run by the Harvard dropout Eva Shang, has emphasized its use of analytics to identify investment opportunities. Shang has said its investments average $500,000 apiece, smaller than those made by other funders.

LexShares, run by Jay Greenberg, has also emphasized a data-driven approach, using a program it calls the “Diamond Mine” to find investment opportunities in court filings. The company courts individual investors as well as institutions and announced last year that it was raising an additional $100 million to invest in cases.

Aaron Katz and Howie Shams of Parabellum Capital.
Aaron Katz and Howie Shams of Parabellum Capital.

Parabellum Capital is run by Howie Shams and Aaron Katz, two veterans of Credit Suisse’s legal-risk strategies and finance unit, one of the earliest involvements by a mainstream financial institution in the litigation-funding space. Its Form ADV lists more than $666 million in discretionary regulatory assets under management as of the end of 2020 and says its investments tend to range from $2 million to $15 million depending on whether it’s investing in a smaller single case or a larger portfolio. Parabellum is one of a subset of funders that also invests in patent litigation.

Ralph Sutton of Validity Finance.
Ralph Sutton of Validity Finance.

Validity Finance is led by Ralph Sutton, another alumni of Credit Suisse’s early venture. The firm, which was set up with $250 million from TowerBrook Capital Partners, said last year that it has deployed $125 million across a range of court cases and arbitrations and raised another $100 million.

Mainstream investors

David Gallagher and Sarah Johnson, the leaders of D.E. Shaw & Co.'s litigation finance unit.
David Gallagher and Sarah Johnson, the leaders of D.E. Shaw & Co.’s litigation finance unit.

D.E. Shaw’s litigation-funding team is led jointly by David Gallagher, an alumnus of one of Omni Bridgeway’s predecessor companies, and Sarah Johnson, who has spent 15 years in D.E. Shaw’s corporate credit unit. The team’s “sweet spot” is investments of $20 million to $50 million, according to the company, and it focuses on quick decisions and flexible terms.

The Fortress team is led by Jack Neumark, with Joe Dunn described by some people as his right-hand man. (The firm has also been involved in high-stakes patent disputes, but a different team led by Eran Zur handles those deals.) While Fortress has directly funded some high-stakes disputes and bought litigation claims, it’s also been known to extend credit to other litigation funders, including Vannin Capital.

Tenor Capital has $5.4 billion and has used some of that money to back several mining companies in their claims against foreign governments. Led since 2004 by Robin Shah, a JPMorgan alumnus, with Blair Wallace, formerly of Och Ziff, managing a portfolio of litigation, the firm has backed Crystallex, which is trying to seize Citgo in order to collect a $1.2 billion award against Venezuela; Eco Oro, which has sued Colombia; and Gabriel Resources, which seeks to hold Romania liable for scuttling its operations there.

The brokers and bankers

Westfleet Advisors and its founder, Charles Agee, are one of two names that regularly spring from the lips of lawyers and funders in the litigation-finance industry. He and his colleagues Gretchen Lowe and Barry Kamar connect claimants, lawyers, and investors. They also regularly conduct and publish surveys of the industry.

Andrew Langhoff is also regularly cited as a trusted source of perspective and opportunities by people in the industry. A former Big Law litigator who went on to hold roles at Burford and at Gerchen Keller, Langhoff now runs Red Bridges Advisors.

Stifel Financial made headlines in 2019 when it hired Justin Brass and Sarah Lieber from Jeffries. Brass, a former bankruptcy lawyer, and Lieber, who worked for an insurer after years at Jones Day, are both Burford alumni. While many commentators said a lack of standardization has made litigation-finance investments hard to flip, Stifel said Brass and Lieber have syndicated more than $1 billion in litigation investments since joining in 2019.

“If I’m playing checkers, they’re really playing three-dimensional chess,” one lawyer who’s worked with them said.

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Billionaire investor Bill Ackman hopes to close his mega SPAC deal in a couple of weeks – and continues to hedge against inflation and a market downturn

Bill Ackman, Ackman, William Ackman
Bill Ackman

  • Bill Ackman hopes to close his huge SPAC deal in the next couple of weeks.
  • The Pershing Square chief is hedging against inflation and a market correction.
  • Ackman switched Starbucks stock for Domino’s Pizza based on valuation and likely upside.
  • See more stories on Insider’s business page.

Billionaire investor Bill Ackman hopes to close his mega-SPAC deal in the next couple of weeks, continues to hedge against inflation and a potential market downturn, and swapped out Starbucks for Domino’s Pizza in search of higher returns, he said on an earnings call this week.

Ackman’s “blank-check” company, Pershing Square Tontine Holdings, floated last summer with the goal of spending about $5 billion for a minority stake in a private company and taking it public. The investor revealed earlier this month that he’s been working to buy a piece of an “iconic, phenomenal, great business” since early November, and was close to sealing the deal.

“We’ve done our homework, we like the business, we love the management team, and we are working to complete a transaction,” Ackman said this week. “Hopefully within a couple of weeks or so.”

If the deal falls through, Ackman and his team will turn their attention to a second target, he added.

Ackman, who made a $2.6 billion profit by hedging the pandemic last spring, also weighed in on growing inflation fears and the steps he’s taken to protect his portfolio. He pointed to multiple government-stimulus packages over the past year, and the prospect of pent-up demand being released and savings being spent as the economy reopens, as drivers of higher prices that could spur the Federal Reserve to hike interest rates. That represents a “risk for markets generally,” he said.

The uncertain backdrop prompted his fund, Pershing Square Capital Management, to spend $157 million on interest-rate “swaptions” between December and early February. The position’s value – which ballooned to almost $500 million by the end of March – is still up about 2.5 times, Ackman said.

The Pershing chief also elaborated on why his fund sold a 1% stake in Starbucks and snapped up more than 5% of Domino’s – a position valued at about $750 million as of March 31 and $860 million today. The move was driven by price and potential upside, he said.

“We’re always willing to trade an existing holding at a kind of full valuation for a business of similar quality at a much more attractive valuation,” Ackman said. “That was the thinking behind the switch.”

The investor and his team determined that Starbucks was likely to generate returns in the low double digits, while Domino’s promises long-term returns in the high teens or low 20s, he added.

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Hedge funds are poaching top volatility traders from Wall Street banks

hedge funds versus bankers in pandemic 4x3
From left to right: Millennium founder Izzy Englander, Citadel founder Ken Griffin, Balyasny founder Dmitry Balyasny, Citigroup CEO Jane Fraser, Goldman Sachs CEO David Solomon, and Bank of America CEO Brian Moynihan.

  • Buy-side trading firms have poached a slew of star derivatives traders from investment banks.
  • The defections, which follow blowout volatility trading hauls in 2020, leave some banks shorthanded.
  • Subscribe now to read the full story here.

The derivatives traders that thrived during 2020’s once-in-a-decade market shock are now some of the hottest commodities on the street.

But unlike recent years, where Wall Street banks snatched senior talent from each other, marquee hedge funds like Balyasny, Citadel, and Millennium are plundering the rosters at Bank of America, Citigroup, and Goldman Sachs as they deploy their massive hordes of capital and chase riches with expanding volatility strategies of their own.

“Usually it’s just sell-side musical chairs,” one veteran volatility trader told Insider. “This is making things more interesting as the buy-side is scooping up so many people,” leaving fewer senior traders at the banks.

Here’s a look at just some of the recent hires:

Subscribe now for the full rundown on which top traders have made moves and to get all the details from execs and recruiters on what’s driving the poaching frenzy

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