The Morning Brief: More Losses for White Elm from Ocwen and Altisource

Shares of the mortgage loan servicer Ocwen Financial Corp. plummeted by 27 percent to close at $16 after the Georgia-based company agreed to a settlement with New York regulators that calls for the resignation of founder William Erbey. The company also agreed to pay a $100 million penalty and another $50 million as restitution to current and former customers whose properties were in foreclosure. Shares of Altisource Portfolio Solutions plummeted nearly 34 percent on Monday. That equalled two big losses for Matthew Iorio’s Greenwich, Connecticut-based White Elm Capital Partners fund. We noted in October that White Elm lost 3.2 percent or so in the third quarter and was down roughly 12 percent for the first three quarters of 2014, thanks in part to its positions in Ocwen and Altisource. The combined losses cost the fund more than 3 percentage points of performance, according to White Elm’s third-quarter investor letter, obtained by Alpha. In the letter, Tiger Grandcub Iorio, who at one time worked for Stephen Mandel Jr.’s Lone Pine Capital, told clients he still owned the two stocks and stressed that he still saw “significant upside.” At the end of the third quarter, Altisource was the fifth-largest holding. Earlier this year the New York State Department of Financial Services launched an investigation into the relationship between Ocwen and Luxembourg-based Altisource, one of a number of companies created by Erbey and spun off from Ocwen, and which does business with Ocwen. Benjamin Lawsky, the top banking regulator in New York State, claimed that the two companies are engaging in questionable transactions that present conflicts of interest.
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A group of hedge funds recently surveyed by Deutsche Bank reported they grew their hedge fund assets by 12 percent in the first three quarters of the year. The Hedge Fund Capital Group’s 3rd Hedge Fund Manager Asset Raising Survey includes information from 52 global hedge fund managers with $328 billion in hedge fund assets. Deutsche Bank says in its report that most of the asset growth came from new investors. Altogether, the 52 managers who participated in the survey received a combined $45 billion in gross hedge fund inflows during the nine-month period. Deutsche Bank notes that institutional investors accounted for 57 percent of the gross inflows, including 34 percent from pension funds. More than half — 56 percent — originated from U.S. investors.
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Shares of Legg Mason jumped about 2.7 percent after the asset manager agreed to allow New York-based activist hedge fund Trian Partners to increase its stake to 13 percent. On December 1, Trian co-founder Nelson Peltz resigned from Legg Mason’s board “to devote more time to other commitments, including service on current and future boards.” He had served as a director since October 2009 and was chairman of Legg Mason’s Nominating & Corporate Governance Committee.
Boston-based Adage Capital Management, founded by former Harvard University endowment money managers Phillip Gross and Robert Atchinson, disclosed it established an 18.84 percent stake in Advaxis, a clinical-stage biotechnology company. It is a passive investment, according to a regulatory filing.