| Anthony Chiasson (photo credit: Peter Foley/Bloomberg) |
For Anthony Chiasson, there is apparently life after exoneration.
The co-founder of now-defunct Level Global Investors has quietly been running his own hedge fund for more than nine months, managing a small sum of money and enjoying modest success. One year ago Chiasson launched Aurmedis Global Investors, and in November the hedge fund firm debuted the Aurmedis Global Master Fund. At year-end he was managing about $27 million, according to a regulatory filing.
But clearly for Chiasson, a former SAC Capital Advisors portfolio manager, this is a big comedown from his heyday at Level Global, where was managing between $4 billion and $5 billion. That was before the feds raided the offices of Level Global and three other hedge fund firms amid the government’s wide-ranging insider trading probe.
In December 2012, Chiasson was convicted of one count of conspiracy to commit securities fraud and five counts of securities fraud. In May 2013 he was sentenced to six and a half years in prison, while former Diamondback Capital Management portfolio manager Todd Newman was sentenced to 54 months in prison. But in a stunning turn of events, a federal appeals court vacated Chiasson’s and Newman’s convictions in December 2014, ruling, in effect, that the jury was given improper instructions. The court asserted that Chiasson and Newman were unaware of the sources of the insider trading information and that it was not apparent that these sources revealed the sensitive information for personal gain.
Since then Chiasson has been maintaining a low profile, these days running Aurmedis, which has nine employees, including four analysts. It is a long-short equity hedge fund focused on the so-called TMT sector — technology, media, telecommunications — and consumer stocks. Altogether, the portfolio is structured around 20 core investment themes. The firm declined to comment for this story.
After losing money in its first two months, Aurmedis Global Master Fund fund posted a gain of about 5 percent in the first half of this year. As a result, in its first eight months of existence, it was up 2.3 percent, according to its June monthly report, obtained by Alpha.
The firm said it doubled assets under management in July, adding, “we are experiencing healthy traction as we continue to engage with the allocator community.”
It maintains a roughly 112 percent gross exposure and 23 percent net exposure. At the end of June, its five largest long positions were eBay, Microsoft Corp., Expedia, Xerox Corp., and Burlington Stores. However, the so-called FANG stocks — Facebook, Amazon.com, Netflix, and Google — accounted for just 5 percent of the portfolio.
“We have intentionally limited exposure to FANG and challenged the investment team to identify less crowded themes and ideas,” the June letter emphasizes.
The firm says it is “constructive” on technology, “cautious” on media, “balanced” on telecom, and “cautious” on select industry groups within consumer. It does not identify its short positions by name, saying only that the largest is a technology solutions provider, another is a chipmaker, two are domestic merchandise retailers, and one is a global entertainment operator.
In the first half of the year, the short book was profitable, kicking in more than 1 percent to the fund’s gross return thanks to profitable negative bets on consumer issues.
“Consumer exposure has been a consistently positive contributor on the short side year-to-date,” the firm states in its June letter. Short bets accounted for six of the fund’s top ten most profitable investments in June alone.
One of Aurmedis’s short themes is called “cord cutting.” One potential victim is the media industry. In the June report the firm discussed the Walt Disney Co., noting poor box office performance for two of its recent movies, and “added negative news at ESPN.” Sure enough, on Wednesday shares of Disney fell more than 5 percent after it reported disappointing earnings and announced plans to pull its movies from Netflix.
In the June report Aurmedis introduced two new short themes. It calls one of them “private label proliferation.” The view is that there are many forces adversely affecting consumer packaged goods companies that will create “significant business model challenges” as the threat of a loss in market share to private label goods escalates.
“As these companies’ valuations have benefited meaningfully from the growth of passive investing, we believe that multiples have expanded to levels which may be at risk,” the report adds. Of course, Aurmedis does not name names of short candidates.
The other new theme is called “auto cycle downturn.”
“We believe that many players across the auto ecosystem have been over earning (pulling forward demand) which will become increasingly apparent over the next several quarters,” the June letter states. “We also believe that the electrification of cars will result in the re-architecting of the supply chain in the medium terms.” Aurmedis also thinks future generations will be less likely to own vehicles in general.