| Phil Falcone |
One year ago
»» Phil Falcone and his Harbinger Capital Partners completed an all-cash $262.5 million acquisition of SkyTerra Communications in a bold, private-equity style bet that rankled some investors. Today, SkyTerra is called LightSquared and says it is on track to build a unique wholesale-only wireless communications network by linking satellites and ground antennas for near-ubiquitous high-speed coverage. In less than a year since launch, the company has raised more than $2 billion in financing and has signed agreements with Best Buy, Cellular South, Leap Wireless, Open Range and SI Wireless. LightSquared-enabled products are anticipated to be available later this year.But the wireless bet has not helped the fund so far. Harbinger’s assets fell by 11.25% during 2010, leaving it with $7.1 billion on January 1, according to AR’s Billion Dollar Club. Falcone’s flagship fund was down about 12% last year, and he also lost 19% in his side pocket fund, which contains illiquid assets, according to the recent AR Rich List. His assets under management have also shrunk from a peak of $26.5 billion.
»» Hedge funds successfully lobbied to avoid burdensome new regulations from Washington’s financial reform rulemaking.
As AR’s analysis noted, “several years of communication with lawmakers is paying dividends. Hedge funds have been largely shielded from proposals that single them out, and the industry has avoided the strong controls likely to be placed on banks.”
Specifics of the resulting Dodd-Frank law are still being decided. For example, the industry has fought the notion that any one hedge fund is systemically important per the government’s new oversight mandate; the details of derivatives oversight is still up for debate, recently including a proposal to exempt foreign exchange swaps and forwards from trading on exchanges; and despite a July target, the deadline for large firms to register with the SEC is unclear.
Five years ago
»» AR profiled Stan Druckenmiller and Duquesne Capital Management in a cover piece, The Anti-Institution. “Certainly, über-secretive Duquesne has become one of the last truly anti-institutional major hedge fund groups that once exemplified the industry. Duquesne is all about Stanley Druckenmiller, and, arguably, it would fold without him,” noted the story.
That prediction held up when Druckenmiller announced his retirement in August, ending one of the most successful runs in hedge fund history. “I have had to recognize that competing in the markets over such a long time frame imposes heavy personal costs,” Druckenmiller wrote in a one-page letter announcing his plans to close his firm, also citing the challenges of running a large fund. Thanks to a late-year surge, Druckenmiller was able to reverse a 5% loss through August and finish the year up about 4.5%, according to AR’s Rich List. In all, he never had a down year and generated a 30% annualized return over 30 years.
The closure of Duquesne spawned new funds, including Espalier Global Management and Point State Capital; Druckenmiller will reportedly continue to invest through a family office and turn his attention to philanthropy.
»» Sprott Asset Management benefited from its grim predictions that paper currencies are less dependable than gold.
Sprott’s pessimism isn’t much different today, nor is its performance. The Toronto firm’s Offshore Fund is up 2.68% through March after gaining 48.22% in 2010 and 19.98% in 2009, according to the AR fund database. Founder Eric Sprott is still a gold bug, predicting its continued rise and has most recently promoted silver alongside it.
