Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 8)

a well-designed Web site that proclaims “Moving Towards a Stronger CSX.” Not surprisingly, the Web site rips the company for its stated underperformance relative to its peers. It also underscores just how aggressive TCI is willing to be in arguing for its investment positions. A lthough such f lashy public disclosure is a new phenomenon in the hedge fund industry, the Web site demonstrates Hohn’s appreciation of regulatory risk: After Deutsche Börse’s bid for the LSE failed, TCI was the subject of an intense, six-month-long inquiry by German regulators seeking to determine whether the ﬁ rm had colluded with other mainstream investors. Their ﬁndings were inconclusive, but Hohn is clearly trying to protect himself from similar scrutiny in the U.S. over his attack on CSX. Both sides are now fully engaged. Shortly after the December 19 announcement that TCI is banding with fellow dissident shareholders, CSX issued a heated selfdefense. Although CEO Ward declined to speak to Scoreboard Hedge fund returns by strategy, sorted by investment process, asset class and geographic focus, through November 30, 2007. Monthly return Composite, equally weighted Composite, asset-weighted Process group Directional trading Systematic trading Discretionary trading Relative value Arbitrage Convertible arbitrage Fixed-income arbitrage Mortgage-backed arbitrage Merger arbitrage Statistical arbitrage Multiprocess Security selection Long bias No bias Variable bias Short bias Specialist credit Distressed securities Long-short credit Multiprocess group Multiprocess Event-driven Asset class indexes Equity Fixed income Diversiﬁed Currencies Geographic area Developed markets Europe North America Japan Developed markets, diversiﬁed Emerging markets Combined Asia-Paciﬁc Global markets * Annualized. –0.45 –0.01 –0.89 –0.83 –0.57 –0.74 –1.09 0.74 –2.21 –1.21 0.04 –3.00 –4.00 –1.02 –2.16 5.08 –1.55 –1.26 –2.04 –2.11 –1.78 –2.87 –2.71 –1.12 –0.67 –0.16 –1.74 –2.55 –2.07 –1.49 –0.71 –2.06 –3.08 –2.77 7.99 6.67 9.53 5.87 6.93 5.45 6.00 9.44 4.49 1.95 11.47 11.47 12.43 8.79 11.55 3.84 7.08 10.34 3.71 9.47 11.05 5.66 10.92 5.83 8.37 3.22 6.95 3.72 7.52 0.33 7.99 16.75 15.10 17.78 6.22 7.96 4.42 1.74 2.32 2.81 1.47 2.95 0.52 –0.25 4.75 3.05 2.96 2.32 4.28 5.37 1.61 1.94 0.93 1.69 2.24 0.34 2.77 1.24 5.25 3.71 2.69 –0.32 2.16 –0.32 5.70 5.83 2.79 4.47 9.13 7.68 10.79 7.06 8.06 6.82 7.14 10.47 5.66 3.13 13.17 13.48 14.72 9.92 13.85 4.76 8.66 12.11 5.06 11.45 12.97 7.74 12.77 7.11 9.77 5.17 8.33 6.18 8.64 1.31 9.25 19.67 17.38 20.46 7.74 5.95 9.70 6.27 5.94 5.56 6.23 7.36 7.07 5.33 9.65 12.48 14.03 9.30 12.45 0.48 9.83 13.62 6.53 10.59 11.02 9.68 11.64 7.83 8.68 4.38 8.59 10.02 8.82 6.64 7.56 16.59 14.06 15.46 5.32 7.32 3.96 1.92 2.08 3.59 1.64 1.23 3.28 2.34 2.33 5.90 7.30 3.34 5.60 7.80 3.04 3.66 2.84 4.17 3.93 5.18 5.21 2.11 4.79 4.67 4.11 4.70 4.16 6.44 4.77 6.75 6.00 6.05 Source: MSCI. –1.80% –1.53 YTD return 9.27% 9.75 3-month return 3.24% 3.65 12-month return 10.92% 11.71 3-year return* 10.04% 10.20 3-year std. dev.* 4.42% 4.19 Alpha, he released a statement, arguing that — contrary to TCI’s claims — the company’s management team has “consistently delivered outstanding ﬁnancial and operational performance.” In particular, he cited an increase of 120 percent in the value of CSX’s stock over the past three years, a sharp uptick in the quarterly dividends paid out during the same period and the company’s $3 billion share repurchase program. “The CSX board and management team are committed to acting in the best interests of all the company’s shareholders,” wrote Ward. Analysts are inclined to agree. Despite Hohn’s vehemence, Jason Seidl, an equity research analyst at Credit Suisse in New York who specializes in air freight and surface transportation companies, gives Ward high marks for burnishing the performance of the beleaguered railroad group. “Anyone who has held CSX’s stock over the past few years is probably quite happy with it,” he says. “We really have seen a turnaround in the results under Michael’s leadership, and Tony Ingram should probably be given some credit, too, as chief operating ofﬁcer. But it’s a concern to me now that management is taking so much time on the ﬁght with TCI because it could well detract from making further improvements.” — Loch Adamson Goldman Ambition I n striking testimony to Goldman, Sachs & Co.’s marketing might and the mystique of its traders, Goldman Sachs Asset Management has raised roughly $7 billion for Goldman Sachs Investment Partners, a new long-short equity hedge fund. The offering is the largest hedge fund launch ever, an impressive feat for a ﬁrm that suffered some of 2007’s biggest and highest-proﬁle hedge fund losses. Global Alpha, Goldman’s ﬂagship quantitative hedge fund that began last year with $10 billion under management, continues to bleed assets following a 39 percent loss in 2007. The ﬁ rm’s mathematical algorithms, which are designed to generate proﬁt by capturing price discrepancies between stocks, stopped working in the equity market fallout from the subprime crisis. Goldman had to bail out another quant product, its Global Equity Opportunities Fund, with a $2 billion capital infusion in August when the subprime crisis caused big losses for that portfolio — which has since recovered some ground. This time around, Goldman is relying on star traders from its fabled principal strategies group, which uses the ﬁrm’s capital to make investments. Goldman Sachs Investment Partners, which launched January 2, is run by Raanan Agus, the former head of the group, and Kenneth Eberts, the former head of U.S. investments. 8 • INSTITUTIONAL INVESTOR’S ALPHA • DECEMBER 2007/JANUARY 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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