Institutional Investor's Alpha Magazine - November 2007 - (Page 10)

buying shares of Citi. In fact, Lampert didn’t reveal his stake until May 15 of this year, by which time he already owned more than 15 million Citi shares. According to published reports, Lampert has raised approximately $4 billion from investors since the start of the year — the likely source of the funding for his Citi stake. He may also have the ear of Citi’s new interim chairman; in the 1980s, Lampert worked for Rubin in the risk arbitrage department of Goldman, Sachs & Co. If Lampert does become actively involved in Citi, there are signs that his presence would be welcomed by investors. “It was a positive catalyst in May,” says Goldberg, referring to the stock’s 4 percent pop the day Lampert initially disclosed his stake. “He bought in the last two quarters. It will be interesting to see what he did in the upcoming quarterly report.” Goldberg believes it will take more than the news that Lampert has been buying shares to boost Cit’s stock price. He says the shares are being overshadowed by looming uncertainty about the bank’s long-term strategy. “It is hard to argue for a sustained rally until a clearer picture of its expected markdowns is available and new leadership is found and implemented,” Goldberg recently told clients in a note, adding that all of this could take months. Indeed, one prominent hedge fund manager says he won’t go near the stock until there is more clarity about Citi’s future. “It’s hard to figure out what’s going on there,” he says. “It’s too opaque.” The same could be said of Lampert’s actions surrounding Citi’s shares. — Stephen Taub Off the Beaten Path T he Milwaukee suburb of St. Francis, Wisconsin, population 8,662, has never been known as a center of industry. Until now the city’s most highprofile business has been Foamation — maker of the foam cheeseheads popular among Green Bay Packers and University of Wisconsin football fans. That could Stark Investments co-founder Michael Roth: Even lawyers can make money investing. change if Michael Roth and Brian Stark have their way. The two co-founded Stark Investments, a $13 billion multistrategy hedge fund firm known for its expertise in special situations and ﬁxed-income arbitrage. Though the majority of managers flock to hedge fund hot spots like London, Manhattan and Greenwich, Connecticut, Roth and Stark, who met when they were classmates at Harvard Law School, chose to move their ﬁrm to St. Francis. Set in a region with less competition, the new headquarters has helped the firm attract and retain the talent necessary to become a major player — Stark is No. 31 in this year’s Hedge Fund 100, Alpha’s annual ranking of the world’s biggest single-manager hedge fund ﬁrms. Stark, which employs 420 people, was also No. 4 on the Virginia-based Society for Human Resource Management’s list of the best midsize companies to work for in the U.S. “We wanted to raise our families here,” says Roth, who, like Stark and both of their wives, grew up in Wisconsin. “It was a very personal decision.” As a high school student in the village of Whiteﬁsh Bay, Stark became interested in investing when his father, an accountant, gave him Edward Thorp’s investment classic, Beat the Market: A Scientific Stock Market System, which details how to use quantitative methods to outperform the market. “Brian was fascinated by the idea that efficientmarket theory was all rubbish,” says Roth. When the pair met at law school, however, neither expected to pursue a career in ﬁnance. “The running joke is that we didn’t even bother to take any securities law,” says Roth. Following law school, both went on to practice — Stark in Denver and Roth in Washington, D.C. In 1983, while working as a lawyer, Stark published his own book on investing, Special Situation Investing: Hedging, Arbitrage and Liquidation, based in part on work he had done as an undergraduate at Brown University. In 1986, after dabbling part-time in investing, Stark sePhoto by Kevin J. Miyazaki/Redux for Alpha 10 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2007

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2007

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

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