Fund managers turn gumshoe as forensic short-selling pays off - News and Current Events | futures io social day trading
futures io futures trading


Fund managers turn gumshoe as forensic short-selling pays off
Updated: Views / Replies:173 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Fund managers turn gumshoe as forensic short-selling pays off

  #1 (permalink)
Elite Member
Aurora, Il USA
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
 
kbit's Avatar
 
Posts: 5,872 since Nov 2010
Thanks: 3,301 given, 3,332 received

Fund managers turn gumshoe as forensic short-selling pays off

Fund managers are increasingly turning to investigative tactics, detailed accounting analysis and corporate sleuthing in a bid to uncover skeletons in company closets that can offer an investment edge in a low-yield world.

While billionaire investors such as Bill Ackman and David Einhorn have made such tactics famous by respectively betting against nutrition group Herbalife (HLF.N) - which denies Ackman's allegations it is a pyramid scheme - and Lehman Brothers in 2008, the broader industry is now adopting them.

Investors say the frustrating market environment - with interest rates at rock-bottom and stock markets holding near multi-year highs - and an impressive recent success rate from investigative hedge funds, which are on course to deliver their best returns in years, are pushing them to make deeper dives.

"The use of forensic accounting and investigative research techniques is noticeably increasing," said Bruce Harington, senior analyst at hedge-fund investor Stenham Asset Management, adding that investment funds were hiring former forensic accountants and investigative journalists.

These strategies offer a twist on traditional short-selling, which involves borrowing and selling a stock that is expected to fall before buying it back at a later date. If the wager was right, the price of the shares will be lower, generating profit.

What makes forensic short-selling different is that the wagers tend to be more aggressive - effectively betting that a company is worth next to nothing - and require more resources: Bill Ackman, for example, recently revealed he had spent $50 million on researching his $1 billion Herbalife bet.

But a Eurekahedge index tracking four global compliance-based hedge funds shows that the broader trend is paying off. It was up nearly 17 percent in the first six months of 2014, more than five times the average hedge fund and nearly three times the MSCI World index. The Eurekahedge index rose 13 percent in 2013 and 9 percent in 2012.

RED FLAGS

Forensic investors' tactics can involve anything from poring over company accounts to using private detectives to gather visual or physical evidence that might contradict public data.

Short-seller Glaucus Research began probing China Metal Recycling (0773.HK) in 2013 after discovering the firm's revenue per employee was 11 times more than that of other recyclers.

Other red flags included financial statements that did not fit with government or industry data, followed by the abrupt departure of the group's chief financial officer and the sale of shares by the firm's chairman.

After Glaucus publicly unveiled its research, Hong Kong's securities regulator accused China Metal of exaggerating its accounts and is now seeking to liquidate the company.

With investment banks cutting back on research coverage, hedge funds believe that there are more skeletons out there.

"There's less and less research being done by banks and brokers, and hedge funds have seen this trend as an opportunity to jump in and boost their investigative work," said Philippe Ferreira, head of research for alternative investments at Lyxor Asset Management.

These bets are not risk-free: by announcing market-sensitive news on stocks they trade, investors who decide to go public with their research are vulnerable to legal action.

London-listed IT outsourcing services provider Quindell (QPP.L), whose shares more than halved after Gotham City Research published a report in April questioning its revenue model and profit quality, said it had started legal action against Gotham.

Taiwan's market watchdog has also turned against short sellers, accusing Glaucus of "spreading rumors" about local recycling firm Asia Plastic (1337.TW).

A spokeswoman for Britain's Financial Conduct Authority said regulated companies can publish research as long as it is not false or misleading and they disclose any financial interest. The U.S. Securities and Exchange Commission declined to comment.

"If we accuse companies of malfeasance, we use publicly available information to argue for why the company is actually fraudulent or is overstating its earnings," said Sahm Adrangi, founder of forensic short-seller Kerrisdale Capital Management.

And in tough markets, the rewards have been trumping the risks.

Spanish Internet company Let's Gowex (GOW.MC) threatened Gotham with legal action for spreading "absolutely false" rumors at the beginning of July - but the bet paid off two weeks later when Let's Gowex filed for bankruptcy after admitting falsifying its accounts.

Fund managers turn gumshoe as forensic short-selling pays off | Reuters

Reply With Quote

Reply



futures io > > > > Fund managers turn gumshoe as forensic short-selling pays off

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Stop short selling, who has the powers to inforce this? tellytub Beginners and Introductions 11 April 25th, 2015 05:48 PM
Mutual Fund Managers are Fully Embracing this Rally Quick Summary News and Current Events 0 November 5th, 2013 01:30 AM
Do Bans on Short Selling Work? See for Yourself Victory Trader News and Current Events 0 August 10th, 2012 09:19 PM
Fund Managers More Bullish About Stocks: Survey Quick Summary News and Current Events 0 January 17th, 2012 05:50 PM
Why Success Is Much Harder Now for Hedge Fund Managers Quick Summary News and Current Events 1 August 19th, 2010 03:48 AM


All times are GMT -4. The time now is 05:12 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-11 in 0.08 seconds with 19 queries on phoenix via your IP 54.226.132.197