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MONEY MANAGER MONITOR
FOR THE WEEK ENDED JUNE 8, 2001 ----------------------------------------------------------- THIS WEEK: ***NOTABLE CONTACT MOVEMENTS ***MERGERS & ACQUISITIONS ***NEWS ***MOORE CAPITAL: GROWING IN NEW DIRECTIONS ***MAVERICK INCREASES EQUITY ASSETS AGAIN ***OMEGA LOSES KEY MEMBERS ***ACTIVE FUNDS MOVE INTO ENERGY, TECHNOLOGY ***K CAPITAL SELLS OUT OF DIVERSIFIED SECTOR ***SECTOR COVERAGE: AAL CAPITAL MANAGEMENT CORPORATION ----------------------------------------------------------- NOTABLE CONTACT MOVEMENTS U.S.: *HOLLY D. DEEM has been named chief executive officer of Atlanta-based INVESCO Capital Management with responsibility for the development and implementation of business strategies. Prior to joining INVESCO, Deem was employed by Bank of America where she was managing director in the private investment unit of Banc of America Capital Management. She will officially join the firm on July 2, 2001. *DEREK S. DERMAN, CFA recently joined Pasadena, CA-based Provident Investment Counsel as a research analyst following small-cap companies. Previously, Derman was employed as a security analyst with Wedbush Morgan Securities, Inc. *MATT GABEL recently joined the New York office of Galleon Management as an analyst with the technology team covering the wireless sector on a global basis. Prior to joining Galleon, Gabel was employed by Digital Century Capital until mid March 2001. Gabel has also worked for Boston-based hedge fund Sirios Capital where he worked as a security analyst following restaurants, semiconductors and telecom and network equipment. *LAURA L. HUSKINS, CFA and ANNE PARRY recently joined the Boston office of Trillium Asset Management as equity analysts. Huskins was previously employed by Adams, Harkness and Hill as an equity analyst in the "Healthy Living" group, which covers specialty consumer stocks which address the consumers' growing awareness of the impact of nutrition, environment and lifestyle choices on their well-being. Parry was previously employed by Kinder, Lydenberg, Domini & Co. *SARAH KETTERER, managing director and leader of the international team at Merrill Lynch Investment Managers (formerly Hotchkis & Wiley), is reportedly leaving the firm to launch her own venture taking with her approximately 14 members of the firm. Joining her are two portfolio managers HARRY HARTFORD and JAMES DOYLE. While at Merrill Lynch, the team managed the Mercury HW International Value Fund. It is expected that JAMES MACMILLAN, portfolio manager with Merrill Lynch in London, will assume management of the fund. *WILLIAM MARTINDALE, formerly chief investment officer of West Conshohocken, PA-based Martindale Andres & Co., recently left the firm to start a new firm, Conestoga Capital Advisors. Joining Martindale in the new venture is former Martindale Andres' portfolio manager ROBERT MITCHELL. *KATHLEEN MAUL, formerly a vice president and analyst/generalist with New York-based Lepercq, de Neuflize & Co., recently left the firm. *MEERA MAYER, formerly a vice president and senior portfolio manager with Goldman Sachs Asset Management, recently left the firm. Prior to her departure from Goldman Sachs, Mayer co-managed the SunAmerica Series- Asset Allocation Portfolio. *JOHN MCNULTY, the head of Goldman Sachs' combined asset management and private wealth management business, announced that he would retire at the end of June 2001. Philip Murphy and Peter Kraus will replace McNulty. *JOHN MCPHERSON recently joined Boston-based Middleton & Company as a security analyst following healthcare, transportation, energy, telecom and retail. Previously, McPherson was employed as an analyst covering the basic materials and transportation industry at Evergreen Investment Management Co. *EDWARD MCMILLAN, director of client services and president of Bee & Associates, will retire on June 15, 2001. McMillan joined Denver, CO-based Bee & Associates in 1993 as a partner and became president after Bruce Bee's death in 1999. Adam Schor, CIO, will take over his client services responsibilities, while other duties will be handed over to the marketing department. *GERRI SOMMERS, formerly a security analyst following retail, hardlines & discounters, and Internet retailers with Alliance Capital Management, recently joined the New York office of SAC Capital Advisors as a security analyst. *KRISHEN SUD, a co-founder of New York hedge fund Galleon Management L.P., is reportedly leaving the firm to start his own health care hedge fund, Argus Partners. Additionally, Sud will take analysts ANGELI KOLHATKAR, MATTHEW BUTEN, JACQUELINE BOVA, ALEXANDRA FORBES, and KARIN HEHENBERGER with him. SAM NAVARRO will continue to run Galleon's health care investments in the interim. SELL-SIDE: *GREGORY E. BURNS joined J.P. Morgan Securities Inc. in April 2001 as a vice president and analyst following airfreight and logistics. Previously, Burns served as a director and analyst following business cyclicals and transportation at Lazard Freres & Co. *ANDREW HUANG recently joined CIBC World Markets as a senior equity analyst covering power electronics. Prior to joining CIBC, Huang was an associate analyst covering power electronics at Bear, Stearns & Co., Inc. *MARK LANDY, DDS joined Boston, MA-based Leerink Swann & Company in June 2001 as vice president- senior analyst following medical devices. Previously, Landy was employed by New Era Capital where he served as a principal and head of the company's healthcare division. *WILLIAM PIERSOL, previously an analyst covering technology with Sutro & Company, left the firm in April 2001. ----------------------------------------------------------- MERGERS & ACQUISITIONS *June 6, 2001- New York Life Insurance Co. agreed to acquire San Francisco-based McMorgan & Co., with $10.8 billion in equity assets according to the 13F filed for the quarter ended March 31, 2001. McMorgan will join New York Life's other investment management units, which include MacKay Shields and New York Life Investment Management (formerly Towneley Capital Management). *June 5, 2001- Royal Bank of Canada completed the acquisition of Rocky Mount, NC-based Centura Banks, Inc., parent company of Centura Investment Management with $732.0 million in equity assets as of March 31, 2001. Centura will now operate under the name RBC Centura. *June 5, 2001- FleetBoston Financial Corp. announced that it had agreed to buy Liberty Financial Cos.' asset management units for $900 million in cash. The deal is expected to close by the end of September. Liberty Financial Cos. investment management units include Liberty Wanger Asset Management, Colonial Management Associates, Crabbe Huson Group, Liberty Asset Management Co., Newport Pacific Management, Progress Investment Management Co. and Stein Roe & Farnham. ---------------------------------------------------------------------------- ---------- NEWS *Royal Bank Investment Management Inc. changed its name to RBC Global Investment Management Inc. as a result of the combination of all the personal and private clients investment management businesses of Royal Bank Financial Group under one platform. *State Street Global Alliance LLC, a jointly owned subsidiary of State Street Global Advisors (SSgA) and the Dutch pension fund ABP that focuses on forming partnerships with specialty asset management firms, announced that it has formed SSARIS Advisors, LLC (SSARIS). SSARIS, which will be based in Stamford, CT, has acquired all of the assets of RXR Capital Management. SSARIS will manage several proprietary strategies which focus on hedged equity, hedged fixed income and global macro strategies of the G7 economies. RXR'S CIO Mark Rosenberg will continue in the same capacity at SSARIS. Rosenberg is joined by chief operating officer and senior portfolio manager James F. Tomeo, and chief financial officer Peter A. Hinrichs. Both Tomeo and Hinrichs held the same roles at RXR. --------------------------------------------------------- MOORE CAPITAL: GROWING IN NEW DIRECTIONS After the retirement of hedge fund gurus George Soros and Julian Robertson and the more recent announcement of the split of Bowman Capital Management and Pequot Capital Management, Moore has quickly moved to the head of this alternative investment class, although not without its own problems. Recently the firm has been marred by a series of high profile departures that began last year with the departure of equity strategist Stanley Shopkorn. In the past few months, however, the number of departures has increased significantly as some of the firm's employees have taken financial backing from their former employer and splintered off to form their own hedge funds. In a situation quite similar to that of Pequot's Arthur Samberg and Dan Benton, (who is taking some of Pequot's assets to launch Andor Capital Management), Moore Capital has experienced its own split. In March 2001, Moore Capital's technology and telecom group, led by TONY ANAGNOSTAKIS, left the firm to start the Agnos Group. With seed money provided by Moore Capital, Agnos Group maintains a close relationship with Moore. The firm's team is composed of Managing Director PETER SWARTZ, Senior Analysts RYAN SPAYDE and ALEX KOTLYAR, and DANIEL MACCARRONE and ROBERT YUEN. Around the same time, JOANNE SOJA, a health care fund manager with Moore Capital, left the firm to launch Maximus Capital with the help of MSDW's Teresa McRoberts and Galleon's Prem Lachman. The Financial Times reported that Maximus, a health care hedge fund, is backed by Moore Capital. With the formation of the Agnos Group and Maximus Capital, it appears as if Moore has expanded into a fund of funds approach, while maintaining its own hedge funds and private equity ventures. In addition to expanding other areas of its business, the firm is also expanding into new locations. Moore Capital Management recently hired Thomas Weisel Asset Management's former chief investment officer Mark Waterhouse to lead the firm's new Boston office. Prior to joining Thomas Weisel in January 2000, Waterhouse was employed with Wellington Management Company, LLP where he managed the Hartford Small Company Fund, Inc. Additionally, the firm hired former Putnam Investment Management analyst Brian Pinsker to head the firm's healthcare group in Boston. For the quarter ended March 31, 2001, Moore Capital Management's 13F filing reported $473.0 million in equity assets invested in a portfolio of 70 companies. This was a dramatic decline from the previous quarter in which the firm reported $1.4 billion in equity assets invested in a portfolio of 164 companies. While some may consider ever shrinking 13F filings as evidence of a firm in trouble, in fact, just the opposite may be true. When reviewing the 13F filings of many hedge funds, it is important to remember that these filings are not always an accurate representation of a firm's true equity assets as a result of the variety of investing techniques available to hedge funds. For example, when a firm shorts a stock, essentially borrowing shares that it will attempt to replace at a lower price thus making money off of the difference, this will often appear on a 13F as a purchase when in fact they are just replacing the shares. Moore Capital's portfolio was invested across a wide variety of industries, including financials (21.0%), basic materials (17.6%), diversified (13.7%), consumer staples (12.4%), and communication services (9.3%). Technology, which was the second most widely held sector at the end of 2000 with 20.1%, dropped to only 2.4% in the first quarter of 2001, likely a result of the formation of the Agnos Group. The majority of the selling in Moore's portfolio was felt in the firm's financials, consumer cyclicals, technology and health care holdings. New positions for the quarter included Voicestream Wireless Corp. [VSTR] with 449,909 shares valued at $41.6 million; Burlington Resources Inc. [BR] with 550,000 shares valued at $24.6 million; Ambac Financial Group Inc. [ABK] with 200,600 shares valued at $12.7 million; Calpine Corp. [CPN] with 197,900 shares valued at $10.9 million; and, Exelon Corp. [EXC] with 150,000 shares valued at $9.8 million. Top holdings for the first quarter of 2001 included: Honeywell International Inc. [HON] with 1,586,400 shares valued at $64.7 million; Quaker Oats Co. [OAT] with 505,800 shares valued at $49.1 million; Apex Silver Mines [SIL] with 5,734,266 shares valued at $45.6 million; Voicestream Wireless Corp. [VSTR] with 449,909 shares valued at $41.6 million; and, Burlington Resources Inc. [BR] with 550,000 shares valued at $24.6 million. ---------------------------------------------------------------------------- ---------------------------- MAVERICK INCREASES EQUITY ASSETS AGAIN For the first quarter ended March 31, 2001, Dallas-based hedge fund Maverick Capital Ltd. reported ownership of 94 companies valued at $7.2 billion, an increase from the previous quarter when the firm reported ownership of 109 companies valued at $6.5 billion. The firm has distinguished itself from many other high-flying hedge funds by continuing to consecutively increase its equity assets under management quarter to quarter. Top macro-sector weightings this quarter included consumer cyclicals (20.6%), consumer staples (14.0%) and health care (13.2%). Maverick was more bearish on financials and health care, as those sectors declined as a percentage of the firm's portfolio despite an increasing asset base. Technology came in at 12.4% of the portfolio. One year ago, technology comprised approximately 18.7%. Maverick, unlike many of its peers, was able to stick to its GARP-based investment approach. Indeed, for more than the past year, the firm's portfolio P/E has remained below that of the S&P 500. LEE AINSLIE's Maverick Capital considers itself an "opportunistic" investor, picking up quality companies when prices are considered favorable. The firm identifies potential candidates for the portfolio using bottom-up fundamental analysis. Maverick looks closely at financial statements for a financial turnaround and diversifies its portfolio across differing industrial categories and regions. Top five holdings included: Nextel Communications Inc. [NXTL] with 3,976,100 shares (valued at $290.3 million); Quaker Oats Co. [OAT] with 2,775,000 shares (valued at $269.3 million); Home Depot Inc. [HD] with 6,000,000 shares (valued at $258.6 million); Philip Morris Cos Inc. [MO] with 5,420,000 shares (valued at $257.2 million); and, AMR Corp. [AMR] with 6,387,200 shares (valued at $224.3 million). Top five new purchases included: Viacom Inc. - Class B [VIA B] with 4,327,100 shares (valued at $190.3 million); Best Buy Co. Inc. [BBY] with 3,513,900 shares (valued at $126.4 million); Tiffany & Co. [TIF] with 4,575,500 shares (valued at $124.7 million); Gap Inc. [GPS] with 4,536,600 shares (valued at $107.6 million); and, Aon Corp. [AOC] with 3,022,000 shares (valued at $107.3 million). -------------------------------------------------------- OMEGA LOSES KEY MEMBERS For the first quarter ended March 31, 2001, hedge fund Omega Advisors reported ownership of 88 companies valued at $1.8 billion, a decline from the previous quarter when the firm reported ownership of 86 companies valued at $2.1 billion. LEON COOPERMAN's New York-based hedge fund has recently suffered from the loss of several staff members. LAWRENCE ROBBINS, formerly a partner at the firm, and KEN CORNICK, formerly a security analyst, recently left to found hedge fund Glenview Capital Management. CHARLES LEEDS, also a former partner at Omega, also left to found New York-based Hermit Capital Management. Top sector weightings for the quarter included: consumer cyclicals (23.8%), financials (15.8%), utilities (11.0%), consumer staples (10.0%), and basic materials (9.6%). Nonetheless, the firm saw a decrease in its holdings in the capital goods, consumer cyclicals, and diversified sectors. The core value player also had a high turnover, averaging 115.0% for the year. Top five holdings for the quarter included: Galileo International Inc. [GLC] with 6,104,994 shares (valued at $133.7 million); Ryder System Inc. [R] with 5,322,600 shares (valued at $95.8 million); Providian Financial Corp. [PVN] with 1,931,220 shares (valued at $94.7 million); Tyco International Ltd. [TYC] with 1,640,521 shares (valued at 70.9 million); IMS Health Inc. [RX] with 2,657,700 shares (valued at $66.2 million). Top five new purchases included: Edison International [EIX] with 3,070,700 shares (valued at $38.8 million); Canadian Pacific Ltd. [CP] with 1,049,100 shares (valued at $39.5 million); Freddie Mac [FRE] with 526,000 shares (valued at $34.1 million); Conseco Inc. [CNC] with 1,838,900 shares (valued at $29.6 million); and, KPMG Consulting Inc. [KCIN] with 1,510,000 shares (valued at $19.6 million). ------------------------------------------------------- ACTIVE FUNDS MOVE INTO ENERGY, TECHNOLOGY While many hedge funds protect their principals by shorting stocks and utilizing a variety of derivatives, some hedge funds attempt to bolster their returns using active trading strategies. Whether the investment approach is merger arbitrage or classic long/short, the aggressive movement of assets may enable a hedge fund to garner solid returns in a historically volatile market. Nonetheless, the firms' portfolios often represent more recent market darlings than long-term investments. March Partners, L.L.C. For the first quarter ended March 31, 2001, New York-based hedge fund March Partners, L.L.C. reported ownership of 53 companies valued at $213.0 million, an increase from the previous quarter when the firm reported ownership of 30 companies valued at $137.1 million. Top sector weightings included consumer staples (19.2%), technology (16.3%), utilities (15.7%), communication services (11.0%), and energy (10.9%). March Partners moved into technology, consumer staples, and energy while backing away slightly from health care, utilities, and basic materials. While the firm increased its ownership of energy producers, recent market darlings, the firm moved away from utilities which have fallen out of favor in many cases as a result of California's energy woes. The firm concentrates on event driven investing, including equity restructurings, risk arbitrage and bankruptcies. With respect to equity restructurings, the firm looks for companies that are changing its assets, capital structure and/or business in some fundamental way. The firm's event driven portfolio seeks securities whose values are meaningfully affected by the occurrence of well-defined future events. Bottom-up, fundamental analysis focuses on each company's earnings, cash flow, relative valuations, financial strength, proprietary products and industry niche. Top five holdings for the quarter included: Honeywell International Inc. [HON] with 398,300 shares (valued at $16.3 million); El Paso Corp. [EPG] with 199,014 shares (valued at $13.0 million); Voicestream Wireless Corp. [VSTR] with 124,199 shares (valued at $11.5 million); Alza Corp. [AZA] with 265,000 shares (valued at $10.7 million); and, Citadel Communications Corp. [CITC] with 407,500 shares (valued at $10.1 million). Top five new purchases included the firm's purchases in El Paso Corp., Alza Corp., and Citadel Communications. Rounding out the top five were Tosco Corp. [TOS] with 225,500 shares (valued at $9.6 million), and AES Corp. [AES] with 185,151 shares (valued at $9.3 million). During the quarter, many new companies found their way into the firm's portfolio. Not surprisingly, the firm had an average annual turnover rate of 281.2%. Taconic Capital Advisors LLC For the first quarter ended March 31, 2001, New York-based hedge fund Taconic Capital Advisors LLC reported ownership of 117 companies valued at $505.7 million, an increase from the previous quarter when the firm reported ownership of 98 companies valued at $445.1 million. The firm concentrates primarily on merger arbitrage across all market-caps. Taconic moved into financials, energy, and technology while backing away from health care and diversified. Four of the firm's top five holdings were new purchases. The firm has a history of rapid portfolio turnover. For this most recent quarter, the firm had an annual portfolio turnover of 206.0%, similar to March Partners. Top sector holdings included financials (22.0%), technology (18.2%), energy (13.7%), consumer staples (10.3%), and utilities (8.8%). Top five holdings for the first quarter ended March 31, 2001 included: Encal Energy Ltd. [ECA] with 2,061,864 shares (valued at $15.4 million); Glaxo SmithKline Plc - ADR with 291,445 shares (valued at $15.2 million); Xcel Energy Inc. [XEL] with 497,027 shares (valued at $15.0 million); Washington Mutual Inc. [WM] with 342,487 shares (valued at $12.5 million); and, Ralston Purina Co. [RAL] with 391,520 shares (valued at $12.2 million). ----------------------------------------------------------- K CAPITAL SELLS OUT OF DIVERSIFIED SECTOR Boston-based hedge fund K Capital Partners, founded in 1999 by Abner Kurtin and Thomas Knott, both formerly with Cambridge, MA-based Baupost Group, L.L.C., manages several investment partnerships including K Capital II, L.P., K Capital I, L.P., and K Capital Offshore Master Fund, L.P. K Capital Partners is a value-driven firm that also involves itself with merger arbitrage. For value situations, the firm looks to identify a potential catalyst for a re-rating within their investment time horizon. Catalysts that the firm will look for include stock buy-backs, spin-offs, restructurings or new management. For the quarter ended March 31, 2001, the firm reported $285.6 million in equity assets invested in a portfolio of 26 companies. This was an increase from the previous quarter in which the firm reported $145.0 million in equity assets invested in a portfolio of 15 companies. In the fourth quarter of 2000, K Capital's portfolio was tilted in favor of large-cap companies, which composed 65.7% of the portfolio, with mid- and small-cap companies comprising the remainder with 8.2% and 26.1% respectively. In the first quarter of 2001, the portfolio was distributed more evenly over all markets capitalizations. Mid-cap companies garnered the lion's share of the portfolio with 45.1%, while large- and small-caps comprised 33.5% and 21.4% respectively. The most heavily weighted sectors included financials (27.0%), technology (17.8%), basic materials (10.7%), utilities (8.2%), and energy (6.7%). From the fourth quarter of 2000 through the first quarter of 2001, the firm sold out of its holdings in the diversified sector, which comprised 23.0% of the portfolio according to the 13F filed for the quarter ended December 31, 2000. Top holdings for the quarter ended March 31, 2001 included: KPMG Consulting Inc. [KCIN] with 2,961,400 shares valued at $38.5 million; Allmerica Financial Corp. [AFC] with 644,700 shares valued at $33.5 million; State Street Corp. [STT] with 515,800 shares valued at $24.1 million; Niagara Mohawk Holdings Inc. [NMK] with 1,380,400 shares valued at $23.3 million; and, Chemfirst Inc. [CEM] with 833,900 shares valued at $22.2 million. All of the top holdings, with the exception of Chemfirst, were new purchases for the firm. ------------------------------------------------------- SECTOR COVERAGE: AAL CAPITAL MANAGEMENT CORPORATION Appleton, WI-based AAL Capital Management Corporation, with approximately $7.5 billion in equity assets according to the 13F filed for the quarter ended March 31, 2001, is a wholly-owned subsidiary of Aid Association for Lutherans (AAL), a fraternal benefit society. The firm's investment approach utilizes a bottom-up process with a top-down overlay for diversification and reducing risk. Valuation models analyze multiples of many companies, emphasizing P/E and P/CF. The most favorable companies would then undergo fundamental analysis, taking into consideration industry position, market share, growth prospects, strategies to exploit prospects, management capability and track record. Current research responsibilities are as follows: *JOHN HINTZ: agricultural products, aluminum, chemicals- diversified and specialty, construction- cement & ag., containers- paper, gold & precious metals, iron/steel, metals mining, paper/forest products, and energy (oil & gas- drilling/equipment, E&P, refining, domestic/international integrated) *DAVID STREIT: aerospace & defense, containers- metal & glass, electrical equipment, engineering/construction, machinery- diversified, manufacturing- diversified and specialty, metal fabricators, office equipment/supplies, trucks & parts, waste management, banks (regional, major regional, and money center), consumer finance, financial (diversified), insurance- life/health, multi-line, P&C, insurance brokers, investment banking & brokerage, investment management, and S&Ls *JOHN KRAUSE: telecom- cellular/wireless, long distance, telephone, communications equipment, electronics- instruments, electric companies, natural gas, power producers (independent), and water utilities *CHRIS SCHEUER: auto parts/equipment, autos, building materials, consumer- novelties/gifts, footwear, gaming & lottery, hardware & tools, homebuilding, household furniture & appliances, leisure time products, lodging & hotels, publishing, retail, textiles, services- ad/marketing, broadcasting, entertainment, household products (non-durables), housewares, personal care, tobacco, air freight, airlines, railroads, shipping, and truckers *JIM WOGSLAND: beverages (alcoholic, non-alcoholic), distributors (food/health), foods, restaurants, retail (drug/food chains), services (employment/environmental), specialty printing, services (commercial/consumer), services (computer systems and data processing) *CHRISTI GROMER: biotech and health care (diversified, generic drugs, hospital management, long-term care, major pharmaceuticals, managed care, medical products, and specialty services) --------------------------------------------------------- NOTE: Positions reported are derived from 13F filings, which do not include cash figures, and may not be representative of a firm's equity assets as of March 31, 2001. In addition, if a firm is hedged with many short positions, when reversed they may appear as net purchases. ----------------------------------------------------------- Questions, comments or if you would like the MMM staff to investigate any news heard on the Street, please send inquiries to staff@news.moneymanagermonitor.com, or call (212) 510-9263. -------------------------------------------------- ?Money Manager Monitor. 2001. Although no assurance can be given for its accuracy, the information contained in this report was obtained from sources considered reliable. Except for making one printed copy of this document, published by The Money Manager Monitor, it may not be reproduced, republished, broadcast or otherwise distributed without prior written permission from The Money Manager Monitor.
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