Opportunities abound for hedge fund managers who know how to play the market. Either by hook or crook, these masters of industry ply their trade to manipulate the financial markets to produce returns for themselves and their shareholders that small investors are unable to attain.
Hedge Fund investment strategies are broad and diverse. They include global macro trading, fundamental equity investing, emerging markets, venture capital, commodities, and event driven strategies. These money management firms are largely unregulated. They invest in a wide array of financial securities, corporations and even non-profit organizations in an effort to create synergies that can sometimes help to drive up the price of an investment asset, or be used to help force the price of an asset to decline.
Managers earn 20% of their funds profits, so there is huge incentive to seek out investments to exploit. Hedge Funds in the past had relied on arbitrage situations to make their money, by finding discrepancies between a stock prices and their fundamentals, but it seems that many of todays fund managers are relying more on short selling strategies (investors betting on a decline in a stock price) than investing in companies that are expected to increase in value. As these managers have learned; it’s much easier to drive the price of a stock down than to prop it up.
Some hedge funds have become experts in manipulating the stock, or reputation, of the companies that they invest in.
Third Point LLC, a $14 billion hedge fund, recently acquired enough stock in Sony to become their largest shareholder and then the fund manager demanded that the company split up.
Another media savvy hedge fund, Pershing Square Capital Management, recently sold “short” Herbalife stock and then publicly announced that the company was operating a pyramid scheme. The stock collapsed and Pershing Square made enormous profits. The Wall Street Journal reported that the funds manager was under investigation by the FBI for manipulating the stock price, but hedge fund managers are sometimes too influential and politically connected to prosecute. (http://www.wsj.com/articles/prosecutors-interview-people-tied-to-ackman-in-probe-of-potential-herbalife-manipulation-1426196822).
Hedge funds managers who subscribe to this type of market manipulation call themselves “activist investors.” (http://bit.ly/1RW7WMa). In the past they were commonly called corporate raiders, but they have rebranded themselves with a new moniker. Activist investor managers normally purchase financial derivatives that make huge profits when the price of the stock or underlying commodity they have targeted declines in value. They often utilize the media or advertising agencies to publicly disparage the companies or industries that the funds have invested in, through negative press releases, paid advertising and other forms of mass propaganda.
Commodities such as oil, orange juice and sugar are routinely manipulated by hedge funds since they are so important to American consumers, and the main street media is happy to report any distress in these markets, either real or wrong.
In the past few years sugar prices have fallen drastically as short sellers drove the price of the commodity down to historically low levels. Analysts have been unable to adequately explain the sharp decline of sugar prices except to suggest that external factors might have caused the price of sugar to decline.
Two of the largest investors in sugar commodities are the $14 billion Tudor Investment fund, owned by Paul Tudor Jones and the $65 billion D. E. Shaw & Co. fund in which Paul Tudor Jones is on their board of directors. Jones also owns a non-profit environmental organization in Florida that claims that their mission is to clean up the Florida environment, but their real intent seems to be to harm agricultural companies in the sunshine state, in an effort to influence the price of sugar and other agricultural products produced in Florida, and make more money.
Last year, the tax-exempt organization that Paul Tudor Jones runs in Florida persuaded Jimmy Buffet to sing a free concert at the state capital, and also paid college students to come from all around the state to watch the show while they pleaded to lawmakers to spend $700 million of this years state budget to force Florida farmers off their land, through eminent domain, thereby forever diminishing the supply of sugar and other farm products from Florida for the forceable future – all in an effort to increase profits for shareholders.