Corzine and TPG-Axon - Casino Connection?

New Jersey Governor Jon Corzine's investment in hedge fund TPG-Axon is accused of being a conflict of interest. The charges relate to TPG-Axon's parent, multi billion dollar private equity firm, Texas Pacific Group.

There is plenty of information available on the web with regard to the actual allegations, but since little useful information is provided we will provide a little background.

Texas Pacific Group

Contact Info (Primary):

301 Commerce Street, Suite 3300

Fort Worth, TX 76102
(817) 871-4000 phone

(817) 871-4010 fax

www.tpg.com

Firm Type: Private Equity

AUM: $45 billion

Key People:

• Founding Partner: David Bonderman

• Founding Partner: James G. (Jim) Coulter

• Partner, Operations: Richard W. (Dick) Boyce

Principal Competitors: Kohlberg Kravis Roberts & Co.; Hicks, Muse, Tate & Furst Incorporated; Clayton, Dubilier & Rice, Inc.

Other Info: TPG is headquartered in Fort Worth, TX and San Francisco, CA. The firm also has offices in 8 countries. Texas Pacific Group's largest private equity fund is TPG Partners VI, an almost $20 billion global buyout fund launched in 2008.

TPG-Axon Capital Management

Contact Info:

888 Seventh Avenue, Floor 38

New York, NY 10106-3899

(212) 479-2000 phone

Firm Type: Hedge Fund

Founded: 2005

2009 AUM: $10.7 billion

Key People:

• Dinakar Singh - Founder and CEO
• 31 Employees

Other Info: TPG-Axon is a global macro hedge funds ranks as the 25th largest US hedge fund by assets under managerment as of August 2009.

Largest Holdings (as of June 30, 2009):

Hewlett Packard - $429 million

Pepsico - $312 million

Oracle - $304 million

Microsoft - $278 million

JP Morgan - $277 million

2001 Interview with Madoff Betrayed Fraud

Suspicious 2001 Interview with Madoff
We have often heard that there were a good many financial professionals who were suspicious of Madoff's hedge fund, based on the low volatility and almost complete lack of a month with negative returns. However, in an interview Madoff gave in 2001, there were many clues, certainly in retrospect, that something was amiss.

Here are a few quotes from that article by MarHedge in May of 2001 that are certainly interesting in hindsight:

"Those who question the consistency of the returns, though not necessarily the ability to generate the gross and net returns reported, include current and former traders, other money managers, consultants, quantitative analysts and fund-of-funds executives, many of whom are familiar with the so-called splitstrike conversion strategy used to manage the assets."

"What is striking to most observers is not so much the annual returns—which, though consider somewhat high for the strategy, could be attributed to the firm’s market making and trade execution capabilities—but the ability to provide such smooth returns with so little volatility."

"The best known entity using a similar strategy, a publicly traded mutual fund dating from 1978 called Gateway, has experienced far greater volatility and lower returns during the same period."

"And in a face-to-face interview and several telephone interviews, Madoff sounds and appears genuinely amused by the interest and attention aimed at an asset management strategy designed to generate conservative, low risk returns that he notes are nowhere near the top results of well-known fund managers on an absolute return basis."

"The apparent lack of volatility in the performance of the fund, Madoff says, is an illusion based on a review of the monthly and annual returns. On an intraday, intraweek and intramonth basis, he says, 'the volatility is all over the place,' with the fund down by as much as 1%."

"But as whole, the split-strike conversion strategy is designed to work best in bull markets and, Madoff points out, until recently 'we’ve really been in a bull market since ‘82, so this has been a good period to do this kind of stuff.'"

"As for the specifics of how the firm manages risk and limits the market impact of moving so much capital in and out of positions, Madoff responds first by saying, 'I’m not interested in educating the world on our strategy, and I won’t get into the nuances of how we manage risk.'"

"He won’t reveal how much capital is required to be deployed at any given time to maintain the strategy’s return characteristics, but does say that 'the goal is to be 100% invested.”

"Indeed, says Madoff, the firm itself has received numerous buyout offers but has so far refused any entreaties because he and the many members of his immediate and extended family who work there continue to enjoy what they do and the independence it allows and have no desire to work for someone else."

"Similarly, he adds, another firm could duplicate the strategy in an attempt to get similar results, but its returns would likely be unmatched because 'you need the physical plant and a large operation' to do it with equal success. However, many Wall Street firms, he says, do use the strategy in their proprietary trading activities, but they don’t devote more capital to such operations because their return on capital is better used in other operations."

"Madoff, who believes that he deserves 'some credibility as a trader for 40 years,” says: “The strategy is the strategy and the returns are the returns.' He suggests that those who believe there is something more to it and seeking an answer beyond that are wasting their time."

Those are chilling quotes knowing what we do now.

Read the full article here

World's Most Stable Hedge Funds

Below is a list of the most stable hedge funds in the world. The majority of hedge funds meeting the criteria are fixed income / arbitrage funds. The stability rating is based on 5 year returns, 5 year standard deviation of returns, and worst 3 mo. returns. All funds below had positive cumulative 5 year returns and had returns of no worse than -2% in the fund's worst 3 mo. period. Of course, just because a fund has stable, positive returns, does not necessarily indicate it is a safe investment. Recall that Bernard Madoff Securities posted positive monthly returns for 10 straight years with very low volatility. Had Madoff's fund still been active, it would have rated at or near the top of this list.

Most Stable Hedge Funds:

Fund Name	Firm Name	City	State	Stability Rating	Fund Type
Fletcher Income Arbitrage Fund	Fletcher Asset Management	New York	NY	99.45	Debt Arbitrage
Talisman Partners	Envision Capital Management	Scottsdale	AZ	99.35	Distressed Debt
Coast Enhanced Income Fund II	Coast Asset Management	Santa Monica	CA	99.15	Debt Arbitrage
Equity Income Partners	Envision Capital Management	Scottsdale	AZ	98.91	Debt/Fixed Income
AlphaBridge Fixed Income Fund	AlphaBridge	Greenwich	CT	98.69	Fixed Income
YA Global Investors	Yorkville Advisors	Jersey City	NJ	98.22	Debt Arbitrage
FAMA Sniper	FAMA Investors	Grand Cayman	GT	97.99	Emerging Markets
Kassirer Market Neutral		Toronto	ON	97.8	Convertible Arbitrage
DB Equilibria Japan Fund USD	DB Advisors	New York	NY	97.63	Absolute Return
Glazer Offshore Fund	Glazer Capital Management	New York	NY	97.38	Merger Arbitrage
Blackthorn Fund	Blackthhorn Group	Overland Park	KS	97.2	Multi Strategy
Durban Capital	Durban Capital	New York	NY	97.02	Equity Arbitrage
Loch Capital I	Loch Capital	Boston	MA	96.84	Equity
Tuscan Investments	Tuscan Group	San Francisco	CA	96.63	Equity
Winbeldon Fund	Weston Capital	Westport	CT	96.4	Global Equity
Gabelli Associates	Gabelli	Rye	NY	96.22	Equity
Blue Rock Capital Fund	Blue Rock Advisors	Minneapolis	MN	96.05	Fund of Funds
Culross Arbitrage Fund	Culross Global Management	London	UK	95.83	Fund of Funds
MKP Opportunity Offshore	MKP Capital	New York	NY	95.64	Debt Arbitrage
Haberman Value Fund	Haberman Capital	New York	NY	95.45	Equity
AlphaGen Capella Fund Limited	Gartmore Investment Services	Frankfurt	Germany	95.26	Equity
Mac Sentinel Cdn Managed Yield	Mackenzie Investments	Toronto	ON	95.01	Equity Arbitrage
Dexia Double Alpha	Dexia Asset Management	Paris	France	94.81	Fixed Income
Aktie-Ansvar Graal	AktieAnsvar	Stockholm	Sweden	94.68	Equity
BBVA & Partners Eq Arbitrage		Madrid	Spain	94.5	Equity

The above chart is based on our proprietary formula for hedge fund stability. The formula is based on 5 year returns, 5 year standard deviation of returns, and worst 3 mo. period as well as return/volatility ratio. Stable hedge funds do not necessarily indicate safety of investments. The above figures are subject to error and should not be used for making investment decisions under any circumstances.

The World's Riskiest Hedge Funds

Below is a list of the riskiest hedge funds for the trailing 5 years. Risk ratings are based on a proprietary volatility formula based on 3yr and 5yr standard deviation of returns, as well as the worst 3 month returns. The list of riskiest/most volatile funds includes US as well as Non-US hedge funds. Commodity/Managed Futures and Trend Following hedge funds compose the majority of the riskiest hedge funds due often to the volatility and high correlation of their underlying investments.

Most High-Risk Hedge Funds:

Fund Name	Firm	City	State	Overal Risk	Fund Type
World Grain & Oilseeds Fund	DEC Capital	Lincoln	NE	99.69	Commodities
CFP IQS Fund	CFP Funds	London	UK	99.38	Multi Strategy
Fletcher Aggressive Fund	Fletcher Asset Management	New York	NY	99.06	Arbitrage
Global Partners	Global Partners LP	Chicago	IL	98.75	Multi Strategy
ICL Managed Account Program	Frontier	Fort Dodge	IA	98.44	Trend
AIS Futures Fund	AIS Group	Wilton	CT	98.13	Leveraged Long/Short
Di Tomasso Equilibrium Fund	Di Tomasso Group	Victoria	BC	97.81	Commodities
Dynamic Power Hedge	Dynamic Funds	Toronto	ON	97.50	Equity
LSGI Technology Venture	LSGI Advisors Inc	Duncanville	TX	97.50	Equity
Gerbino Gold Group	The Gerbino Gold Group	Beverly Hills	CA	96.88	Commodities
Legacy Futures Fund	Hawksbill Capital	Chicago	IL	96.56	Managed Futures/Commodities
Liberty Global Fund LP	Liberty Funds Group	Dallas	TX	96.25	Commodities
RAM Aggressive	RAM Futures	New Canaan	CT	96.25	Commodities
TMS Managed Futures Program	TMS Trade	Houston	TX	95.63	FX
Fort Orange Capital GL Strategic	Fort Orange Capital Management	Albany	NY	95.63	Trend
XT-99 Diversified	Pardo Capital	Kenilworth	IL	95.00	Trend
Permal Media & Technology	Permal Capital	New York	NY	95.00	Equity
Harmony Capital LTD Class A	Harmony Capital	London	UK	94.38	FX
Firebird Fund	Firebird Management	New York	NY	94.06	Emerging Markets
BP Capital Energy Equity	BP Capital	Dallas	TX	93.75	Energy

Overall Risk is determined based on worst 3 mo returns, 3 year standard deviation, and 5 year standard deviation based on funds with 5+ years of available returns. There are many definitions of risk and we have developed this measure simply for informational purposes. High levels of risk does not necessarily indicate a poor investment. Many riskier hedge funds have outperformed their peers in total returns. You should not make any investment decisions based on the above information.