Investment firm Hunterbrook has started hiring financial journalists to support its analysis team in scouting deals. The editorial team, which will operate autonomously from the investment arm, will look for stories and share them with the managers of the free investment fund (hedge fund, in the jargon). They can use them to bet for or against a listed company, a country or bonds. Once the investment is made, the news will be published.
Those responsible for this initiative, revealed by the newspaper Financial Times, are American investor Nathaniel Brooks Horwitz and writer Sam Koppelman, both 27 years old. The project has managed to raise 10 million dollars in seed capital, which is then intended to be expanded with new rounds of financing to reach 100 million.
One of the first signings that Hunterbrook has made is Matt Murray, former editor of the newspaper The Wall Street Journal (one of the most influential economic newspapers in the world). Murray has been hired as an advisor.
Although the final operation is not defined, its promoters are explaining that there would be two clearly differentiated divisions. On the one hand, there would be hedge funda type of investment vehicle that has complete freedom of action: it can take bets against companies or countries, it can go into debt, it can concentrate the portfolio in a couple of operations… On the other hand, there would be a newsroom of journalists (which seems to Will be called watchdog) and that he would dedicate himself to reporting.
To try to avoid any legal problems, due to access to privileged information, for example, between the two business units there would be a legal department through which all articles would pass. This division would be in charge of determining if a certain story can be passed to the investment team for them to carry out an operation. The reports would only be published after the investments were made.
The mode of operation of the hedge funds can sometimes be very controversial. By taking short positions on companies, they benefit from their value plummeting, so they may be very interested in discrediting the business model or governance structure of a listed company. The important thing is that your criticism is based on evidence.
The Gowex case
A well-known case in Spain of a company fallen from grace due to the actions of activist investors is Gowex. This company, founded by Jenaro García, sold free Wi-Fi installation projects in public spaces. It went public in 2010 and its shares appreciated by 2,500%. Until the Gotham City Research firm crossed his path. This entity published a devastating report questioning the figures it reported and the audit reports. That caused the stock to plummet and trading to be suspended, making Gotham’s analysts/investors a lot of money. Jenaro García ended up acknowledging his guilt and asking the judge to go to prison.
There are free investment funds, such as Mudy Waters Research, that base their investment strategy on this type of operation. Thoroughly investigate companies, detect fraud or misconduct, take short positions and then publish reports and report the findings, to profit from the fall of the stock. Sometimes, after a bloody battle for the story, hedge funds end up losing, as It happened to manager Bill Ackman with his crusade against Herbalife.
In the case of the new Hunterbrook firm, its promoters want to have very well outlined the possible legal conflicts and conflicts of interest that journalists working for the entity could incur. Especially when they access privileged information.
“Instead of trying to predict or react to events, our idea is to schedule operations based on the news that we ourselves publish,” Nathaniel Brooks Horwitz explained to potential investors, defining the company as “the first investment fund promoted by a global publication,” according to an email to which the Financial Times.
The team of journalists would include people who have worked for the WSJ, the BBC and Barron’s, as well as “intelligence analysts.” Its goal will be to publish research articles about the market “like Bloomberg,” but without advertising or a subscription paywall.
Horwitz explained to potential investors that the fund would trade stocks, options, currencies, commodities and other assets. Hunterbrook’s initial investors include a former JPMorgan chief investment officer and a former US attorney general.
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