Viking Global Investors, one of the world's largest hedge funds, is returning about a quarter of its capital to investors as its chief investment officer steps down, according to a letter the firm sent to investors Monday morning.

The $32 billion hedge fund said in its letter it would be returning $8 billion beginning in August as part of a plan to let its traders hold smaller, more liquid positions. It also informed investors that Daniel Sundheim, the firm's chief investment officer, would be leaving "to pursue entrepreneurial interests" after 15 years at the firm.

Sundheim had been CIO since 2014, and Ben Jacobs and Ning Jin are now serving as co-CIOs, the letter said. Bloomberg News earlier reported about Viking's letter.

Sundheim's departure appears to be amicable, and Sundheim is considering starting a hedge fund of his own, people familiar with the matter said. Still, the departure could prompt investors in the fund to pull assets, according to a Viking investor who spoke with Business Insider on the condition of anonymity.

Rose Shabet, a spokeswoman for the firm, declined to comment.

"He is in a league of his own as a stock picker and portfolio manager and has earned the respect of every Viking and many others," the letter said.

About two-thirds of the $8 billion will come from Viking's flagship equities fund, with the rest coming from its long fund, the letter said. The firm is allowing investors a "one-time liquidity option" for the end of July and will consider taking in new money from its waitlist, the letter added.

Viking, founded by billionaire Andreas Halvorsen, had a rocky year in 2016, with its flagship fund losing 4% while the S&P 500 gained 12%. That fund has regained this year, returning 7.1% net through May 31, according to an investor document that was reviewed by Business Insider.

Some investors, including the state of Rhode Island, asked for some of their money back following the down year, only the fund's third since it launched in 1999. The company retooled its stock-picking team in response, Reuters reported in January.

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Japanese tech and telecom giant SoftBank has hired Colin Fan, a former head of investment banking and trading at Deutsche Bank, Bloomberg News' Stephanie Baker reports. 

The Hong Kong-born banker joined Deutsche Bank as a credit trader in 1998. Over 19 years, Fan rose through the ranks, eventually being named co-head of the firm’s investment banking arm in 2012.

Fan left the bank in 2015 as part of a large restructuring.  

Fan isn't the only former Deutsche Bank executive with strong connections to Softbank. 

Rajeev Misra, a former top trading exec at Deutsche Bank, is SoftBank’s head of strategic finance. And Nizar Al-Bassam and Dalinc Ariburnu, who both previously worked at Deutsche Bank, arranged SoftBank's deal for hedge fund group Fortress.

The tech giant recently launched its $93 billion Vision Fund, with funding from Saudi Arabia, Abu Dhabi, Apple and Qualcomm. Vision Fund is the world's largest tech fund and is based in London. It plans to purchase SoftBank’s previous investments in Nvidia and other American tech companies.

Read the Bloomberg story here.

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It's easy to be distracted by a high market capitalization.

Companies that have worked their way to the top of their fields must have made some right moves along the way.

But past returns are not necessarily indicators of future performance, and the stocks on the following list might be perfect examples of that.

Credit Suisse put together a list of the large-cap stocks that hedge funds are dropping. These are stocks that, in many cases, a lot of funds still own, but that saw a big fall in the number of funds investing in them during the first quarter of this year.

A large number of hedge funds selling a stock could be an indicator of a not-so-bright future for the company. Read through the list below.

Targa Resources (TRGP)

Current Price: $45.74

2017 performance: -18.4%

Number of hedge funds that dropped the stock: 16

Click here to learn more about the company...

Data provided by Credit Suisse

General Motors (GM)

Current Price: $34.68

2017 performance: -0.5%

Number of hedge funds that dropped the stock: 16

Click here to learn more about the company...

Data provided by Credit Suisse

Gilead Sciences (GILD)

Current Price: $65.43

2017 performance: -8.6%

Number of hedge funds that dropped the stock: 16

Click here to learn more about the company...

Data provided by Credit Suisse

A one-time portfolio manager at a New York hedge fund that shuttered last year amid an insider trading scandal has been sentenced to 18 months in prison.

Stefan Lumiere was found guilty earlier this year of inflating bond prices in Visium Asset Management's credit fund and hiding those losses from investors.

The sentence, which was set Wednesday, June 14, includes a $1 million fine and three years of supervised release.

Lumiere's sentencing had been scheduled for the end of May but was rescheduled after the judge found that the government had failed to provide sufficient information. 

Lumiere is the ex-brother in law of Visium's founder, Jake Gottlieb, a physician who founded the firm, which became known for investing in healthcare stocks.

The hedge fund attracted billions in assets, often from public pensions and endowments, even as Wall Street players distanced themselves, Business Insider previously reported. Billionaire hedge funder Steve Cohen, for instance, stopped hiring from Visium before the government's indictment became public.

At its peak, Visium managed $8 billion, and its shuttering marked one of the most notable insider trading cases in recent years.

Sanjay Valvani, a star fund manager overseeing the firm's flagship healthcare fund, committed suicide last year days after he was accused of insider trading. Valvani had maintained his innocence. Gottlieb hasn't been accused of any wrongdoing.

Lumiere's boss, Chris Plaford, pleaded guilty and cooperated with the government investigation.

A spokesperson for Visium didn't immediately respond to a request comment. 

Jonathan N. Halpern and Jonathan H. Friedman, partner and senior counse with the law firm of Foley & Lardner LLP and legal counsels to Lumiere, said in a statement:

 “We are pleased that our arguments resonated with the court, which imposed a sentence of 18 months rather than applying the range of 11 to 14 years under the Sentencing Guidelines that the government presented. Mr. Lumiere looks forward to pressing his claims on appeal.”

MUST READ: As Visium drew Main Street money, Wall Street was backing away

SEE ALSO: Behind the life and death of a star money manager accused of insider trading

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Hedge funds are using exchange-traded funds to make a killer bet. 

Markets Insider recently wrote about the most popular ETFs among hedge funds, and it turns out the two most popular funds have something in common.

Vanguard and iShares both offer an emerging markets ETF, and hedge funds love the two products, according to data from Credit Suisse. What's more, the two funds are up more than 20% in the past 12 months.

Of the combined $81 billion in the two ETFs, hedge funds own $10.3 billion, or about 12.8%, according to Credit Suisse. This is a big bet on the two funds and emerging markets by extension.

By betting on emerging markets, hedge funds are betting on countries like Brazil, China and India. Emerging markets are ones that do not have mature markets set up, or lack strict standards like advanced markets. MSCI classifies 24 countries as emerging markets in its emerging markets index.

Emerging markets have been on the rise recently. The Vanguard FTSE Emerging Markets Fund invests in companies located in emerging markets around the world and has grown 23.0% in the last year.

Some of the top holdings for the fund include Tencent Holdings, Taiwan Semiconductor Manufacturing Co. and China Construction Bank Corp. The largest position in the Vanguard fund is in Tencent, which comprises 3.8% of the total fund. So far this year, Tencent has been a pretty good bet, as the company has grown 33%.

The iShares MSCI Emerging Markets Fund is also invested in Tencent, but also holds large shares in companies like Samsung, Alibaba and Baidu. The iShares fund has grown 26.89% this year.

Exchange-traded funds have proven hugely popular with investors. US-listed ETFs saw $283 billion in net inflows during 2016, taking aggregate assets under management to $2.5 trillion, according to Citigroup. The appeal is obvious. ETFs provide cheap and easy access to asset classes and sectors, and are as easy to buy and sell as a single stock. 

Emerging markets are not a sure bet by any means. They have grown a lot over the past year, but even Vanguard warns that it's emerging markets fund is risky, and only appropriate for "long-term goals."

Comparing the recent explosive growth to historical returns seems to back up that assessment. Over the past decade, Vanguard's fund has grown 1.91% and iShares' has grown 2.04%. The general S&P 500 index grew about 69% in the same timeframe.

To learn more about the Vanguard fund, click here ...

SEE ALSO: Hedge funds are loading up on these 17 ETFs

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Everyone loves stocks that promise strong performance.

Credit Suisse recently released a list of some of the best stocks according to hedge funds.

The list was created by looking at large-cap companies that saw a big increase in the number of hedge funds holding their stock in the first quarter of 2017. Some of the stocks still are not owned by very many funds, but it could be the beginning of something big for those companies.

All of the stocks on the list have had good returns this year, some as high as 30%. Each stock is listed with the current price, year to date performance, the number of funds that own the stock and the number of funds that added the stock in the first quarter of the year. They are sorted so the most stock with the biggest increase in hedge fund ownership is listed last.

If the hedge funds are right, these stocks are the ones to watch for big gains in the future.

Microchip Technology (MCHP)

Current Price: $83.08

Performance in 2017: 29.5%

Number of Invested Funds: 56

Change in funds during the first quarter: 14

Click here to learn more about the stock ...

Data provided via Credit Suisse

Viacom (VIAB)

Current Price: $36.09

Performance in 2017: 2.8% 

Number of Invested Funds: 55

Change in funds during the first quarter: 15

Click here to learn more about the stock ...

Data provided via Credit Suisse

L3 Technologies (LLL)

Current Price: $166.93

Performance in 2017: 9.7% 

Number of Invested Funds: 28

Change in funds during the first quarter: 15

Click here to learn more about the stock ...

Data provided via Credit Suisse

Sometimes, no matter how right you are, you're still wrong and you're still going to lose money.

On Thursday hedge fund manager Kyle Bass of Hayman Capital told Reuters that China's credit problems are "metastasizing" and that he still expects the yuan to fall 30% against the dollar when it does.

It's a bet he's been making since February of last year, and the currency has mocked him for his efforts. After a 2% devaluation in the summer of 2015, the yuan rallied, gaining 2.1% in 2017 alone.  Of course, that doesn't mean that the country's problems with debt have disappeared. The banking system is indeed fragile.

“What the public narrative is and what they have been doing behind the scenes are two completely different stories,” Bass said in a telephone interview with Reuters. “China has been masterful controlling the public narrative. As a fiduciary, I have no idea how anyone can invest in China.”

Fair enough.  There's plenty of reason to believe that the relative stability China has been enjoying in 2017 is coming to an end.

Solid May export numbers look about as good as it's going to get as "the export outlook is for sustained if unspectacular growth," according to Bloomberg economist Tom Orlik. A crackdown on financial products is making already scarce liquidity even more scarce. Corporates are running out of funding options as short-term borrowingrates for even AAA rated companies rise. Increasingly they're turning to more risky lenders to get money. Banks are pushing more high yield products to try to get some cash.

There are problems everywhere. 

So, Bass is right. This is as good as it's going to get in China. After Xi consolidates power at a party meeting at the end of 2017, he'll turn his all-seeing eye on the Chinese economy.

And that is when Bass will find out that he is also wrong.

"Guys like Kyle Bass sees China as a commercial financial system. It's not," said Lee Miller, founder of China Beige Book, a private firm that collects Chinese economic data. "Foreign exchange reserves aren't even full fire power, there's $800 billion more in the banking system at the government's disposal."

"All their banks are insolvent technically, but that doesn't mean the system can't support them," he said.

That is to say, everything is at the government's disposal. Bass is expecting a CRASH/BANG to signal the end of the Chinese miracle and an eye-popping devaluation that rewards the impatient (a year, after all, is not very long in the world of economics).

But what Miller sees is a process that will take a very long time — a gear grinding painstakingly slowly to a halt.

So what's going to happen to the $3.054 trillion of foreign exchange reserves China holds? What is its destiny?

It will serve to "fight leaks that pop up in your hull," said Miller. "And they [the Chinese] can keep doing it [the cash]... goes to the biggest problem first."

And if that problem is a yuan declining in value — after all the effort the People's Bank of China has put into making sure the currency is stable — then that's where that money is going to go. The last thing the country's leaders want is capital flight and/or a decline its people's purchasing power. The yuan is key here, and it will be treated with care.

What will not be handled with care is up to the government's discretion. Big banks will likely be allowed to survive, as will be companies with AAA ratings, even as their yields hit record highs. The Chinese can't save everything.

But they will try to save the yuan. 

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It looks like a highly anticipated hedge fund that has been taking talent from Izzy Englander's $35 billion fund has a potential name: ExodusPoint.

The name was registered in a filing by Michael Gelband, and has been floated among industry insiders over the past several weeks. Gelband is Millennium's former fixed income head, and he has been in talks with Hyung Soon Lee, Millennium's former equity chief, to start their own fund.

Registering the name doesn't mean that it's what they'll go with, of course. One person close to the matter told Business Insider that it isn't yet clear if that's the plan.

Still, the name has been drawing attention over the past several weeks.

At least one person who flagged the name thought it was a play on the departures from Millennium who are expected to join the startup. They include Peter Hornick, Millennium's former head of business development, Business Insider reported earlier this year. Several others have recently left Millennium, and some could end up there, too.

You could call it an exodus. 

Gelband abruptly resigned from Millennium at the start of the year after Englander, Millennium's billionaire founder, refused to grant him ownership in the firm, Bloomberg reported in January. Gelband had spent eight years at the hedge fund and told colleagues that he had transformed the fixed income team from a money-losing operation to one that created $7 billion in trading revenue, according to the report. Millennium says the numbers are unsubstantiated.

Gelband's startup would come up against competition from other monster launches expected for the coming months, namely billionaire Steve Cohen's new hedge fund.

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Michael Steinberg, a former top trader at billionaire Steve Cohen's hedge fund, then known as SAC Capital Advisors, has raised at least $25 million for his newly-formed fintech venture fund, Reciprocal Venture Management, according to Bloomberg's Miles Weiss. 

Steinberg was found guilty of insider trading in December 2013 while at SAC, but the conviction was dropped two years later. The New Yorker previously reported that a potential insider trading case against Steve Cohen was based on an email that Steinberg had received from his analyst, that was then forwarded to another portfolio manager at the firm, and eventually Cohen himself. 

SAC Capital Advisors, was barred from managing external money and pleaded guilty to insider trading. Cohen was never charged, and he neither admitted nor denied wrongdoing in a civil settlement. He is allowed to manage external capital again in 2018, and is reportedly prepping a huge hedge fund comeback. 

In a March filing, Steinberg said he was looking to raise as much as $60 million for the Reciprocal Ventures I fund, and in May, a separate filing showed that the fund managed $25 million. An unidentified person told Bloomberg that the fund has since raised more.

Reciprocal is finalizing its first three investments for the fund, Bloomberg reports. Details are scant, but the firm plans to focus on five categories: capital markets, asset management, business-to-business payments, financial SaaS (software as a servive), and blockchain digital ledgers.

Before the fund, Steinberg personally invested in a tech company called Dataminr, which turns social media's firehose of data into useful information for the finance and government sectors. 

Business Insider has reached out to Reciprocal for comment and will update this post if any more details emerge. 

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One of the largest hedge fund launches of the year is closing its doors to new money.

Holocene Advisors, a New York-based firm that launched in April, is closing to new capital, including from existing investors, on July 1, people familiar with the matter said.

The firm is expected to manage around $2 billion, up from the $1.5 billion that it launched with three months ago. 

It is not clear when the firm will reopen to outside money.

Holocene's size was already big by current hedge fund launch standards, and comes as some industry titans are shutting.

The fund has long been expected to be one of this year's largest, with founder Brandon Haley said to be putting in a significant amount of his net worth into the fund. The firm was expected to initially employ a stock strategy focused on the consumer, industrials and tech, and media and telecommunications sectors, people familiar with the matter previously told Business Insider.

Haley previously led Citadel's Global Equities unit.

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BOSTON, June 20 (Reuters) - Hedge fund manager David Russekoff has hired Chetan Gulati, a former colleague from Perry Capital, to beef up the investment team at his newly formed firm Smith Cove Capital.

Gulati will work in London, a spokesman for Smith Cove confirmed on Tuesday.

Russekoff and Gulati will reunite at Smith Cove after having worked together at Perry for eight years. Russekoff, who had been Perry's chief investment officer, left the firm in 2015 and Gulati, who specialized in buying distressed structured securities, stayed through 2016 when Perry announced plans to shut down.

Russekoff already hired former colleague Bob Carroll as his head trader. Roger Schmitz, who used to work at Monarch Alternative Capital, and Victor Consoli, who previously worked with Perella Weinberg Partners, round out the investment team.

Smith Cove began trading with less than $100 million in partner capital in March and likely will begin trying to raise outside capital later in the year. The firm owned Rice Energy Inc. whose share price surged on Monday amid news that it would be acquired by EQT Corp.

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Add David Siegel, co-founder of $45 billion hedge fund Two Sigma Investments, to the list of those warning against protectionism. 

In an op-ed on LinkedIn, Siegel recites a recent trip to an Abu Dhabi camel farm, which he toured in a "comfortable, Japanese-made SUV." His host explained that everyone used to drive American cars, but they don't stack up anymore.

"As US policymakers wrestle with how to stanch (if not reverse) the decline of manufacturing employment and alleviate the US trade deficit, my thoughts often return to that conversation in the desert, and to many others like it," he said.

From the op-ed:

We hear a lot about how both automation and globalization have affected factory jobs here at home. It’s true that repetitive manual and cognitive tasks are increasingly likely to be automated, and that labor costs in developing countries remain far below those of the developed world. When it comes to solutions, however, I see a concerning sign: trade protectionism is once again becoming the response to dwindling factory payrolls and a swollen trade deficit.

The recent re-embrace of this warmed-over policy seems more like a convenient fig leaf for the shortcomings of US business leaders than a viable answer. The qualities that have driven US economic growth and job creation in the past–creativity, risk taking, and innovation–are what will actually help rekindle demand for US-made products overseas, and for American labor.

The rise of protectionism has been a hot topic of late, given the UK's decision to leave the EU and the election of Donald Trump at US president. Trump made the debate over free trade one of the central topics of his campaign. He argued in favor of ripping up trade deals, said NAFTA was "the worst trade deal in the history of the country," and called the Trans-Pacific Partnership, or TPP, "a rape of our country."

Back in February, Jeff Immelt, then CEO of GE, said America "will be less of a leader in trade" in the coming years. And in June, Ray Dalio, the founder of Bridgewater Associates, said Trump was showcasing a tendency to choose the part over the whole. Trump's actions are leaving people scrambling to figure out which Americans Trump is trying to help, such as American manufacturing workers, and at the expense of whom, Dalio wrote.

In his op-ed, Siegel cites Boeing, Apple, and Google as examples of American companies that have prospered globally, and touched on why protectionism was proving popular:

Those supporting increased trade barriers often couch it in terms of “leveling the playing field.” That is well and good, but my sense is that some simply hope to make it easier for US companies to compete in the global marketplace with inferior products or insufficient effort. Nobody claims making great products is easy, but again, this attitude is not a recipe for reviving American manufacturing employment. There is simply no substitute for doing the hard work of learning local markets.

The op-ed concluded:

Automation and competition from overseas will remain stiff headwinds for U.S. manufacturing employment. But we shouldn’t make excuses and hope protectionism will save the day. The only way for American manufacturers to succeed is through an uncompromising commitment to innovation.

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NOW WATCH: HENRY BLODGET: Tech market is nowhere near the dotcom days

Keith Meister’s Corvex Management and Richard (Mick) McGuire III’s Marcato Capital Management, two once-hot activist hedge fund firms that bolted out of the gate during the post-financial crisis bull market, have lost a big chunk of their assets over the past year as some of their highest-profile activist plays have slipped into the red. 

Meister and McGuire are the protégés of rival activists Carl Icahn and Bill Ackman. At his peak, Meister, the former Icahn lieutenant, owned $8.5 billion in U.S. equities at the end of the third quarter of 2015, according to Corvex’s filings with regulators. His most recent 13F, filed in mid-May, show his U.S. equity holdings at $3.6 billion —a 58 percent decline. While those numbers don’t tell the whole story, they are a proxy, as most of activists’ holdings are in equities. 

Earlier this year, Corvex reported regulatory assets under management, which also includes leverage, of $7.4 billion at the end of 2016. Corvex had $5 billion in capital at the beginning of 2017, according to estimates by data provider Absolute Return, which said that was a 29 percent decline since January 2016. 

With backing from Soros’ seeding platform, Meister launched Corvex in 2011 to much fanfare, doubling assets by 2013 with several early activist successes. But many of his activist plays have not performed well, particularly recently. His latest ones — oil and gas exploration company Energen Corp., telecommunications company CenturyLink, and streaming music service Pandora Media — are all trading lower than his average purchase price, according to his 13D filings.

Pandora is the worst — it’s down 26 percent from the price Meister paid for his stake, which was disclosed in May of 2016. Overall, Meiser’s current activist plays are down about 15 percent by that measure, compared with a 6.78 percent gain for the Standard & Poor’s 500 stock index during the respective time periods. Out of 14 activist plays in which he took a 5 percent stake or more, six are either trading lower than when he bought them, or did so when he sold out. Over time, however, his holdings still outperform the S&P 500 — but by just a little more than 1 percent. Meister declined to comment. 

Marcato’s assets have fallen 50 percent, to $1 billion, according to a person familiar with the numbers. McGuire, a former partner at Ackman’s Pershing Square Capital Management, launched Marcato in 2010 with seeding from Blackstone and quickly took off, nearly doubling assets in 2013. Marcato’s decline is entirely from redemptions, largely from funds of funds, as the flagship fund is actually performing well. Although it lost 9.3 percent in 2015, it gained 9 percent last year. This year, the fund is up about 8 percent so far.

McGuire’s newest activist positions— in Deckers Outdoor Corp., which makes UGG boots and apparel, and Terex Corp., which manufactures cranes — have gained 44.45 percent and 67.45 percent, respectively, from his average purchase price, trouncing the S&P 500. But the attention has been on casual dining chain Buffalo Wild Wings, where he recently wrangled a board seat. So far, though, the position has been a loser. His stake is down almost 6 percent from his purchase cost of $138 per share.

In recent years, McGuire has been involved in a couple of other high-profile losers — auction house Sotheby’s International, which he exited with a 3.6 percent loss from his purchase price, and transactions processing company NCR, which had fallen 7 percent by the same measure when he left the board, then quickly sold out. Overall, however, his 12 activist plays’ gains have almost doubled the broader market, with an average gain of 30 percent.

McGuire declined to comment.

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Third Point, a $18 billion activist hedge fund founded by billionaire Dan Loeb, has taken a massive stake in Nestlé.

While Third Point owns only about 1.4% of the Swiss company – Third Point's 40 million shares are worth more than $3.5 billion – it's one of the biggest activist plays ever.

New York-based Third Point raised $1 billion specifically for the Nestlé investment, creating the firm's first-ever special purpose vehicle, which has since closed, according to a person familiar with the situation.

Third Point has been raising fresh money from investors since last year, an infrequent move for the fund, people familiar with the matter previously told Business Insider. The capital raising has gone towards the Nestlé vehicle as well as the firm's main fund, the person close to the situation said.

In turn, Third Point's assets have steadily grown this year as it continues to raise money. While some of those gains are related to the performance of Third Point's main fund, which has risen 10% net of fees this year, the firm currently manages around $18 billion, up about $3 billion from the start of the year, the person close to the firm said.

Nestlé is the largest position Loeb has ever taken and the biggest company his fund has ever gone after, per Bloomberg. Nestlé has a market cap of about $265 billion.

The company is behind a slew of familiar candies, such as Butterfinger, Raisinets, Baby Ruth and KitKat, as well as Gerber baby food and Nescafé. The company said earlier this month it may sell its US confectionary business. 

Here's a roundup of Third Point's thesis, according to a letter that the fund sent to investors on Sunday, June 25. Emphasis added:

• Nestlé works within a number of "advantaged categories including, coffee, infant formula, pet food and bottled water. Nestlé also has a strong footprint in emerging markets. The category and geographic mix of the portfolio is excellent and offers the company a long runway for growth as emerging market customers increase consumption and developed market consumers trade up."
• Nestlé has been underperforming its competitors, however. Here's Nestlé's performance, on a total shareholder return basis, per Third Point. 
• "Nestlé has fallen behind over the past decade in an environment where growth has slowed due to changes in consumer tastes and shopping habits, as well as an influx of new competition from smaller, local brands."
• "Third Point invested in Nestlé because we recognized a familiar set of conditions that make it ripe for improvement and change: a conglomerate with unrealized potential for margin improvement and innovation in its core businesses, an unoptimized balance sheet, a number of non-core assets, and a recent history of meaningful under-performance versus peers."
• Third Point is happy with Nestlé's CEO, Ulf Mark Schneider, who the company hired last year. However, the hedge fund thinks that "in order to succeed, Dr. Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company’s prior leadership and resulted in its long-term underperformance."
• Third Point has hired Jan Bennink, an expert in the packaged goods space, to advise on the investment.

Here is what Nestlé has to do, per Third Point:

• Adopt a formal margin target. Third Point thinks that Nestlé should be able to improve its margins by as much as 4% over the next several years.
• Return capital in conjunction with a formal leverage target. "Nestlé should set a target of at least 2.0x, which would better optimize the company’s cost of capital. Getting to 2.0x and staying there would also produce enormous capacity for share buybacks over time."
• Re-shape its portfolio. Nestlé has more than 2,000 brands in food and beverage and health science. "Management must... strategically reduce exposure" to businesses that are not "key pillars of growth."
• Sell its stake in L'Oréal. "The company acquired 29% of L’Oréal, the global leader in beauty products, in 1974 and sold 6% in 2014. This has been a superb investment, and the remaining 23% stake is equivalent to more than $25 billion, or roughly 10%, of Nestlé’s market capitalization today. However, having L’Oréal in the portfolio is not strategic and shareholders should be free to choose whether they want to invest in Nestlé or some combination of Nestlé and L’Oréal ... We also believe that the L’Oréal stake could be divested via an exchange offer for Nestlé shares that would accelerate efforts to optimize its capital return policies, immediately enhance the company’s return on equity, and meaningfully increase its share value in the long run as earnings improve over a reduced share count."

Nestlé, in an emailed statement, said: "As always, we keep an open dialogue with all of our shareholders and we remain committed to executing our strategy and creating long-term shareholder value."

SEE ALSO: Dan Loeb's Third Point is looking to win fresh money

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How low can the VIX go?

That seems to be the question hedge funds are asking themselves as they continue to bet that the so-called stock market fear gauge will fall further from current near-record-low levels.

Positioning on VIX futures, which allow investors to bet on whether or not the stock market will see big price swings, is now the most bearish on record, according to Commodity Futures Trading Commission data going back to 2004.

And a bet against the VIX generally translates to a bullish wager on the S&P 500, since the VIX and the S&P 500 tend to move in opposite directions. That means investors are the most confident about further gains in stocks than at any point in more than a decade, at least according to this measure.

It's the latest optimistic signal being flashed by a seemingly unstoppable stock market that's more than eight years into its latest bull cycle, the second-longest on record. Less than three weeks ago, the CBOE Equity Put/Call Ratio fell to its lowest level of the year, 20% below the measure's bull market average, implying that traders are making a small number of bearish bets compared to bullish bets.

Amid the apparent lack of worry, not everyone is convinced.

To JPMorgan's quant guru Marko Kolanovic, the current low-volatility environment is a disaster waiting to happen. What worries Kolanovic, the firm's global head of macro quantitative and derivatives strategy, is the ever-present possibility that the market will make an unexpectedly sharp move. He thinks that if the VIX, which is currently sitting near 10, spikes up to 20, the short-volatility strategy could be at risk of "catastrophic losses."

Still, equity experts around Wall Street aren't sounding the alarm bells yet. They see the S&P 500 ending the year at 2,414, less than 0.1% from last Friday's closing price, according to a Bloomberg survey of 19 strategists.

In other words, they see the market sitting still. An ideal situation for those betting against the VIX.

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Robert Soros, the eldest son of George Soros, is stepping down as deputy chairman and president of Soros Fund Management.

Soros, 53, who will remain an owner at the firm, will set up Soros Capital to look at illiquid investments, including venture capital, a spokesman said.

Robert Soros announced his departure in a note to colleagues Monday morning, June 26. He wrote that he wished "to pursue my own interests more directly through the creation of Soros Capital. Dawn Fitzpatrick is providing solid leadership to the investment team and I have enormous confidence in David Milich, who will assume many of my day-to-day responsibilities."

Milich joined the fund four years ago as chief operating officer and Fitzpatrick became the firm's chief investment officer earlier this year.

In a statement, George Soros said that his son "has done an outstanding job in preparing [Soros Fund Management] for its next phase. I look forward to his continued involvement and wish him the greatest success in his personal ventures.”

George Soros, the Hungarian-born founder of Soros Fund Management, known as the man who 'broke the Bank of England' by shorting billions of pounds in 1992, promoted Robert as chief investment officer in 2004 after the investment firm suffered churn in its top ranks.

Robert, a literature graduate, stepped down from the role in 2006 and stopped trading for the fund around five years ago but continued to manage his own money.

Soros Fund Management recently boosted its stake in Goldman Sachs Group by nearly 40 percent during the first quarter and bought shares in Snapchat's parent, Snap Inc.

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2016 was a tough year for hedge funds. 

The industry as a whole only delivered a 5.4% return for clients, well below the S&P 500's return of 11.9%, according to data from eVestment.

Poor performance and high fees drove money out of the money managers' funds, with about $70 billion pulled out of the funds last year, the biggest drop since 2009, according to data tracker HFR.

But not all firms saw their funds shrink, according to Institutional Investor's Alpha's recently released 2017 Hedge Fund 100 list. The annual list, which ranks the world's largest hedge funds by assets, shows that many of the top funds' assets have grown by double digits. 

Ray Dalio's Bridgewater Associates, a Connecticut-based firm with $122 billion in hedge fund assets under management, took the top spot on the list. Its hedge fund AuM at the beginning of 2017 were up about 17% from the same time last year. 

The funds that witnessed the most impressive growth, according to the list, were so-called quant funds. Such funds rely on algorithms or computer programs to guide their investing. Renaissance Technologies, one of the best known and oldest quant firms, saw its assets balloon by 42%, year-over-year. It moved up to the fourth spot on the list, up from twelfth last year. 

Two Sigma, another quant fund, snagged a higher spot on the list. Its assets under management are up 28% from last year. 

Here are the top 11 funds by hedge fund assets, according to the full list. 

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11. Elliott Management - $31.3 billion

10. Winton Capital Management - $32 billion

9. Och-Ziff Capital Management - $33.5 billion

The stock market's seemingly endless gains don't make much sense, according to a $3.7 billion hedge fund.

More than eight years into the market's latest bull cycle, the second-longest on record, stocks have rallied notably since President Trump was elected in November.

"People are just paying significantly more for assets without any fundamental improvement in those assets," Tourbillon Capital's Jason Karp wrote in a recent letter to investors that was reviewed by Business Insider.

Karp was referring to stocks' gains in the first quarter, which were heavily marked by tech. He wrote that "greater than 100% of the return came from multiple expansion without any corresponding revision upwards in earnings."

He added: "It was often the most crowded securities with the most undeniable themes that fared the best in Q1, as big multiples got bigger while fundamentals remained the same."

Karp highlighted Apple as an example, which recently surged "without any notable improvements in consensus future earnings or prospects." By contrast, Karp's fund owns several long positions that "have materially improved their future earnings/EBITDA potential" yet have not gone up in price.

Tourbillon's main fund, which manages about $2.9 billion, was down 4.1% net of fees through May of this year, according to investor documents. The fund has a 19.6% net exposure to the market. Tourbillon managed $3.7 billion as of February this year.

Stocks have continued their upward gains since Karp wrote his letter several weeks ago. Investors have placed their most bearish position ever on VIX futures, signalling a bullish wager on the S&P 500.

Karp is optimistic about his firm's long-term investment strategy, however, even as money flows to "fast-money" and data-driven strategies. 

"One of today’s greatest market inefficiencies may stem from the scarcity of capital devoted toward long-term, fundamental investing," Karp wrote. "The risk/reward of holding stocks decreases with time horizons, and our work continues to support the fact that fundamentals grow more, rather than less effective as time horizons increase."

The rise of big data has brought "more dislocations resulting from market participants putting undue emphasis on near-term trends while often times ignoring the secular and cyclical forces at play over the medium to long-term," he wrote.

Tourbillon is finding opportunities investing in companies going through so-called special situations – mergers, bankruptcies, and the like – partly because of how quant strategies work.

"Many quantitative strategies purposely exclude issuers with limited price history like IPOs/Splits/Spins/etc. from their algorithms," he wrote, adding that "certain special situations are initially excluded or removed from indices, temporarily reducing the influence of passive investors ... That leads to structural inefficiency."

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LONDON (Reuters) - Hedge funds have significantly stepped up bets against Britain's traditional high street retailers, as the sector struggles with online competition, worries about a stretched consumer and weakening sales and profits.

The risks were on full display on Tuesday when shares in Debenhams slid more than 3 percent to an eight-year low following a weak trading update and a warning on UK sales.

Britain's upcoming exit from the European Union, an inconclusive general election, and worrying data on consumer spending have muddied the outlook for bricks-and-mortar retailers like Debenhams, Marks & Spencer and Next, whose share prices have fallen this year.

Short-sellers, who borrow shares in a company before selling them into the market, hoping to buy them back at a lower price in the future and pocket the difference, are doubling down.

Of the 10 most-shorted stocks in the UK, five – M&S, Debenhams, Pets At Home and grocers Morrisons and Ocado – are now in the retail sector, according to data from UK regulator the Financial Conduct Authority.

This comes after sofa retailer DFS warned on June 15 that it would miss expectations on profits this year, blaming an uncertain political and economic outlook, and that the lack of demand was “market-wide”.

DFS's comments sent a stock index tracking Britain’s retailers down 4.1 percent on June 15 – its biggest one-day fall since Britain voted to leave the European Union in June 2016.

That was followed a day later by Amazon announcing its intention to buy Whole Foods , stoking fears the online giant may push further into retail.

Analysts and investors are braced for further weakness.

“Traditional clothing retailers are an area where I find it much harder to see how the pressure is going to go away,” said Matthew Tillett, a fund manager at Allianz Global Investors.

“I am always asking, ‘is it Amazon-able?’ If the answer to that question is ‘yes’ it is always going to be hard for me to buy a bricks and mortar retailer.”

UK retail sales fell more sharply than expected in May, data from the Office of National Statistics showed on the same day as the DFS profit warning, with non-food retailers particularly badly affected.

“It is a tough backdrop,” said Tineke Frikkee, a fund manager at Smith & Williamson. It owns shares in M&S and Debenhams, both of which have seen increases in short interest in the last week. “The response shows you the glass is half empty on these stocks,” Frikkee said.

In particular, DFS’s profit warning and Amazon’s expansion have coincided with a spike in short-selling in M&S and Debenhams.

Of the 11 funds short M&S’s shares, six increased their positions on June 15 and 16, according to regulatory filings. Short interest in the retailer, which primarily sells clothing and food, has risen more than five-fold to 10.2 percent since the start of the year.

Hedge funds shorting M&S include Marshall Wace, which has a 2.3 percent position in the company’s shares and is also shorting pet food retailer Pets At Home. At around 130 million pounds ($166 million), the bet against M&S is one of the fund’s largest shorts in the UK. Marshall Wace declined to comment.

Debenhams, already one of the UK’s most shorted stocks, has seen short interest nearly double since the start of the year to reach an all-time high of 11.9 percent.

Odey Asset Management, run by billionaire investor Crispin Odey, increased its position to nearly 4 percent of the company’s shares on June 15, according to filings. The firm did not respond to requests for comment.

Shorting the sector has been a successful trade so far in 2017: Pets At Home has fallen 33 percent and Debenhams has lost more than a fifth of its value this year. M&S is down 3 percent.

(Reporting by Alasdair Pal, Editing by Vikram Subhedar and Susan Fenton)

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Nestlé, the Swiss food and candy company that has been targeted by an $18 billion activist fund, says it will buy back roughly $21 billion of its shares.

In a statement, Nestlé said that the share buyback program of up to CHF 20 billion (roughly $21 billion) would be completed by the end of June 2020. The program is slated to start next week, on July 4.

"In the context of low interest rates and strong cash flow generation, share buybacks offer a viable option to create shareholder value," the company said.

Earlier this week, Third Point, a New York-based activist fund founded by Dan Loeb, announced that it was targeting the $265 billion Swiss company in its biggest bet yet. The fund had asked for Nestlé to engage in a round of share buybacks in conjunction with a formal leverage target.

A spokesperson for the firm declined to comment on the buybacks.

Third Point raised $1 billion specifically for the Nestlé investment, creating the firm's first-ever special purpose vehicle, which has since closed, a person familiar with the situation earlier told Business Insider.

Third Point has been raising fresh money from investors since last year, an infrequent move for the fund, people familiar with the matter previously said.

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