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When the Feds Went After the Hedge-Fund Legend Steven A. Cohen - The New Yorker
Inside the government’s nearly ten-year battle against one of the most powerful men on Wall Street.
By Sheelah Kolhatkar
Wall_Street  Preet_Bharara  insider_trading  hedge_funds  SAC_Capital  Steven_Cohen  white-collar_crime  nonpublic  Sheelah_Kolhatkar 
january 2017 by jerryking
Traders Seek an Edge With High-Tech Snooping -
Dec. 18, 2013 | WSJ | By Michael Rothfeld and Scott Patterson.

A growing industry uses surveillance and data-crunching technology to supply traders with nonpublic information.

Genscape's clients include banks such as Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Deutsche Bank AG, hedge funds including Citadel LLC and large energy-trading outfits such as Trafigura Beheer BV. Surveillance and analysis of the oil, electricity and natural-gas sectors can run Genscape clients more than $300,000 a year.
surveillance  data_driven  slight_edge  traders  hedge_funds  sleuthing  Genscape  sensors  commodities  corporate_espionage  competitive_intelligence  scuttlebutt  due_diligence  market_research  exclusivity  investment_research  research_methods  LBMA  nonpublic  primary_field_research  banks  Citadel  oil_industry  natural_gas  snooping  alternative_data  informational_advantages  imagery  satellites  infrared  electric_power 
december 2013 by jerryking
Prudential Research Model May Have Been a Dinosaur
June 8, 2007 | WSJ | Scott Patterson.

The decision by Prudential Financial PRU +0.70% to close its stock-research arm doesn't mean research is doomed, but it does signal an important shift. Deep-pocketed investors such as pension funds and hedge funds are hungry for exclusive, specialized research that can give them an edge over competition.

Experts say Prudential's research had become too widely distributed to draw enough interest, or dollars.

"The notion of widespread dissemination of a recommendation, that model is 40 years old," said Mike Thompson, director of research at Thomson Financial. "If you talk to the hedge funds, what they want are ideas that are actionable that not everyone gets."

The trend has given rise to independent, specialized research outfits. There are 63 independent research firms today, up from 14 in 2000, according to Thomson Financial.
equity_research  Wall_Street  investment_research  hedge_funds  pension_funds  exclusivity  nonpublic  slight_edge  proprietary  hard_to_find  novelty  interestingness  actionable_information 
february 2013 by jerryking
Go Ahead, Take a Risk
June 22, 2004 | WSJ | By ADRIAN SLYWOTSKY

What are the risks you should be taking but aren't? Most managers treat risk as an unwanted byproduct of the business. They think narrowly of financial, operating, and hazard risks, such as currency fluctuations, employee fraud, and earthquakes. And they defend themselves through practices like hedging, internal controls, and insurance.

But disruptive strategic risks can be a much larger source of value destruction for a firm. I looked back to the bull market of the 1990s to analyze movements of the Fortune 1000 stocks; even then, before the market collapsed, 10% of stocks lost over one-quarter of their value in a single month, primarily because of strategic-risk events.

The most successful companies do not try to simply minimize strategic risk; they embrace such risk by making prudent bets in their growth-oriented strategies. Strategic risks include not just the obvious, high-probability events that a new ad campaign or new product launch will fail, but other less-obvious risks as well: Customers' priorities will change quickly -- as when baby-boomer parents quickly migrated from station wagons to minivans, catching most automakers off guard. New technology will overtake your product -- as mobile telephony has stolen market share from fixed-line voice. A one-of-a-kind competitor will render your business model obsolete -- as the Wal-Mart tidal wave has washed over mid-range department stores.

Although insurance and hedging can't address strategic risks, there are an array of countermeasures that can, including these three:
1) Smart sequencing for new growth initiatives. Look for incumbents that are moving deliberately, leveraging existing assets and customer relationships to gain the experience, knowledge, and reputation necessary to take the next step with confidence.
2) Proprietary information to reduce the risk of each new initiative. Gather and generate proprietary information that produces a depth of insight into the customer's needs and activities that traditional suppliers cannot match. This will make you a supplier of choice, reducing bidding volatility and allow you to plan with greater certainty.
3) Double betting to minimize the risk of obsolescence. When several versions of a new technology are competing to become the standard, it's impossible to predict which will prevail. So smart managers make double bets. Betting on both Windows and OS/2 positioned Microsoft to be the winner, regardless of which operating system prevailed.

Traditional risk management seeks to contain losses. But that's just one-half of the growth equation. By embracing strategic risk, Cardinal, JCI, and other risk-savvy companies have raised their growth potential in addition to reducing their economic volatility. That's important at a time when aggregate market growth is sluggish: The biggest risk of all is not to take the right growth risks for the business.
leaps_of_faith  Adrian_J._Slywotzky  risk-taking  proprietary  sequencing  scuttlebutt  information  growth  strategic_thinking  Mercer  Oliver_Wyman  product_launches  nonpublic  low_growth  slow_growth  insights  customer_insights  value_destruction  disruption  insurance  new_products  obsolescence  countermeasures  volatility  customer_risk  one-of-a-kind  hedging  overly_cautious  risk-aversion  de-risking  double_betting  risk-management  bull_markets  customer_relationships  dark_data  risk-savvy  internal_controls  financial_risk  risks 
june 2012 by jerryking
How to Build Your Network
December 2005 | HBR | Brian Uzzi and Shannon Dunlap.

Strong personal networks don't just happen at the watercooler. They have to be carefully constructed.Networks offer three unique advantages: private information, access to different skills and power. Leaders see the benefits of working every day, but perhaps not pause to examine how their networks are governed....Here's how to strengthen your connections.

Paul Revere was an information broker, a person who occupies a key role in a social network by connecting disparate groups of people....Networks determine which ideas become breakthroughs, which new drugs are prescribed, which farmers cultivate pest-resistant crops, and which R&D engineers makes the most high impact discoveries....When we make judgments, we use both public and private information. These days, public information is readily available from various sources, including the Internet, but precisely because it is so accessible, public information provides a competitive advantage much less than usual. Privacy, however, gathered from personal contacts that can offer something unique that can not be found in public spaces such as the release of a new product, the novel software code, or knowledge of this what a particular investigator seeks in candidates. Private information, therefore, may provide an advantage for executives, but is more subjective than public information, because it usually is not marked by an independent third party, such as Dun & Bradstreet. Therefore, the value of your private information to others and the value of your private information depends on how much confidence exists in the network of relationships....the best way to have a good idea is to have a lot of ideas....And when you trade information or skills with people whose experiences differ from your own, you provide one another with unique, exceptionally valuable resources....Power was repositioned in the network's information brokers, who could adapt to changes in the organization, develop clients, and synthesize opposing points of view.
These brokers weren't necessarily at the top of the hierarchy or experts in the field, but they linked specialists in the firm with trustworthy and informative ties.
networking  social_networking  social_capital  HBR  howto  networks  nonpublic  confidence  slight_edge  proprietary  relationships  exclusivity  public_information  private_information  inequality_of_information  homogeneity  heterogeneity  dual-consciousness  power_brokers  network_power  personal_chemistry  personal_connections  judgment  prolificacy  subjectivity  information_brokers  intentionality 
march 2012 by jerryking
Rajaratnam: Relentless Pursuit of Data -
OCTOBER 24, 2009 | Wall Street Journal | by GREGORY ZUCKERMAN
and ROBERT A. GUTH. The power of the "edge," as Mr. Rajaratnam called
it, also was reflected in how Galleon was organized. At most hedge
funds, traders are supposed to simply execute a firm's trades, which are
dictated by analysts and portfolio managers. Galleon had a different
approach: putting traders in charge of their own capital. A trader who
showed promise would sometimes be given $25 million to $50 million to
invest in a semi-autonomous fashion. To be sure, gathering information
is the lifeblood of most hedge funds. But when it is material, nonpublic
information about a company, it can expose a trader to accusations of
insider trading.
insider_information  Wall_Street  insider_trading  information_flows  private_information  hedge_funds  Raj_Rajaratnam  slight_edge  nonpublic  traders 
october 2009 by jerryking
Prudential Research Model May Have Been a Dinosaur
June 8, 2007, WSJ letter to the editor by a Mr. Scot Patterson.
Points out that deep-pocketed investors such as pension funds and
hedge funds are hungry for exclusive, specialized research that can give
them an edge over competition.
hedge_funds  equity_research  due_diligence  scuttlebutt  exclusivity  ProQuest  private_information  inequality_of_information  slight_edge  nonpublic 
march 2009 by jerryking

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