Saturday, March 04, 2006

Philippe Jabre: The Return of the Hedge Fund "Legend"

The Financial Times published this article today praising the talent and survival skills of Philippe Jabre, one of the leading hedge fund managers in the world:

"An unbeaten risk-taker
>By Stephen Schurr

Even for the most extra­ordinary skier, neither acumen nor experience can prepare oneself for the mortal threat of an avalanche. Philippe Jabre learnt this last year.

Last February, Mr Jabre, then the star trader for London hedge fund GLG Partners, was skiing in Courchevel with his wife Zaza, a client and two guides when a huge mass of snow rapidly descended upon them. When the avalanche hit, his wife was submerged. Mr Jabre and his companions spent 23 minutes trying to find her and dig her out, with the odds of her survival dwindling by the minute. Miraculously, she survived, capping her recovery in January with a return to the slopes at the French ski resort where they own a home.

Mr Jabre also faced down two powerful forces in his professional life in 2005 that threatened to submerge him. The first was a near-cataclysm in the credit market that put his GLG Market Neutral fund down 18 per cent through May. The fund posted a remarkable recovery, capped by a double-digit return in December that put it up 5.47 per cent for the year.

The second was the UK Financial Services Authority’s investigation into his February 2003 trades in Japan’s Sumitomo after he received information about a coming convertible-bond deal from Goldman Sachs. It was the most high-profile regulatory probe in the history of the London hedge-fund community.

The latter reached its conclusion this week, with the FSA’s Regulatory Decisions Committee deciding to fine Mr Jabre and his former firm GLG £750,000 (€1.09m) apiece, determining that the trader and, in turn, his firm violated market conduct and committed market abuse.

The fine against Mr Jabre, born 45 years ago to a prominent Lebanese Catholic family, was the largest ever meted out to an individual. Despite the penalty, the RDC ruling marked the third time Mr Jabre evaded a dreadful fate. The judicial panel decided that Mr Jabre did not deliberately commit market abuse, ruling that he did not violate the FSA’s Principle 1 governing market integrity. Against the FSA regulators’ recommendation, the RDC opted not to ban or suspend Mr Jabre.

That he emerged with his licence intact can be seen as miraculous in some regards. When the two-year investigation came to light last year, it seemed to many in London’s hedge fund set a clear-cut case that would end with Mr Jabre’s head on a platter. As the investigation wore on, the details became less clear, as is often the case regarding the nebulous terrain of information exchanges between investment banks and hedge funds.

The decision ensures that Mr Jabre, for two decades a prominent fixture in London’s investment community, will have a third act – the first being the spectacular success, the second his near-demise under regulatory scrutiny and the third his potential return to running money. The course of the third act may not go smoothly. He will not be returning to GLG and he must re-register to run money if he plans to start a new fund – meaning the FSA once again holds the key to his future.

Mr Jabre was not available for comment. But several prominent individuals in the London hedge fund community said that whatever the outcome, the third act will be as closely followed as the first two because of his stature.

“Philippe is a hedge fund legend,” said a manager at a London fund that operates some strategies similar to GLG. “He is a born money-maker, and there are very few of those out there, even in the hedge fund world.”

Mr Jabre’s personality, according to those who know him well, is that of the quintessential hedge fund manager, only more so. The price of a ticket to this world is an extreme degree of competitiveness, high intelligence and innovative thinking. Mr Jabre established a reputation at a young age in the London investing community as both a risk taker and a brilliant trader. He earned an MBA from New York’s Columbia University in 1982, trained at JPMorgan and soon made his way to BAii, a division of BNP, the French Bank. In his 16 years there, he specialised in the budding market for convertible arbitrage, a strategy that involved buying a company’s convertible bonds and selling short the company’s stock.

Mr Jabre acquired a reputation among critics for operating aggressively. In 1997, he joined GLG Partners, a hot two-year-old hedge fund started by former Goldman Sachs bankers Noam Gottesman, Pierre LaGrange and Jonathan Green. It was developing a reputation as a player in the burgeoning London hedge fund industry, in part on the strength of its access to new offerings, and Mr Jabre’s convertible arbitrage brought a new dimension. “It’s ironic now, given the investigation, but one of GLG’s big moves toward legitimising themselves as a firm was getting Philippe,” said one hedge fund manager who was active in the 1990s.

Mr Jabre’s Market Neutral fund grew to more than $4bn at its peak, returning 23.1 per cent returns on average after fees between 1998 and 2005. According to individuals familiar with his investing style, Mr Jabre’s ability to beat the benchmark by 18 percentage points a year on average was his push to move away from convertible arbitrage and toward more opportunistic trading across various asset classes.

GLG helped Mr Jabre, who has four children, become a rich man, with his personal fortune estimated at £180m-£200m, enabling him to concentrate on charitable efforts, including a focus on Lebanese causes.

However, the two-year FSA investigation caused an irreparable strain in the relationship between GLG’s senior ranks and Mr Jabre. Individuals familiar with the firm say GLG came to view Mr Jabre as someone who took unnecessary risks. One individual described the rift as akin to “a rock group that becomes huge, where their success leads to their eventual break-up”.

While Mr Jabre officially remains on leave, individuals say he will not return to GLG. Mr Jabre will almost certainly look to raise money for his own firm. Some individuals say the FSA could decide to block any attempt by him to set up a new fund in London. But other hedge fund industry participants, however, say the FSA would grant him approval since the RDC did not suspend him.

And no one is questioning Mr Jabre’s continued ability to attract investors. Said one hedge fund manager: “Somebody was asking me the other day whether he could raise money if he starts running his own hedge fund. My God, he’ll almost be killed in the rush.”"

Wednesday, March 01, 2006

Even when they talk, the heart of Beirut stops

Due to very tight security, the national dialogue that will start tomorrow has brought downtown Beirut to a standstill for the next 10 days.

The government will not compensate local businesses and the only beneficiary so far is the Etoile Suite hotel that is selling its rooms to the participants at prices ranging from $250 to $1,500 per night.

Even the Ministry of Finance, which is located in Riyad El Solh Square, will be shut for the period and its staff will be relocated to other branches.

Politically, the most important preliminary meeting was held last night in Qoraytem between Saad Hariri and Hassan Nasrallah and it lasted seven hours, according to Future TV.

Furthermore, unless the dialogue is fruitful, Walid Jumblat will attend the national conference that will be held in the Parliament for only four days and then he will be leaving for the United States where he is due to meet among others, US Secretary of State Condoleezza Rice and World Bank President, Paul Wolfowitz.

The most important points that will be discussed at the conference will be the removal of President Emile Lahoud, his eventual successor, Hezbollah’s weapons and the relations with Syria.

Most columnists today were pessimistic about the outcome but they added that at least it is a start.

Tuesday, February 28, 2006

Rap(p)ing Lebanon

The Sun reported today that Mohammed Kamel Mostapha, 24, son of Abu Hamza, a cleric with a hook instead of a hand who was jailed in the United Kingdom for insighting hate, is pursuing a solo rap career. He had launched the Lionz Of Da Dezert band last year and is now aiming for solo success.

Mostapha sings the following lyrics:

"I was born to be a soldier,
Kalashnikov in my shoulder,
peace to Hamas and Hezbollah,
that’s the way of the lord Allah . . .
we’re Jihad through,
defend my religion with the holy sword."
(Mostapha/Al Ansari aka MC Hamza)

If only some of the leaders we know could rap as well as MC Hamza, they would probably sound something like this:

I am the Bey I am Jumblat
I look thin but my bank account is fat
I shift right and I shift left
But I'm really good at pure theft
I took from Damascus and from Teheran
I took from the Saudi man and never had a plan
As long as my cash flow is never low
I don't care about your children, yo!

(MC FrogEyes)

Burn Solidere burn the rich
I'll do it if you don't gimme this bitch
She's the presidency and she's mine
I'll audit you all and I'll call you swine
You're maybe criminals but I am crime
You must understand that bitch is mine

(MC General Nutter)

S.A.A.D., Saad is my name
I don't know how I got in that messed up game
I was partying all night
Never been in a fight
Until they killed my dad
And they made me mad
And Like Samson in the Bible whose hair was cut
I'll bring the temple down on everybody's butt

(MC Truth)

I’m the president I’m the king
I’m in awe of my power and my bling
My master is gone and my minions are in jail
I stashed a few millions and I’m ready to bail
I can barely speak but my son is rich
Let Aoun take the chair and deal with this bitch

(MC Mini Prez)

The dictator that’s me and I am the heir
Freddie Kruger was mad but I am your nightmare
The neighbour with the bomb that’ll blow you away
I have servants in your house that’ll make you pay
Condi Bush Chirac, you think they’re your friends
I’ll give them my soldiers in Iraq and make you beg for amends

(MC Scary Neighbour)

I’m the only warlord that paid the price
I admit I killed and wasn’t very nice
Now I’m a new man you can see me on TV
Night after night on the L.B.C.
Preachin’ a wisdom that I only understand
I even joined the 14th of March band
The sea is in front of me and my enemy is behind
The presidency is not Aoun’s she’s mine mine mine

(MC InMate)

Thanks MC Hamza for supporting me
But crazier than thou I will be
I’m not paranoid ‘cause Zion is everywhere
Just listen to your prime minister Tony Blair
My weapons are mine Jumblat can choke
Even if Lebanon will soon go broke
Paris one or two Beirut one or three
I only get my orders from Khamanei

(MC Hammer, God’s Hammer)

Monday, February 27, 2006

Dialogue or Cockfight?

How can Lebanese secterian leaders with egos of gamecocks meet and start a national dialogue this week? They have always been better at cockfighting than at peacemaking.

Anyway, the following is my definition of a Lebanese cockfight as compared to Wikipedia’s definition:

A Lebanese cockfight is a contest held in a ring called a cockpit, (in this case Lebanon), between warlords. Warlords are not your average Hassan, George, Omar or Marwan. They are specially bred and trained for increased stamina and strength. Morality and feelings are cut off of a young sectarian leader. If left intact, it would be a disadvantage during a strife.

Hassan, Michel, Walid and Samir all possess an inherent aggression toward one another and towards all males of the same party.
Cockfighting is considered a traditional sporting event by some in Lebanon, and an example of human cruelty by others.

Usually Syrian, Iranian, US and French wagers are made on the outcome of the match, with the surviving or last-bird-standing being declared the winner, but that never happens in Lebanon where everyone loses.

In some regional variations, the leading cocks are equipped with secret services tied directly to them. The secret service or Mukhabarat is a group that uses curved, sharp and cruel ways to subdue the opposition.

In many parts of the world cockfighting is illegal.

Regional and international proponents of Lebanese cockfighting believe in breeding, arming and financing warlords to fight their fights.

Not everyone feels this way, however. Those against cockfighting in Lebanon maintain that it is a perversion of the natural behaviour exhibited by politicians in civilized countries.

Most politicians in the world will naturally fight over government contracts, influence, ministerial or governmental appointments, parliamentary seats, territory or mates. But the fight is done through ballot boxes and does not stress the public and ruin the economy.

Lebanese politicians are trained to view their opponents as potentially deadly predators, and they react as such when placed in a fighting arena, where they are usually forced to fight until they can do so no more.

For a long time, it was believed that our fighting leaders could not be retrained to live peacefully. When they saw other leaders, they panicked and attacked.
15 years ago, though, in a small sanctuary in Taef, the world community tried to rehabilitate them.

That operation, however, necessitated important dosages of international pressure, cash and most importantly a Syrian gamekeeper.

Now our local cocks are facing one another again around a table without the cruel gamekeeper or the rich cash feeder. And the 4-million- Lebanese-question is: are they truly rehabilitated?

Sunday, February 26, 2006

A Letter to the Son

A year after and the road is still blocked

The green "Normandy"

Dear Saad,

Your father did not die because he was a Sunni, a billionaire and a friend to the powerful of this world. Your father died because he was a true Lebanese.

Your father was a machine of a man whose life was filled with good deeds and great achievements but also with controversial economic and business decisions.
He was a doer and a positive force in Lebanon's politics and compared to the present leaders, he was great.

Lebanon was like the "Normandy" mountain of rubbish when your father became Prime Minister. Today the greenest grass in Beirut is to be found there and it will soon become a public garden.

You could never be your father, because he was born poor while you were brought up in one of the richest families in the world.

I hope that you do not think that because the Presidents of France and the US are receiving you that you are a leader. Do not forget that they are receiving you because you are your father's son.

Your father has become an icon. You have been chosen to represent this legend. You have a lot of good will both locally and internationally, do not waste it.

Your father had said, according to an interview published for the first time a few weeks ago in Al Hayat newspaper, that spent US$150 million per year. $30 million of which were for personal use and the rest went to "help people" or, as I have understood, went to boost his political influence.

I do not think that you can spend these sums or even a fraction of them, because of several factors, the most important one being that your father knew that he could always win back the millions.

Your father also knew how to win people by a simple gesture, a few simple words or a large smile. His charisma was natural. Your father commanded respect because he achieved more than many in Lebanon. This respect has flowed onto you. And to keep it you will have to find your own way.

Your father was a good man, a giving man who sometimes, due to political or financial circumstances, used dirty tricks to get to his goals. He was a peaceful man who personally never hurt anyone physically or financially, but some people profited greatly from his friendship and trust at the expense of transparency and clean government.

Your father was not a warlord like Walid Jumblat, Nabih Berri, Michel Aoun, Hassan Nasrallah and Samir Geagea. He started off as a sectarian leader with national aspirations and ended as a true Lebanese leader. He died a Lebanese hero.

His death brought about the independence of Lebanon.

He surely "educated [more than 30,000 pupils], built [Solidere, roads, communications etc.] and liberated" but his policies left Lebanon with a debt of US$36 billion.
The Syrian hegemony and the whole Lebanese political and military establishment certainly caused this debt, but Rafic Hariri's credibility and impatience to rebuild Lebanon facilitated the operation.

However, he was the only one who really tried to salvage Lebanon's financial straits with the Paris donor conferences. He worked hard to boost Lebanon's economy again but the same sectarian and military establishment he helped enrich stood in his way.

He was killed because of Lebanon. Because of his dream.

Therefore I urge you Saad not to kill his dream of a great Lebanon. Follow your father's path of economic development.

Surround yourself with intelligent advisors such as the late Basel Fleihan and hold on to PM Fouad Seniora. Sycophants, vultures and yes-men are dangerous and can make you fail. Get rid of them.

Get people who think, work and achieve. Not people who talk hate, are lazy and make you spend useless sums of money.

Be noble, charitable and polite because you were raised by a Lebanese martyr and impose these virtues on all the Members of Parliament, journalists, allies and friends who claim to be on your side.

Do not let your instincts for revenge and glory guide you. Study your father's achievements, understand him but do not copy him and try to accomplish his vision of Lebanon your own way.

Remember that when your father took over there were more than 300,000 victims in Lebanon. Revenge was out of the question, and his message was all about unity and wealth creation.

Lebanon has a chance to begin anew. 4 million Lebanese cannot dwell one more day on the past. Lead the way and start by a symbolic gesture: open the road where your father was killed. Let the traffic flow. Let Lebanon rise.

Dusty and Foggy Beirut

A foggy morning follows a dusty night

A thick cloud of dust engulfed Beirut last night and this morning it is fog's turn. Planes, however, are still landing at the airport.
Amidst the sandy mist yesterday, families, young people and tourists filled the streets, sidewalks and cafes of downtown Beirut.
The heart of Beirut is beating again. The will to live and enjoy life is stronger than the destructive instincts of our leaders or some of our TV stations.

Indeed, Samir Zaiter, a self-appointed clairvoyant, was on NTV last night predicting gloomy days of civil strife after attempts on the lives of Jumblat and Berri. And when the pretty NTV host asked the Norman Bates looking Nostradamus from Baalbek to end the program on a good note, Zaiter said that "God willing the Lebanese will avert war, but it will happen anyway".

Aoun, Taxi of the Republic

I can imagine Michel Aoun as a butcher in a shop somewhere in Mount Lebanon, a restaurant owner in Baabdad or better yet a taxi driver, but I cannot imagine him President of the Republic.

Yet again today he talked about "burning Solidere". Is he that egocentric and irresponsible or is his diabetes affecting his thoughts? Didn't his intelligent advisors tell him that Lebanon lives on tourism and services or did he ever hear Charles De Gaulle say that he will burn Paris during the 1968 riots?

Aoun is no De Gaulle. Aoun is the less intelligent Lebanese version of Jean Marie Le Pen, a populist appealing to the basest instincts of his constituents.

Aoun has no shame and nothing can stop him from getting to the Presidency. He is uncontrollable and dangerously narcissistic.

He is no better than Geagea, Jumblat, Nasrallah and all the semi-gods that our Lebanese tribes cherish.

We had enough of them and their visions of sacrifice and death, their daily lectures, their ugly faces and their furious eyes.

We want simple politicians, with simple programs that will improve our quality of life. We want to live, work, laugh and do what normal people do in normal countries.

We want people like Aoun to beep and tell us: "taxeee?"