Hedge Fund Secrets: At&T's Top Investors

AT&T is a major media company that provides broadband connectivity through its high-speed fiber and wireless networks. The company also owns WarnerMedia, which produces TV and film entertainment, including HBO Max. As of 2024, AT&T had reported consolidated revenues of nearly $169 billion for 2021.

Hedge funds are investment funds that employ complex trading and risk management techniques to improve investment performance and insulate returns from market risk. They are considered alternative investments due to their ability to use leverage and more complex investment techniques than regulated investment funds.

In the case of AT&T, the top hedge funds holding the company's stock include Vanguard Total Market, Vanguard 500, SPDR S&P 500 ETF Trust, and Fidelity 500 Index Fund. Additionally, hedge fund managers such as Michael Rockefeller, Jeffrey Altman, and Steven A. Tananbaum hold significant shares in AT&T.

Hedge funds are known for their aggressive investment strategies and ability to invest in a diverse range of assets. However, they are also associated with higher risks and are typically accessible only to institutional or accredited investors due to government restrictions and high buy-in amounts.

Who are the top hedge fund managers investing in AT&T?

According to TipRanks, the hedge funds that hold the most shares in AT&T are Michael Rockefeller, Jeffrey Altman, and Steven A. Tananbaum. In the last quarter, hedge funds increased their holdings in AT&T by 2.2 million shares.

AT&T is a major media company that provides broadband connectivity and owns WarnerMedia, which produces entertainment content via TV and film, including HBO Max. The company reported nearly $169 billion in consolidated revenues for 2021.

• Bridgewater Associates: Founded by Ray Dalio in 1975, Bridgewater Associates is the largest hedge fund in the world, with Dalio having a personal fortune of approximately $19 billion. The firm serves institutional clients and employs strategies such as Pure Alpha, Pure Alpha Major Markets, and All Weather.
• Renaissance Technologies: Founded in 1982 by James Simons, a mathematician and former codebreaker. Renaissance Technologies uses mathematical and statistical methods for its investment strategies. Their Medallion fund has one of the best track records in the industry.
• AQR Capital Management: Founded in 1998 by Cliff Asness, David Kabiller, John Liew, and Robert Krail. AQR offers its clients more than 40 diversified strategies across equity and alternative investments, applying academic research to identify long-term, repeatable sources of return.
• Two Sigma: Founded by John Overdeck, David Siegel, and Mark Pickard in 2001. Two Sigma employs research methods inspired by artificial intelligence, machine learning, and distributed computing to support its trading strategies. The firm seeks to consistently generate alpha in liquid global markets.
• Millennium Management: Founded in 1989, Millennium Management pursues a diverse array of investment strategies across sectors, asset classes, and geographic regions. The firm's four primary strategies include fundamental equity, equity arbitrage, fixed income, and quant.
• Citadel: Founded in 1990 by Kenneth Griffin, Citadel invests in various areas, including commodities, credit and convertibles, equities, global fixed income, and macro, and global quantitative strategies. Citadel is one of the most profitable hedge funds of all time, generating $16 billion in profits for its investors in 2022.
• Tiger Global Management: Founded in 2001 by Chase Coleman III, Tiger Global Management focuses on public and private companies in the global internet, software, consumer, and financial technology industries. The firm takes a long-term, fundamentally oriented approach to investment.

These hedge fund managers and firms are among the largest and most successful in the industry, with a significant presence in AT&T holdings.

What are the risks of investing in hedge funds?

Hedge funds have become a hot topic, with the number of funds growing exponentially and attracting billions in investment dollars. However, investing in hedge funds comes with several risks that should be carefully considered. Here are some of the key risks associated with investing in hedge funds:

Lack of Regulation and Fraud Risk

Hedge funds are not regulated like many other types of institutions, giving fund managers significant freedom in investment decisions. This lack of regulation also increases the risk of fraud, unethical behaviour, or misrepresentation of fund performance.

Investment Risk and Style Drift

The risk of losing some or all of the investment is always present. Hedge fund managers may employ strategies such as excessive leverage or stray from their stated goals to chase gains, increasing investment risk. Style drift occurs when a manager deviates from the fund's strategy to enter a hot sector or avoid downturns, which may not be in the investors' best interests.

Market Risk

Both equity and fixed-income funds are susceptible to overall market movements. Equity markets can be volatile and move quickly in either direction, especially during downturns. A diversified portfolio may not be enough to protect against a market crash, and widening credit spreads can hurt fixed-income fund performance.

Leverage Risk

The use of leverage is common in the hedge fund industry to magnify gains, but it is a double-edged sword. Even small unfavourable market movements can significantly impact a fund's returns, especially for funds heavily invested in commodities and currencies.

Operational Risk

Hedge funds often deal in over-the-counter (OTC) markets with tailor-made positions, making it challenging to value these securities accurately due to their illiquidity. Operational risk also includes shortcomings in policies, procedures, and activities, such as inadequate risk management systems or inefficient valuation practices.

Liquidity Risk

Hedge funds investing in complex and illiquid assets may struggle to liquidate positions rapidly without incurring significant losses during stressful market conditions.

Red Flags and Due Diligence

Investors should be vigilant for "red flags", such as inadequate risk management practices, lack of stress testing, and poor understanding of leverage. Due diligence is crucial, and investors should carefully review a fund's risk management policies, procedures, and track record.

In summary, investing in hedge funds carries various risks, including the potential loss of investment, market volatility, leverage exposure, operational inefficiencies, liquidity issues, and fraud. It is essential for investors to conduct thorough due diligence, understand the fund's strategies, and carefully evaluate the associated risks before investing.

How do hedge fund managers get paid?

Hedge fund managers make money through a variety of fees and percentages of profits. The typical fee structure is "2 and 20", meaning a 2% fee on assets under management and 20% of profits. This can be adjusted depending on the fund's performance, with a "high watermark" policy specifying that the fund manager will only receive a percentage of the profits if the fund's net value exceeds its previous highest value. This protects investors if the fund starts to lose money.

For example, if a hedge fund manages $1 billion in assets, it will earn $20 million in fees. If the firm makes 20% in profits and has no high watermark, the fund will earn $200 million x 20% = $40 million. However, if there is an 8% high watermark, the fund can only earn 20% on $120 million, resulting in $24 million in shared profits.

Hedge funds also charge a flat fee, which is typically 2% but can range from 1-4% depending on the fund. These fees are generally paid monthly or quarterly and help cover the daily expenses of running the fund.

The top-rated hedge fund managers include:

• David Tepper from Appaloosa
• George Soros from Soros
• Ray Dalio from Bridgewater Associates
• James Simons from Renaissance Technologies

The top 10 hedge funds holding AT&T as of their latest 13F filing are:

• Arrowstreet Capital Limited Partnership
• Moore Capital Management
• Maverick Capital Ltd
• Kahn Brothers Group Inc
• Wela Strategies, Inc.
• Gallacher Capital Management LLC
• EntryPoint Capital, LLC
• ESL Trust Services, LLC
• Platinum Investment Management
• Luke M. Babcock & Scott R. Hirsch
• Saybrook Capital /Nc

What are the fees and minimum investment amounts for hedge funds?

Hedge funds are generally inaccessible to most people due to government restrictions and high buy-in prices. Minimum initial investment amounts for hedge funds range from $100,000 to upwards of $2 million. They are also less liquid than stocks or bonds, and investors may only be able to withdraw their money after a certain time period or during specific times of the year.

Hedge funds also carry high fees. They typically charge an asset management fee of 1% to 2% of the amount invested, plus a performance fee of 20% of the fund's profit. These fees can eat into overall returns. This fee structure is known as "2 and 20". The 2% management fee is charged on the total assets under management, while the 20% performance fee is only charged when the fund achieves a certain level of profit. For example, if a fund with an 8% threshold generates a return of 15% for the year, the 20% performance fee will be charged on the incremental 7% profit above the 8% threshold.

Some investors consider the "2 and 20" fee structure excessively high, and in the wake of the 2008 financial crisis, an increasing number of investors have sought out hedge funds that charge lower fees. There are alternative fee structures available, such as "1.5 and 10" or discounted fees for investors who lock in their investments for a specified time period.

How do hedge funds compare to mutual funds and ETFs?

Hedge funds, mutual funds, and ETFs are all popular investment vehicles where investors entrust their money to fund managers who invest in different types of publicly traded securities on their behalf. However, there are some key differences in how they operate and who they cater to.

Hedge Funds vs Mutual Funds

Hedge funds and mutual funds have the same basic structure of pooled funds from multiple investors, which are then used to invest in securities according to a specific strategy. However, hedge funds are private investments that target high-net-worth individuals and require investors to meet specific accredited characteristics. Mutual funds, on the other hand, are regulated investment products offered to the general public and are therefore available to everyday investors. They are also more heavily regulated, with the Securities and Exchange Commission providing oversight through the Securities Act of 1933 and the Investment Company Act of 1940.

Hedge funds are known for their aggressive management strategies and use of higher-risk investments, such as options, leverage, and short-selling, with the goal of achieving higher returns. Mutual funds, in comparison, tend to be more conservative and focus on traditional investments, making them better suited for the average investor. Mutual funds also have more liquidity, allowing investors to redeem their units on any business day. Hedge funds, on the other hand, often have strict redemption rules, such as weekly, monthly, quarterly, or even annual redemptions, and may impose lock-up periods where investors cannot withdraw their money.

Mutual Funds vs ETFs

Mutual funds and ETFs are both popular ways for investors to diversify their portfolios. However, mutual funds are typically actively managed by fund managers who make decisions about buying and selling securities within the fund to beat the market. ETFs, on the other hand, are usually passively managed and track a market index or sector sub-index. Mutual funds are purchased directly from the fund provider and can only be bought and sold at the end of each trading day, based on the calculated net asset value (NAV). ETFs, however, can be traded intra-day just like stocks and are priced continuously throughout the trading day.

Mutual funds often have higher minimum investment requirements, typically ranging from $250 to $3,000 or more. ETFs, on the other hand, can be purchased for as little as the cost of one share, making them more accessible to smaller investors. Mutual funds are also generally less tax-efficient than ETFs because sales of securities within the fund can generate capital gains. ETFs, as passively managed portfolios, tend to realise fewer capital gains and are therefore more tax-efficient.

Hedge Funds vs ETFs

Hedge funds and ETFs differ in many ways, but one key distinction is that hedge funds are private investments for accredited investors only, while ETFs are marketable securities traded on a securities exchange and available to all investors. Hedge funds are also noted for their aggressive management strategies and higher-risk investments, whereas ETFs are passively managed and track specific indexes or sector sub-indexes. Additionally, hedge funds have strict redemption rules and lock-up periods, whereas ETFs offer intra-day liquidity and can be traded throughout the day.

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