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Wharton: Are Hedge Funds out of Control?

If you go to Amazon.com and search for books about venture capital, you get 14,114 responses, which include many text books. Andrew Metrick, a professor of finance at Wharton, has just written a new book on the subject titled, "Venture Capital and the Finance of Innovation." Unlike the thousands of other books, though, this one offers a different approach, especially in areas such as valuing startup companies and IPOs, by bridging the gap between finance fundamentals and venture capital practice. Knowledge@Wharton spoke to Metrick about his new book and also about the increasing power and presence of hedge funds.

[ mp3 ] listen or download / Knowledge@Wharton

Courtroom intelligence: Hedge fund investment strategies

Hedge fund managers are always looking for an edge. Lately they've found one by sending patent litigators to court -- not to try a case, but as highly informed (and highly paid) observers. Their task: to pick up and quickly report back to the money managers any intelligence that could move a stock.

Litigators have often been called in to evaluate the investment impact of a patent conflict during the course of due diligence for an acquisition. Now hedge funds are moving earlier and faster. They are putting lawyers in the courtroom to report on the outcome of a trial as it is happening. "I hear these stories of Markman hearings; the minute the ruling comes down, 15 guys jump up and run out of the room," says Ron Laurie, of Inflexion Point Strategy, an IP investment bank. "These guys are texting the hedge fund, so they can short the stock." By the time the market-moving information hits financial news services like Bloomberg, the investors get to take their gains.

» law.com

Dow Stocks: Best winning streak since '55...

The Dow Jones industrial average hit another record high Wednesday, capping its longest winning stretch in almost 52 years as investors welcomed strong earnings, lower oil prices, media merger news and a strong reading on manufacturing.

The Dow (up 75.74 to 13,211.88, Charts) rose 0.6 percent to close at an all-time high for the fifth time in the last six sessions. The Dow also hit an intraday record high of 13,256.33 during the session before retreating near the close.

» money.cnn.com

Mergermarket: April a record month for M&A

April was a record month for M&A, no matter whose data you choose to read. Mergermarket, the financial news and data business, newly part of the Financial Times Group, calculates $482.6bn worth of M&A activity during the month, while Thomson puts the figure at a whopping $626.3bn.

» Alphaville

Top 3 fund managers earn over $1bn, top 25 almost $15bn

The combined earnings of the world’s top 25 hedge fund managers of almost $15bn exceeded the national income of Jordan last year and three individuals took home more than $1bn, according to an annual industry survey.

The survey put Jim Simons, of Renaissance Technologies, on earnings of $1.7bn, Ken Griffin, of Citadel Investment Group, on $1.4bn and Eddie Lampert, of ESL Investments, on $1.3bn.

The earnings reflect record investment into hedge funds, with the money increasingly flowing into the biggest managers as institutional investors such as pension funds begin to put cash into the industry.

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