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After news outlets started reporting that Magnetar might had a significant role in the financial crisis of 2007–2010, this article was created. I'm trying to avoid Personal Attacks, but I feel I must point out that an anonymous IP editor (74.113.151.1) has an IP address on the Magnetar internet domain ( magnetar.com is 74.113.151.16). I'm concerned this could present a Conflict of Interest, especially since the user's only edits were to remove material from this article. I can't figure out how to use WikiScanner, but feel free to try it yourself.
This sentence was removed: "According to several reports the company helped worsen the financial crisis", with the comment that it was "opinion" and "could be considered defamation of character of the company." Also removed was reporting from This American Life, The Wall Street Journal, ProPublica, and The Australian, claiming that they "don't provide enough detail or related information to write something as if it is fact." Can the article describe reports in the mainstream media, or we have to first measure the amount of detail and opinion/defamation in such reports? Why can't we simply present it as "reports or allegations from the mainstream media"? —— Rich jj ( talk) 14:38, 12 April 2010 (UTC)
Why should the article discuss Alexander Rekeda? This section has been removed three times (by an IP address on the Magnetar subnet). It stated that Rekeda orchestrated six CDO "deals" with Magnetar while working for different banks. I understand "deals" to be creations of massive financial CDO packages (what is the $-amount?). I also understand CDOs have been blamed for significant contribution to the financial crisis. Was Rekeda given his own section in the article because his six deals especially notable or make up a large portion of Magnetar's CDO business? Is Rekeda a notable person aside from his Magnetar deals?
In the latest deletion, the rationale was that Rekeda "is not apart of Magnetar Capital and should not be listed under under this heading [Magnetar's history]." However, I believe the company's notable business activities should be included, if this is actually notable. —— Rich jj ( talk) 14:57, 12 April 2010 (UTC)
"Math whiz Alexander Rekeda's skill creating bonds from pools of risky subprime loans and other debts was prized by big banks before the financial crisis hit. Now the 38-year-old former trader stands out for a different reason: Regulators fined and suspended Mr. Rekeda on Thursday for allegedly hiding a trading loss on a collateralized loan obligation. The latest regulatory rebuke comes on top of one in July, when he was fined and suspended from the securities industry for misleading investors about an earlier bond deal...One of the deals Mr. Rekeda created at Mizuho, a $1.6 billion CDO called Delphinus CDO 2007-01, was sold to investors in mid-2007 just as the housing market started to crack. Delphinus soon imploded, and Mizuho suffered a multibillion-dollar loss on investments created by Mr. Rekeda and his team. The Japanese firm closed its U.S. CDO operation in late 2007. In retrospect, Crédit Agricole's Calyon unit [for whom Rekeda was formerly employed prior to Mizuho poaching him] "should have written Mizuho a thank-you note" for hiring Mr. Rekeda, said Janet Tavakoli, who runs a structured-finance consulting firm."
people seem to have transformed a relatively simple explanation of the propublica article into a fantastic morass of mish mash language and impossible muddling nonsense. instead of simply presenting the arguments made by the major parties (propublica, magnetar) it has this meandering, self redundant train wreck of ideas.
then there is the attempt to 'shoe horn' naked capitalism / EConned into the article... great i have wanted to do the same for a while but have had other priorities. someone could easily have made a whole section on yves smith's take on magnetar, because it takes up several pages of her book. it would be much better than smashing it into the propublica section.
and of course the fact that janet tavakoli has discussed the whole trade years before others talked about it, and that Carrick Mollenkamp and Serena Ng wrote about it in the WSJ in 2008. anyways.
i would delve to repair this myself but... i have this thing called 'food' and 'a roof over my head' i have to 'pay for' and wikipedia isnt helping on that score so im kind of abandoning this sort of nitty gritty zero reward stuff for now .. especially since i cant even afford internet anymore lolz Decora ( talk) 23:18, 30 June 2010 (UTC)
Magnetar Capital's AUM is now ~$14 billion. [1]
I wanted to suggest that the summary box be updated to reflect that. Can I ask a Wiki editor for help with that or make the change myself?
Thank you. — Preceding unsigned comment added by BrooklyMcLaugh ( talk • contribs) 22:59, 20 January 2016 (UTC)
I am going to update the AUM figure: http://www.magnetar.com/firm-overview
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![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! I'm looking for help to update this article, starting with a hopefully fairly simple update to the infobox and introduction. As disclosure, I do have a financial conflict of interest, as I am here on behalf of Magnetar Capital as part of my work at Beutler Ink. For this request, my goal is to clean up the infobox, adding some additional details and some sourcing too, and also adding some clarification to the introduction. The changes I'm suggesting are as follows:
Infobox
Introduction
Company type | Private company |
---|---|
Industry | Investment management |
Founded | 2005 |
Headquarters | Evanston, Illinois [2] |
Key people | |
Products | Hedge fund |
AUM | $13.5 billion [3] |
Number of employees | 260 [2] |
Website | www.magnetar.com |
Magnetar Capital is a hedge fund based in Evanston, Illinois. The firm was founded in 2005 and invests in fixed income, energy, quantitative and event-driven strategies. [2] The firm was actively involved in the collateralized debt obligation (CDO) market during the 2006–2007 period. In some articles critical of Magnetar Capital, the firm's arbitrage strategy for CDOs is described as the "Magnetar trade". [4]
{{infobox company
| name = Magnetar Capital
| type = [[Private company]]
| logo = <!--[[File:Magnetar-logo.PNG|198px|Magnetar Capital]]-->
| fate =
| predecessor =
| successor =
| foundation = 2005
| founder =
| defunct = v
<nowiki>| hq_location = [[Evanston, Illinois]]<ref name="Copeland17">{{cite magazine |last=Copeland |first=Rob |date=24 May 2017 |title=This Old School Hedge Fund is Going Quant |url=https://www.wsj.com/articles/this-old-school-hedge-fund-is-going-quant-1495635267 |magazine=[[The Wall Street Journal]] |access-date=2 April 2018}}</ref>
| area_served =
| key_people = {{ubl|Alec Litowitz (Founder and [[chief executive officer|CEO]])|Ross Laser (Co-founder and [[President (corporate title)|President]])<ref name="Copeland17"/>}}
| industry = [[Investment management]]
| products = [[Hedge fund]]
| services =
| revenue =
| operating_income =
| net_income =
| aum = $13.5 billion<ref name="Levy17">{{cite magazine |last=Levy |first=Rachael |date=17 March 2017 |title='I think it benefits everybody': Hedge fund managers are cheering Trump |url=http://www.businessinsider.com/chris-hardy-patrick-kelly-on-trump-at-absolute-return-symposium-2017-3 |magazine=[[Business Insider]] |access-date=2 April 2018 }}</ref>
| assets =
| equity =
| owner =
| num_employees = 260<ref name="Copeland17"/>
| homepage = [http://www.magnetar.com www.magnetar.com]
| intl =
}}
References
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References
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. Crh23 and Boson: Since both of you have reviewed updated on requests of mine in the past on a similar topic area, I'm wondering if you would be interested in reviewing these updates? Thanks in advance, 16912 Rhiannon ( Talk · COI) 19:07, 4 May 2018 (UTC)
Hi there! As editors consider my proposed edits above, I want to separately bring up the major concerns I have with this article in its entirety. For anyone new to this article, or who perhaps hasn't looked at it in a while, the key thing I would note is that there's been very little activity on this page for more than five years. The current content has not been edited significantly since 2013, and the majority of the article was written back in 2010; of 260 edits total, 145 of them were made in 2010 (96 in the month the article was created). These edits were mainly by a single user, VanishedUser sdu9aya9fasdsopa who is responsible for about 70% of the page's content. (VanishedUser has not been active for over 3 years or I would ping them here.)
Given this and the absence of up-to-date information in the article, it's clear to see that this article has not developed over time, and I see numerous issues with its existing content. Below I've highlighted some of of the major problems. While I have a conflict of interest which I've disclosed on this page previously, it's my hope that other editors will review the article and come to a similar conclusion: this article needs to be pared down and refocused toward its nominal subject, Magnetar Capital.
Overall, much of this article fails to treat its subject matter in a neutral manner and is not written in an encyclopedic tone. Instead, the article emphasizes non-Magnetar material, lacks important context, misses citations, and includes speculative content. Specifically:
For now, I want to bring all these issues to editors' attention, and see if anyone has any specific thoughts on how best to approach. I'm working on drafting an updated version of the History that gives a better overview of events (and uses sourcing from the In the press section to add information, as appropriate), but I'm keen to hear how editors feel the In the press section should be treated. Specifically, whether this should be kept at all. In general, I'd love to get editors' thoughts on the article and how we can work together to improve it. Thanks in advance, 16912 Rhiannon ( Talk · COI) 20:17, 16 May 2018 (UTC)
I am editing as an impartial unbiased neutral and very ordinary editor of Wikipedia. I have NO conflict of interest.
Although Magnetar Capital has a sordid history, there is undue influence on past activities in the article. I am somewhat at a loss about how to represent this company in a neutral light, over 10 years after the 2007 - 2008 financial crisis. Yet I can't even find valid unbroken links to many of the Pulitzer Prize winning articles that exposed Magnetar on the Pro-Publica website! That is a sad statement of impermanence in its own right. Although the article says that the 2011 expose of Magnetar published by Pro-Publica won the first Pulitzer Prize for digital only reporting, the original article doesn't even exist anymore (404 error not found)! I found most of the content on the Pulitzer Prize website ONLY.
I am going to carve out or consolidate large sections of the article, while linking to currently extant sources. I will do so incrementally, over a period of time, so that any who wish to revert my changes or discuss further have an opportunity to do so here.-- FeralOink ( talk) 06:55, 9 July 2018 (UTC)
![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! It's taken me a while, but I'm back with another request to update this article. @ FeralOink: I am still in the process of drafting material to address the issues we have discussed here, and that you've flagged in your post above. But first, to get started with something simple, I have created a section to address a very basic issue: this article's lack of content that explains the company as it exists today. I'm hoping this can be a good place to start before I offer suggestions for the more complicated history of the company! Would you be able to review my proposed Corporate affairs section below, all of which is sourced to independent, third-party sources? It includes:
==Corporate affairs==
Magnetar Capital is a private company based in Evanston, Illinois, with additional offices in [[New York City]], [[London, England]], [[Houston, Texas]], and [[Minneapolis, Minnesota]].<ref name="Davis17">{{cite web |url=https://www.smartbrief.com/original/2017/07/magnetar-opens-houston-office-expand-footprint-energy-trading |title=Magnetar opens Houston office to expand footprint in energy trading |author=Jahn Davis and Sean McMahon |date=14 July 2017 |publisher=SmartBrief |accessdate=7 May 2018}}</ref> The company employs about 260 staff members.<ref name="Copeland17"/> Magnetar Capital's senior management team includes Alec Litowitz, founder and CEO; Ross Laser, co-founder and president; and David Snyderman, global head of fixed income.<ref name="Copeland17"/> The firm invests in fixed income,<ref name="Copeland17"/> quantitative trading,<ref name="Copeland17"/> energy,<ref name="Copeland17"/> corporate events,<ref name="Reuters15">{{cite news |title=Hedge fund Magnetar Capital says Blackstone buys minority interest |url=https://www.reuters.com/article/magnetarcapital-sale-blackstone-group/hedge-fund-magnetar-capital-says-blackstone-buys-minority-interest-idUSL3N0Y577U20150514 |newspaper=[[Reuters]] |date=14 May 2015 |accessdate=7 May 2018}}</ref> real estate,<ref name="Perlberg13">{{cite news |title=Magnetar Goes Long Ohio Town While Shorting Its Tax Base |last1=Perlberg |first1=Heather |last2=Gittelsohn |first2=John |url=https://www.bloomberg.com/news/articles/2013-10-21/magnetar-goes-long-ohio-town-while-shorting-its-tax-base |newspaper=[[Bloomberg LP]] |date=21 October 2013 |accessdate=7 May 2018}}</ref> solar,<ref name="Taub14">{{cite news |title=The Morning Brief: Magnetar, Saba Launch New Funds |last1=Taub |first1=Stephen |url=https://www.nexis.com/docview/getDocForCuiReq?lni=5DJT-Y941-F0J6-S54G&csi=8399&oc=00240&perma=true |newspaper=Absolute Return + Alpha |date=October 2014 |accessdate=21 June 2018 |quote=Alec Litowitz's Magnetar Capital has raised nearly $200 million for two new funds, Magnetar Solar Holdings (Cayman) and Magnetar Solar Opportunities Fund. The Evanston, Illinois-based hedge fund firm indicated in a regulatory filing that the new offerings are private equity funds. The minimum investment for the offshore version is $100,000, according to a filing. Magnetar, which manages $12.4 billion, declined to provide further details.}}</ref><ref name="Platts-Europe15">{{cite news |title=Magnetar funds 111-MW solar drive |url=https://www.nexis.com/docview/getDocForCuiReq?lni=5FDR-11R1-DY96-20BR&csi=280434&oc=00240&perma=true |newspaper=Platts Power In Europe |date=16 February 2015 |accessdate=21 June 2018 |quote=Magnetar Solar (UK) Ltd owns 300-MW of PV capacity spread across twenty-five UK sites. Around 100-MW are operational, with the balance in construction. It is owned by US investment fund Magnetar Capital.}}</ref> automotive,<ref name="Burke-Kennedy17">{{cite news |title=Dublin-based First Citizen nets €28m in new capital raise |last1=Burke-Kennedy |first1=Eoin |url=https://www.irishtimes.com/business/financial-services/dublin-based-first-citizen-nets-28m-in-new-capital-raise-1.3104271 |newspaper=[[Irish Times]] |date=1 June 2017 |accessdate=21 June 2018}}</ref> telecom,<ref name="Alonso18">{{cite news |title=Eurona aprueba su plan de negocio con nuevas inyecciones de fondos |last1=Alonso |first1=Santiago Millan |url=https://cincodias.elpais.com/cincodias/2018/06/20/companias/1529508284_511597.html |newspaper=Cinco Días |date=21 June 2018 |accessdate=3 July 2018}}</ref> film,<ref name="Abrams13">{{cite news |title=Fox closes $400 million co-financing pact |last1=Abrams |first1=Rachel |url=https://variety.com/2013/film/news/fox-closes-400-million-co-financing-pact-1118065325/ |newspaper=[[Variety (magazine)|Variety]] |date=29 January 2013 |accessdate=21 June 2018}}</ref> and appraisal rights.<ref name="Solomon14">{{cite news |title=A new form of shareholder activism gains momentum |last1=Solomon |first1=Steven Davidoff |url=https://dealbook.nytimes.com/2014/03/04/a-new-form-of-shareholder-activism-gains-momentum/ |newspaper=[[The New York Times]] |date=4 March 2014 |accessdate=3 July 2018}}</ref>Referencess
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References
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. FeralOink, I appreciate all the work you have done to this article so far and I hope that my proposal here (and those to come) can help in those efforts. Thanks in advance, 16912 Rhiannon ( Talk · COI) 00:54, 2 August 2018 (UTC)
![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! I've continued to work on drafting improved content for this article, and I'm ready to share it here. As disclosure, I do have a financial conflict of interest, as I am here on behalf of Magnetar Capital as part of my work at Beutler Ink. @ FeralOink: I hope your move is going well! I'm posting my proposed updates so you can review what I had in mind when you have time to dig in.
You can see my full-article draft in my user space. I've also made this diff to show the changes I've made in the draft vs. the live article.
To break up my proposal, following my request above, my next suggestion is creating a section that focuses on Magnetar Capital's CDO investments. In my draft, I have named this section Hedged CDO investment strategy.
As has been discussed on this Talk page above, when I started working on this article, much of it failed to treat its subject matter in a neutral manner and was not written in an encyclopedic tone. Instead, the article emphasized non-Magnetar material, lacks important context, missed citations, and included speculative content. FeralOink's work on the page since then has helped with these issues. My draft Hedged CDO investment strategy is another proposal to help address some remaining issues. I've outlined the major points below:
Magnetar Capital was actively involved in the collateralized debt obligation markets during the 2006–2007 period, when it invested in the equity of about $30 billion worth of CDOs. [1] As a proposed means to hedge CDO investments, Goldman Sachs sent Magnetar Capital marketing information regarding "short bets" against the housing market via an asset-backed securities index (ABX). [2] Partner David Snyderman told Derivatives Week at the time that Magnetar Capital was "excited about the opportunities in the mortgage derivatives market". [3]
CDO investments are divided into risk-based tranches: the highest risk slices offer the highest yield, whereas the safer pieces have lower yields. [1] With what some observers have referred to as the "Magnetar Trade", Magnetar Capital took long positions in the highest risk slices of synthetic collateralized debt obligations and hedged those positions by placing short bets on safer slices called mezzanine tranches via credit default swaps, which act similarly to an insurance policy. [4] [1] This allowed Magnetar Capital to receive payments while the housing market ran smoothly and hedged its downside risk. [4]
As a result, it lost money on the riskiest slices it bought, but made much more from the hedges when the market collapsed in 2007. [1] According to mortgage analysts, Magnetar Capital would have benefitted from its Magnetar Trade regardless of whether the subprime market collapsed. [1]
ProPublica's coverage of the CDO industry, which won the Pulitzer Prize in 2011, made a number of allegations regarding Magnetar Capital's CDO investments, including that Magnetar Capital's trades in the CDO market helped worsen the financial crisis by helping to structure CDOs the company was planning to short (bet against). [5] [6] Other claims made by the ProPublica series include: Magnetar Capital tried to influence CDO managers to buy riskier bonds to increase the likelihood of those CDOs failing; CDOs that Magnetar Capital invested in "defaulted" at a much higher rate than similar CDOs; and the CDO market would have "cooled off" in late 2005 had Magnetar Capital not entered the market, resulting in a less severe financial crisis. [7] [5] ProPublica did note that in its view, while Magnetar Capital's CDOs might have prolonged and exacerbated the financial crisis, the firm did not cause the crisis or the housing bubble. [8]
Janet Tavakoli, a financial industry consultant, wrote in her 2008 book, "Structured Finance and Collateralized Debt Obligations", that Magnetar Capital's Constellation CDOs "seemed designed to fail". [9]
Contrary to the allegations, Magnetar Capital maintains that it did not control asset selection for the CDOs in which it invested and that the firm did not place an overall bet against the housing market. [10] The firm said its investments were market neutral and would have made money whether the housing market went up or down. [5] According to the Financial Times, "Magnetar argues that it was not shorting the subprime market but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers". [11]
In 2010, the Securities and Exchange Commission filed a complaint against JP Morgan Chase for a deal in 2007 that involved securities picked by Magnetar Capital. [12] [13] [5] JP Morgan settled the lawsuit for $153.6 million in 2011. [14] Separately, in 2012, The Wall Street Journal reported that the government sought to see if Magnetar "had such a strong influence in designing any of the deals that in effect it took over the role of collateral manager". [15] [16] [17] Particularly, the regulator spent more than a year examining whether Magnetar Capital had any influence over asset selection of a $1.5 billion CDO created by Merrill Lynch called Norma CDO I, but the SEC took no action against the firm. [10] [18]
In 2010, Intesa Sanpaolo named Magnetar Capital, and others, in its lawsuit against Credit Agricole, alleging fraud related to the CDO Pyxis ABS CDO 2006-1. [19] [20] The suit alleged that a Credit Agricole unit concealed Magnetar's role in the collateralized debt obligation. [20] The case was dismissed, as the court ruled Intesa failed to file the suit in a timely manner. [20] [21]== Hedged CDO investment strategy ==
Magnetar Capital was actively involved in the collateralized debt obligation markets during the 2006–2007 period, when it invested in the equity of about $30 billion worth of CDOs.<ref name="Ng08"/> As a proposed means to hedge CDO investments, [[Goldman Sachs]] sent Magnetar Capital marketing information regarding "short bets" against the housing market via an [[asset-backed securities index]] (ABX).<ref name="morsto2009">[https://www.nytimes.com/2009/12/24/business/24trading.html?pagewanted=1 Banks Bundled Bad Debt, Bet Against It and Won ] by Gretchen Morgenson and Louise Story, 23 December 2009, New York Times</ref> Partner David Snyderman told ''Derivatives Week'' at the time that Magnetar Capital was "excited about the opportunities in the mortgage derivatives market".<ref name="dw081406moses">{{Cite web| url=https://www.globalcapital.com/article/k64sv7tqg02y/ill-fund-swallows-big-chunk-of-synthetic-abs | format = pdf | title = Reach for the Stars: Ill. Fund Swallows Big Chunk of Synthetic ABS | author = Abigail Moses | publisher = Derivatives Week | date = 2006-08-14 | accessdate = 2010-05-01 }}</ref>
CDO investments are divided into risk-based tranches: the highest risk slices offer the highest yield, whereas the safer pieces have lower yields.<ref name="Ng08"/> With what some observers have referred to as the "Magnetar Trade", Magnetar Capital took long positions in the highest risk slices of synthetic collateralized debt obligations and hedged those positions by placing short bets on safer slices called mezzanine tranches via [[credit default swaps]], which act similarly to an insurance policy.<ref name="Cantrell12"/><ref name="Ng08"/> This allowed Magnetar Capital to receive payments while the housing market ran smoothly and hedged its downside risk.<ref name="Cantrell12"/>
As a result, it lost money on the riskiest slices it bought, but made much more from the hedges when the market collapsed in 2007.<ref name="Ng08"/> According to mortgage analysts, Magnetar Capital would have benefitted from its Magnetar Trade regardless of whether the subprime market collapsed.<ref name="Ng08"/>
''[[ProPublica]]''{{'}}s coverage of the CDO industry, which won the [[Pulitzer Prize]] in 2011, made a number of allegations regarding Magnetar Capital's CDO investments, including that Magnetar Capital's trades in the CDO market helped worsen the financial crisis by helping to structure CDOs the company was planning to [[Short (finance)|short]] (bet against).<ref name="ProPublica12"/><ref name="Adams11">{{cite news |title=ProPublica makes history with web-based Pulitzer Prize win |last1=Adams |first1=Richard |url=https://www.theguardian.com/world/richard-adams-blog/2011/apr/18/pulitzer-prize-winners-propublica |newspaper=[[The Guardian]] |date=18 April 2011 |accessdate=22 June 2018}}</ref> Other claims made by the ''ProPublica'' series include: Magnetar Capital tried to influence CDO managers to buy riskier bonds to increase the likelihood of those CDOs failing; CDOs that Magnetar Capital invested in "defaulted" at a much higher rate than similar CDOs; and the CDO market would have "cooled off" in late 2005 had Magnetar Capital not entered the market, resulting in a less severe financial crisis.<ref name="This American Life-Blumberg-2010-04-09"/><ref name="ProPublica12">{{cite web | url=https://www.propublica.org/article/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble | title=The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going | publisher=[[ProPublica]] | accessdate=4 March 2016 | author=Eisinger, Jesse}}</ref> ''ProPublica'' did note that in its view, while Magnetar Capital's CDOs might have prolonged and exacerbated the financial crisis, the firm did not cause the crisis or the housing bubble.<ref name="Eisinger04-16-2010">{{cite news |title=Your Magnetar Questions, Answered |last1=Eisinger |first1=Jesse |last2=Bernstein |first2=Jake |url=https://www.propublica.org/getinvolved/your-magnetar-questions-answered |newspaper=[[ProPublica]] |date=16 April 2010 |accessdate=22 June 2018}}</ref>
[[Janet Tavakoli]], a financial industry consultant, wrote in her 2008 book, "Structured Finance and Collateralized Debt Obligations", that Magnetar Capital's Constellation CDOs "seemed designed to fail".<ref name=tavakoli2008>Structured Finance and Collateralized Debt Obligations, Second Edition, Janet Tavakoli, publisher John Wiley & Sons, Inc., 2008, Constellation CDOs: pgs 413-415</ref>
Contrary to the allegations, Magnetar Capital maintains that it did not control asset selection for the CDOs in which it invested and that the firm did not place an overall bet against the housing market.<ref name="Eaglesham08-06-13">{{cite news |title=SEC's Hunt for Crisis-Era Wrongdoing Loses Steam |last1=Eaglesham |first1=Jean |url=https://www.wsj.com/articles/secs-hunt-for-crisisera-wrongdoing-loses-steam-1375838090 |newspaper=[[The Wall Street Journal]] |date=6 August 2013 |accessdate=22 June 2018}}</ref> The firm said its investments were market neutral and would have made money whether the housing market went up or down.<ref name="ProPublica12"/> According to the ''Financial Times'', "Magnetar argues that it was not shorting the subprime market but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers".<ref name="Gapper10">{{cite news |title=Magnetar comes out fighting on synthetic CDOs |last1=Gapper |first1=John |url=http://blogs.ft.com/gapperblog/2010/04/magnetar-comes-out-fighting-on-synthetic-cdos/ |newspaper=[[Financial Times]] |date=20 April 2010 |accessdate=22 June 2018}}</ref>
In 2010, the Securities and Exchange Commission filed a complaint against [[JP Morgan Chase]] for a deal in 2007 that involved securities picked by Magnetar Capital.<ref>[https://www.sec.gov/litigation/complaints/2011/comp-pr2011-131-jpmorgan.pdf SEC.gov]</ref><ref name="Ovide11-Timeline">{{cite news |title=Timeline of the J.P. Morgan CDO Deal |last1=Ovide |first1=Shira |url=https://blogs.wsj.com/deals/2011/06/21/timeline-of-the-j-p-morgan-cdo-deal/ |newspaper=[[The Wall Street Journal]] |date=21 June 2011 |accessdate=7 May 2018}}</ref><ref name="ProPublica12"/> JP Morgan settled the lawsuit for $153.6 million in 2011.<ref name="Ovide11">{{cite news |title=J.P. Morgan to Pay $153.6 Million to Settle SEC Charges |last1=Ovide |first1=Shira |url=https://blogs.wsj.com/deals/2011/06/21/j-p-morgan-to-pay-153-6-million-to-settle-sec-charges/ |newspaper=[[The Wall Street Journal]] |date=21 June 2011 |accessdate=7 May 2018}}</ref> Separately, in 2012, ''The Wall Street Journal'' reported that the government sought to see if Magnetar "had such a strong influence in designing any of the deals that in effect it took over the role of collateral manager".<ref>[https://www.propublica.org/article/the-magnetar-fallout-whos-been-charged-settled-or-is-being-investigated The Magnetar Fallout: Who’s Been Charged, Has Settled, or is Now Being Investigated?] by Cora Currier, ProPublica, July 19, 2012</ref><ref name="Eaglesham12">{{cite news |title=SEC Probes Role of Hedge Fund in CDOs |last1=Eaglesham |first1=Jean |url=https://www.wsj.com/articles/SB10001424052702303879604577408593277245510 |newspaper=[[The Wall Street Journal]] |date=17 May 2012 |accessdate=7 May 2018}}</ref><ref name="Bernstein12122013">{{cite news |title=SEC Issues More Fines Over Magnetar Deals – and Appears to Move on |last1=Bernstein |first1=Jake |last2=Eisinger |first2=Jesse |url=https://www.propublica.org/article/sec-issues-more-fines-over-magnetar-deals-and-appears-to-move-on |newspaper=[[ProPublica]] |date=12 December 2013 |accessdate=7 May 2018}}</ref> Particularly, the regulator spent more than a year examining whether Magnetar Capital had any influence over asset selection of a $1.5 billion CDO created by Merrill Lynch called Norma CDO I, but the SEC took no action against the firm.<ref name="Eaglesham08-06-13"/><ref name="Gallu13">{{cite news |title=BofA's Merrill to Pay $131 Million Over Norma CDO Marketing |last1=Gallu |first1=Joshua |url=https://www.bloomberg.com/news/articles/2013-12-12/bofa-s-merrill-to-pay-131-million-over-norma-cdo-marketing-1- |newspaper=[[Bloomberg]] |date=12 December 2013 |accessdate=10 September 2018}}</ref>
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. Thanks in advance, 16912 Rhiannon ( Talk · COI) 20:34, 4 October 2018 (UTC)
@ FeralOink: So glad you're back! Your edits make sense to me and I'm glad you were able to resolve the issues. Overall, I feel the article is much better because of our collaborative effort here. I, too, have enjoyed working with you on this article and thank you so much for your efforts on it. Thanks! 16912 Rhiannon ( Talk · COI) 22:09, 28 January 2019 (UTC)
Magnetar should be part of Wikiproject Finance and probably Wikiproject Private Equity rather than the rather generic "Companies". I am going to take care of that now.-- FeralOink ( talk) 01:30, 27 January 2019 (UTC)
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After news outlets started reporting that Magnetar might had a significant role in the financial crisis of 2007–2010, this article was created. I'm trying to avoid Personal Attacks, but I feel I must point out that an anonymous IP editor (74.113.151.1) has an IP address on the Magnetar internet domain ( magnetar.com is 74.113.151.16). I'm concerned this could present a Conflict of Interest, especially since the user's only edits were to remove material from this article. I can't figure out how to use WikiScanner, but feel free to try it yourself.
This sentence was removed: "According to several reports the company helped worsen the financial crisis", with the comment that it was "opinion" and "could be considered defamation of character of the company." Also removed was reporting from This American Life, The Wall Street Journal, ProPublica, and The Australian, claiming that they "don't provide enough detail or related information to write something as if it is fact." Can the article describe reports in the mainstream media, or we have to first measure the amount of detail and opinion/defamation in such reports? Why can't we simply present it as "reports or allegations from the mainstream media"? —— Rich jj ( talk) 14:38, 12 April 2010 (UTC)
Why should the article discuss Alexander Rekeda? This section has been removed three times (by an IP address on the Magnetar subnet). It stated that Rekeda orchestrated six CDO "deals" with Magnetar while working for different banks. I understand "deals" to be creations of massive financial CDO packages (what is the $-amount?). I also understand CDOs have been blamed for significant contribution to the financial crisis. Was Rekeda given his own section in the article because his six deals especially notable or make up a large portion of Magnetar's CDO business? Is Rekeda a notable person aside from his Magnetar deals?
In the latest deletion, the rationale was that Rekeda "is not apart of Magnetar Capital and should not be listed under under this heading [Magnetar's history]." However, I believe the company's notable business activities should be included, if this is actually notable. —— Rich jj ( talk) 14:57, 12 April 2010 (UTC)
"Math whiz Alexander Rekeda's skill creating bonds from pools of risky subprime loans and other debts was prized by big banks before the financial crisis hit. Now the 38-year-old former trader stands out for a different reason: Regulators fined and suspended Mr. Rekeda on Thursday for allegedly hiding a trading loss on a collateralized loan obligation. The latest regulatory rebuke comes on top of one in July, when he was fined and suspended from the securities industry for misleading investors about an earlier bond deal...One of the deals Mr. Rekeda created at Mizuho, a $1.6 billion CDO called Delphinus CDO 2007-01, was sold to investors in mid-2007 just as the housing market started to crack. Delphinus soon imploded, and Mizuho suffered a multibillion-dollar loss on investments created by Mr. Rekeda and his team. The Japanese firm closed its U.S. CDO operation in late 2007. In retrospect, Crédit Agricole's Calyon unit [for whom Rekeda was formerly employed prior to Mizuho poaching him] "should have written Mizuho a thank-you note" for hiring Mr. Rekeda, said Janet Tavakoli, who runs a structured-finance consulting firm."
people seem to have transformed a relatively simple explanation of the propublica article into a fantastic morass of mish mash language and impossible muddling nonsense. instead of simply presenting the arguments made by the major parties (propublica, magnetar) it has this meandering, self redundant train wreck of ideas.
then there is the attempt to 'shoe horn' naked capitalism / EConned into the article... great i have wanted to do the same for a while but have had other priorities. someone could easily have made a whole section on yves smith's take on magnetar, because it takes up several pages of her book. it would be much better than smashing it into the propublica section.
and of course the fact that janet tavakoli has discussed the whole trade years before others talked about it, and that Carrick Mollenkamp and Serena Ng wrote about it in the WSJ in 2008. anyways.
i would delve to repair this myself but... i have this thing called 'food' and 'a roof over my head' i have to 'pay for' and wikipedia isnt helping on that score so im kind of abandoning this sort of nitty gritty zero reward stuff for now .. especially since i cant even afford internet anymore lolz Decora ( talk) 23:18, 30 June 2010 (UTC)
Magnetar Capital's AUM is now ~$14 billion. [1]
I wanted to suggest that the summary box be updated to reflect that. Can I ask a Wiki editor for help with that or make the change myself?
Thank you. — Preceding unsigned comment added by BrooklyMcLaugh ( talk • contribs) 22:59, 20 January 2016 (UTC)
I am going to update the AUM figure: http://www.magnetar.com/firm-overview
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![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! I'm looking for help to update this article, starting with a hopefully fairly simple update to the infobox and introduction. As disclosure, I do have a financial conflict of interest, as I am here on behalf of Magnetar Capital as part of my work at Beutler Ink. For this request, my goal is to clean up the infobox, adding some additional details and some sourcing too, and also adding some clarification to the introduction. The changes I'm suggesting are as follows:
Infobox
Introduction
Company type | Private company |
---|---|
Industry | Investment management |
Founded | 2005 |
Headquarters | Evanston, Illinois [2] |
Key people | |
Products | Hedge fund |
AUM | $13.5 billion [3] |
Number of employees | 260 [2] |
Website | www.magnetar.com |
Magnetar Capital is a hedge fund based in Evanston, Illinois. The firm was founded in 2005 and invests in fixed income, energy, quantitative and event-driven strategies. [2] The firm was actively involved in the collateralized debt obligation (CDO) market during the 2006–2007 period. In some articles critical of Magnetar Capital, the firm's arbitrage strategy for CDOs is described as the "Magnetar trade". [4]
{{infobox company
| name = Magnetar Capital
| type = [[Private company]]
| logo = <!--[[File:Magnetar-logo.PNG|198px|Magnetar Capital]]-->
| fate =
| predecessor =
| successor =
| foundation = 2005
| founder =
| defunct = v
<nowiki>| hq_location = [[Evanston, Illinois]]<ref name="Copeland17">{{cite magazine |last=Copeland |first=Rob |date=24 May 2017 |title=This Old School Hedge Fund is Going Quant |url=https://www.wsj.com/articles/this-old-school-hedge-fund-is-going-quant-1495635267 |magazine=[[The Wall Street Journal]] |access-date=2 April 2018}}</ref>
| area_served =
| key_people = {{ubl|Alec Litowitz (Founder and [[chief executive officer|CEO]])|Ross Laser (Co-founder and [[President (corporate title)|President]])<ref name="Copeland17"/>}}
| industry = [[Investment management]]
| products = [[Hedge fund]]
| services =
| revenue =
| operating_income =
| net_income =
| aum = $13.5 billion<ref name="Levy17">{{cite magazine |last=Levy |first=Rachael |date=17 March 2017 |title='I think it benefits everybody': Hedge fund managers are cheering Trump |url=http://www.businessinsider.com/chris-hardy-patrick-kelly-on-trump-at-absolute-return-symposium-2017-3 |magazine=[[Business Insider]] |access-date=2 April 2018 }}</ref>
| assets =
| equity =
| owner =
| num_employees = 260<ref name="Copeland17"/>
| homepage = [http://www.magnetar.com www.magnetar.com]
| intl =
}}
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. Crh23 and Boson: Since both of you have reviewed updated on requests of mine in the past on a similar topic area, I'm wondering if you would be interested in reviewing these updates? Thanks in advance, 16912 Rhiannon ( Talk · COI) 19:07, 4 May 2018 (UTC)
Hi there! As editors consider my proposed edits above, I want to separately bring up the major concerns I have with this article in its entirety. For anyone new to this article, or who perhaps hasn't looked at it in a while, the key thing I would note is that there's been very little activity on this page for more than five years. The current content has not been edited significantly since 2013, and the majority of the article was written back in 2010; of 260 edits total, 145 of them were made in 2010 (96 in the month the article was created). These edits were mainly by a single user, VanishedUser sdu9aya9fasdsopa who is responsible for about 70% of the page's content. (VanishedUser has not been active for over 3 years or I would ping them here.)
Given this and the absence of up-to-date information in the article, it's clear to see that this article has not developed over time, and I see numerous issues with its existing content. Below I've highlighted some of of the major problems. While I have a conflict of interest which I've disclosed on this page previously, it's my hope that other editors will review the article and come to a similar conclusion: this article needs to be pared down and refocused toward its nominal subject, Magnetar Capital.
Overall, much of this article fails to treat its subject matter in a neutral manner and is not written in an encyclopedic tone. Instead, the article emphasizes non-Magnetar material, lacks important context, misses citations, and includes speculative content. Specifically:
For now, I want to bring all these issues to editors' attention, and see if anyone has any specific thoughts on how best to approach. I'm working on drafting an updated version of the History that gives a better overview of events (and uses sourcing from the In the press section to add information, as appropriate), but I'm keen to hear how editors feel the In the press section should be treated. Specifically, whether this should be kept at all. In general, I'd love to get editors' thoughts on the article and how we can work together to improve it. Thanks in advance, 16912 Rhiannon ( Talk · COI) 20:17, 16 May 2018 (UTC)
I am editing as an impartial unbiased neutral and very ordinary editor of Wikipedia. I have NO conflict of interest.
Although Magnetar Capital has a sordid history, there is undue influence on past activities in the article. I am somewhat at a loss about how to represent this company in a neutral light, over 10 years after the 2007 - 2008 financial crisis. Yet I can't even find valid unbroken links to many of the Pulitzer Prize winning articles that exposed Magnetar on the Pro-Publica website! That is a sad statement of impermanence in its own right. Although the article says that the 2011 expose of Magnetar published by Pro-Publica won the first Pulitzer Prize for digital only reporting, the original article doesn't even exist anymore (404 error not found)! I found most of the content on the Pulitzer Prize website ONLY.
I am going to carve out or consolidate large sections of the article, while linking to currently extant sources. I will do so incrementally, over a period of time, so that any who wish to revert my changes or discuss further have an opportunity to do so here.-- FeralOink ( talk) 06:55, 9 July 2018 (UTC)
![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! It's taken me a while, but I'm back with another request to update this article. @ FeralOink: I am still in the process of drafting material to address the issues we have discussed here, and that you've flagged in your post above. But first, to get started with something simple, I have created a section to address a very basic issue: this article's lack of content that explains the company as it exists today. I'm hoping this can be a good place to start before I offer suggestions for the more complicated history of the company! Would you be able to review my proposed Corporate affairs section below, all of which is sourced to independent, third-party sources? It includes:
==Corporate affairs==
Magnetar Capital is a private company based in Evanston, Illinois, with additional offices in [[New York City]], [[London, England]], [[Houston, Texas]], and [[Minneapolis, Minnesota]].<ref name="Davis17">{{cite web |url=https://www.smartbrief.com/original/2017/07/magnetar-opens-houston-office-expand-footprint-energy-trading |title=Magnetar opens Houston office to expand footprint in energy trading |author=Jahn Davis and Sean McMahon |date=14 July 2017 |publisher=SmartBrief |accessdate=7 May 2018}}</ref> The company employs about 260 staff members.<ref name="Copeland17"/> Magnetar Capital's senior management team includes Alec Litowitz, founder and CEO; Ross Laser, co-founder and president; and David Snyderman, global head of fixed income.<ref name="Copeland17"/> The firm invests in fixed income,<ref name="Copeland17"/> quantitative trading,<ref name="Copeland17"/> energy,<ref name="Copeland17"/> corporate events,<ref name="Reuters15">{{cite news |title=Hedge fund Magnetar Capital says Blackstone buys minority interest |url=https://www.reuters.com/article/magnetarcapital-sale-blackstone-group/hedge-fund-magnetar-capital-says-blackstone-buys-minority-interest-idUSL3N0Y577U20150514 |newspaper=[[Reuters]] |date=14 May 2015 |accessdate=7 May 2018}}</ref> real estate,<ref name="Perlberg13">{{cite news |title=Magnetar Goes Long Ohio Town While Shorting Its Tax Base |last1=Perlberg |first1=Heather |last2=Gittelsohn |first2=John |url=https://www.bloomberg.com/news/articles/2013-10-21/magnetar-goes-long-ohio-town-while-shorting-its-tax-base |newspaper=[[Bloomberg LP]] |date=21 October 2013 |accessdate=7 May 2018}}</ref> solar,<ref name="Taub14">{{cite news |title=The Morning Brief: Magnetar, Saba Launch New Funds |last1=Taub |first1=Stephen |url=https://www.nexis.com/docview/getDocForCuiReq?lni=5DJT-Y941-F0J6-S54G&csi=8399&oc=00240&perma=true |newspaper=Absolute Return + Alpha |date=October 2014 |accessdate=21 June 2018 |quote=Alec Litowitz's Magnetar Capital has raised nearly $200 million for two new funds, Magnetar Solar Holdings (Cayman) and Magnetar Solar Opportunities Fund. The Evanston, Illinois-based hedge fund firm indicated in a regulatory filing that the new offerings are private equity funds. The minimum investment for the offshore version is $100,000, according to a filing. Magnetar, which manages $12.4 billion, declined to provide further details.}}</ref><ref name="Platts-Europe15">{{cite news |title=Magnetar funds 111-MW solar drive |url=https://www.nexis.com/docview/getDocForCuiReq?lni=5FDR-11R1-DY96-20BR&csi=280434&oc=00240&perma=true |newspaper=Platts Power In Europe |date=16 February 2015 |accessdate=21 June 2018 |quote=Magnetar Solar (UK) Ltd owns 300-MW of PV capacity spread across twenty-five UK sites. Around 100-MW are operational, with the balance in construction. It is owned by US investment fund Magnetar Capital.}}</ref> automotive,<ref name="Burke-Kennedy17">{{cite news |title=Dublin-based First Citizen nets €28m in new capital raise |last1=Burke-Kennedy |first1=Eoin |url=https://www.irishtimes.com/business/financial-services/dublin-based-first-citizen-nets-28m-in-new-capital-raise-1.3104271 |newspaper=[[Irish Times]] |date=1 June 2017 |accessdate=21 June 2018}}</ref> telecom,<ref name="Alonso18">{{cite news |title=Eurona aprueba su plan de negocio con nuevas inyecciones de fondos |last1=Alonso |first1=Santiago Millan |url=https://cincodias.elpais.com/cincodias/2018/06/20/companias/1529508284_511597.html |newspaper=Cinco Días |date=21 June 2018 |accessdate=3 July 2018}}</ref> film,<ref name="Abrams13">{{cite news |title=Fox closes $400 million co-financing pact |last1=Abrams |first1=Rachel |url=https://variety.com/2013/film/news/fox-closes-400-million-co-financing-pact-1118065325/ |newspaper=[[Variety (magazine)|Variety]] |date=29 January 2013 |accessdate=21 June 2018}}</ref> and appraisal rights.<ref name="Solomon14">{{cite news |title=A new form of shareholder activism gains momentum |last1=Solomon |first1=Steven Davidoff |url=https://dealbook.nytimes.com/2014/03/04/a-new-form-of-shareholder-activism-gains-momentum/ |newspaper=[[The New York Times]] |date=4 March 2014 |accessdate=3 July 2018}}</ref>Referencess
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. FeralOink, I appreciate all the work you have done to this article so far and I hope that my proposal here (and those to come) can help in those efforts. Thanks in advance, 16912 Rhiannon ( Talk · COI) 00:54, 2 August 2018 (UTC)
![]() | This edit request by an editor with a conflict of interest has now been answered. |
Hi there! I've continued to work on drafting improved content for this article, and I'm ready to share it here. As disclosure, I do have a financial conflict of interest, as I am here on behalf of Magnetar Capital as part of my work at Beutler Ink. @ FeralOink: I hope your move is going well! I'm posting my proposed updates so you can review what I had in mind when you have time to dig in.
You can see my full-article draft in my user space. I've also made this diff to show the changes I've made in the draft vs. the live article.
To break up my proposal, following my request above, my next suggestion is creating a section that focuses on Magnetar Capital's CDO investments. In my draft, I have named this section Hedged CDO investment strategy.
As has been discussed on this Talk page above, when I started working on this article, much of it failed to treat its subject matter in a neutral manner and was not written in an encyclopedic tone. Instead, the article emphasized non-Magnetar material, lacks important context, missed citations, and included speculative content. FeralOink's work on the page since then has helped with these issues. My draft Hedged CDO investment strategy is another proposal to help address some remaining issues. I've outlined the major points below:
Magnetar Capital was actively involved in the collateralized debt obligation markets during the 2006–2007 period, when it invested in the equity of about $30 billion worth of CDOs. [1] As a proposed means to hedge CDO investments, Goldman Sachs sent Magnetar Capital marketing information regarding "short bets" against the housing market via an asset-backed securities index (ABX). [2] Partner David Snyderman told Derivatives Week at the time that Magnetar Capital was "excited about the opportunities in the mortgage derivatives market". [3]
CDO investments are divided into risk-based tranches: the highest risk slices offer the highest yield, whereas the safer pieces have lower yields. [1] With what some observers have referred to as the "Magnetar Trade", Magnetar Capital took long positions in the highest risk slices of synthetic collateralized debt obligations and hedged those positions by placing short bets on safer slices called mezzanine tranches via credit default swaps, which act similarly to an insurance policy. [4] [1] This allowed Magnetar Capital to receive payments while the housing market ran smoothly and hedged its downside risk. [4]
As a result, it lost money on the riskiest slices it bought, but made much more from the hedges when the market collapsed in 2007. [1] According to mortgage analysts, Magnetar Capital would have benefitted from its Magnetar Trade regardless of whether the subprime market collapsed. [1]
ProPublica's coverage of the CDO industry, which won the Pulitzer Prize in 2011, made a number of allegations regarding Magnetar Capital's CDO investments, including that Magnetar Capital's trades in the CDO market helped worsen the financial crisis by helping to structure CDOs the company was planning to short (bet against). [5] [6] Other claims made by the ProPublica series include: Magnetar Capital tried to influence CDO managers to buy riskier bonds to increase the likelihood of those CDOs failing; CDOs that Magnetar Capital invested in "defaulted" at a much higher rate than similar CDOs; and the CDO market would have "cooled off" in late 2005 had Magnetar Capital not entered the market, resulting in a less severe financial crisis. [7] [5] ProPublica did note that in its view, while Magnetar Capital's CDOs might have prolonged and exacerbated the financial crisis, the firm did not cause the crisis or the housing bubble. [8]
Janet Tavakoli, a financial industry consultant, wrote in her 2008 book, "Structured Finance and Collateralized Debt Obligations", that Magnetar Capital's Constellation CDOs "seemed designed to fail". [9]
Contrary to the allegations, Magnetar Capital maintains that it did not control asset selection for the CDOs in which it invested and that the firm did not place an overall bet against the housing market. [10] The firm said its investments were market neutral and would have made money whether the housing market went up or down. [5] According to the Financial Times, "Magnetar argues that it was not shorting the subprime market but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers". [11]
In 2010, the Securities and Exchange Commission filed a complaint against JP Morgan Chase for a deal in 2007 that involved securities picked by Magnetar Capital. [12] [13] [5] JP Morgan settled the lawsuit for $153.6 million in 2011. [14] Separately, in 2012, The Wall Street Journal reported that the government sought to see if Magnetar "had such a strong influence in designing any of the deals that in effect it took over the role of collateral manager". [15] [16] [17] Particularly, the regulator spent more than a year examining whether Magnetar Capital had any influence over asset selection of a $1.5 billion CDO created by Merrill Lynch called Norma CDO I, but the SEC took no action against the firm. [10] [18]
In 2010, Intesa Sanpaolo named Magnetar Capital, and others, in its lawsuit against Credit Agricole, alleging fraud related to the CDO Pyxis ABS CDO 2006-1. [19] [20] The suit alleged that a Credit Agricole unit concealed Magnetar's role in the collateralized debt obligation. [20] The case was dismissed, as the court ruled Intesa failed to file the suit in a timely manner. [20] [21]== Hedged CDO investment strategy ==
Magnetar Capital was actively involved in the collateralized debt obligation markets during the 2006–2007 period, when it invested in the equity of about $30 billion worth of CDOs.<ref name="Ng08"/> As a proposed means to hedge CDO investments, [[Goldman Sachs]] sent Magnetar Capital marketing information regarding "short bets" against the housing market via an [[asset-backed securities index]] (ABX).<ref name="morsto2009">[https://www.nytimes.com/2009/12/24/business/24trading.html?pagewanted=1 Banks Bundled Bad Debt, Bet Against It and Won ] by Gretchen Morgenson and Louise Story, 23 December 2009, New York Times</ref> Partner David Snyderman told ''Derivatives Week'' at the time that Magnetar Capital was "excited about the opportunities in the mortgage derivatives market".<ref name="dw081406moses">{{Cite web| url=https://www.globalcapital.com/article/k64sv7tqg02y/ill-fund-swallows-big-chunk-of-synthetic-abs | format = pdf | title = Reach for the Stars: Ill. Fund Swallows Big Chunk of Synthetic ABS | author = Abigail Moses | publisher = Derivatives Week | date = 2006-08-14 | accessdate = 2010-05-01 }}</ref>
CDO investments are divided into risk-based tranches: the highest risk slices offer the highest yield, whereas the safer pieces have lower yields.<ref name="Ng08"/> With what some observers have referred to as the "Magnetar Trade", Magnetar Capital took long positions in the highest risk slices of synthetic collateralized debt obligations and hedged those positions by placing short bets on safer slices called mezzanine tranches via [[credit default swaps]], which act similarly to an insurance policy.<ref name="Cantrell12"/><ref name="Ng08"/> This allowed Magnetar Capital to receive payments while the housing market ran smoothly and hedged its downside risk.<ref name="Cantrell12"/>
As a result, it lost money on the riskiest slices it bought, but made much more from the hedges when the market collapsed in 2007.<ref name="Ng08"/> According to mortgage analysts, Magnetar Capital would have benefitted from its Magnetar Trade regardless of whether the subprime market collapsed.<ref name="Ng08"/>
''[[ProPublica]]''{{'}}s coverage of the CDO industry, which won the [[Pulitzer Prize]] in 2011, made a number of allegations regarding Magnetar Capital's CDO investments, including that Magnetar Capital's trades in the CDO market helped worsen the financial crisis by helping to structure CDOs the company was planning to [[Short (finance)|short]] (bet against).<ref name="ProPublica12"/><ref name="Adams11">{{cite news |title=ProPublica makes history with web-based Pulitzer Prize win |last1=Adams |first1=Richard |url=https://www.theguardian.com/world/richard-adams-blog/2011/apr/18/pulitzer-prize-winners-propublica |newspaper=[[The Guardian]] |date=18 April 2011 |accessdate=22 June 2018}}</ref> Other claims made by the ''ProPublica'' series include: Magnetar Capital tried to influence CDO managers to buy riskier bonds to increase the likelihood of those CDOs failing; CDOs that Magnetar Capital invested in "defaulted" at a much higher rate than similar CDOs; and the CDO market would have "cooled off" in late 2005 had Magnetar Capital not entered the market, resulting in a less severe financial crisis.<ref name="This American Life-Blumberg-2010-04-09"/><ref name="ProPublica12">{{cite web | url=https://www.propublica.org/article/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble | title=The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going | publisher=[[ProPublica]] | accessdate=4 March 2016 | author=Eisinger, Jesse}}</ref> ''ProPublica'' did note that in its view, while Magnetar Capital's CDOs might have prolonged and exacerbated the financial crisis, the firm did not cause the crisis or the housing bubble.<ref name="Eisinger04-16-2010">{{cite news |title=Your Magnetar Questions, Answered |last1=Eisinger |first1=Jesse |last2=Bernstein |first2=Jake |url=https://www.propublica.org/getinvolved/your-magnetar-questions-answered |newspaper=[[ProPublica]] |date=16 April 2010 |accessdate=22 June 2018}}</ref>
[[Janet Tavakoli]], a financial industry consultant, wrote in her 2008 book, "Structured Finance and Collateralized Debt Obligations", that Magnetar Capital's Constellation CDOs "seemed designed to fail".<ref name=tavakoli2008>Structured Finance and Collateralized Debt Obligations, Second Edition, Janet Tavakoli, publisher John Wiley & Sons, Inc., 2008, Constellation CDOs: pgs 413-415</ref>
Contrary to the allegations, Magnetar Capital maintains that it did not control asset selection for the CDOs in which it invested and that the firm did not place an overall bet against the housing market.<ref name="Eaglesham08-06-13">{{cite news |title=SEC's Hunt for Crisis-Era Wrongdoing Loses Steam |last1=Eaglesham |first1=Jean |url=https://www.wsj.com/articles/secs-hunt-for-crisisera-wrongdoing-loses-steam-1375838090 |newspaper=[[The Wall Street Journal]] |date=6 August 2013 |accessdate=22 June 2018}}</ref> The firm said its investments were market neutral and would have made money whether the housing market went up or down.<ref name="ProPublica12"/> According to the ''Financial Times'', "Magnetar argues that it was not shorting the subprime market but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers".<ref name="Gapper10">{{cite news |title=Magnetar comes out fighting on synthetic CDOs |last1=Gapper |first1=John |url=http://blogs.ft.com/gapperblog/2010/04/magnetar-comes-out-fighting-on-synthetic-cdos/ |newspaper=[[Financial Times]] |date=20 April 2010 |accessdate=22 June 2018}}</ref>
In 2010, the Securities and Exchange Commission filed a complaint against [[JP Morgan Chase]] for a deal in 2007 that involved securities picked by Magnetar Capital.<ref>[https://www.sec.gov/litigation/complaints/2011/comp-pr2011-131-jpmorgan.pdf SEC.gov]</ref><ref name="Ovide11-Timeline">{{cite news |title=Timeline of the J.P. Morgan CDO Deal |last1=Ovide |first1=Shira |url=https://blogs.wsj.com/deals/2011/06/21/timeline-of-the-j-p-morgan-cdo-deal/ |newspaper=[[The Wall Street Journal]] |date=21 June 2011 |accessdate=7 May 2018}}</ref><ref name="ProPublica12"/> JP Morgan settled the lawsuit for $153.6 million in 2011.<ref name="Ovide11">{{cite news |title=J.P. Morgan to Pay $153.6 Million to Settle SEC Charges |last1=Ovide |first1=Shira |url=https://blogs.wsj.com/deals/2011/06/21/j-p-morgan-to-pay-153-6-million-to-settle-sec-charges/ |newspaper=[[The Wall Street Journal]] |date=21 June 2011 |accessdate=7 May 2018}}</ref> Separately, in 2012, ''The Wall Street Journal'' reported that the government sought to see if Magnetar "had such a strong influence in designing any of the deals that in effect it took over the role of collateral manager".<ref>[https://www.propublica.org/article/the-magnetar-fallout-whos-been-charged-settled-or-is-being-investigated The Magnetar Fallout: Who’s Been Charged, Has Settled, or is Now Being Investigated?] by Cora Currier, ProPublica, July 19, 2012</ref><ref name="Eaglesham12">{{cite news |title=SEC Probes Role of Hedge Fund in CDOs |last1=Eaglesham |first1=Jean |url=https://www.wsj.com/articles/SB10001424052702303879604577408593277245510 |newspaper=[[The Wall Street Journal]] |date=17 May 2012 |accessdate=7 May 2018}}</ref><ref name="Bernstein12122013">{{cite news |title=SEC Issues More Fines Over Magnetar Deals – and Appears to Move on |last1=Bernstein |first1=Jake |last2=Eisinger |first2=Jesse |url=https://www.propublica.org/article/sec-issues-more-fines-over-magnetar-deals-and-appears-to-move-on |newspaper=[[ProPublica]] |date=12 December 2013 |accessdate=7 May 2018}}</ref> Particularly, the regulator spent more than a year examining whether Magnetar Capital had any influence over asset selection of a $1.5 billion CDO created by Merrill Lynch called Norma CDO I, but the SEC took no action against the firm.<ref name="Eaglesham08-06-13"/><ref name="Gallu13">{{cite news |title=BofA's Merrill to Pay $131 Million Over Norma CDO Marketing |last1=Gallu |first1=Joshua |url=https://www.bloomberg.com/news/articles/2013-12-12/bofa-s-merrill-to-pay-131-million-over-norma-cdo-marketing-1- |newspaper=[[Bloomberg]] |date=12 December 2013 |accessdate=10 September 2018}}</ref>
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I won't make any edits to the article myself because of my conflict of interest. Instead, I welcome input from uninvolved editors and assistance taking live changes as appropriate. Thanks in advance, 16912 Rhiannon ( Talk · COI) 20:34, 4 October 2018 (UTC)
@ FeralOink: So glad you're back! Your edits make sense to me and I'm glad you were able to resolve the issues. Overall, I feel the article is much better because of our collaborative effort here. I, too, have enjoyed working with you on this article and thank you so much for your efforts on it. Thanks! 16912 Rhiannon ( Talk · COI) 22:09, 28 January 2019 (UTC)
Magnetar should be part of Wikiproject Finance and probably Wikiproject Private Equity rather than the rather generic "Companies". I am going to take care of that now.-- FeralOink ( talk) 01:30, 27 January 2019 (UTC)