Highbridge's Dubin and York's Dinan make bullish case for equities

By Lawrence Delevingne

Tue Jan 29, 2013


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Views from Eton Park's Mindich and Och-Ziff's Och from the off-the-record Morgan Stanley Breakers conference.


   
   Dan Och (Photo: Bloomberg)
Jamie Dinan and Glenn Dubin are bullish on stocks while Eric Mindich is wary of European credit, according to comments made during a panel discussion today at Morgan Stanley's showpiece hedge fund conference. 

The respective heads of York Capital Management, Highbridge Capital Management and Eton Park Capital Management gave their views today at The Breakers hotel in Palm Beach, Fla. where the annual event is held. The confab, which is closed to the media, was again hosted by Morgan Stanley's prime brokerage division and traditionally features some of the most prominent managers in the industry (see Absolute Return's report on comments made yesterday by Paul Singer, Jeff Vinik, Lee Ainslie and more here).

"U.S. equity markets offer a real decent return," Dinan said, according to two people who attended the panel moderated by Dan Stern of Reservoir Capital Group. "I am very upbeat at 14.5 times EPS and think by the end of year the markets could be trading at 17 times EPS for the S&P." He also noted that dividend yields exceed bond yields for big U.S. companies for the first time in 50 years.

An external spokesperson for York, Kelly Smith of public relations firm Abernathy MacGregor, declined to comment.

Another equity bull was Dubin. "I see big opportunities in long/short equities," he said, according to two people in the room. Dubin added that the biggest market trends today were capital moving out of public credit and into equities; and direct lending and mezzanine financing.

An external spokesman for Highbridge, Dave Millar of PR firm RLM Finsbury, declined to comment.

Mindich took a more cautious tone on the U.S. The U.S. economy is in decent shape but there is not yet a self sustaining recovery and government action is still needed, he said, according to witnesses. That's consistent with the neutral view that $10.7 billion Eton Park expressed in its yearend letter that noted "idiosyncratic" opportunities for both equity longs and shorts (see Eton Park bounces back).

Mindich also expressed a cautious view of Europe, noting that important structural reforms have not yet happened even though credit spreads have tightened. An external spokesman for Eton Park, Jonathan Gasthalter of PR firm Sard Verbinnen & Co., declined to comment.

A fourth panelist, Dan Och of Och-Ziff Capital Management, said he noted "a sense of complacency in credit" and that his firm is doing more in Europe and Asia, according to two people in attendance.

Separately, Och was dismissive of the notion that larger hedge funds cannot produce the same returns (Och-Ziff managed $31.9 billion as of January 1). "We've been hearing that question since we went over $1 billion...no large investor has ever said to us 'we don't need a lot of return, just be safe,'" Och said, according to the attendees. "We don't come to work to be mediocre."

An external spokesman for Och-Ziff, also Gasthalter of Sard Verbinnen, declined to comment.

At one point, someone in the audience asked why the panelists continued in their positions despite having already achieved so much wealth. "When you're younger, you have more of a propensity to make money," Dinan responded, according to two people in the room. "I have less mojo but I have these young guys around me who have more mojo." Dinan also said that York will grow to manage $25 billion in five years, up from $12.6 billion as of July 2012.

Dubin echoed his comments. "What gets me excited is building businesses," he said, according to attendees. He said he's spending his time building $29 billion Highbridge's quantitative business and integrating its statistical arbitrage futures strategy into the quantitative strategy.

The last question from moderator Dan Stern was 'What are the biggest risks ahead?' For Dubin it was "the inevitability of rates rising...inflation is one risk that could unsettle global markets." For Dinan the "biggest risk is social unrest in Europe." For Mindich it was that "governments have used most of their capacity...in emerging Asia, credit spreads are too tight now."

The conference continues tomorrow with another panel, "High conviction ideas in an uncertain world." The speakers are: Stuart Spodek of BlackRock Fundamental Fixed Income; Eric Bannasch of Cadian Capital Management; David Stemerman of Conatus Capital Management; Arthur Cohen of HealthCor Group; Carl Huttenlocher of Myriad Asset Management; and David Gallo of Valinor Management. The moderator will be Joel Greenblatt of Gotham Asset Management.

Morgan Stanley declined to comment.

See also: Paul Singer gives gold an "A," Bernanke a "D" | Eton Park bounces back

ISSN: 2151-1845 / CDC10004H