The hedge fund billionaire playing activist at his former firm

One quiz competition: DD is giving away a few special invitations to the premiere of Skandal!, the new film about the Wirecard fraud featuring the FT’s Dan McCrum and other colleagues.

To win, drop us an email at Due.Diligence@ft.com with the correct answer to this question: Which celebrity chef personally served Jan Marsalek and his friends when marking a quiet Tuesday in Singapore?

We will follow up with you if you have won. The event is in London on the evening of September 14. (For those that want to go hunting for the answer, read Money Men, Dan’s first-hand account of the scandal.)

In today’s newsletter:

• Daniel Och targets his former firm

• Wall Street takes on Joe Biden’s buyback tax

• Lars Windhorst says he can pay back his debts

Daniel Och tries investor activism on for size

Rarely do we see really wealthy men complain about the salaries of other wealthy men. But Daniel Och, the billionaire hedge fund manager, thinks the chief executive of the firm he founded is being paid too much money.

Och filed a legal request in the Delaware Court of Chancery on Wednesday seeking access to books and records related to the board’s decision to award James Levin a $145.8mn pay package in 2021 despite what he called “less than mediocre performance” at Sculptor Capital Management.

This is typically considered a precursor to a lawsuit if the firm doesn’t comply. Och is seeking to find out whether Levin has leveraged his power over the board to get “ever-escalating pay packages”. 

Levin earned about four times what Goldman Sachs boss David Solomon and JPMorgan Chase head Jamie Dimon earned last year. Yet, in hedge fund terms, it’s probably comfortably within the norm.

Since Levin took the helm at Sculptor, previously known as Och-Ziff Capital Management, the firm’s share price has declined about 25 per cent. The shares this year have shed more than half their value. Assets, which once exceeded $50bn, are now at $36.9bn.

In the filings, Och claims Levin “has been paid in the 99th-percentile of public company executives even while Sculptor’s market capitalisation has fallen in the bottom quartile”.

While Levin’s current compensation is about a quarter of the group’s market capitalisation, it is about half of what he was paid when Och promoted him to chief investment officer in 2017. The $280mn pay package Och offered then-33-year old Levin, which included money out of his own pocket, set him apart from many of his peers on Wall Street. Och insisted it was necessary to incentivise Levin.

It was probably quite difficult to retain talent at the time, as investors were fleeing after the firm settled foreign bribery charges with US authorities in 2016 for $413mn.

But things started to unravel between Och and Levin when the time came to pick a successor in 2018. Och decided “now is not the right time to transition to Jimmy” and hired Credit Suisse executive Robert Shafir instead.

In the background of the fight is a destruction of value that underscores the rarity of hedge funds succeeding on public markets. At its 2007 IPO, Sculptor was worth more than $10bn, about 20 times its current value.

Wall Street tries to get ahead of Biden’s new buyback tax

As deals become fewer and further between, US bankers and corporate lawyers now have something fresh to pitch to clients thanks to Washington’s new buyback tax.

Wall Street advisers are investigating ways to help companies avoid paying extra taxes on repurchasing their shares, the FT’s Eric Platt and Nicholas Megaw report — efforts that threaten to chip away at a major revenue generator in president Joe Biden’s climate and health package.

One way for companies to get ahead of the new rules could be to use accelerated share repurchase (ASR) programmes, a type of structured deal normally used to buy back large volumes of shares quickly without causing drastic price moves.

In these trades, companies pay an investment bank to buy shares in the market over several months, but immediately receive a pile of stock that the bank has borrowed from other investors, making it look like the deal has been executed on a single day.

With a little more than four months until the tax rule goes into effect, that could give enough time to pull forward purchases that would have happened next year.

It remains unclear whether the Treasury will consider a buyback to take place on the day the company receives the shares, or when the banks actually buy them in the open market.

Bankers across Wall Street have sought legal advice from law firms including Davis Polk on the schemes, said several people briefed on the discussions.

Politicians on both sides of the aisle have criticised buybacks, saying the practice bolsters stock prices and executive compensation at the expense of long-term investment, hiring and worker pay.

The criticism has done little to curb corporate America’s buyback spree. S&P 500 groups spent $281bn on buybacks in the first three months of this year, according to S&P Global, setting a new record high for the third consecutive quarter.

Bankers aren’t convinced that Biden’s buyback tax will change behaviour, but there are fears that it could creep higher, fuelling interest in uncovering loopholes.

“One per cent now is not a big deal,” said a New York-based banker who works on corporate share buybacks, “but what if that 1 becomes 3 or 5 or 10 per cent to raise revenue or score political points?”

Lars Windhorst says he’s liquid enough to pay H2O

Lars Windhorst is going to cough up more than half a billion euros any week now. You just have to trust him.

That’s the proposition facing H2O Asset Management and its long-suffering investors, who have €1.6bn of their savings trapped in funds that will only be reimbursed when the controversial German financier clears his substantial debts.

Windhorst, whose dramatic ups and downs have made him a fixture of German tabloid headlines since he was a teenager, is late paying the French asset manager: his investment company Tennor blew through a deadline to repay more than €1.1bn in January.

But sitting in his lavishly appointed personal office in Mayfair’s Savile Row, the 45-year-old financier assured DD’s Rob Smith that a significant chunk of the money is now on the way.

“We will make payments of not less than €550mn in cash to H2O Asset Management in the coming weeks,” said Windhorst, ascribing his improved liquidity to an upswing in the fortunes of his ragbag portfolio of businesses, which range from luxury lingerie maker La Perla to a little-known African farming company.

The bold pledge is indicative of Windhorst’s signature chutzpah, which has won him an eclectic circle of high-powered contacts and confidants, including billionaires such as Michael Milken and Sir Leonard Blavatnik.

But will H2O actually receive the money on time? Given the numerous times Windhorst has made similar pledges in the past, to no avail, you could excuse H2O’s investors for feeling a sense of déjà vu at his latest pronouncement.

Job moves

• Ares Management has promoted Barry Miller, a partner at the firm focused on private equity secondaries, as chief executive of its private markets fund.

• Blackstone has promoted private equity senior managing director Sachin Bavishi to lead its new San Francisco office.

• BNP Paribas has hired Joe Lai as head of healthcare investment banking for the Asia-Pacific region based in Hong Kong, per Bloomberg. He was a managing director at China Renaissance Holdings.

Smart reads

Representing the Right The conservative movement in the US government and judicial system had a key proponent: corporate law firm Jones Day. The New York Times chronicles its integral role in building and benefiting from Donald Trump’s rise to power.

Make or break Under pressure to churn out original content on waning budgets, streaming platforms are putting all their chips on big blockbusters. But flops could be all the more lethal as consumers look to cut more subscriptions, the FT reports.

Ground the Gulfstreams The French transport minister’s idea to restrict the use of private jets by high-flying financiers and Hollywood stars could have wings, writes Reuters’ Breakingviews, as there’s little economic downside to the plan.

News round-up

Capital Group: the slow-moving giant in dangerous waters (FT)

Novartis to spin off generic drugs unit Sandoz (FT)

CIMC abandons $1bn deal for Maersk’s refrigerated container arm (FT)

Citigroup to wind down Russian consumer and commercial operations (FT)

Hedge funds build biggest bet against Italian debt since 2008 (FT)

China’s distressed asset funds struggle to profit from collapsing property sector (FT)

UK to probe Czech billionaire’s Royal Mail stake (FT)

Tech IPOs: quiet market creates backlog of companies waiting to go public (Lex)

Bank of England/rates: rising reserve costs may prompt stealth tax on banks (Lex)