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Are there any rules about hedge funds discussing their positions?


dyow
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Let's say you are not invested in a fund, have no connection to them, except that you own a specific stock position they own as well. 

 

I tried to talk to a fund that owns a stock I own - and I plan on contacting a couple more.  For the fund I called I never got through to the actual fund manager.  But the person that answered the phone mentioned that they don't discuss their positions because of legal issues/lawyer related stuff.  They are not on the board of directors of that company.

 

I don't know of any rules where you can't discuss your positions with other shareholders - i was under the impression that funds were able to discuss their positions freely with anybody.

 

Also all the information discussed would be public information, nothing new, i just wanted to compare assumptions and the thesis - I am thinking this fund just doesn't want to talk, and there are no legal issues, but i don't know, i don't run a fund.

 

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Let's say you are not invested in a fund, have no connection to them, except that you own a specific stock position they own as well. 

 

I tried to talk to a fund that owns a stock I own - and I plan on contacting a couple more.  For the fund I called I never got through to the actual fund manager.  But the person that answered the phone mentioned that they don't discuss their positions because of legal issues/lawyer related stuff.  They are not on the board of directors of that company.

 

I don't know of any rules where you can't discuss your positions with other shareholders - i was under the impression that funds were able to discuss their positions freely with anybody.

 

Also all the information discussed would be public information, nothing new, i just wanted to compare assumptions and the thesis - I am thinking this fund just doesn't want to talk, and there are no legal issues, but i don't know, i don't run a fund.

 

Sounds like a perfectly Phil Fisher'ish thing to do (might find a good manager to put money with in the process...)

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I think this is a function of two things -

 

1. They are giving a very cautious reading to the securities laws, whereby discussing the position in any way they could be construed as recommending it and exposing them to liability.  There are multiple reasons there is minimal risk of actual liability, but if there's even the slightest gray area it's easier to just say no unless there's a good reason to do it.  This is how lawyers and compliance people think.  Why risk it if there's no benefit to them?

 

2. They see no benefit from discussing the position with you.

 

I see no reason not to make these calls, but I'd expect any fund of decent size to refuse to discuss unless you have something for them.

 

I also think a lot of funds see their analysis as their valuable intellectual property and keep it exclusive to their investors.  This is why Klarman and others threaten to sue people who post their fund letters, and why compliance won't let analysts discuss stocks on twitter even anonymously. 

 

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I probably wouldn't find someone because i like managing everything myself.

 

Yes i think you are right and "the no benefit to us" thing might be the biggest issue - but I think i can add value so it would not be just me benefiting (but obviously we won't know this until we talk). These funds i am trying to talk to are smaller.

 

Yeah Klarman is super secretive and the size of his fund makes the rules much more strict - i am not even sure if he explains to his investors why he buys certain securities. 

 

...thanks.

 

 

 

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This varies but more often than not the fund managers not willing to talk about stocks are just self absorbed schmucks who don't want to waste their time unless it's something they can get publicity out of.

 

I've actually had decent luck with this, although hands down the best place to approach them is shareholder meetings.

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I think this is a function of two things -

 

1. They are giving a very cautious reading to the securities laws, whereby discussing the position in any way they could be construed as recommending it and exposing them to liability.  There are multiple reasons there is minimal risk of actual liability, but if there's even the slightest gray area it's easier to just say no unless there's a good reason to do it.  This is how lawyers and compliance people think.  Why risk it if there's no benefit to them?

 

2. They see no benefit from discussing the position with you.

 

I see no reason not to make these calls, but I'd expect any fund of decent size to refuse to discuss unless you have something for them.

 

I also think a lot of funds see their analysis as their valuable intellectual property and keep it exclusive to their investors.  This is why Klarman and others threaten to sue people who post their fund letters, and why compliance won't let analysts discuss stocks on twitter even anonymously. 

 

 

If 1) is their concern, maybe assuring them that you are an accredited investor might relieve their worries about the liability of talking to you about an investment, but it won't do any good if their reason is "it doesn't benefit us to talk to you".

 

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This varies but more often than not the fund managers not willing to talk about stocks are just self absorbed schmucks who don't want to waste their time unless it's something they can get publicity out of.

 

I've actually had decent luck with this, although hands down the best place to approach them is shareholder meetings.

 

Yeah, personally i always want to hear other people's views on my position, good and bad.  Agree on shareholder meetings I would assume they would be a lot more open to talking there.

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If 1) is their concern, maybe assuring them that you are an accredited investor might relieve their worries about the liability of talking to you about an investment, but it won't do any good if their reason is "it doesn't benefit us to talk to you".

 

That's the thing, firms with super conservative lawyers/compliance are generally going to default to no.  It's just easier to justify the "safe" position.  Happens in so many different areas not just here.

 

Good insight on shareholder meetings, Gregmal.  Skips the gatekeepers.

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