Evan Vitale

Accounting Professional

Evan Vitale – Sophisticated Cyber Attack on Hedge Fund

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A hedge fund has announced that it was hacked by cyber attackers – and it’s being labeled as one of the most complex cyber attacks ever.

BAE Systems Applied Intelligence said that its technicians stopped an attack while it was happening. BAE did not mention which of its clients were hacked during the attack.

The BAE has estimated that the attack cost the firm millions of dollars.

The attack, however, has been in the making for a long time. Cybercriminals planted the “bug” back in 2013 – a malicious computer program that has been stealing trading strategies from the firm’s computers. Hackers were focusing on the hedge fund’s trade order entry system. The bug corrupted the system, disrupting trade strategies while sending details of the trades to computers outside the firm.

This attack is just one of a series of cyber attacks happening against big businesses. Recently, Target and Neiman Marcus have been attacked; those attacks, however, were for credit card numbers.

Paul Henninger – the product director at BAE – said that this represents one of the most complex attacks he has ever seen.

New attacks are looking to not only make a quick buck but also provide a long-term return. In this case, the program was designed to uncover trading strategies. It combines both business and technical sophistication.

Henninger calls cyber attacks such as this one “the perfect crime.” This is because the attack is extremely difficult to trace and the fact that companies are reluctant to go to law enforcement.

“It often takes a while for firms to get comfortable with the idea of exposing what is in effect their dirty laundry to a law enforcement investigation,” Henninger said. “You can imagine the impact potentially on investor confidence.”

Henninger said that he is unaware as to whether or not the firm alerted law enforcement.

The SEC announced that it has been encouraging hedge funds to increase their cyber security over the past couple of years. At the beginning of the year, the SEC announced its plan to review security policies.

Jane Jarcho, an associate director at the SEC, said that it is looking at policies for a variety of fronts – such as IT training, vendor information and vendor access.

Evan Vitale – $4 Billion Real Estate Fund Launch

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High risk private equity funds may be coming back into style after a tough few years. Since the financial crisis, firms have run into trouble raising the capital needed for new real-estate funds. However, private equity giants TPG Capital, KKR, and Carlyle Group have demonstrated interest in and taken steps toward launching real-estate focused funds. Carlyle Group is preparing for a multi-billion dollar real-estate fund with plans to raise up to $4 billion. The fund would qualify as the largest property fund since the financial crisis and the burst of the real-estate bubble.

Carlyle is hoping to benefit from a surge in positive publicity from its recent sales of trophy assets at high profits. The firm and its partners reached an agreement late last month to sell the 27-story Manhattan office building at 650 Madison Ave. for $1.3 billion, or about $500 million more than the firm spent buying and fixing up the property.

Carlyle invests in a wide range of asset types, including corporate private equity, debt and energy. Real estate makes up only $13 billion of its total portfolio. Carlyle tends to buy single buildings, less often acquiring large property portfolios as some of its peers such as Blackstone Group or Starwood Capital Group. Source

Carlyle has had seven real-estate focused funds since 1997, the largest of which topped out at $3 billion. The private equity giant, with $176 billion in assets under management, will hope to capitalize on a renewed confidence in the real estate market and the rising prices of homes.

Evan Vitale – Come And Get It: $70 Billion Available

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Global hedge funds are looking to further expand in Asia over the next few years – and expand they will. A Barclays survey states that as much as $70 billion is available.

Hedge fund managers are looking to uncover a pot of gold. -- Evan Vitale Finance & Accounting

Hedge fund managers are looking to uncover the pot of gold that lies in Asia.

Due to the increase in sovereign-wealth funds, as well as the private wealth throughout Asia, have opened the door for managers to invest.

Currently, Asian investors account for approximately $150 billion in global hedge funds. This is just over five percent of the total amount invested in global hedge funds.

Hedge fund managers are targeting corporate pensions in Japan, which are seeking alternative investments. Also, Korean institutional investors are seen as likely suitors to jump into global hedge funds.

David Bennett, the head of capital solutions at Barclays, said that managers in North America believe there is a pot of gold in Asia that has yet to be uncovered.

“There is definitely a lot of potential here in terms of raising assets,” Bennett said. “Realizing that potential is a very different matter.”

Evan Vitale – Private Equity Investment Model

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It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation (ARDC) and J.H. Whitney & Company.

Private equity companies manage funds, which typically invest in unlisted companies. There are several stages in the private equity investment process starting from collecting capital for the fund and ending with returning committed capital and realized returns to fund investors.

Establishing a fund

Private equity fund managers raise capital from institutional investors to establish private equity funds. Typically, investors include both private and state pension funds, funds of funds, life insurance companies, foundations and other institutions. Often the fund manager also commits capital to the newly established fund. Private equity funds are typically organized as limited partnerships with a life cycle of approximately ten years. Capital is called from investors when the investments are made into portfolio companies. The fund manager acts as an advisor to the fund and is responsible for the decision making process, such as making investment and exit proposals and developing the investment targets during the ownership period.

Mapping potential investments

The private equity fund manager maps potential investment targets for the fund. Typically, the targets need to fulfill certain criteria in terms of size, industry and life cycle phase in accordance with the fund’s strategy. Additionally, the fund manager evaluates the attractiveness of each target based on its value creation and exit potential. Investment targets are usually sourced either through proprietary networks or by participating in auction processes. Efficient deal sourcing therefore calls for strong business networks across the fund’s target geography.

Making an investment

After a fund manager identifies an investment target, a more detailed analysis of the business is performed. This due diligence analysis usually involves going through the company’s financial and legal documents, as well as evaluating its commercial attractiveness. Negotiations with banks to arrange financing are also initiated at this stage. Provided that bank financing is available and due diligence findings support the investment, final negotiations regarding the transaction are initiated.

Developing the target company

Once the investment is made, the private equity fund manager starts developing the company based on a detailed value creation plan. In addition to financial capital, the manager supports the target company by providing sector knowledge, operational experience and access to a wider business/industry network. This usually involves taking a seat on the target company’s board.

Exit

Private equity investors are temporary owners. Therefore, a portfolio company is usually held between 4 to 6 years, during which the value creation plan is being implemented in cooperation with the management team. There are several alternatives available for the private equity fund to exit the investment. Most commonly exits take place through:

  • Trade sale to an industrial buyer
  • Secondary sale to another private equity fund
  • Listing through initial public offering (IPO)
  • Sale to the management group

Once the exit is finalized, the initial capital and proceeds from the investment are returned to the fund investors.

Evan Vitale – Private Equity in Short

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Private equity enables the growth and development of unlisted businesses. Private equity consists of funds making equity investments in non-listed companies. Private equity investors are active owners. Besides capital, the investors provide the companies with strategic and managerial support. Value creation in private equity is primarily based on achieving increased growth and operational efficiency.

Private equity investments are usually categorized based on life cycle phase of the
target company:

  • Seed/early stage investments: Financing for development and commercialization of a business concept.
  • Venture Capital: Minority/majority investments in early stage or expansion ventures.
  • Growth Capital: Typically minority investments in companies with major growth potential.
  • Buyout: Acquisition of a controlling interest in a company together with the operative management or an outside management group.
  • Special situations: Investments in distressed companies or companies operating in an industry with major changes

Evan Vitale – China Real Estate Bubble Bursting

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Finally, the Chinese real estate market seems to be stalling. It’s been a long run.

For almost 20 years, increases have occurred in construction and real estate prices across all of China. But development is starting to come back to earth as housing starts have decreased by 25 percent from a year ago.

Some economists are saying that the bubble has burst, something that could have severe economic and political implications.

The Chinese government put a series of policies in play in order to try to tame the ever-rising market. For starters, they’ve placed punitive interest rates on mortgages for second homes and a ban on buying third homes. Plus, the central bank has kept short-term interest rates well above the rate of inflation.

Not only has there been a delay in new projects – existing projects are being completed at a reduced speed as well. This has led to a slowing in both steel and cement output as well as retail sales.

Chinese economists believe that this downturn in the real estate market will most likely lead to considerable increases in nonperforming loans.

However, there is no need to worry about a shutdown such as the one that occurred in the U.S. in 2008. More than half of the homes in China were purchased over five years ago and real estate prices have doubled in that same time-frame. And Chinese families have a tendency to save – putting almost half of their income into a savings account.

Households in China have 66 percent of their assets in their homes, a much larger percentage than that of the U.S.

Evan Vitale – London’s Real Estate is Going Crazy

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An apartment overlooking Hyde Park in London recently sold for $237 million, giving a glowing example of the craziness of London’s real estate market.

The city’s housing prices have skyrocketed 18% within the last year and it has both politicians and economists worried.

The apartment, which is speculated to have been sold to a foreign buyer, is still unfinished. It is approximately 16,000 square feet. 

Londoners cite foreign buyers as a reason for this rising market price, making ridiculous investments in a market that has a high demand.

London Vs. New York City

A new report shows that over $676 billion has been invested in London real estate. This is approximately four times the amount that has been invested in New York City.

London is desirable due to a bunch of reasons — it’s vibrant culture, a growing economy and business scene, and the variety of green spaces. One aspect that is often overlooked, however, is the timezone — one which is located between Asia and the US. 

Low interest rates and aggressive government incentives have also helped with the housing boom in London. 

Dangers 

The housing market in London is a bubble waiting to burst. Economists are considering raising interest rates later this year. Rates have not risen since July 2007. 

These rapid price gains raise the chances of future debt growth. The low interest rates are no longer necessary for the London housing market. 

Evan Vitale – Rangers Suffer Tough Second-Game Loss

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Ranger's Lundqvist reaches for a save. -Evan VitaleLast night was Game 2 in the second-round playoff series between the NY Rangers and the Pittsburgh Penguins.  The Penguins won the game handily, scoring three unanswered goals, tying the best-of-7 series at one-one.  Game three will be tonight in New York.

The Rangers are currently in the middle of a grueling back to back game schedule.  Last night’s game was the fourth in six nights, and some wonder if goaltender Henrik Lundqvist is too tired to play every game.  Rangers coach Alain Vigneault says he’s fine, and intends to keep him on the ice for every minute of the playoffs.  Indeed, Lundqvist looked sharp on the ice.  What this means for the Rangers is that the Penguins offense is a formidable force.

Much of the game was spent in Rangers defense territory, with the Penguins skill on full display.  The fact that Pittsburgh only scored three goals is actually a testament to Lundqvist’s performance.  The fact that the Rangers scored none, could be a bad sign.

The Penguins took 3 major penalties in the first seven or so minutes of the game.  The Rangers, looking to take advantage of the power play only had two shots on goal.  It’s going to take a lot more to bring this team down.  Both teams are excellent, and when two teams are playing at such a high level, every moment matters.  Every play, every little thing becomes important.  The Rangers need to make sure they capitalize when they have power play opportunities.

Fans at the CONSOL Energy Center loved the game, of course.  They were galvanized by the wasted chance in the first 10 minutes, and rallied behind their team.  Rangers fans are hoping that the next few games being in NYC will give the Rangers that home ice advantage to help give them an edge.

Penguins goaltender Marc-Andre Fleury set a new Penguins record last night, with his 7th postseason shutout, the most in club history.  He collected all 22 shots on goal.  The Rangers need to make Fleury work harder.  It’s not that he had such a great game, it’s that there just weren’t enough shots on goal by the Rangers.  Analysts called the Blueshirts play sloppy, losing battles all over the ice, and offering no real pressure on offense.  Brad Richards felt that the Penguins were desperate and played harder.

On the other hand, experts are calling Lundqvist’s performance among his best all season.  Some of his stops were remarkable, particularly during the second period.  He made fifteen saves, many of which will make their way to fans best-of lists at the end of the season.

The Pittsburgh coach, Dan Byslma, is hoping to turn the victory into positive momentum.  The Rangers have a tough schedule, and he wants to use that to his advantage – “We want to make the schedule a factor.”

Evan Vitale – Reasons to File Taxes On Time

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evan vitale tax deadlineVery few of us plan not to do our taxes on time, but sometimes it happens.  To try and help motivate those of you still waiting to put pen to paper (or fingertip to keyboard), here are a few reasons why filing on time is better than putting it off until later.  Courtesy of Daily Finance.

The first reason to file taxes on time is late penalties.  There’s no better motivation than trying to keep money in your wallet.  The reason there is a monetary fine on late filing is because the filing of national taxes is so important.  There’s also been reports that the IRS will hound you harder if you fail to file on time and owe a deal of money – as opposed to those expecting to receive money back.  The fine amounts to about 5% of the taxes you owe for every month you delay, with a cap at five months.  If you’re not filing on time because you can’t pay the money you know you’ll owe – still file!  The fine is significantly less for failing to pay what taxes you owe.

The next reason is delayed reimbursement.  The longer you wait to file, the longer it will take for you to receive your return.  In essence, you’re giving the government an interest-free loan.  Better that money was in your savings account accruing money for you.

Up next is forfeiture of your refund altogether.  After a generous window of three years, any money owed to you by the government just kind of…disappears.  Whatever happens to it exactly, it no longer belongs to you.  Hope you were planning on making a donation to the IRS.

Number four – if you don’t file, the IRS is allowed to file for you!  Yes, they will estimate your taxable income and file on your behalf.  This is usually not in your best interest, since they won’t be making any deductions.  If you do receive a notice that a substitute return has been filed, along with a bill, you will still have a little time to calculate your deductions.

And the last reason is the most compelling:  You will lose your freedom.  After all the letters, requests (or even a representative sent to your door), the IRS will get serious.  This means they could automatically remove money from your wages, seize assets (think vehicles), and maybe even put a warrant out for your arrest for the federal crime of tax evasion.

There really is no valid argument for not filing your taxes on time.  So take some time over the next ten days and see it through.

Evan Vitale – Why Is Everyone Upset? Facebook & WhatsApp

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Evan Vitale facebook whatsappEveryone’s been talking about the recent acquisition of WhatsApp by Facebook, and I found a very interesting take on it from Yahoo Finance.  The writer of the article mostly concurs with general sentiment – that Facebook overpaid.  Overpaid in a major way.  But he goes on to say that the acquisition makes no strategic sense at all.

The reason is that there are a lot of these messenger apps.  WhatsApp is the biggest, but new ones come out every day.  The newer Telegram Messenger app signed up five million users yesterday.  These messenger apps all work the same, cost the same (very little to nothing), and do the same things – many even look the same, with similar colors and virtually identical layouts.  What’s more is that the content they use is merely what we’ve already entered into our address books.  If one app suddenly makes a change that you don’t like, there are plenty of options.  So the apparent value is very low – these are interchangeable, right?

So why didn’t Facebook create it’s own version of the app and simply promote it to their network, which just so happens to be the largest on earth?  For the cost of developing an app, they could have pulled off one of the biggest messenger app user bases around.  Spend some of that extra money on a mega advertising campaign worldwide.

Instead, here comes Facebook making a monstrously expensive purchase on just one player in this interchangeable, disposable market space.  There’s no sustainable revenue…in fact, the app has to remain free in order to retain their user base.  WhatsApp wasn’t a threat – they’re not an identity company, one that you give your info to for public consumption.  They simply hold an account for you to contact your own address book.  Instagram was different – there was and is a huge advertising potential upon which Facebook has already capitalized in a big way.

But does this mean that Mark Zuckerberg simply made a rash decision with not enough oversight from his board, as posited by this editorial?  Is this a simple win for WhatsApp and a necessary loss for Facebook?  Should shareholders of the social giant be upset?  Should Google be happy that they couldn’t get their hands on it?  After all, they tried buying it for $10 billion, and there are reports that they even matched the offer from Facebook.

My question is, why does anyone need to be upset?  Facebook just acquired the biggest global brand of messaging apps.  They also acquired it at a time when the future for social networking is hazy…do you want to publish your thoughts for mass consumption and be aware of the goings on of your entire social network every time you go online?  Or would you prefer to put that aside to some degree and enjoy a more intimate, meaningful interaction with those to which you’re closest?

I think Facebook is preparing for the future.  A future that might involve people looking for alternative social networking avenues for different social purposes.  After all, there’s something entirely more special about a game night with a couple friends and New Year’s Eve in Times Square.