Princeton Newport Partners

From Wikipedia, the free encyclopedia

Convertible Hedge Associates (CHA) was an early alternative investment management company founded by Edward O. Thorp and a partner, Jay Regan, in November 1969. Based in Long Beach, California, CHA was said by Thorp to have been the first market-neutral hedge fund. In 1974 it was renamed as Princeton/Newport Partners.

Princeton Newport Partners (PNP), founded by in 1974, was stated by its founder, mathematics professor Edward O. Thorp, to be the world's first market neutral hedge fund.[1] The company was a pioneer in quantitative trading techniques, profiting from mispricings in derivatives, and later statistical arbitrage, which involved trading a large number of stocks for short-term returns. PNP achieved an annualized rate of return of 20 percent after fees for over two decades, without a single down quarter,[2] until becoming embroiled in the junk bond schemes of Michael Milken's circle at Drexel Burnham Lambert.[3] Thorp and other principals at PNP were eventually cleared of wrongdoing,[4][5] but the financial burdens imposed by the ensuing Racketeer Influenced and Corrupt Organizations Act investigation forced PNP to liquidate. His circle of associates later regrouped as , with focus on statistical arbitrage.[6]

References[]

  1. ^ Edward O. Thorp (2003). A Perspective on Quantitative Finance: Models for Beating the Market (PDF). Quantitative Finance Review. p. 4.
  2. ^ Patterson, Scott (March 22, 2008). "Old Pros Size Up the Game". Wall Street Journal.
  3. ^ Paltrow, Scot J. (November 7, 1989). "Six in Princeton/Newport Case Escape Tough RICO Sentences". Los Angeles Times.
  4. ^ Eichenwald, Kurt (August 1, 1989). "Six Guilty Of Stock Conspiracy". The New York Times.
  5. ^ Paltrow, Scot J. (June 29, 1991). "Racketeering Convictions of 6 Overturned: Wall Street: An appeals court reverses the decisions in the case of Princeton/Newport Partners, the first in which organized-crime law was applied to securities fraud". Los Angeles Times.
  6. ^ Mider, Zachary (May 14, 2014). "The $13 Billion Mystery Angels". Bloomberg.
  • Some notes about CHA history are available in Thorp's articles Option Theory: What I Knew and When I Knew It, Parts 1 and 2, from Wilmott Magazine.
Retrieved from ""