The bernsteins of the world, as we have come to call them, have long been at the center of our investment-banking world.
The billionaire brothers John and James have built a sprawling wealth management empire that has helped to keep global markets from crashing.
But it is their hedge fund, BofA Merrill Lynch, that has been the most visible beneficiary.
With more than $1 trillion in assets under management, the firm is the biggest U.S. bank by assets and one of the biggest global hedge funds by assets.
In its latest quarterly financial report, the company noted that it had more than doubled its capitalization in the last 12 months, to $6.5 trillion.
This is an enormous leap.
It’s the second-biggest jump in Bofas capitalization.
The firm is one of a few hedge funds that have seen their stocks and bonds rise during the crisis.
The rest have had their market values plunge, while Bofa’s is still relatively low, thanks in part to a recent surge in its stock.
But Bofan is also the biggest hedge fund in the world that has made its money through asset-backed securities.
That is, a security issued by a firm is guaranteed by a bank to pay back the investor in the event that it is not profitable.
Bofar has long been known for its aggressive asset-manipulation strategies, using its large holdings of corporate debt to buy up smaller companies and sell them off to other firms, then refinance the loans with the bank’s cash and buy back the shares at a higher valuation.
It also has a long history of taking on large exposures, such as owning the nation’s largest mortgage lender Fannie Mae.
Its $1.5 billion bet on UBS AG in the summer of 2008 helped it win back control of the U.K. sovereign-debt market, which was then struggling to recover from the collapse of Lehman Brothers.
The bank, which had been bailed out by the government, was able to raise $1 billion in cash and borrow more than it would have if it had sold its bonds.
But that same day, Bifa announced it had bought back UBS shares and was selling off UBS assets.
It later paid $7 billion to settle allegations that it defrauded investors.
In a statement, the hedge fund said the buyback “has enabled BofAs capital structure to continue to grow at a solid pace, while also increasing the attractiveness of the portfolio.”
Bofarex also is part of a handful of other firms that have bought back their own shares, using the same strategy.
They include the investment firm Fortress Global Capital and the investment bank Pimco.
“The asset value of the entire portfolio is a critical component to the fund’s long-term profitability,” Bofarrex said in a statement.
Bifas shares are currently trading at about $8.50 a share, up about 20% in the past year.
While some of these deals may not be lucrative, others are big deals.
The company said it had acquired $1,400 million in bonds from Goldman Sachs Group Inc., for example.
And it said it sold $500 million in UBS debt.
A $50 billion hedge fund called KKR and a $20 billion hedge firm called BlackRock Inc. each own about $2.5 million of the firm’s holdings.
BKR is a small but growing player in asset-purchase programs, with about $500 billion in assets, according to data compiled by Bloomberg.
The hedge fund is part-owned by the investment company Blackstone Group Inc. Blackstone has said it would invest more in Bifares debt-buying program, and its shares have risen sharply in recent weeks.
BKS shares are up nearly 60% in 2017, compared with the S&P 500’s 10% rise in the same period.
The biggest asset of the group is Bofs $10 billion investment in the energy company SolarCity Corp., which was acquired by Tesla Inc. in October for $2 billion.
SolarCity is now worth about $40 billion, according a person familiar with the matter.
BKA, which is not subject to Bofares regulatory controls, has a $5 billion investment fund with ties to the Blackstone family.
The investment fund, called BKB, has bought up the majority of SolarCity shares.
BKB is expected to use some of its new capital to pursue a number of other business deals, according the person familiar.
The Blackstone group has also bought up about $1 million of BKBs assets in the solar-panel business.
BKC, which has also sold its stake in the UBS loan portfolio, is also looking to buy back a portion of Bofars shares.
The two firms are not required to disclose the terms of any of their deals, but the hedge funds have been in talks for several years about buying more