HedgeCo is among a handful of hedge fund-services firms that are positioning themselves to capitalize on the JOBS Act.
The West Palm Beach, Fla., firm is setting up an advertising-placement unit that would connect fund managers with financial-news publications and websites. The Jumpstart Our Business Startups Act, which President Obama signed into law on April 5, includes a provision that lifts an age-old ban on private-fund operators marketing to the general public.
HedgeCo chief executive Evan Rapoport said that once the SEC formally implements the change, he expects to see hedge fund promotions popping up in a variety of formats and venues. His company already has drawn up proposals for five hedge fund clients that want to start advertising.
Rapoport said the freedom to advertise could give smaller fund operators a much-needed boost — though they still are limited to raising capital from accredited and qualified investors.
Meanwhile, a group of industry players has set up a website called HedgeFundReputation.com that is designed to optimize Internet searches for the names of hedge fund operators.
Other service providers said they’re waiting to see how the SEC implements the JOBS Act provision before deciding whether to pursue new marketing ventures.
HedgeCo Networks has hired a Wall Street veteran to serve as its president.
Brett Langbert joins from UBS, where he led prime brokerage sales for the Americas. He said that his new firm's
"unique approach to helping start-ups and emerging manager funds represent a significant business opportunity and I am excited by
the opportunity to leverage my experience in this entrepreneurial environment."
EVER SINCE BERNARD MADOFF'S PONZI SCHEME was uncovered in late 2008, funds-of-hedge-funds -- some of which invested with Madoff even though he shared little information with them -- have been getting squeezed. Massive redemptions and gating -- restrictions limiting withdrawals from hedge funds -- left a lot of the funds, and their investors, without an escape hatch as stocks and bonds plummeted during the credit crisis.
Even so, Scott Prince of SkyBridge Capital sees "a secular trend" of individuals and large pension plans, among others, gradually returning to hedge funds. It can't come too quickly for the funds-of-funds, whose assets have fallen from a high of $826 billion in the second quarter of 2008 to $570 billion more recently, according to industry tracker Hedge Fund Research. Total hedge-fund assets, meanwhile, have begun to creep back up to about $1.67 trillion.
"We have seen a number of mergers and acquisitions in the fund-of-fund industry," says Evan Rapoport, managing partner at hedge-fund database HedgeCo.net, in an e-mail. "However, I would say that we have barely scratched the surface and expect to see a large amount of consolidation. Would-be acquirers wanted to wait and see which funds of funds would survive." The number of hedge-fund-of-funds has fallen to 2,117, compared with 2,439 fund of funds at the end of 2008.
BOSTON/NEW YORK, Aug 9 (Reuters) - August is not even two weeks old and for top hedge fund traders like Steven Cohen, John Paulson and Bill Ackman it could be a month to forget.
Even Cohen, one of the industry's titans, hasn't escaped the global sell-off -- his $14 billion SAC Capital is down 4 percent this month.
Still after SAC's poor start to the year, the fund is still in the black with a roughly 6 percent gain this year.
That's not the case for John Paulson, whose two flagship funds had suffered steep losses even before the month began. The Paulson's Advantage funds lost more than 10 percent in the last week, bringing total losses in the two portfolios, which oversee about $17 billion of investor money, to more than 25 percent.
The brutal global stock sell-off is quickly turning hedge funds that had been up for the year into losers. Meanwhile, funds that entered August already down for the year are piling up even more red ink.
But just as quickly as the Dow Jones industrials plummeted 6.7 percent on Monday, the index climbed back 4 percent on Tuesday, creating ever more uncertain trading conditions for even the savviest stock pickers.
Industry observers say the way things are headed, many funds may post double digit losses for August.
But so far, there appear to be few large hedge fund blowups because many managers were already reducing their stock holdings going into the summer given concerns about Europe's debt crisis, the sluggish U.S. economy and the political impasse over the U.S. debt ceiling.
The carnage, for the moment, appears confined to small and lesser known funds that can't weather a big loss.
"There have been a number of blowups in the past week, particularly small hedge funds in the volatility options arbitrage space," said Evan Rapoport, chief executive of HedgeCo Networks, which helps clients invest with funds and runs a hedge fund.
If you think the past few weeks have been rough on your portfolio, take a look at John Paulson's flagship hedge funds.
His firm's two Advantage Funds have lost more than 10% in the past week, according to Reuters. Those portfolios, which have a combined $17 billion in assets, have lost an estimated 25% so far this year.
"There have been a number of blowups in the past week, particularly small hedge funds in the volatility options arbitrage space," Evan Rapoport, CEO of HedgeCo Networks, said in the report.
Other big hedgies are also believed to be feeling their lumps lately. Bill Ackman's Pershing Square Capital Management, which was down more than 4% at the end of July, has seen some of its biggest bets get hit hard in the downturn. Those include JC Penney (JCP) and Citigroup (C).
EVER SINCE BERNARD MADOFF'S PONZI SCHEME was uncovered in late 2008, funds-of-hedge-funds -- some of which invested with Madoff even though he shared little information with
them -- have been getting squeezed. Massive redemptions and gating -- restrictions limiting withdrawals from hedge funds -- left a lot of the funds, and their investors,
without an escape hatch as stocks and bonds plummeted during the credit crisis.
Even so, Scott Prince of SkyBridge Capital sees "a secular trend" of individuals and large pension plans, among others, gradually returning to hedge funds. It can't come too
quickly for the funds-of-funds, whose assets have fallen from a high of $826 billion in the second quarter of 2008 to $570 billion more recently, according to industry tracker
Hedge Fund Research. Total hedge-fund assets, meanwhile, have begun to creep back up to about $1.67 trillion.
"We have seen a number of mergers and acquisitions in the fund-of-fund industry," says Evan Rapoport, managing partner at hedge-fund database HedgeCo.net, in an e-mail.
"However, I would say that we have barely scratched the surface and expect to see a large amount of consolidation. Would-be acquirers wanted to wait and see which funds of
funds would survive." The number of hedge-fund-of-funds has fallen to 2,117, compared with 2,439 fund of funds at the end of 2008.
NEW YORK (TheStreet) -- Investors are returning to hedge funds. During the first four months of the year, hedge funds
recorded $24 billion of inflows, according to HedgeFund.net.
The inflows represent a big turnaround from the turmoil of 2008. During the downturn, many funds were forced to liquidate, and some
analysts predicted that the hedge fund industry was bound to shrink permanently. Hedge fund assets dropped from a peak of nearly
$3 trillion in the second quarter of 2008 to $2.3 trillion this year.
The industry continues to face serious hurdles. With memories of the stock-market meltdown still fresh, many individual investors remain
wary of hedge funds. In addition, the new Dodd-Frank financial legislation aims to rein in hedge funds, tightening regulations and restricting investments by banks.
Still, the outlook for the industry remains positive. Many pensions and institutions have been increasing their allocations to hedge funds.
The performance of hedge funds in recent years is helping to attract investors. "Hedge funds have outperformed the S&P 500 and done it
with a lot less volatility," says Evan Rapoport, principal of Hedgeco.net, a data provider.
The full Thestreet article is available here: TheStreet
The general consensus for fundraising is that 2010 holds much in the way of promise for hedge funds.
Strong performance in 2009 slowed the enormous tide of redemptions, and net inflows finally took hold
at year-end. Seed announcements dot the news headlines and new launches have picked up pace; the growing
momentum is palpable.
New York-based research firm Carbon 360° recently sought to determine how those assets would return to hedge funds.
The firm surveyed third party marketing firms and capital introduction specialists to gain a clearer picture of
investor trends.
According to the survey, institutional investors now dominate the industry's investor base, followed by family
offices/pension funds. While these investors are beginning to allocate into hedge funds, there is still a
certain amount of apprehension in moving sidelined cash back into the financial markets.
"While a large number of institutional and private investors wait on the sidelines, third party marketers
focus their efforts on sourcing capital from areas outside of the United States," writes the report's author,
Carbon 360 Senior Analyst Daniel Golyanov.
Fund of hedge funds, which once were the gateway to the hedge fund industry for many institutional investors
have seen their foothold greatly diminished as many institutions have instead hired in-house hedge fund specialists.
This drop off in assets is reflected as surveyed marketers and capital introduction specialists gave them third
place in terms of investor size.
The future of fund of hedge funds is still very much in the air. Those that did not gate funds and that performed
well over the past two years will likely benefit from much less competition. But the re-growth of the FoHF
space will likely only occur if the "liquidity mismatch" problems that are built into the typical FoHF business
model and that caused severe distress during the height of the liquidity crisis are addressed.
Considering this shift in the investor landscape, it is no surprise that transparency and risk management are almost
equally important as performance for hedge fund investors. Large institutions have spent much of the past year
demanding better reporting, and pressuring funds to make use of third party providers such as risk management platforms,
valuations specialists and third party administrators. "As capital begins to return to the industry the biggest winners
will be managers with proven track records, large assets under management, and an infrastructure that allows for greater
transparency," concludes Golyanov.
Third party marketers themselves have also reportedly picked up the pace of the due diligence they do on their own hedge
fund partners, mainly in anticipation of the even more stringent due diligence performed by potential institutional investors.
While expectations for the asset-raising climate as a whole are optimistic, with the bulk of allocations expected to come
from institutional investors, a large portion of hedge fund managers will not even be able to compete for these funds.
New managers and those with performance records of less than 5 years do not stand much of a chance in securing institutional
assets, which in addition to performance track records often require the type of infrastructure that only multi-billion
dollar funds have in place.
This is likely why the majority of hedge fund clients that third party marketers are in business with are new and young
hedge fund firms. The smaller investment base looking at these funds (family offices and high net worth individuals)
means competition for assets in this crowd will be fierce. With the majority of third party marketers paid only upon
securing allocations (most reported to take fees of 20% on all management and performance fees of incoming allocations),
fund managers are more open to outsourcing their marketing and investor relations efforts, and focusing on the
performance of their funds.
"2010 should be a prosperous year for alternative investments." Evan Rapoport, CEO of HedgeCo Securities LLC is quoted
as saying in the report. "The managers and investors who survived 2008 and 2009 are the cream of the crop, providing
third party marketers and capital introduction firms with a vast array of opportunity. As hedge funds go, so goes the
capital introduction industry,"
The full Carbon 360° report is available here: Carbon 360.com
10 February, 2009 - A hedge fund database website raised serious doubts about funds managed by accused Florida Ponzi schemer Arthur Nadel in 2005. According to the Sarasota Herald Tribune, when the founders of the HedgeCo.net database then called Nadel's firm, Scoop Management Inc., to obtain audited financials for the funds, they were rebuffed.
10 February, 2009 - But what seems mysterious to them raised red flags in 2005 for the founders of HedgeCo.Net, a West Palm Beach hedge fund database site. HedgeCo dropped three funds run by Nadel's Scoop Management Inc. -- Valhalla Investment Partners LP, Viking Fund LLC and Viking IRA LLC.
23 January, 2009 - On the night of December 3, about 650 guests piled on to Nikki Beach on the east side of Manhattan drinking dirty martinis and grooving into the early hours of the morning. Not an unusual sight in New York, except that the party was hosted for the much-battered hedge fund industry. "For months, all you hear about is lagging numbers, layoffs and huge bailouts. Just for a night, I wanted everyone to forget all that. I think everyone was long overdue for a good time," says Evan Rapoport, co-founder of HedgeCo Networks and organiser of the event.
We are proud to showcase the talents of IPA member and HedgeCo Networks principle, Evan Rapoport
Evan Rapoport is the son of IPA founder Len Rapoport. He is a principal and co-founder of the West Palm Beach based internet and hedge fund consulting company, HedgeCo Networks.
Palm Beach, Florida: HedgeCo.Net, 4 April, 2007 - As domicile for approximately 80% of the world's hedge funds, the Cayman Islands have now implemented a mechanism for the electronic submission of annual returns for all funds licensed, registered and administered in the Cayman Islands.
The time is ripe for looking at funds of funds, says Evan Rapoport, a principal with hedge fund research and services firm HedgeCo.Net. "It's important for investment advisors to start lookng at hedge funds or funds of funds as part of their asset allocation because if they don't, an investment manager who does will end up taking business away from them." According to Rapoport, the more than 9,000 hedge funds managing around $1.5 trillion in assets pursue a wide range of investment strategies.
"There are very low barriers to entry but very high barriers to staying in the business," notes Evan Rapoport, principal of HedgeCo Networks, a hedge fund information and consulting firm in West Palm Beach, Fla. Competition is treacherous and lots of start-up funds don't survive. "While the high-profile start-ups command great attention," he says, "many established managers are busy broadening their product offering and expanding their footprint," in turn "raising the bar on what it takes to be successful as a new manager.".
Hollywood has had outside investors in the past and many of them have been burned. But the new crew have logical motives for getting into business with Hollywood. Consulting firm Hedgeco Networks has had six requests over the past year to start up Hollywood film funds. It had none the previous year, according to principal Evan Rappaport.
Until this past September, Jeffrey Glusman was a financial advisor at Merrill Lynch, a rising star sharing a book worth more than $250 million with a partner, a book truly to be envied. But after five successful years as an advisor, he's calling it quits - leaving his clients with his partner to start a hedge fund with a longtime friend. Glusman says the biggest surprise in starting up has been how cheap it is. In a package provided by hedgfundtools.com, the consulting arm of HedgeCo Networks, an industry information source, he got everything he needed to start Mogul - including legal and accounting services, auditors, prime broker introductions, Web site construction, database membership with Hedgeco.net and hedge fund software. And all that for $35,000. "If you go a la carte it's very expensive - buffet-style is cheap," he says.
HedgeCo Networks plans to charge customers $995 per year to use its Hedgefundcalculator program, undercutting the $5,000/year charge that the West Palm Beach, Fla., firm maintains is the going rate among its rivals.The program computes quantitative statistics, converts gross returns into net figures and generates monthly data for marketing materials. It also allows fund-of-fund managers to calculate their performance. However, the program isn't as comprehensive as some other products on the market, such as Strategic Financial Solutions' PerTrac software package. But HedgeCo says that small fund operators generally can't afford such extensive programs anyway, creating a niche for Hedgefundcalculator.
Investors still dream of striking it rich in risky stocks, but in practice they're on the cusp of turning conservative. Financial reality is slowly
sinking in. Next month, the oldest baby boomers reach 59 1/2--the age when they can tap a retirement account without paying a penalty. But after
adjusting for inflation, the average retirement plan is only 3 percent higher than it was back in 1993. Younger investors have plenty of time to
right themselves, but the boomer bulge will soon be up against the wall. A new little voice, at the back of their minds, whispers,
"what do I do for income at 65 if I'm retired with no pension, and chose lousy stocks?"
The program computes quantitative statistics,
converts gross returns into net figures and generates monthly data for marketing materials. It also allows fund-of-fund managers to calculate their
performance. However, the program isn't as comprehensive as some other products on the market, such as Strategic Financial Solutions' PerTrac software
package. But HedgeCo says that small fund operators generally can't afford such extensive programs anyway, creating a niche for Hedgefundcalculator.
Evan Rapoport, president of HedgeCo.Net, a Web-based consulting firm, will host a Live Talk on investing on Thursday, June 16, at noon ET.
Wonder where the money's going? Hedge funds. These privately managed, loosely regulated investment pools pulled in $24 billion last quarter. TIP SHEET's Linda Stern asked Rapoport for some perspective.
After 17 years of quietly establishing an investment empire, D. Scott Luttrell wants to share the wealth with others in the Bay area. Luttrell's LCM Group, an investment firm in New Tampa, founded in 1988, has opened its hedge fund to outside investors for the first time since the fund was established in 1995. The hedge fund industry has grown dramatically since 1990, when there were about 300 funds, to more than 8,000 funds now with an estimated $1 trillion under management, according to HedgeCo.Net, a West Palm Beach-based hedge fund research firm.
A rule requiring hedge fund managers to register with the SEC or state regulators is coming too late for investors who lost millions in now-closed West Palm Beach-based KL Group. But the new rule, effective next Feb. 1, will help regulators detect hedge fund problems more quickly, according to officials in the SEC's Miami office. HedgeCo Networks, a West Palm Beach-based research firm, reports that 67 hedge funds with Florida offices have registered for its data base. Palm Beach, North Palm Beach, Boca Raton, Miami Beach and Miami all have at least several hedge funds, said Evan Rapoport, a HedgeCo Networks principal.
Hedge funds aren't just for the Porsche and Rolls-Royce set anymore, a fact that's catching the eye of regulators. The SEC is concerned about growing risks as some hedge funds allow in investors with income as little as $200,000 - $300,000 for a couple - or net worth as low as $1 million. There are indications that a growing number of Americans in the $200,000 income range are investing in hedge funds. HedgeCo principal Evan Rapoport is concerned that cost of compliance for SEC registration could lead some hedge funds to raise fees for investors and, in a few cases, possibly close U.S. offices.
