Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Telegraph – Hedge funds are betting that G4S’s £5.2bn acquisition of ISS will collapse, by buying credit default swaps on the Danish company’s debt.
The cost of insuring ISS’s debt has risen sharply over the past week, despite initially tumbling when the deal with G4S was announced. Cost of credit default swaps on ISS’s senior five-year debt have increased more than 50pc from 186.25 basis points to 295.085 since October 17.
Economist – Eric Wong, who helps run his Hong Kong family’s money through an investment office, TCG Capital, looks like a hedge-fund manager’s dream. He’s rich, young and, having been to university there, comfortable with American ways—just the type of investor that Western hedge funds looking for Asian expansion have set their sights on. He is not, however, very interested. Real estate is the “best pension plan my family ever had,” he says. Why change?
Where they are not greeted with apathy, Asia-minded hedge funds often face antipathy. Since the financial crisis of the late 1990s “fund” has been a four-letter word throughout Asia. George Soros, a famous hedge-fund investor, is still reviled for aggravating and profiting from the crisis. When the Chinese refer to hedge funds as ju e, or “big crocodiles”, it is not by way of a compliment on their killer instincts.
Reuters – Steven A. Cohen, who built one of the world’s biggest and most successful hedge funds, is branching out and plans to set up his own reinsurance firm, two people familiar with the matter said.
Cohen, who runs $14 billion SAC Capital Advisors in Stamford, Connecticut, recently told investors he plans to launch SAC Re, a reinsurer based in Bermuda, early next year.
Bloomberg – Basis Capital, an Australian hedge fund, said one of its funds filed a new lawsuit in state court in New York against Goldman Sachs Group Inc. over the sale of securities known as Timberwolf and Point Pleasant.
The filing couldn’t immediately be confirmed from court records. A June 2010 lawsuit by Basis Capital’s Basis Yield Alpha Fund in federal court in Manhattan was dismissed earlier this year. U.S. District Judge Barbara Jones ruled the Australian fund couldn’t use U.S. securities laws to pursue its claims against Goldman Sachs.
Bloomberg – Hedge funds reduced bets that stocks will rise to almost the lowest level since 2009 this week, according to International Strategy & Investment Group.
ISI’s index of “net exposure” to stocks slipped to 44.7 yesterday, compared with its 2011 high of 54.2 in February, according to a note sent to clients. The measure climbed to 45.5 on Oct. 12 after declining to 44 on Sept. 21, the lowest level since April 2009.
New York (HedgeCo.net) – Sustainable and responsible investing (SRI) is making major strides in the hedge fund arena, according to a new report prepared for the US SIF Foundation by the Center for Social Philanthropy at the Tellus Institute.
According to “Sustainability Trends in Alternative Investments in the United States,” $80.9 billion was invested in 375 alternative investment funds incorporating environmental, social and governance (ESG) criteria at the outset of 2011, reflecting a 15.9-percent growth in combined assets since the beginning of 2010, when 346 alternative funds managed a combined total of $69.8 million.
The alternative investment funds tracked in the report span the asset classes of private equity and venture capital funds, property investment funds and hedge funds, and they utilize a broad range of approaches to ESG criteria and themes.
“Alternative investments in sustainable and responsible investing are attracting a wide range of investors – high-net-worth families and individual ‘angel’ investors, mission-driven institutional investors such as philanthropic foundations, hospitals and faith-based institutions, and some of the largest and most prominent pension funds and private equity firms.” US SIF CEO Lisa Woll said, “The growth of the SRI alternative investment market is being supported by an ecosystem of investor networks and field-building organizations working to develop reliable metrics to evaluate the social and environmental returns of these funds.”
Key findings include:
Private equity and venture capital funds led the field of ESG alternative investment vehicles numerically with 233 distinct funds in 2011, or 62 percent of total funds tracked. In asset-weighted terms, however, private equity and venture funds are the second largest of the three asset categories studied, with $33.9 billion in combined assets under management, or 41.9 percent of the ESG alternative investment market.
Property and real estate funds managed 54 percent of total assets tracked in 2011, with a combined $44.3 billion under management in 95 distinct funds.
In 2011, 47 hedge funds were identified with a total of $2.6 billion under management. Representing just 3.2 percent of total assets tracked and 12.5 percent of funds numerically, hedge funds are the smallest group of ESG alternative investment vehicles.
Environmental criteria were predominant among ESG alternative investment funds in both numerical and asset-weighted terms, with $68.9 billion of total assets incorporating an environmental theme. Environmental criteria were followed by social criteria, which are considered by $48.8 billion of the assets studied, and then by governance criteria, which affected $37.5 billion. This illustrates the considerable overlap in ESG criteria within alternative investment funds. In 2011, 73 percent of alternative investment funds included multiple ESG criteria in fund management.
“The majority of the alternative fund managers we reviewed consider several ESG criteria simultaneously, but environmental factors predominate.” US SIF Deputy Director and Research Director Meg Voorhes said, “In particular, we see interest in green building, climate change issues, clean technology, renewable energy and energy efficiency. These managers look to produce market rates of return for their clients while helping to foster businesses, generate jobs or introduce products that will yield social and environmental benefits.”
Hedge Funds Review - A UK tribunal decision could change the way partners in Financial Service Authority-regulated organisations, such as hedge funds, are employed. The case also has implications for US-based hedge funds.
The UK Employment Tribunal decision paves the way for partners in financial services organisations regulated by the Financial Services Authority (FSA) such as hedge funds to claim they are ‘employees’ instead of ‘self-employed’.
Bloomberg – Richard Arney, head of hedge funds at BlackRock Alternative Investors, spoke to Bloomberg Television’s Susan Li in Hong Kong today about recent market swings and its implications. The BlackRock Inc. (BLK)division manages $114 billion of hedge funds, funds of hedge funds, private equity, real-estate investments.
On what are the promising strategies at the moment: “Right now we have done very well in long/short Asia equities. We see a lot of opportunities there. I also see more recently we’ve done very well in the global macro space.”
Bermuda News – Opus Fund Services, an award winning and leading independent Bermuda fund administrator, this week announced the acquisition of the hedge fund administration unit of Agile Hedge Solutions, based in San Francisco.
Opus, based in Somerset and with offices in Chicago and San Francisco, expects the transaction will immediately strengthen its West Coast presence.
Reuters – Poor returns at hedge funds are hurting owners and senior investment professionals as heavy losses eat into the hefty incomes the industry is famous for.
Compensation at hedge funds, long known for being among the highest in the finance industry, is down about 10 percent this year, according to a report compiled by Glocap and Hedge Fund Research and released on Tuesday.
New York (HedgeCo.net) – One of Goldman Sachs’ former directors, Rajat Gupta, has been arrested on charges of insider trading as a co-conspirator in the criminal case against hedge fund manager Raj Rajaratnam.
The New York Times reports:
“Rajat K. Gupta, a former director at Goldman Sachs and Procter & Gamble, pleaded not guilty Wednesday to insider trading charges, setting the stage for a courtroom battle that will extend the government’s broad crackdown on Wall Street to the corporate boardroom.”
Bloomberg reports:
“The prosecution is built on circumstantial evidence that may be less persuasive than the wiretaps that sealed the fate of his friend Raj Rajaratnam. Prosecutors will seek to convict Gupta based on the timing of his phone calls and the Rajaratnam trades that immediately followed.”
The Economic Times says:
“Regardless of the case’s outcome, the charges punctuate a stunning fall from grace for Gupta, whose personal story reads like a caricature of a Horatio Alger tale.
Orphaned at 18, Gupta, a native of Kolkata, received an engineering degree from the elite Indian Institute of Technology. He earned a scholarship to Harvard Business School, graduating at the top of his class and securing a prized posting at McKinsey & Co.”
Gupta has been freed on $10 million bail, pending trial. He faces a sentence of over 100 years and a $25 million fine if found guilty.
New York (HedgeCo.net) – The SEC yesterday obtained an asset freeze against a Massachusetts hedge fund manager and his investment advisory firm.
Andrey C. Hicks and Locust Offshore Management LLC are charged with misleading investors in a supposed quantitative hedge fund and diverting portions of investor money into his personal bank account.
“Hicks lied to investors about virtually every aspect of his fictitious hedge fund. This brazen web of lies to investors constituted an outright fraud,” David P. Bergers, Director of the SEC’s Boston Regional Office, said.
Hicks is alleged to have raised at least $1.7 million from several investors for the hedge fund. Among the false claims made to investors were that the hedge fund manager obtained undergraduate and graduate degrees at Harvard University, and that he previously worked for Barclays Capital, and that the hedge fund held more than $1.2 billion in assets.
At the SEC’s request, Judge Richard Stearns of the U.S. District Court in Massachusetts issued a temporary restraining order that freezes the assets of Hicks, his firm, and the hedge fund.
“Hicks and Locust Offshore Management created this intricate scheme in order to gain credibility with investors,” Robert Kaplan, Co-Chief of the Asset Management Unit in the SEC’s Division of Enforcement, said. “Even hedge fund managers who claim affiliations with well-known institutions should be thoroughly researched before making an investment.”
