FRANKFURT – European private equity group Permira said at the weekend that the growing influence of hedge funds could spoil acquisitions planned by private equity firms in Germany.

“Legal protection for minority shareholders de facto works to the advantage of hedge funds,” said Permira’s German head Thomas Krenz in an interview.

Krenz said it was preferable for takeover targets to be acquired by private equity firms rather than by hedge funds as the latter were driven by short-term trading interests.

A few weeks ago, Australian bank Macquarie (MBL.AX: Quote, Profile , Research) and private equity firm BC Partners failed to take over German metering service firm Techem (TNHG.DE: Quote, Profile , Research) after several hedge funds raised their stakes in the firm and asked for a higher price.

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LONDON (Reuters) – Carrousel Capital, an activist hedge fund trying to shake up Gartmore European, a trust run by star manager Roger Guy, said it is concerned about “apparent conflicts of interest” on the trust’s board.

Carrousel, which owns 28.03 percent of the 395 million-pound investment trust, said it was concerned the trust (GEO.L: Quote, Profile , Research) had accepted a 202,000-pound payment from Gartmore Investment Management last year to pay for a corporate review, after which the trust reappointed the fund firm as its manager.

The hedge fund, Gartmore’s largest shareholder, also said it was concerned the board hadn’t disclosed details of this review, which was carried out when Gartmore Investment Management’s future ownership was uncertain, to all shareholders.

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Railpen, the giant pension scheme that looks after the retirement savings of 380,000 railway workers, will move at least £540 million into hedge funds this year.

In his first interview as chairman of the National Association of Pension Funds (NAPF), Chris Hitchen, the chief executive of Railpen, said that the £18 billion fund would have about £1.4 billion invested in hedge funds by December, after increasing its exposure from 5 per cent to 8 per cent.

“We have been divesting our equity portfolio to buy other asset classes, such as private equity, property, hedge funds and infrastructure,” Mr Hitchen said. “We went into infrastructure assets last year, but they’re somewhat overheated, so we’re trying to make sure we don’t put all our money in at the same time.”

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HedgeCo.Net (New York) – A Washington hedge fund manager has been charged with defrauding Maryland investors of $9 million by soliciting moneyfor his hedge funds, LaJon Corp, LaJon Capital Management, LaJon Capital Advisors and LaJon Capital Fund.

Attorney General Douglas F. Gansler froze the assets of Williams’s hedge funds, saying that John H. Williams of Upper Marlboro violated eight civil statutes of state security laws.

Williams lured investors with free lunch seminars and hid losses with fake statements, the state attorney general’s office said. Williams became involved in the scheme after meeting a Canadianhedge fund trader, Stephen Chesnowitz, in an Internet chat room, according to a court filing by Gansler’s office.

According to The Washington Post, the two traders sent out mass mailings advertising a free “gourmet meal” and the opportunity to “earn excellent returns with a guarantee against market risk.” More than 150 people, mainly from Montgomery and Prince George’s counties, attended the seminars and gave Williams a total of $9 million. He transferred the money to Chesnowitz’s hedge funds in Canada and the Cayman Islands.

Investors could log onto a Web site to check how the hedge funds were doing, and online statements showed that their investments were profitable. But that was not true. On April 28, 2006, alone, the hedge fund piled up $626,380 in losses, the filing said. Williams, “knowing the money was gone . . . continued to take fees” based on phantom returns, the court filing said. In total, Williams paid himself $586,000 for managing the investments.

Maryland officials said they are trying to figure out how much Williams lost in his trades and whether there is anything left to return to investors. Most of the money has been transferred out of the country to Chesnowitz’s firms.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

HedgeCo.net – WASHINGTON, D.C., February 22, 2007 — Managed Funds Association (MFA) said today it applauds the announcement by Treasury Secretary Paulson, chairman of the President’s Working Group (PWG), and supports the PWG’s unanimous agreement on setting forth a common set of principles and guidelines for oversight of private pools of capital, including hedge funds.  MFA is the unified voice of the hedge fund industry. 

Baltimore Sun – A Securities and Exchange Commission proposal to sharply limit the number of Americans who can invest in hedge funds has triggered a public backlash – and the latest controversy over the booming private investment pools.

The agency has received hundreds of e-mail messages and letters since December, when it proposed raising the financial bar for hedge fund eligibility for the first time since 1982.

Most of those writing have advised the SEC to back off. Some comments have an angry tone, unusual for matters of securities regulation.

“This has got to be unconstitutional, if not communistic,” wrote M. Joan Conrad, a Naples, Fla., resident who says she has had money in hedge funds for the past decade.

The commission proposed limiting participation in the largely secretive and unregulated investment vehicles to investors who have a minimum of $2.5 million in investable assets, excluding the value of their primary residence.

Currently, investors must have a minimum of $1 million in net worth, including real estate, or earn at least $200,000 a year.

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BusinessWeek – Hedge fund magnate Steven A. Cohen is running with a new crowd on Wall Street. After hiring a seasoned private equity dealmaker in December, Cohen’s $12 billion SAC Capital Partners teamed up with buyout king Kohlberg Kravis Roberts & Co. on a $3.1 billion deal for the higher learning outfit Laureate Education Inc. (LAUR ) in late January.

Cohen isn’t the only hedge fund guy expanding his repertoire. Hedge funds accounted for at least 50 private equity deals in 2006, according to Dealogic. Most recently, Farallon Capital Management joined with real estate investment trust Simon Property Group (SPG ) on a pending deal to buy mall operator Mills (MLS ) for $1.56 billion. ValueAct Capital jumped into the $3 billion deal in December for used-car auctioneer ADESA Inc. (KAR ).

The lures of private equity are twofold. First, hedge funds want to tap the gusher of money flowing into private equity from institutional investors. Second, and more worrisome, hedge funds as a group need a way to boost their performance. The average fund returned 13.9% in 2006, according to the Credit Suisse/Tremont Hedge Fund Index–not much better than the 13.6% return of the Standard & Poor’s 500-stock index. The typical buyout fund soared 25%, according to Mercer Investment Consulting Inc.

True to their nature, hedge funds are exploiting opportunities overlooked by their bigger private equity brethren. While brand-name firms are arranging mammoth buyouts–Blackstone Group’s record $39 billion acquisition of Equity Office Properties Trust (EOP ), for instance–hedge funds are setting their sights on smaller prey. DE Shaw & Co., one of the more active hedge funds in the private-equity space, sank $500 million into Kentucky’s ERORA Group, a private developer of coal gasification plants. It’s a typical size deal for the group.

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EurActiv.com – Internal Market Commissioner Charlie McCreevy will not impose specific regulation, despite recent calls by politicians to tighten rules.

G7 finance ministers called for vigilance on 10 Feburary 2007 and pointed out the potential risks posed by the fast-growing hedge-fund industry to the stability of international financial markets.

Speaking at a conference in London on 20 February 2007, McCreevy underlined that the decision not to regulate hedge funds on an EU level should be “recognised as swallows of a new European regulatory spring. We are reducing the regulatory pressure post-FSAP and intend to stay there”.

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Bloomberg – Feb. 22 (Bloomberg) — Five minutes ago, advisers barnacled to the investment industry were championing hedge funds as balm for the swollen deficits afflicting pension funds.

Now, the purveyors of contradictory counsel have decided hedge-fund investments are more placebo than panacea.

At a two-day conference in London last week, the backlash was in full swing as more than 200 attendees pondered the merits of “Hedge Fund Replication and Alternative Beta.” While the two-part title won’t win any awards from the Plain English Campaign, it sketches a possible solution to the current disenchantment with the former market paragons.

The concept is seductively simple. Is it possible to reproduce a hedge fund on the cheap, duplicating the strategies and stellar returns without giving away fees worth 2 percent of the initial investment and 20 percent of the profit?

The easiest way to try and get your head around the cloning concept is to consider how a merger-arbitrage fund operates. Its investment style is easy to understand: Buy the stocks of companies being bought, which typically gain, and sell short the stocks of acquirers, which typically decline.

A rule-based system would copy that strategy and “capture almost all of the return,” Bill Fung, a professor at the BNP Paribas Hedge Fund Centre of the London Business School, said at the conference.

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HedgeCo.Net (New York) – Senator Barack Obama has backed legislation that would require hedge funds to require their offshore clients toestablish anti-money laundering programs in the same way as other US financial institutions, under regulations to be issued by the Treasury Department.

It is not immediately clear whether the move will increase the transparency of US-owned assets in offshore accounts, but the legislation is being set up with the hopes of curbing tax evasion. The UShas in the past years signed tax information exchange agreements with Aruba, the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and theIsle of Man.

Obama has joined senators Carl Levin and Norm Coleman in introducing legislation aimed at stopping offshore tax haven and tax shelter abuses. Says Obama: “This is a basic issue of fairness andintegrity. We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren’t disadvantaged.”

They believe the loss to the Treasury from offshore tax evasion could amount to $100 billion a year. They say abusive tax shelters add tens of billions of dollars more.

“This bill provides a powerful set of new tools to clamp down on offshore tax and tax shelter abuses. None of these offshore schemes would work without the secrecy that prevents US agencies fromenforcing our laws. Our bill offers innovative ways to combat offshore secrecy.” Levin says.

The bill would strengthen detection of offshore activities by requiring US financial institutions that open accounts for foreign entities controlled by US clients, open accounts or establish entitiesin offshore secrecy jurisdictions for US clients to report such actions to the IRS.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

HedgeCo.Net (New York) – Fund of hedge funds manager, Gottex Fund Management, announced that they intend to launch a publicly listedclosed-ended investment company, Gottex Market Neutral Trust, which will be listed on London’s main market.
 
All proceeds from a placing and offer for subscription, net of working capital requirements, will be invested in a portfolio of underlying hedge funds, it added, no numbers were provided.

The company’s initial investment rationale, methodology and portfolio management will be consistent with that of Gottex Market Neutral Fund, a conservative open ended fund of hedge funds that seeksconsistent returns with a low correlation to the major stock and bond market, it has been managed by GFM since 1999.

JPMorgan Cazenove is the group’s financial adviser, book runner and sponsor.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

HedgeCo.Net (New York) – The Children’s Investment Fund Management, a $3.8 billion hedge fund launched in 2003, announced in a letter to Dutchbank ABN AMRO that they believe the bank is undervalued and should sell some of its assets, merge with another bank, or even sell off the whole business.

TCI Fund Management takes its name from the money it donates to children’s charities. The hedge fund, which said it owns more than 1% of ABN AMRO, asked shareholders to vote on its proposals at ashareholder meeting scheduled for April 26.

In 2005 TCI was part of a group of activist investors who criticized Deutsche Börse for its $2.5 billion bid for the London Stock Exchange, eventually causing Werner Seifert, the chief executive toresign. It turns out TCI, which owned 8% of Deutsche Börse, actively recruited some powerful partners, including Atticus Capital, Merrill Lynch, and Fidelity Investments, in order to facilitate themove.

In a letter first published by Reuters, the hedge fund said, “We believe that this strategy would not only create significant shareholder value but also would best serve all the stakeholders whootherwise would suffer over the long term from the structurally declining competitive position of ABN AMRO,……In 2006 they again committed to cut costs and they have so far failed to deliver,” thehedge fund said.

TCI was founded by money manager Christopher Hohn, a 39-year-old graduate of Southampton University. It is said that Mr Hohn set up the hedge fund so that half of TCI’s annual assets go to charity as a way of motivating himself.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net