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New York (HedgeCo.net) – On Thursday, a Federal Judge dismissed a $150 million lawsuit brought by the San Diego County Employees Retirement Association (SDCERA) against Amaranth Investors on the basis of the fact that, like all investors, the county had signed offering documents indicating there was a chance of losing its $175 million investment. New York federal court judge Deborah Batts ruled that the $7.2 billion dollar fund, which handles the benefits of more the 34,000 employees, should have been sophisticated enough to interpret the “clear, unambiguous language of the non-reliance provisions.” The ruling pointed specifically to language in Amaranth’s private placement memorandum (among 16 pages of legal disclaimers about the risk of investment) which said, “Investors must be prepared to lose all or substantially all of the investment in the Fund.”
The Connecticut-based hedge fund, which had assets totaling nearly $6 billion at its height, imploded in September 2006 because of a bad bet on natural gas trades. Although the association managed to wrest about $70 million of its initial investment from the fund before it went under, in 2007, it filed the $150 million lawsuit to recover the remaining $105 million, plus an additional $45 million it claimed to have earned before the fund collapsed. The SDCERA argued in its lawsuit that the disclaimers were standard and did not excuse the excessive risk taking and unreasonable conduct that led to Amaranth’s downfall.
It bears noting that while waiting for a ruling, Amaranth settled with the Federal Energy Regulation Commission for $7 million for violating anti-manipulation rules, the association said. “None of those disclaimers advised us that Amaranth was going to break the law,” Brian White, CEO of the association, said. “It was never in our contract that Amaranth could engage in behavior for which they would later be sanctioned by the Federal Energy Regulatory Commission.”
“Disclaimers weren’t a license for Amaranth to do whatever it wanted at the expense of its clients,” Brian White said in a news release. Disappointed by the judge’s ruling, the association’s board, which runs the association for county government employees, met Thursday and voted to appeal the decision.
By Colleen McCaffrey
For HedgeCo.net
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New York (HedgeCo.net) – Deutsche Bank surveyed over 600 investor entities worldwide, representing over $1 trillion in hedge fund assets, revealing that 52% of investors predict equity long/short to be one of the best performing strategies for 2010, and 51% believe they will increase their allocations to the strategy.
“In 2009, the hedge fund industry experienced its best annual performance in a decade, and investors predict continued strength in 2010,” said Barry Bausano, Co-Head of Global Prime Finance. “Investors predict inflows of $222 billion this year, which would increase the total amount of hedge fund assets under management to approximately $1.722 trillion by 2011.”
“The hedge fund industry weathered the global financial crisis and matured as a result,” said Jonathan Hitchon, Co-Head of Global Prime Finance. “Risk management remains a top consideration for investors when assessing a hedge fund manager, and investors are increasingly using consultants to perform specialist operational due diligence.”
Some highlights from Deutsche’s Bank Eighth Annual Alternative Investment Survey include:
Survey participants are looking to reduce their cash levels over the next 6 months by $3.09 billion, and 29% have 10% or upwards of cash available to allocate to hedge funds
While the hedge fund industry has proven resilient, investors have not forgiven management’s behavior during the crisis: 80% of investors will not make a new allocation to a manager who has frozen or suspended assets in the past
There is a continued appetite amongst investors for managed accounts: 14% currently use managed accounts and 26% of investors are likely to in the immediate future
Investors remain reluctant to allocate to small start-up funds, with 50% requiring the start-up to have at least AUM $100 million before investing.
Survey respondents represent asset management companies, corporations, family offices, high net worth individuals, foundations, endowments, fund of funds, insurance companies, investment consultants, private banks and private and public pension plans. The Bank’s Hedge Fund Capital Group, within its Global Prime Finance business, conducted the survey during January 2010.
New York (HedgeCo.net) – Investors have recovered their bullishness towards equity markets but are shifting their focus away from Europe and into the U.S. and Japan, according to the BofA Merrill Lynch Survey of Fund Managers for March.
A total of 207 fund managers, managing a total of US$589 billion, participated in the global survey from 5 March to 11 March. A total of 165 managers, managing US$403 billion, participated in the regional surveys.
After weakened sentiment in February, the survey shows that investors have restored their faith in equities with a net 46 percent of asset allocators saying they are overweight the asset class, up from 33 percent the previous month. Cash positions have fallen with respondents at a net neutral cash allocation compared with a net 12 percent underweight in February.
Asset allocators have retrenched from Europe, however. A net 21 percent are underweight European equities this month, up sharply from a net 2 percent overweight in January.
The change in favor of U.S. equities has been similar. A net 19 percent of asset allocators are overweight U.S. equities this month, up from just 1 percent in January. Japan is also regaining popularity. A net 6 percent of allocators are overweight Japanese equities, the most bullish reading since August 2007, and up from a net 10 percent underweight in January.
Global investors believe that the corporate outlook is better away from Europe. A net 40 percent of the panel says the outlook for eurozone corporate profits is the least favorable of all regions.
“Investors’ concerns about Greece are easing, but European country risk remains a key constraint to optimism over economic recovery,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Research. “Investors are more willing to embrace corporate risk, via equities, than sovereign risk,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Research.
The net number of European fund managers predicting growth in their own economy over the coming 12 months has fallen to 45 percent, down from 72 percent in January, according to the Regional Fund Manager Survey. While European sentiment might have been expected to weaken, a similar fall in optimism is also evident among U.S. investors. A net 43 percent forecast growth in the American economy over the next 12 months, down from a net 76 percent in January.
Investors in both regions have stronger belief in earnings growth. A net 60 percent of European respondents predict improved earnings in the coming 12 months, an increase of 11 percent on February. Their colleagues in the U.S. are more positive with a net 72 percent forecasting earnings growth, up from a net 52 percent in February.
U.S. and European investors have significantly scaled back their cash allocations. A net 9 percent of the European panel is overweight cash this month, down from 26 percent in February. The corresponding numbers for U.S. investors are a net 8 percent in March and 19 percent in February.
European respondents have increased exposure to cyclical sectors, including Basic Resources and Construction. They have reduced their underweight position on banks. US investors have also increased exposure to cyclicals, such as Industrials and Materials, but have extended their underweight positions in Banks.
New York (HedgeCo.net) – The SEC has filed a federal case against hedge fund advisor Stephen X. Kim and Spyglass Management, L.P. for their roles in allegedly defrauding Spyglass Capital Partners, L.P., a hedge fund managed by Kim through Spyglass, according to court filings.
The SEC complaint, filed in Texas, alleges that between in 2004 and 2006, Kim and Spyglass raised approximately $4.7 million from investors located primarily in Houston, Texas using offering materials that contained misleading information relating to Kim’s education, business experience, and compensation.
The SEC alleges that Kim and Spyglass failed to employ any hedging strategy to manage risk, causing the hedge fund to loose over $2 million then directing the hedge fund to make approximately $1.7 million in Ponzi payments to investors.
Finally, the SEC alleges that Kim misappropriated approximately $1.5 million of the hedge fund’s remaining assets to repay several outstanding personal obligations.
Without admitting or denying the allegations, Kim and Spyglass made a settlement with the SEC, pending the approval of the United States District Court for the Southern District of Texas.
New York (HedgeCo.net) – Hedge fund and FoHF manager, SSARIS Advisors, LLC, won the “Global Multi-Strategy over 3 years” award ($500 million -$1 billion) at the annual InvestHedge FoHF Awards ceremony held last night in New York City. SSARIS won in the Multi-Manager Absolute Return Strategy category.
To qualify, all funds of funds must provide a strategy allocation breakdown for each fund nominated. InvestHedge has the final say in which category a fund is nominated. Winners are decided using an established methodology based on a combination of Sharpe ratios and returns over the relevant time period.
SSARIS Advisors, LLC is a majority-owned subsidiary of State Street Global Alliance, LLC. SSARIS Advisors, LLC was founded in 2001 and is directed by Mark Rosenberg, Chairman and CIO; Peter Hinrichs, CFO and Chief Compliance Officer; and Jim Tomeo, COO and Senior Portfolio Manager.
With $1.9 trillion in assets under management, State Street Global Advisors has investment centers in Boston, Hong Kong, London, Montreal, Munich, Paris, Singapore, Sydney, Tokyo, Toronto and Zurich, and offices in 26 cities worldwide.
New York (HedgeCo.net) – The UCITS Hedge Fund Strategy Index gained 0,93% within the first two weeks in March 2010, every strategy except fixed income and market neutral were positive, Global macro not only being the most successful strategy in 2010 but also in March with gains of 2,85% so far.
The other most successful strategies in March are convertible (+1,75%), CTA (+1,70%) and L/S equity (+1,54%), the latter turning positive ytd for the first time.
The UCITS HFS Index Series is the first index family that tracks all UCITS funds using hedge fund strategies. The UCITS HFS Index Series includes all UCITS III funds that apply absolute return strategies, have more than 10 Million Euros of assets under management, offer at least weekly liquidity and have reported numbers for more than one month. Index tracking funds, long-only and 130/30 strategies are excluded.
The indices are calculated on every 5th, 10th and 15th business day and at the end of each month by the index calculator Structured Solutions AG.
New York (HedgeCo.net) – Institutional broker dealer, Ticonderoga Securities has launched an exchange traded funds (ETF) desk, led by industry veteran William Bauer. Bauer joins Ticonderoga with more than 18 years of institutional equity and derivative sales and trading experience, with five years focused on ETFs.
“Hedge funds and money managers are increasingly embracing ETFs as a superior product with greater transparency and liquidity,” said Bauer. “As this continues, Ticonderoga will be positioned well for growth.”
The new group will specialize in market making capabilities for institutional investors moving in and out of ETFs. The team will also advise clients on portfolio-trading issues, provide analysis and strategy, and assist in order execution through strong collaboration with the firm’s Sales & Trading Desk. As head of the ETF Desk, Bauer will focus on building out the ETF platform over the next several months, adding support staff, assistant traders and sales traders focused on ETF sales.
Bauer comes to Ticonderoga from Knight Capital, where he was a Director in ETF sales and trading. Before that, he was Vice President in sales and trading on the ETF market-making desk at Newedge Financial LLC, and also served as Vice President in sales and trading at RBC Capital Markets. Bauer attended University of Hartford with a focus on economics and finance.
New York (HedgeCo.net) – When hedge fund founder and manager John Horseman stepped down from his position as CEO of Horseman Capital, his clients pulled out with more than half of the hedge fund’s assets, Reuters reported.
Horseman’s flagship fund fell to just $535 million in size from $2.8 billion in November. The clients withdrew aproximately $2.5 billion at the first possible opportunity, after hearing of Horsman’s resignation, Reuters said.
“We had redemptions on the back of the announcement made last year,” a spokesman said in an interview with Reuters. “Investors were allowed to redeem on January 4, and that’s when the bulk of the redemptions took place.”
New York (HedgeCo.net) – Hedge fund managers can use the brokered CD market for cash management according to attorney Stephen M. Goodman, a partner with New York law firm Pryor Cashman.
“Brokered CDs are used in cash management to provide returns which are slightly better than money market funds, but with the added benefit of FDIC insurance,” Goodman said. “As long as the individual’s total deposits with any institution are less than the mandated limit, the funds at that institution will be insured. The deposits can be spread among multiple institutions if there is more cash than can be kept at a single one.”
Interest payments and maturities can be structured according to a client’s needs, Goodman explained. “Longer maturities may be possible than the usual CD,” he said. “They can be ‘laddered’ to ensure specific cash flows, and yields can be increased by acquiring ‘callable’ or ’step-up’ CDs.
However, there are various risks, particularly if there is a need to liquidate a CD prior to maturity.
“On the date it is sold, intervening changes in interest rates may affect its value, as with any other debt security,” Goodman said. “Early redemption from the issuing institution can result in penalties. And of course there is generally a broker’s fee for acquiring the CD, which would in turn lower the overall return, depending on the number of CDs bought and sold and their size.”
Stephen M. Goodman acts as outside general counsel to a variety of public and private companies, particularly those involved in the development, exploitation, purchase and sale of intellectual property and technology assets, such as publishing and media companies, computer software and Internet companies, and pharmaceutical and biotechnology companies.
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New York (HedgeCo.net) – New research is in from Pensions & Investments starting with a list of the world’s largest hedge funds as of the end of 2009.
($ billions)
1. J.P. Morgan $53.5
2. Bridgewater Associates $43.6
3. Paulson & Co. $32.0
4. Brevan Howard $27.0
5. Soros Fund Mgmt. $27.0
6. Man Group $25.3
7. Och-Ziff Capital Mgmt. Group $23.1
8. D.E. Shaw Group* $23.0
9. BlackRock (BGI) $21.0
10. Farallon Capital Mgmt. $20.7
11. Baupost Group** $20.0
12. Goldman Sachs Asset Mgmt. $17.8
13. BlueCrest Capital Mgmt. $17.3
14. Canyon Partners $17.0
15. Landsdowne Partners* $15.0
16. Renaissance Technologies $15.0
17. Fortress Investment Group $13.8
18. Moore Capital Mgmt. $12.4
19. Viking Global Investors* $12.4
20. Citadel Investment Group $12.2
21. SAC Capital Partners $12.0
22. GLG Partners $11.5
23. Tudor Investment Corp $10.0
Total $482.6
* as of Jan 1st, 2010
** as of Sept 30th, 2009
Pensions & Investments also reported that despite the drop in the collective amount managed for institutions, hedge fund managers themselves reported that institutions remained their staunchest investors throughout the troubled period, although many pension funds, endowments and foundations were forced to redeem assets to meet liquidity needs during the credit crunch.
New York (HedgeCo.net) – Hedge funds returned to positive territory in February 2010, according to a preliminary Eurekahedge report. There were approximately 90 hedge fund launches globally in 1Q2010. With arbitrage hedge funds delivering 15 consecutive months of positive returns, gaining 26.23% since November 2008.
New York Hedge fund returns across most regions were marginally positive for February; however, early reports showed that North American managers, who make up 65% of the hedge fund universe, posted impressive gains of 1.41%. Regional managers capitalised on the marked improvements in market sentiment on the back of some strong earnings reports, positive movements in the US dollar and commodities as well as improved manufacturing data and the Fed’s decision to maintain low interest rates
Latin American funds were also positive with a 0.48% returns in February while Asia ex-Japan and Japan funds returned nominally positive performances. Continued problems in the eurozone led to negative results by the region’s managers, who were down 0.66% in February as the euro weakened amid speculation of Greece’s sovereign debt default.
The composite Eurekahedge Hedge Fund Index gained 0.52% during the month as the underlying global markets posted a recovery from a disappointing January. The MSCI World Index was up 1.23% in February, bringing its YTD figure to -3.01%.
The Eurekahedge CTA/Managed Futures Hedge Fund Index was up a strong 1.27% during the month. Continued low interest rates in the US also helped managers in the bonds sector to deliver yet another month of positive results. Fixed income, arbitrage and relative value hedge funds were all up during the month while distressed debt managers were flat to slightly negative.
New York (HedgeCo.net) – U.S. prosecutors yesterday recommended a sentence of 335 years in prison for hedge fund founder Thomas Petters, more than twice the term given to Bernard Madoff, according to Bloomberg. Petters was charged with mail and wire fraud, money laundering and obstructing justice.
A federal judge in Minneapolis ordered Petters to be held without bail in October 2000, after a taped phone conversation revealed that the disgraced entrepreneur planned to leave the country.
Petters and his hedge fund, Petters Group Worldwide LLC was convicted in December 2000, of all 20 criminal counts, adding up to a $3.5 billion fraud.
“The defendant’s fraud is staggering and unprecedented in size and impact on victims and the community,” prosecutors said, according to Bloomberg.
The case is U.S. v. Thomas Joseph Petters, U.S. District Court, District of Minnesota. The final sentencing is set for April 8th.
“Brokered CDs are used in cash management to provide returns which are slightly better than money market funds, but with the added benefit of FDIC insurance,” Goodman said. “As long as the individual’s total deposits with any institution are less than the mandated limit, the funds at that institution will be insured. The deposits can be spread among multiple institutions if there is more cash than can be kept at a single one.”
