New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, announced today that the Hennessee Hedge Fund Index advanced +2.51% in January, while the S&P 500 advanced +4.36%, the Dow Jones Industrial Average increased +3.40%, and the NASDAQ Composite Index climbed +8.01%.  Bonds also advanced, as the Barclays Aggregate Bond Index increased +0.88% and the Barclays High Yield Credit Bond Index advanced +3.04%.

“After several months of treading water, managers posted profits as stocks rallied on fundamentals, being driven less by macroeconomic and political news and more by underlying company specific fundamentals,”commented Charles Gradante, Co-Founder of Hennessee Group. “The top performing managers were positioned for a January rally and were long stocks that underperformed in 2011.”

“January was a good month for hedge funds.  After a -4.6% decline last year, the industry has a more positive outlook for 2012,” said Lee Hennessee, Managing Principal of Hennessee Group. “It is encouraging to see a respectable gain even with managers conservatively positioned.  Looking forward, managers are still cautious but are optimistic on the potential to generate positive alpha.”

Equity long/short was one of the best performing strategies in January, as the Hennessee Long/Short Equity Index advanced +2.47%.  Stocks pushed higher in January, led by technology and financials, as U.S. economic data continued to show signs of improvement.  In addition, volatility declined as investor sentiment around the European sovereign debt crisis improved.  Managers benefitted from improving conditions. Stock-picking generated alpha as volatility and correlation declined, equity market inflows increased, and investors started actively allocating capital to new ideas.  Many managers took advantage of the “January Effect” by increasing exposures at the beginning of the month.  While hedge funds lagged long only benchmarks on a relative basis as shorts and hedges detracted from performance, long/short equity were able to generate a significant in January with average exposure levels, an encouraging sign for 2012.

Generally, managers commented that it seems the market wants to go higher as long as Europe stabilizes.  Managers are still monitoring the situation in Europe as Greece’s debt problems have not been resolved.  However, it seems most feel that the debt issues will be resolved in the long run and are focusing less on short-term political noise, resulting in a decline in volatility.

The Hennessee Arbitrage/Event Driven Index advanced +2.31% in January.  The strategy posted its best month since December 2010, with positive contributions across all strategies.  Along with an equity market rally, credit markets advanced for the month, with the exception of Treasuries.  Spreads on high yield bonds tightened to 654 basis points from 723 basis points, the narrowest level since August 2011, according to the Bank of America.  The Hennessee Distressed Index increased +3.24% in January. 

Long-biased portfolios benefited from the continued market rally and outperformance of underperforming 2011 stocks.  The outlook for distressed managers has improved as investors start increasing risk and investing on fundamentals.  The Hennessee Merger Arbitrage Index advanced +1.25% in January.  During the month, corporate credit and M&A deal spreads tightened.  While the NYSE/Deutsche Borse deal fell apart, managers benefited from significant activity in the healthcare and technology sectors.  While January deal flow was lacking, managers expect acceleration in deal activity as company valuations are low, interest rates are low, and corporate cash is high.  The Hennessee Convertible Arbitrage Index returned +1.91% as the convertible space richened in January.   Tightening of spreads and improved equity markets were positive drivers for convertible strategies.  Non-traditional outright buyers of convertibles remain very active, providing a floor for valuations.

“During the month, bullish sentiment was boosted by dovish Fed comments which left the door open to additional quantitative easing.” commented Charles Gradante. “Many managers remain concerned about the long term ramifications of continued monetary easing, causing managers to hold gold as a long term hedge.  While the precious metal has been volatile, up +14% in January, managers still see significant upside.  Most managers have already built full positions but will add on pullbacks greater than 10%.”

The Hennessee Global/Macro Index advanced +2.89% in January.  International equities advanced, driven by Emerging Markets, as the MSCI EAFE Index increased +5.25%. International managers underperformed due to conservative positioning.  Emerging market hedge funds were top performers for the month, as the Hennessee Emerging Market Index advanced +6.15%.  In addition to the European sovereign debt crisis and a possible slowdown in China, managers are closely monitoring the political and social unrest in the Middle East and several have concerns about Iran and Syria.  The Hennessee Macro Index increased +1.46% for the month.   Manager benefited from gains in global equity and credit markets. 

The U.S. Dollar declined against the Euro and Yen.  In fixed income, the U.S. treasury curved steepened as longer dated yields rose.  Commodity metals rallied, with the S&P Goldman Sachs Commodity Index returning +2.23%.  Precious metals outperformed, with gold advancing +13.9% and silver climbing +19.2%.  Managers also had gains in agricultural commodities.

Thursday, 2 February 2012 – I want to use the occasion of this week’s Financial Stability Oversight Council meeting to review the progress made on financial reform to date and to outline our priorities and challenges for the year ahead. I am providing this assessment in my capacity as Chair of the Council, but do not speak for its individual members.

This is a critical year for financial reform. In 2012, we expect to put in place key elements of the new framework of safeguards for the financial system. And we expect this year to make progress building the foundations of reforms to the housing finance system.

Much of the basic framework of these reforms is already in effect. New global agreements to limit leverage have been reached. The FDIC has finalized rules for managing the failure of a large firm. The CFPB is up and running and providing better disclosure for consumers. We are deploying new authority and greater enforcement resources on a more coordinated basis to go after fraud and abuse. The majority of the new safeguards for derivatives markets have been proposed.

First, banks now face a much tougher set of limits on how much risk they can take.  New rules on capital and liquidity will limit leverage by requiring banks to hold more financial reserves against risk and to fund themselves more conservatively. These new safeguards are critical to reducing the risk of large financial failures and limiting the damage those failures can cause to the broader economy.  In 2012, we will focus on defining the new liquidity standards and on making sure that capital risk-weights are applied consistently.

The Private Equity Growth Capital Council (PEGCC) today announced that Steve Judge has been appointed president and chief executive officer.  Judge succeeds Douglas Lowenstein, who stepped down last year. Since August 2011, Judge served as interim president and chief executive officer, prior to that he served as the Council’s vice president for government relations.  The appointment is effective immediately.

Mark B. Tresnowski, chairman of the PEGCC and managing director and general counsel of Madison Dearborn Partners, a PEGCC member firm, said, “After a search and several months of Steve’s leadership, it became clear that Steve’s effective advocacy during a challenging and dynamic time for our industry make him the right person for this important role. With the full support of the PEGCC membership, we are confident that Steve and his team will succeed in their mission.”

Mr. Judge said, “I am extremely proud of what we’ve accomplished in just a few years since the founding of the PEGCC and I look forward to building on that record of success. Our goal is to engage policymakers, the media, and the public in a national dialogue about how private equity and growth capital firms drive economic growth, strengthen and improve businesses, and provide financial security for millions of Americans. The year is already off to an exciting start, and the Council is ready for the challenges to come.”

Judge has a long and distinguished career in Washington. Before joining the Council in March 2007, Judge was Senior Vice President, Government Affairs and Head of the Washington Office for the Securities Industry Association (SIA), now the Securities Industry and Financial Markets Association (SIFMA). Judge also served as a member of several congressional staffs. From 1987 to 1991 he was Deputy Staff Director of the Committee on Banking, Finance and Urban Affairs of the U.S. House of Representatives. Judge came to Washington, D.C. in 1978 with Congressman Bruce Vento (DFL-MN), eventually becoming the Congressman’s Legislative Director. He began his legislative career in the Minnesota State Legislature as Staff Assistant with the Senate Committee on Education. Judge holds a Bachelor of Science degree in government from St. John’s University in Minnesota.

Press Release – Northern Trust has enhanced its offering to Fund of Hedge Funds (FoHF) clients with a new reporting platform which provides clients with better, more flexible access to key data elements. This, the latest in a series of enhancements, is available to Northern Trust’s FoHF clients worldwide, through its Hedge Fund Monitor product(TM).

The new Hedge Fund Monitor reporting enables clients to:

– Extract the specific elements they need and schedule queries for key data

– Create customised, user defined reports to assist in meeting regulations e.g. AIFMD, Form PF

– Facilitate demands for transparency through an on demand flexible reporting tool

– Produce data to better execute on performance return analysis, portfolio management, liquidity or compliance

Northern Trust’s Hedge Fund Monitor offering is seamlessly integrated onto its core fund administration, custody and treasury services platform, thereby creating a front-to-back FoHF offering.

“Our clients are faced with new and evolving investor reporting and transparency requirements and as a result they need to be in a position to access reports and data requests on demand,” said Ian Headon, Northern Trust’s asset servicing product manager for alternative investments. “The enhancements to our Hedge Fund Monitor reporting tool give our clients this capability without them needing to invest management time and effort in formally defining and specifying requirements.”

“We are delighted to offer these enhancements to our global FoHF client base and we remain committed to creating the best of breed global hedge funds platform,” said Peter Sanchez, head of Northern Trust Hedge Fund Services, the business entity formed following Northern Trust’s acquisition of Omnium LLC in 2011.

Northern Trust is a leading administrator of hedge funds and FoHF with excess US$180 billion hedge funds and FoHF assets under administration, as of 30 September 2011. In addition to providing fund administration and custody services, Northern Trust also services the hedge fund investment portfolios of its institutional custody clients.

About Northern Trust

Northern Trust Corporation is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2011, Northern Trust had assets under custody of US$4.3 trillion, and assets under investment management of US$662.9 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com .

Black Diamond Capital Management, L.L.C. (“Black Diamond”), a leading alternative asset management firm with over $10 billion in assets under management, today announced the appointment of Kenneth Rubin as a Senior Managing Director and Hedge Fund Portfolio Manager. Mr. Rubin will have responsibility for the hedge fund platform along with Stephen Deckoff, Managing Principal of BDCM. Mr. Rubin will be based in Black Diamond’s Greenwich, Connecticut office.

Commenting on the appointment, Mr. Deckoff said, “I am excited to have Ken joining our team and am confident that with his demonstrated investment success and his deep experience in credit and distressed investing he will be a great asset to Black Diamond. Ken will play a significant role in enhancing our hedge fund offering and his addition underscores Black Diamond’s commitment to our hedge fund clients. With attractive opportunities presenting themselves in the market, we are excited to be able to enhance the team that will focus on continuing to deliver attractive returns, and I look forward to Ken’s contribution to this effort.”

“I am thrilled to be joining the Black Diamond team,” stated Rubin. “With over fifteen years of success at its hedge fund, Black Diamond continues to deliver superior returns and its disciplined approach to investing and asset growth is a great foundation from which to build. I look forward to working with such a talented and committed group of people to continue that success.”

Mr. Rubin has over twenty years of experience in the credit and distressed investing field. Most recently, he served as Managing Director and Co-Head of the Credit Group at Och-Ziff Capital Management Group, L.L.C. where he managed the U.S. corporate credit portfolio. Prior to Och-Ziff, Mr. Rubin was a Managing Director at Cerberus Capital Management L.P where he focused on stressed and distressed investing. Before that, Mr. Rubin was an Executive Director at CIBC World Markets where he published research and invested in distressed and special situations. Previously, Mr. Rubin practiced bankruptcy law, having worked primarily at Weil, Gotshal & Manges. Mr. Rubin earned a J.D. from Columbia University Law School and a Bachelor of Science in Economics from The Wharton School of the University of Pennsylvania.

About Black Diamond Capital Management:

Black Diamond is a leading alternative asset management firm with over $10 billion in assets under management across four complementary investment platforms: control distressed/private equity funds, a hedge fund, mezzanine funds and CLO and other structured vehicles. Founded in 1995, Black Diamond has offices in Greenwich, CT, Lake Forest, IL, and London, England.

LightSquared, a wholesale carrier building a nationwide wireless broadband network that will create consumer choice and drive industry innovation, today announced the appointment of telecommunications veteran Marc Montagner as chief financial officer.

In this role, Montagner will report to Sanjiv Ahuja, LightSquared’s chairman and chief executive officer, and will be responsible for the company’s daily financial operations and will oversee investor and bondholder relations.

Montagner will also leverage his experience as executive vice president, sales, marketing and strategy for SkyTerra, LightSquared’s predecessor company, where he worked on the regulatory, technical and business issues associated with re-purposing SkyTerra’s satellite spectrum for terrestrial use. His nearly 25 years of experience also includes working for companies such as France Telecom, Morgan Stanley, Sprint Nextel and Banc of America Securities.

“Marc brings with him deep experience in financial and corporate development for the wireless communications sector, as well as extensive knowledge of LightSquared, and we’re thrilled that he will be joining our management team,” said Ahuja. “His proven track record will be tremendously helpful as we advance our plan to bring world-class wireless broadband service to 260 million Americans.”

Prior to joining LightSquared, in addition to his role at SkyTerra, Montagner was managing partner of Dupont Circle Partners, a mergers and acquisitions advisory firm specializing in the media, technology and telecommunications industries. Previously, he was managing director and co-head of the Global Telecom, Media and Technology Merger and Acquisition Group of Banc of America Securities where he advised a number of companies during acquisitions.

Montagner was also senior vice president, corporate development and mergers and acquisitions for Sprint Nextel Corporation, where he was responsible for all M&A activities for the company, including the $70 billion merger between Sprint and Nextel. Prior to Sprint Nextel, Montagner was a managing director in the Telecom and Media Group at Morgan Stanley. Montagner started his career in the telecom industry at France Telecom.

“I’m looking forward to harnessing my experience in finance and corporate development as LightSquared aims to revolutionize the wireless landscape,” said Montagner. “With more than 30 wholesale customer agreements in place, and even more to come, the company is on the way to fulfilling its vision of high-speed wireless connectivity for all, and I’m proud to help LightSquared achieve that goal.”

About LightSquared

LightSquared’s mission is to revolutionize the U.S. wireless industry. With the creation of the first-ever, wholesale-only nationwide 4G-LTE network integrated with satellite coverage, LightSquared offers people the speed, value and reliability of universal connectivity, wherever they are in the United States. As a wholesale-only operator, LightSquared will deploy an open 4G wireless broadband network to be used by existing and new service providers to sell their own devices, applications and services – at a competitive cost and without retail competition from LightSquared. The deployment and operation of LightSquared’s network represent more than $14 billion of private investment over the next eight years.

Dow Jones Indexes, a leading global index provider, and UBS Securities LLC today announced the launch of the Dow Jones-UBS Commodity Index 2-4-6 Forward Blend, a gauge that measures diversified exposure to longer-dated commodity futures contracts spread across the commodity price curve.

An enhanced version of the Dow Jones-UBS Commodity Index, the Dow Jones-UBS Commodity Index 2-4-6 Forward Blend reflects the return of underlying commodity futures price movements. Also introduced was a total return version of the index, which reflects the return on fully collateralized futures positions.

The index is constructed as an equally weighted basket of the two-month, four-month and six-month forward versions of the Dow Jones-UBS Commodity Index, with the notional exposure to the three component indexes rebalanced at the end of every month so that each index represents one-third of the basket. The index is quoted in USD.

The Dow Jones-UBS Commodity Index family has grown into one of the most closely followed commodity benchmarks with more than $80 billion in assets under management tracking the indexes, as of June 30, 2011.

“This new gauge is a welcome addition to the Dow Jones-UBS Commodity Index family,” said Michael A. Petronella, President, Dow Jones Indexes. “The Dow Jones-UBS Commodity Index 2-4-6 Forward Blend tracks diversified exposure across a range of longer-dated commodity contracts — a measure growing in importance for this asset class.”

The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities. It currently includes 19 commodity futures in seven sectors. The weightings of the commodities are calculated in accordance with rules that ensure that the relative proportion of each of the underlying individual commodities reflects its global economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index, and no sector can represent more than 33% of the index (as of the annual reweightings of the components). The Dow Jones-UBS Commodity Index is reweighted and rebalanced annually on a price-percentage basis.

A recent survey conducted by Information Management Network (IMN), global organizers of institutional finance and investment conferences, found that 93.3% of respondents believe market volatility will remain the same or increase in 2012, indicating that another year of instability is universally anticipated.

Despite the expected volatility, 87% of respondents cited a consistent or increased risk appetite in the next six to 12 months. Additionally, 54% do not plan to alter exposure to global markets and 39% actually plan to invest a bigger part of their portfolio internationally. Regardless of the current speculation over the fiscal future of certain European nations, only 2% plan to decrease global exposure.

“I am encouraged by investors’ willingness to increase their exposure to the market. It suggests that professional investors are able to look beyond near-term volatility and seek attractively priced markets,” said Jack Ablin, Chief Investment Officer of BMO-Harris Private Bank in Chicago.

Additional survey findings include:

- The majority of respondents (71%) feel more prepared to combat exposure now than they did in 2008.

- 62% of survey respondents use alternative assets citing a combination of hard assets (48%), hedge funds (36%), private equity (36%), as well as commodity futures, real estate, natural resources, infrastructure and 40 Act funds.

- Not surprisingly, most respondents expect that market volatility and global economic conditions will have the greatest impact on portfolio strategy (66%), followed by changing regulatory requirements (11%) and customer demand for control and transparency (5%).

Survey respondents included plan sponsors, endowments, foundations, health-care organizations, non-profit investors, institutional investors, fund managers, academics, index and service providers, traders, investment consultants, financial advisors, planners and RIAs, as well as registrants for the 16th Annual Super Bowl of Indexing conference.

Kimberly Mounts, Managing Partner of MAP Alternative Asset Management Company, a women-owned Fixed Income Fund of Hedge Funds, was one of 120 business leaders who participated in a White House Business Leaders’ Forum recently in Washington, DC. The forum brought together CEO’s, senior executives, investors, venture capitalists and small business owners for a chance to share data, ask questions and raise concerns over how to create jobs and improve America’s economic competitiveness.

Senior officials, including White House Senior Advisor Valerie Jarrett, NEC Director Gene Sperling, Commerce Secretary John Bryson, Deputy Chief of Staff Nancy Ann DeParle, and Federal CTO Aneesh Chopra participated in briefings that covered a range of business issues, from regulatory reform to exports, tax reform and the American Jobs Act.

“Seven out of 10 participants were CEOs and Presidents – and nearly all of them called for dramatic, bipartisan action to address long-term deficits and expressed a desire to create more jobs – but few of them have ever had the opportunity to share their experience and expertise with White House officials here in Washington,” said Jim Doyle, president of Business Forward. “If more local business leaders get involved, we have a better chance at meaningful, pro-growth reform.”

Ms. Mounts was privileged to attend the White House Business Forum not only as a women-owned business, but also as the only Hedge Fund representative attending the event. Kimberly Mounts states “The access to Senior Administration Officials and the ability to engage in a meaningful dialogue at the White House is truly a once in a lifetime event. The sheer determination of President Obama’s Administration to work with Businesses in moving our Country forward, despite a solid roadblock in Congress, is truly admirable. The White House Council and Business Forward are phenomenal organizations with diverse and numerous programs dedicated to furthering Small Businesses and creating jobs throughout the Country.”

About Business Forward

More than 100 senior Obama Administration officials have participated in Business Forward programming, which is now active in more than 40 cities and has included briefings with thousands of local business leaders. Business Forward counts more than 30 of America’s most respected companies among its Founding and National members, including Aetna, Alcoa, American Airlines, AT&T, Bank of New York Mellon, CIT, Citi, Comcast, Dow, Duke, Facebook, Fidelity, Ford, Hilton, HP, Intuit, KPMG, Lockheed, McDonalds, Microsoft, Nike, Qualcomm, Shell, T-Mobile, Time Warner, Time Warner Cable, Verizon, Visa and Wal-Mart. On the web: http://www.businessfwd.org

About MAP Alternative Asset Management Company

MAP Alternative Asset Management Company is a women-owned Fixed Income Fund of Hedge Funds and SEC Registered Investment Advisor with Assets under Advisement in excess of $25 Billion. MAP recently has been retained by one of the Nation’s Largest Public Pensions as a Consultant on their Hedge Fund Portfolio and was a finalist for the $6 Billion Chicago Teachers Emerging Manager Fund of Hedge Funds mandate. MAP is also advising Fortune 50 Corporate Pensions on their Fixed Income and Fixed income Hedge Fund Portfolios. Founded in 2006, by Ms. Kimberly Mounts, who previously held positions at Goldman Sachs and Morgan Stanley as a Fixed Income Derivative Product Specialist in New York City, MAP is located in Newport Beach, California.

Press Release – In accordance with SEBI’s recent directive, where mutual funds are allowed to pay prescribed transaction charges for subscription application received through distributors, Quantum Mutual Fund, India’s first and only direct-to-investor mutual fund, has announced Zero transaction charges for all subscriptions received through distributors. The fund house has also published details of commissions paid to distributors – zero commissions paid since inception till date – on its website: www.QuantumMF.com.

The regulator’s recent guidelines permit Asset Management Companies (AMCs) to pay distributors a transaction charge of Rs.100 for existing investors and Rs.150 for first time investors as transaction charges for each subscription of Rs.10,000 and above. The AMC shall deduct the transaction charges from the subscription amount received from the investor and pay the same to the distributor. The balance amount will be invested in the scheme.

However, investors in Quantum Mutual Fund will not have to incur any such charges. The direct-to-investor fund house has announced “ZERO” transaction charges for all subscription applications received from distributors, which will ensure that there are no deductions made from the investor’s subscription amount. And continuing with its tradition of not paying commission, Quantum will not pay any transaction charges to the distributors.

Commenting on the introduction of these charges, Jimmy A Patel, Chief Executive Officer, Quantum Asset Management Company Pvt Ltd said, “Long term wealth creation is all about the magic of compounding. A miniscule deduction of Rs.100 or Rs.150 at the start could accumulate to a pretty decent difference in the final amount if you consider a compounded rate of growth. The differential keeps adding to the difference in amount. That’s the edge we are offering as a direct-to-investor mutual fund – an initial “Zero Deduction”.

Quantum Mutual Fund has always been a crusader for transparency in the commission structure of the mutual fund industry and has vocally admonished the practice of pushing products to investors for the sake of adding to the AuM corpus. This has been the primary reason why Quantum Mutual Fund was launched as a direct-to-investor fund house. Simply put, the fund house refused to work with distributors without declaring the commission paid to them, and as a result has paid zero commissions since its inception in 2006 till date.

With a view to provide its investors with complete information, Quantum has proactively published commission details, including brokerages paid for investment trades, in its Annual Reports. However, the fund house is not averse to working with distributors or paying them for their services. Its only fight has been that payments made should be declared and investors must know why they are being sold one fund over another.

Jimmy A Patel complimented SEBI on its pro-investor stance saying, “We have been known as the mavericks and the angry boys of the industry. And all because we lobbied against an opaque distribution system. We were the first mutual fund in India to have Zero entry loads. SEBI regularized this initiative in August, 2009. We have pushed for declaration of distributor fees since 2006, and we are ecstatic that the regulator has brought in much needed transparency via its recent circular. We believe that everyone including distributors need to get paid for the work they do – but those payments need to be revealed.”

Since the Committee last met in August, economic activity indicators have firmed and real GDP in the third quarter expanded at a 2.5% annual rate, a noticeable acceleration from the 0.8% growth rate experienced in the first half of the year. Real final sales reached a 3.6% growth pace in the third quarter, an even greater acceleration from its modest 0.8% growth pace in the first half. Economic activity has received support recently from a rebound in motor vehicle production and an easing in energy prices. Early indications suggest the economy continues to expand at a reasonable pace in the fourth quarter.

Despite some progress recently, the ongoing debt crisis in Europe remains a downside risk to domestic economic activity. As was the case at the last meeting, the outlook for fiscal policy remains considerably uncertain, and expectations regarding budget deliberations continue to shape the outlook for next year.

The third quarter rebound in growth was driven by a pick-up in domestic final sales which accelerated to 3.2% annual growth rate, up from 1.3% the prior quarter, as both households and businesses quickened their pace of purchases. Net exports contributed 0.2%-point to growth last quarter, a surprisingly large gain, as imports expanded at only a 1.9% annual rate despite a large rebound in auto imports following earlier supply disruptions. Real inventory accumulation slowed markedly to only $5.4 billion at an annual rate last quarter subtracting 1.1%-point from real GDP growth. Industrial activity has been robust lately and the unexpected strength in third-quarter final sales and weakness in third-quarter inventory investment improves prospects for continued solid growth in the fourth quarter.

Consumer spending increased at a 2.4% pace last quarter, a firming from the anemic 0.7% growth rate the prior quarter. Real income edged lower in the third quarter, as prices rose faster than nominal income. Consumers managed to increase their pace of real spending by reducing the saving rate from 5.1% in the second quarter to 4.1% in the third quarter, and only 3.6% in September. Surveys measures of consumer attitudes remain at very depressed levels. So far, pessimism about the economy has manifested itself more in the housing market than in consumer spending. In addition to low sentiment, housing demand is likely being held back by difficulties in obtaining mortgage credit. Homebuilding has generally been subdued, though multi-family homebuilding is picking up as the shift from homeownership to renting drives rental vacancy rates down and puts upward pressure on rents.

Business fixed investment has remained the most reliably expansionary sector of the economy. Total outlays on capital expenditures rose at a 16.3% annual rate last quarter. Real spending on equipment and software increased at a 17.4% pace in 3Q11. Spending on information processing equipment and software slowed but spending on all other major categories of capital equipment accelerated sharply. Business spending on structures rose at a 13.3% annual rate, a step-down from the very robust pace seen in the second quarter, but nonetheless a solid outcome. Business fundamentals, such as excellent profitability, remain supportive of the outlook for capital spending. Survey indicators do suggest some moderation in the pace of business spending ahead, perhaps because levels of capital outlays have generally recovered much of the decline they experienced during the recession.

The September labor market report was an improvement from the upward-revised August report. In September 103,000 jobs were added, and on average 90,000 private sector jobs were created per month in August and September. Timely indicators such as jobless claims suggest positive job growth has continued into October. While overall employment has expanded, job growth has not been fast enough to make a meaningful dent in the unemployment rate, which stood at 9.1% in September, the same rate as in the prior two months. Wage gains remain modest, as average hourly earnings have increased just 1.9% over the past year.

Headline inflation remains somewhat firm, as the PCE price index rose 0.2% in September and is up at a 3.3% annual rate over the past three months. Looking forward, the easing in gas prices could cause this price index to dip slightly in October. Excluding food and energy, core inflation was expanding at a fast pace through much of the spring and summer, and on a year-ago basis the core PCE is up 1.6%. More recently, however, there is some evidence that the lapsing of commodity price pass-through as well as greater supply of motor vehicles is leading to an easing in core inflation, as the core PCE index was unchanged in September. Looking forward, the continued moderation in commodity prices should remove that upward source of pressure on headline and core inflation. Moreover, labor costs remain contained and inflation expectations are subdued, all of which should contribute to an easing in underlying inflation pressures.
Since the last meeting, monetary policy has been active in pursuing its full employment responsibility. At the August FOMC meeting, the Committee gave additional information on its interest rate guidance, indicating that conditions are unlikely to lead to an increase in overnight interest rates before mid-2013. At the September FOMC meeting, the Committee took action to extend the maturity of its portfolio of Treasury securities and also decided to reinvest the proceeds of maturing housing-related assets back into mortgage-backed securities. Collectively these actions have served to ease financial conditions somewhat.
Fiscal policy continues to remains in flux. The deficit “super committee” has less than a month to arrive at a plan that produces $1.5 trillion in deficit reductions over ten years. The progress of these deliberations is uncertain and market participants do not have high expectations for the outcome. Fiscal policy is set to tighten significantly early next year, though talks are ongoing regarding extending some income support measures that are scheduled to expire at the end of this year.

Against this economic backdrop, the Committee’s first charge was to examine what adjustments to debt issuance, if any, Treasury should make in consideration of its financing needs. The Committee did not feel any changes to coupon issuance were necessary at this time. There were ongoing discussions of the SFP (Supplementary Financing Program). Given the uncertainty surrounding the path and timing of future debt limit increases, the Committee continued to believe that the reintroduction of the SFP was not possible for the foreseeable future.

The Committee examined with more granularity the expected evolution of debt composition (attached). A familiar discussion on weighted average maturity ensued. The Committee continued to believe that more progress on maturity extension should be made, while being mindful of the cost effectiveness of the strategy. More work needs to be done in this regard.
The Committee also discussed the merits of adding floating rate notes to Treasury’s issuance program. While members were generally supportive, there were questions regarding the appropriate reference index, optimal maturities, and liquidity costs. Discussion on the topic was both exploratory and preliminary.

The second charge was to examine the impact of a prolonged period of low interest rates on financial markets. The presentation (attached) looks at the current rate structure’s impact on loan growth, bond asset managers, money market funds, foreign investors, bank portfolios, securities dealers, insurance companies, pension funds, mortgage lenders, and Treasury issuance mix. The paper probes each area for challenges, emerging changes, and opportunities posed by persistent low interest rates.

In the final charge, the Committee considered the composition of marketable financing for the remainder of the October 2011 to December 2011 quarter and the January 2012 to March 2012 quarter. The committee’s recommendations are attached. TBAC Recommended Financing Table Q4 2011  &  TBAC Recommended Financing Table Q1 2012 PDF

Mourant Ozannes has been named ‘Best Offshore Law Firm – Client Service’ at the HFMWeek US Hedge Fund Services Awards 2011. This follows the firm winning the same client service accolade at the HFMWeek European Hedge Fund Services Awards earlier this year.

The winners of the US awards, which were announced at a ceremony held at Cipriani’s in New York on Thursday 13 October, were recognised for outstanding performance from June 2010 to July 2011.

The awards featured a number of categories that spanned the best and most cutting edge hedge fund service providers in the US marketplace, including the onshore and offshore legal, administration, accountancy, advisory, insurance and technology sectors.

The awards were judged by a panel of independent senior industry representatives who took into consideration financial progress, growth and innovation in order to put together a shortlist and identify the eventual winners of each category.

Neal Lomax, Mourant Ozannes’ Cayman Islands Managing Partner, collected the award on behalf of the firm. He said:

“We are delighted by this latest accolade for our Cayman funds practice, which continues to grow and go from strength to strength, with a number of significant senior appointments this year. We aim to differentiate ourselves on client service so it is very pleasing indeed to receive this award from such a respected hedge fund publication, which recognises the expertise and quality of service provided by our lawyers.”