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.
Independent – Hedge funds Apollo and Octavian have been quietly building up a position in ProSieben, one of Europe’s biggest commercial broadcasters. The move could lead to a showdown with private equity owners Permira, the Damon Buffini-run giant, and Kohlberg Kravis & Roberts (KKR). Lord Hollick, who was chief executive at former Daily Express owner United Business Media, represents KKR on the ProSieben board.
It is understood that Apollo and Permira have been buying the struggling German broadcaster’s debt on the cheap. Sources suggested that the pair had been paying only around 30cents for every euro of debt, allowing them to become, in effect, major creditors. "Apollo and Octavian have been buying up debt that is trading at distressed levels and I can see them taking on Permira and KKR over the direction of ProSieben," said a source.
FierceFinance – Not too long ago we were lamenting the trend by top investment banks to move into hedge funds and alternative investments in general. Buying hedge fund firms and launching them internally didn’t work out so well for Citigroup. It also wasn’t a home run for other firms, notably Bear Stearns.
Has JPMorgan Chase found a way to buck the trend? It has announced it will buy the portion of Highbridge that it doesn’t already own, and has shut down its proprietary hedge fund and private equity businesses. As of now, it looks like the Highbridge gambit has paid off-and then some. It remains among the biggest of the hedge fund firms, and has tripled its assets under management since JPMorgan invested in December of 2004, reports TheStreet.com. My sense is that Highbridge is one of the mega fund firms that is really well positioned to steal market share.
Reuters – JPMorgan Chase & Co plans to shut down its Principal Investment Management Group’s hedge-fund business and private-equity division, with the exception of a team that focuses on Asia, Bloomberg said, citing two people familiar with the plan.
Bob Case, the head of Principal Investments, may be given another post, the people told the news agency, adding that most of the group’s 150 employees will move to other parts of the firm.
Bloomberg – Yale University and Harvard University may have to cut investments in hedge funds and private equity because the risks of holding the hard-to-sell assets outweigh the returns, said Bill Gross, co-chief investment officer of Pacific Investment Management Co.
“The Yale and Harvard portfolios, which have succeeded enormously over the past 10 or 20 years in terms of the emphasis on illiquidity and private investments and risk-taking — you have to question that model,” Gross said yesterday at an industry conference in Chicago.
The two Ivy League schools had more than half of their endowments in hedge funds, private equity, real estate and hard assets such as commodities at June 30. Gross, who manages the $150 billion Pimco Total Return Fund, the world’s biggest bond mutual fund, recommended in March buying securities that provide stable income this year rather than more speculative and illiquid investments, as slowing economic growth and higher unemployment depress returns.
Reuters UK – NewSmith Capital Partners, one of the hedge fund firms to appear before a parliamentary committee investigating the UK banking crisis in January, has lost six staff as it cuts costs in a tough period for the industry.
According to a regulatory filing obtained by Reuters on Tuesday, Edward Johnson, an analyst on the firm’s resources and energy fund, and Ben Squire, an analyst on the credit fund, are no longer members of the firm.
The firm, which employs around 70 people, has also parted company with Sadiq Currimbhoy, a strategist on the firm’s Global Opportunities fund. A spokesman said investors had taken up an option to withdraw their assets from the liquid part of the fund and keep the remaining part of the portfolio as a private equity vehicle.
Bloomberg – FRM Capital Advisors Ltd., a unit of London-based asset manager Financial Risk Management Ltd., plans to make as much as $300 million of strategic investments in hedge funds this year, including its first in Asia.
FRM Capital may invest in six more managers in 2009, with two expected by June and its first Asian deal in the third quarter, Chief Operating Officer Patric de Gentile-Williams said. The London-based company makes strategic investments in hedge funds for two to four years in exchange for a share of their fee incomes for as long as 10 years.
Record losses and redemptions have cut hedge funds’ assets and fee revenue, making them more reliant on so-called seeders like FRM Capital. Some investment banks, insurers and private equity houses have exited the hedge fund seeding business amid the credit crisis, said de Gentile-Williams.
Bloomberg – Blackstone Group LP and Fortress Investment Group LLC are seeking to take over credit funds from managers unable to support their businesses after the value of investments fell.
There are “a lot of companies that are on the block,” Tony James, Blackstone’s president, said on a conference call yesterday with investors. New York-based Blackstone, the world’s biggest private-equity company, is “looking hard at consolidating acquisitions,” he said.
EurActiv.com – A draft EU proposal to regulate hedge funds and private equity, due to be unveiled next week, was criticised for being too weak by Socialist leaders, who branded the text a "major political mistake" ahead of European elections in June.
The main issue raised by the Socialists was that the proposed regulation will only apply to fund managers, rather than to the funds themselves, creating a loophole in the system.
Reuters India – New Vernon Bought stakes in Indage Vitners and Orbit Corp. Deutsche Sec bought 11% into UB Group.
Private equity and hedge funds seem to be playing their parts in the brief rally that the Indian stock markets are witnessing. Multi-strategy fund New Vernon has picked up minor stakes in two
companies. New Vernon bought little more than 3% stake in Indage Vintners for Rs 2.76 crore. Indage Vintners, formerly known as Champagne Indage, is one of the oldest wine producer in the country.
Bloomberg – Hedge fund managers who run the largest 15 percent of portfolios in the European Union would have to report risks, debts and trading activities to regulators under a draft proposal to tighten oversight after the financial crisis.
The EU’s executive agency in Brussels is weighing plans to regulate “alternative investment fund managers” who oversee at least 250 million euros ($333 million). The measure also covers private-equity buyout firms.
The proposal answers calls from EU lawmakers for rules on all market actors, and from the Group of 20 nations for oversight of hedge funds large enough to put financial systems at risk. While the proposal, which may still be changed, excludes 85 percent of hedge fund managers, it would leave out 24 percent of their assets in the region, according to the commission.
Reuters - Bernard Madoff is behind bars, but the effects of his fraud are still reverberating in the hedge fund industry, with more redemptions expected and investor confidence decimated.
Traumatized investors are now more likely to closely monitor where their money is and who is managing it, hedge fund professionals said at the Reuters Private Equity and Hedge Funds Summit this week.
"You know, it is just absolutely devastating," said Anthony Scaramucci, managing partner at SkyBridge Capital, referring to the Madoff scandal.
Reuters – The heat is on hedge funds to outperform markets and prove their worth to skeptical investors, and to do so requires strategies based on riding out spikes in volatility, seeking liquidity and deft trading.
Returns this year will, of course, not be what they were in the over-leveraged days before the financial crisis, but convictions on one’s investment strategies and asset allocation will help the best and brightest funds survive, industry experts told the Reuters Private Equity and Hedge Funds Summit.
The strategies expected to do well include commodity trading advisors’ managed futures accounts because they can perform well in times of heightened volatility. Funds that focus on macroeconomic developments were also seen outperforming other strategies given the tremendous changes in policy affecting markets globally and risks of both deflation and inflation.
