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WA Today – Richard Wallace has been ousted from the hedge fund he founded after the listed asset manager made losing bets throughout the financial crisis.
Mr Wallace, who is based in Sydney, will no longer manage the Australian-listed hedge fund for Wallace Absolute Return after the Supreme Court of NSW dismissed an injunction he filed seeking to block a termination notice.
The management agreement will be cancelled immediately, the company said yesterday.
New York (HedgeCo.Net) – Over $84 billion worth of U.S. hedge funds shut down last year, compared to just $18.7 billion in 2007, according to the latest data published by Absolute Return Magazine, a unit of HedgeFund Intelligence. More than 200 funds closed up shop in 2008, with 20 percent or $16 billion of those assets deriving from Madoff feeder funds.
The largest fund closure was Fairfield Greenwich Group’s Fairfield Sentry fund, which once managed $6.9 billion in assets, and fed almost all of their investments to Madoff funds. The other major Madoff feeder funds that faltered included Tremont Group’s Rye funds, which once managed $3.1 billion and Kingate Management’s Kingate Global Fund which was worth about $2.7 billion.
The largest failure unrelated to the Madoff scandal was Drake Management, who was forced to close funds that once oversaw $4.7 billion. Citigroup’s Old Lane Partners, another Multi-strategy hedge fund founded by its Chief Executive Vikram Pandit, decided to liquidate after unimpressive returns and mounting write downs by the bank. It once managed $4.4 billion in assets.
Here are the top 10 hedge fund closures of 2008 according to Absolute Return Magazine:
1. Fairfield Greenwich Group, Fairfield Sentry
Madoff feeder fund
6.9 Billion
2. Drake Management, Global Opp, Low Volatility, Abs. Return
Macro/Multi
4.7 Billion
3. Citigroup, Old Lane Partners
Multistrategy
4.4 Billion
4. D.B. Zwirn, Zwirn Special Opp. Fund
Multistrategy
4.0 Billion
5. Tontine Capital Management, Tontine Capital, Tontine Partners
Equity Long/Short
4.0 Billion
6. Ospraie Management, Ospraie Fund
Commodities
3.8 Billion
7. Highland Capital Management, Crusader, Highland Credit
New York (HedgeCo.Net) – Although confidence in the hedge fund industry has taken a hit, a large and notable UK pension fund has begun to place their trust into alternative investments. The West Midlands Local Authority Pension Fund, which manages close to $10 billion, was looking to diversify investments, and chose to allocate 8 percent into hedge funds.
In an interview with Reuters, management pointed out that although hedge funds may have had a dismal 2008, they still outperformed the equity markets. In addition, Chief Investment Officer Judith Saunders believes that hedge funds “have been forced to improve their practices and some of the weaker ones have gone.”
200 hedge funds who couldn’t withstand market conditions closed up shop last year in the United States alone, thinning out an industry that once managed close to $3 trillion. In addition, the unfavorable economic conditions exposed dozens of hedge funds that were running fraudulent schemes. Many companies feel now is the time to invest, with a number of strong funds that withstood the storm.
The Universities Supeannuation Scheme, UK’s second largest pension fund, is also pursuing diversification, confirming they would allocate 20 percent of their $32 billion in assets under management to alternative investments. Management recently told reporters “that current turmoil in the hedge fund industry represents a compelling investment opportunity for investors like USS who are able to take the long-term view.”
The West Midlands Fund chose investments that employ absolute return strategies, which are supposed to be less volatile than other strategies. Saunders has been pondering the idea of investing in hedge since late last year, when she stated the company was considering a 2 percent allocation.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
Bloomberg – Ray Dalio’s Bridgewater Associates Inc. overtook JPMorgan Chase & Co. to become the biggest U.S. hedge-fund manager, even as the firm lost assets during the industry’s worst year, according to a survey.
Bridgewater, based in Westport, Connecticut, managed $38.6 billion on Jan. 1, down 11 percent from July, according to Absolute Return magazine. New York-based JPMorgan, which owns Highbridge Capital Management LLC, ranked second at $32.9 billion, a decline of 26 percent.
“The bulk of hedge funds were delivering returns that were highly correlated with the market,” said Sharath Sury, chief executive officer of S4 Capital LLC, a Chicago-based firm that advises clients on investing. “So when the markets fell, so did their assets.”
Investment returns dropped an average of 19 percent last year, the most on record, according to data compiled by Chicago- based Hedge Fund Research Inc. Hedge-fund assets shrank to $1.2 trillion at the end of 2008 from the June peak of $1.9 trillion on the market losses and investor withdrawals, according to Morgan Stanley analyst Huw van Steenis in London.
Assets at U.S. hedge funds that managed at least $1 billion each fell 32.3 percent in the second half to $1.1 trillion, according to Absolute Return, which is published by London-based HedgeFund Intelligence Ltd.
Morningstar.ca – Hedge fund managers, once the swashbuckling frontiersmen of international finance and subject of fawning cocktail party banter, have quickly gone from hero to goat. As the global credit bubble burst with a vengeance in 2008, so too did the oft-touted myth that these alternative strategies could deliver positive results in any market.
But those claims painted the universe with too broad a brush. There has always been a difference between arbitrage funds that isolated structural inefficiencies, and speculators that either didn’t hedge or used the ability to short stock as a means of leveraging directional bets. Clearly it should never have been expected that a fund that was short financials and long commodities, as many hedge funds were last year, would have a market neutral, "absolute return" profile. The majority of Canadian offerings fall into that camp, so it’s no surprise we’ve seen stark declines among many of our homegrown funds.
Lexington Herald-Leader – When does "absolute" imply something that in reality is far less than certain?
When it comes to "absolute return funds." That’s the label mutual fund companies have put on hedge fund-style products that they’ve been rolling out the past three years. The funds seek to smooth out the bumpy, downward ride the markets have taken lately.
But you can still lose money, even if you manage to fare better than most investors in a downturn. Absolute return funds lost an average 11.7 percent over the 12-month period ended Wednesday, according to Morningstar Inc.
Forbes – When does "absolute" imply something that in reality is far less than certain?
When it comes to absolute return funds. That’s the label mutual fund companies have put on hedge fund-style products that they’ve been rolling out with increasing frequency the past three years. The funds seek to smooth out the bumpy, downward ride the markets have taken lately.
Seattle Times – With their investment records in tatters, some mutual-fund companies are pinning their hopes on products with an old-fashioned ambition: delivering steady returns.
Many of these funds are doing just that, while others are falling short of the mark.
Putnam Investments recently introduced four "absolute return" funds that use such strategies as buying foreign securities or bonds to smooth out their performance and aim to earn investors 1 to 7 percent a year above inflation.
Absolute Return – Assets for new hedge-fund launches fell "significantly" in the U.S. last year as hedge funds had their worst-ever year of performance, according to hedge-fund magazine Absolute Return.
"With these results, it’s no surprise that 2008 is being dubbed hedge funds’ worst year," deputy editor Carolyn Sargent said. "Turbulent markets, big losses, fund closures and the Madoff scandal have put investor loyalty to the test. Most investors are staying on the sideline, but those who are allocating capital can demand more favorable investment terms."
The financial crisis spurred investors to convert holdings to cash, and some funds faced unexpected disruptions to their trading strategies, including temporary bans on selling stock short.
Globe and Mail – The market meltdown has claimed another hedge fund, with Silvercreek Management into workout mode on a convertible bond fund that featured a who’s who of Canadian finance backers.
Silvercreek oversees an estimated $300-million, and ran into trouble in November when the wheels came off the convertible bond market. This debt, which can be flipped into equity, constituted the single worst performing asset class for hedge funds in 2008. That makes converts, as they are known on the Street, the baddest of a very bad lot.
Convertible funds were down an average of 26 per cent last year, according to the U.S. bible for the industry, Absolute Return. The average performance was a loss of just 6.9 per cent.
West Palm Beach (HedgeCo.net) – Privately-owned investment management company, SVM Asset Management, is seeking approval from the Financial Services Authority for the launch of the long/short SVM UK Absolute Alpha Fund, which has a similar investment approach to their SVM Saltire fund, which returned +19.7% in 2008.
The fund, if approved, will have the flexibility to move from a net long to a net short position differentiating it from other absolute return funds, the company says. Managed by Colin McLean, returns will be driven by stock selection and the net position of the fund will be determined by whether the manager has more long or short stock ideas at the time.
"In 2008 just 31 of the stocks in the FTSE All Share ended the year higher, and 580 were down. It is therefore not surprising that few long only managers were able to profit," McLean says, "Without question this year will be challenging for the economy. However, at a company level there will be winners and losers and fundamental stock picking skills will be required to identify them."
The focus will be on generating positive returns over the long term rather than positive performance each month, as such SVM believes the appropriate time frame for investing in the new fund is at least three years.
Based in Edinburgh, SVM focuses principally on global fund of funds, UK and European equities.
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Bloomberg – Martin Ward, a teacher at a London experimental school called the Evelyn Grace Academy, is pitching Arpad Busson on a new idea for getting poor kids interested in science. The charity that Busson leads, Absolute Return for Kids, or ARK, is a sponsor of Evelyn Grace to the tune of 2 million pounds.
Ward wants to buy a used ice-cream truck and turn it into a mobile science lab so that kids at cash-strapped schools around London can do hands-on experiments. Busson, who runs fund-of- hedge-funds firm EIM SA, asks a few questions and confers with a colleague. “It’s done,” he says. “You’ve got it. We’ve found the money.”
