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.
Associated Press – The Obama administration’s latest plan to help banks get credit flowing again is drawing a tepid reaction from investors and academics, who say the proposal comes with too many strings attached and is unlikely to stimulate lending industrywide.
And even if banks are willing to start lending more money, they wonder if many people will be able to take on more credit until the economy gets going again.
"We went on a borrowing binge," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Debt levels, especially in households, are too high or unmanageable."
Reuters – President George W. Bush said on Monday an announcement on a auto industry rescue was not imminent, leaving the industry’s fate clouded in uncertainty for a little longer.
"We’re not quite ready to announce that yet," Bush told reporters on Air Force One during a flight from Baghdad on an unannounced visit to Afghanistan.
He had been asked when he might make an anticipated announcement about tapping a $700 billion financial industry bailout fund to aid General Motors Corp, Ford Motor Co and Chrysler LLC.
Asked whether he was leaning toward using financial bailout funds, Bush said: "I signaled that that’s a possibility."
Reuters – Man Group plans to be a consolidator in the hedge fund industry in the long-term, said Chief Executive Peter Clarke, who thinks the industry could see redemptions of between a third and a quarter at the year-end. "Consolidation is undoubtedly going to happen … Longer-term we’d expect to be a consolidator in these markets," he told Reuters in an interview on Thursday.
However, he said the firm was "doing nothing in these markets, there’s too much uncertainty."
Clarke also said redemptions in the $1.7 trillion hedge fund industry of between a quarter and a third at the end of the year would be "the right sort of figure."
"The year-end is seeing significant levels of redemptions," he said.
Times of Malta – The situation in the international financial markets, although still displaying signs of uncertainty, seems to be settling down. Governments in the major economies, US, UK, Germany, France and Italy, no longer seem to be chasing fairies (or bad witches!), but appear to have got ahead of the situation.
The money markets (which were a major issue) are getting unblocked and as such even interbank lending rates are going down. However, this does not mean that the world has solved all its economic problems. We have simply gone back to the situation of a few months ago, when there was already fear of an international economic slowdown resulting from the increases in the price of oil and the consequent rise in inflation.
The recapitalisation of financial institutions by different governments, the partial or full re-nationalisation of such institutions and the continued provision of liquidity by governments to the financial system have restored a level of confidence that at last allows the system to function, even if not at an optimum, at least to an acceptable level.
Globe and Mail – Canadian hedge funds posted a brutal 11.2 per cent decline in September, losses that are likely to leave many investors questioning this expensive alternative asset strategy.
The latest installment of the Scotia Capital Canadian Hedge Fund Performance shows these funds outperformed the S&P/TSX composite index last month – it was down 14.7 per cent. But mounting losses on funds sold to investors as market neutral, or absolute return, are going to translate into redemptions.
“September was an extremely challenging month for Canadian hedge fund managers who were largely unable to successfully navigate erratic price movements in stocks and falling energy prices,” said Scotia Capital’s note on the sector’s performance.
“Panic selloffs in an environment driven by fear and uncertainty left major equity markets significantly down at the end of September,” said the investment bank. Obviously, the market swings have become even more violent in October.
Reuters – Asian stocks plummeted, led by an 11 percent drop on Japan’s Nikkei, and oil prices dropped to a one-year low on Thursday as fears grew of a more protracted and sharp global slowdown than initially expected.
Major European stock markets were expected to open down as much as 5.9 percent, according to financial bookmakers, as investors anticipated poor corporate results in such an uncertain economic environment, while the dollar gained in a flight from risk.
Optimism about the stabilisation in money markets has been swept aside and widespread selling of global equities has resumed in earnest as the quarterly results season gets underway and reports trickle in about sharp losses at hedge funds.
"I think today there is just a combination of uncertainty and deleveraging in the market," said Amar Gill, head of thematic research at CLSA in Singapore.
Cay Compass – Turmoil caused by the US financial meltdown will likely effect Cayman’s hedge fund industry.
Leader of Government Business Kurt Tibbetts acknowledged at the Cabinet press briefing Friday that Cayman’s economy “does not operate in isolation and that we are not immune from the global volatility and uncertainty”.
Although Mr. Tibbetts said preliminary consultations with the financial industry indicated the retail banking sector was not experiencing any problems, the story was different for other key aspects of the sector.
“The areas that are expected to suffer most are those connected with hedge funds and structured finance,” he said. “Current global market conditions in the hedge fund arena are characterized by heavy redemptions, suspensions and re–structurings coupled with much–reduced… new fund formations.”
New York Post – With just two large investment banks remaining – Morgan Stanley and Goldman Sachs – questions are growing over who might step into the suddenly emptier playing field.
Many Wall Street watchers are pointing to the looming presence of large hedge funds and private-equity firms, which have been stealthily encroaching on many of Wall Street’s traditional lines of business for years now.
"I think the new Wall Street is not going to be on Wall Street," said Ferenc Sanderson, a hedge fund researcher at Thomson Reuters. "The headquarters of Citadel is in Chicago," he said.
Indeed, the $20 billion Citadel Investment Group is more often compared to Goldman these days.
Last year, Citadel branched into providing administrative and technical support to other hedge funds, not unlike the investment banks. Citadel also has a unit that executes trades for retail brokerages, akin to market makers like Morgan Stanley and Merrill Lynch.
It’s a far cry from the small operation Ken Griffin had when he founded Citadel with a modest $1 million in trading money in 1990.
Evening Standard – Krom River, which has £453 million in assets, said it was moving to Switzerland, known for its low tax regime.
The fund is one of the few to perform well in the credit crunch and would see its partners’ income tax rate fall from 40 per cent to 10 per cent with the switch to the small town of Zug, south of Zurich.
The move makes the firm the latest to quit London for lower tax regimes. It came as HSBC fuelled fears of an exodus of leading companies. Three FTSE250 firms disclosed last month that they were leaving London.
The disclosure by Britain’s biggest bank that it was reviewing having its headquarters in London will heap more pressure on the Government to end uncertainty over its tax policies. Key tax concerns include government proposals to begin taxing "non-domiciled" foreign staff.
