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.
New York (HedgeCo.net) – London-based hedge fund, Dynamic Decisions Capital Management, which operated the Cayman Islands-based Growth Premium Master fund is being investigated by the Serious Fraud Office (SFO).
The hedge fund collapsed in April this year when investors applied for it to be put into liquidation, making accusations of “gross mismanagement and misfeasance”.
The Guardian reports that it is alleged that the hedge fund moved a large proportion of its assets out of equities and into asset-backed bonds that could be converted into oil. According to reports, the company then “received legal advice that raised questions relating to the counterparties to the oil sales contracts that lie behind the bonds”.
Dynamic Decisions’ chairman, Dr Alberto Micalizzi, said in an interview with the Times, “The investigations are not founded, first of all. There have been complaints from investors about the delays in payment of redemptions.” He said that it was his “expectation” that investors would receive their money back in full.
New York (HedgeCo.net) – Northern Trust has been named the Best Overall Hedge Fund Administrator by HFMWeek in the magazine’s inaugural U.S. Service Provider Awards. The awards recognize companies that have outperformed their peers during 2008-2009 and demonstrated financial progress, growth and genuine innovation.
“Northern Trust was recognized for the strength of its service offering and for demonstrating business momentum and product innovation during a challenging period for the hedge fund industry,” said Lucy Guest, senior publishing executive for HFMWeek.
“The importance of a Third Party Administrator is now being disseminated throughout the industry so that all funds, including start ups, are embracing the need for the service.” Joe Goldstein, Managing Partner at G&S Fund Services, said. “Prior to Madoff, start up and smaller funds were reluctant to use third party administrators even though we provided them with a higher quality of financial management at a lower cost.”
What Goldstein sees as a change in the industry is that the necessity of a hedge fund administrator is now understood by investors. “This change is contributing to the growth of the hedge fund administration business, as funds who were reluctant to use hedge fund administrators are now either turning over their financial administration to a third party, or at very least using them to review and confirm their NAV calculations.” Goldstein said.
Northern Trust has a growing hedge fund servicing business, with assets under administration of $75.5 billion as of June 30, 2009, an increase of 54 percent over the prior year. Northern Trust services nearly 300 hedge funds worldwide as of June 2009, and in the previous 12 months had provided global operations services to more than 120 new fund launches and transitions.
“We’re delighted to be recognized as best overall administrator as it validates our approach of blending innovative technology, strong process and automation with the exceptional service standards that set Northern Trust apart from our competitors,” said Matt Ward, Head of Fund Administration-North America for Northern Trust. “Ultimately this is a service business and our experienced and attentive people are the real strength of our offering.”
Bloomberg – Bear Stearns Cos. hedge fund manager Ralph Cioffi told investors in April 2007 that there had been a “couple of million” dollars in redemptions, days after being told an investor asked to withdraw $57 million.
Evan Kerr, a former managing director of Bear hedge fund sales, testified in federal court that he told Cioffi on April 18, 2007, that his client, Concord Management LLC, a Tarrytown, New York, hedge fund adviser, intended to pull its investment in Cioffi’s funds, after meeting that day with Cioffi and fellow fund manager, Matthew Tannin.
New York (HedgeCo.net) – $703 billion global asset management firm, Legg Mason, announced today that an outstanding shareholder, hedge fund manager Nelson Peltz, will be elected to the Company’s Board of Directors,
Peltz is Chief Executive Officer and a founding partner of hedge fund Trian Fund Management, L.P., which owns 6,946,756 shares, or approximately 4.3% of Legg Mason’s outstanding common stock.
“Over the past several months, my colleagues and I have been engaged in constructive dialogue with Mark Fetting and other members of the Legg Mason management team.” Peltz commented, “We share their view that Legg Mason’s recent strategic initiatives are improving the Company’s operating performance and I look forward to contributing as a Board member and working with the management team and the Board to help this great company achieve its full potential.”
The addition of Peltz to the Board reflects an agreement between Legg Mason and Trian Fund Management, L.P., certain funds managed by it and certain of its affiliates. In addition, pursuant to the agreement, Trian Partners has agreed to vote its shares in favor of Legg Mason’s director nominees as provided in the agreement and made certain other commitments.
New York (HedgeCo.net) – In a letter first made public by Reuters today to Galleon employees and clients, Raj Rajaratnam, who has been released on bail, said “I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business.”
His bail was set at $100 million. He said, regarding the charges, that, “they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm.”
“The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital.” Rajartnam concluded.
New York (HedgeCo.net) The Galleon scandal is raging full force, with Raj Rajaratnam’s global hedge funds under a microscope. Supervising the case is U.S. District Court Judge Jed S. Rakoff, who’s ruling on the Merrill Lynch/BofA case, earned him the nickname ‘Judge Dread’ on Wall Street, according to The Post.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA’s largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
New York (HedgeCo.net) – London-based government fixed-income specialist firm, Capula Investment Management LLP, has appointed BNY Mellon as provider of global hedge fund custody services for their flagship hedge fund, the Capula Global Relative Value Master Fund Limited.
“We selected BNY Mellon as a global custodian as in the current economic environment it is important – to both the firm and to its clients – to have a provider with the financial stability to ensure the safekeeping of our assets. Neil McCallum, chief operating officer at the $4 billion Capula Investment Management LLP, said.
“BNY Mellon is committed to helping our hedge fund clients reduce their counterparty risks. Our appointment gives Capula an additional custody option with a custodian of recognized quality.”David Aldrich, managing director and head of alternative investment services EMEA, at BNY Mellon said.
New York (HedgeCo.net) – RBC Capital Markets reported today that the RBC Hedge 250 Index(R) had a net return of 2.20% for the month of September 2009. This brings the year-to-date return of the Index to 17.44%. These returns are estimated and will be finalized by the middle of next month. The return for August 2009 has been finalized at 1.67%.
The RBC Hedge 250 Index is an investable benchmark of the performance of the hedge fund industry. Comprised of approximately 250 actual hedge funds, the RBC Hedge 250 Index is positioned as the industry’s most diversified and representative investable index. The Universe on which the Index is based currently consists of 5,230 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $915 billion.
Since its inception on July 1, 2005 through the end of August 2009, the RBC Hedge 250 Index has had an annualized net return of 3.38%. In comparison, over the same period, other investable indices have averaged -0.77%t while non-investable indices have averaged 4.95%, according to information reported by the sponsors of those indices.
New York (HedgeCo.net) – The London Metropolitan police are considering launching an investigation into the whereabouts of Nicholas Levene, who is being accused by investors of disappearing with their money.
The Guardian reports that at least £70 million ($114 million) is owed. Others say the hedge fund manager is not on the run, but in a hospital receiving care. His lawyers would neither confirm nor deny, the Guardian said.
The questions started when Levene failed to appear at crucial court hearings to defend himself, prompting the court to freeze assets and demand he surrender his passport. A spread betting firm also alleges that Levene has racked up gambling debts.
“Levene is known to be a generous family man with an extravagant lifestyle. One leading city broker described him as a man who ‘lived the dream’ and had a private jet on call,” the Guardian reported.
“Last week certain information was passed to the fraud squad.” the police said in a statement, “Detectives are now assessing the matter to determine what action if any is necessary. At this time no decision has yet been reached whether an inquiry should be conducted.”
New York (HedgeCo.net) – The jury selection has begun for the trial of two former Bear Stearns hedge fund managers, Matthew Tannin and Ralph Cioffi, over the alleged hedge fund securities and wire fraud.
Although the prosecution alleges that the hedge fund managers misled investors, they are not being charged with having contributed to the collapse of Bear Stearns. They could face up to 20 years in prison if convicted. Cioffi is charged with an additional count of insider trading for withdrawing $2m from one of the hedge funds.
Tannin’s personal Email, which he used as a diary, is being used to prove that he was worried about a possible “blow up” and was under some stress. The evidence also alleges that he had trouble sleeping and was taking some anti-anxiety medication.
The trial is expected to last six weeks. Tannin and Cioffi have denied the charges.
New York (HedgeCo.net) – Despite rich equity market multiples and uncertainty surrounding the upcoming 3rd quarter earnings reports, Hennessee Group said that hedge fund investors continued to pile into stocks due to an uptick in merger activity during September.
The Hennessee Long/Short Equity Index gained +3.13% in September (+18.75% YTD), while the S&P 500 index finished September up +3.6%, faring much better than the average loss of -1.2% the S&P has historically posted during the month of September dating back to 1929.
Hedge funds have also taken on additional directional risk in order to participate in the ongoing equity market rally and Hennessee believes they remain cautious and aware that the market could turn sharply to the downside.
“Little of the bail out money given to banks seems to have been passed on to businesses or consumers. It must have gone somewhere, and it is possible that is has gone to the proprietary desks of the banks, which are putting it to work in the markets,” Charles Gradante Co-Founder of Hennessee Group, said. “That could lead to a potential problem if the public and institutions do not join the rally, and the banks eventually have to sell equities into a vacuum.”
“The current debate among hedge fund managers is ‘Deflation versus Inflation’,” Gradante said, “The weak dollar and deficits are inflationary, but the 30 year treasury below 4% (80 bps over the 10 year) points to deflation expectations. Hennessee research is noticing a growing propensity of hedge funds to short 20 and 30 year treasuries as yields break 4%. The U.S. Treasury is currently funding its long term debt with 3 to 10 year Treasuries. The need to finance America ’s debt on the long end of the curve with attractive yields is increasingly obvious.”
New York (HedgeCo.net) – Ken Fisher, Founder and CEO of Fisher Investments will be honored along with Charles Schwab as recipients of Tiburon’s Inaugural CEO Summit Awards, recognizing their contributions to “Focusing on Customer Needs” and “Challenging Conventional Wisdom.”
“Never yet done” practices – rather than ‘best practices’ – hold the key to break-out performance in the asset management industry, Fisher said in remarks prepared for more than 120 leading industry executives at Tiburon Strategic Advisors’ CEO Summit XVII on October 7 at the Ritz Carlton Hotel in San Francisco.
“So-called ‘best practices’ aren’t,” Mr. Fisher said in his prepared remarks. “They are a fine way for a D-quality firm to become a B-quality firm. But in asset management, to become an A-quality firm you have to ban ‘best practices’ from your lexicon, think more in terms of innovation and challenging conventional wisdom by establishing practices that have never been done before.”
Fisher is also the author of three New York Times best-sellers, including his current best-seller “How to Smell a Rat: The Five Signs of Financial Fraud” (Wiley, August 2009). For the past 25 years, he has also written Forbes’ “Portfolio Strategy” column, making him the fourth longest-running columnist in the magazine’s history.
