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.
Globe and Mail – Hedge fund manager Eric Sprott heaps praise on his "defensive team" for helping him survive this bear market.
While some of his peers have cratered amid this year’s stock market crash, his short positions have kept him well ahead of his benchmark index.
For the first 11 months of this year, the returns of Sprott Bull/Bear RSP and Sprott Hedge LP I and II range from an 8.5-per-cent gain to a 4.5-per-cent loss compared with the S&P/TSX composite’s sharp 33-per-cent slide.
"The reason we started our first Canadian hedge fund in 2000 was because we foresaw this very, very difficult market," recalls Mr. Sprott, also chief executive officer of Toronto-based Sprott Inc.
Reuters – Even hedge-fund managers with portfolio gains are in trouble this year.
Dozens of managers who are outperforming the market and their troubled rivals with gains of as little as a few percent or as much as nearly 100 percent are facing a surge of withdrawals as investors try to exit during the worst bear market since the Great Depression.
Connective Capital, a Palo Alto, California-based hedge fund, treated investors in its short strategy to an eye-popping 85 percent gain this year as its benchmark Nasdaq Index slumped 42 percent. Still, clients asked manager Robert Romero to return roughly 20 percent of their capital.
Seeking Alpha – With the news getting worse and worse for the hedgies (e.g. Fortress, Thomas Lee, D. E. Shaw), it’s time for a rethink on hedge funds.
For hedge fund investors: You probably went into them believing that they were uncorrelated absolute return vehicles, or pure alpha. Isn’t it funny how correlations all go to 1 in times of crisis? Maybe it’s time to return to your roots and understand the role of alternative investments in your portfolio.
For hedge fund managers: The really successful ones began fifteen or twenty years ago as small, nimble, guerilla investors. Somewhere along the way the guerillas came down from the hills, got big and became the government. Maybe it’s time to return to the hills again.
Investors thought hedge funds were the panacea when the hedgies showed positive returns in the post-Tech bubble crash. Ultimi Barbarorum writes:
Last time we had a bear market, hedge fund fortunes were made. Andor Capital, William von Meuffling, Crispin Odey, Chris Hohn, even Jim Cramer when he was trading, all made out like bandits producing 20-50% returns on the short side in 2000-2002, many after having doubled their money by being long in 1999.
USA Today – Technically, a bear market is when stocks fall 20% or more from their highs. But there’s a saying that a bear’s true signature is making a fool out of everyone. Based on that, we’re all laughingstocks, because there has been virtually no way to avoid this bear market’s claws.
Following a 445-point slide to 7552 Thursday, the Dow Jones industrial average is down more than 6,600 points from its high. The broad stock market is at it lowest level in 11½ years, with the Standard & Poor’s 500 index off 52% from its high in October 2007 and on pace for its worst year ever, S&P says. Only 13 of its 500 stocks are not down for the year, and more than 100 trade for less than $10 a share.
Tacoma News Tribune – Changes in winning and losing investments have come so swiftly of late that you might not have realized your favorite approach has backfired lately.
International funds – the hot funds of the last few years – have turned more disappointing than U.S. stock funds. Gold has lost its luster or, more precisely, more than $200 since reaching more than $1,000 an ounce a few months ago. Oil is in a bear market – a decline of 20 percent or more. Small-cap funds, which typically would be shunned during rough economic times, have been on a roll.
The last few weeks have shown why financial planners try to discourage clients from loading up on a few winners while discarding everything else. They know that changes in cycles can come quickly, and without warning, turning winners into losers and vice versa.
Many analysts are confessing their surprise at the twists of the last few weeks. It now appears that the globe is not immune from U.S. economic problems, although that was a favorite theory until a couple of months ago.
Investors Chronicle- In Homer’s Iliad, Troy was razed to the ground by Greek warriors, but Troy Asset Management aims to put up a much better defence for its investors. The boutique fund manager takes its name not from the ancient city but from Lord Weinstock’s British thoroughbred racehorse, winner of the 1979 Epsom Derby.
As chief executive of Troy Asset Management, Sebastian Lyon’s main concern is not to lose investors’ money. He used to work for GEC as one of the team running its pension fund but in 2000 was asked by GEC managing director Lord Weinstock to set up an independent management company to look after £36m of the family fortune, with a brief to look after it conservatively.
Troy’s three funds are open to investors who have £10,000 (or £7,200 in an individual savings account) to invest, and between them they have assets of £258m.
"It’s not an easy time to be a fund manager," admits Mr Lyon, who manages the conservative Trojan Fund and co-manages the more aggressive Trojan Capital Fund. "We will probably continue to be in a bear market for the next year or so."
Reuters UK- European hedge fund launches in the first half of 2008 fell to their lowest level since the last bear market, a survey showed on Monday, as the credit crisis hit investors’ confidence.
The survey by EuroHedge, part of news and data group HedgeFund Intelligence, showed 106 funds were launched in the first half, which is 45 percent down on a year ago and the lowest level since the first half of 2002, when markets were still in a three-year bear market and 84 funds were launched.
However, just over 50 funds closed down in the first half of 2008, indicating the number of funds continues to grow.
Bloomberg – Hedge funds turned in their worst first-half performance in almost two decades as the collapse of subprime-mortgage bonds and rising commodity prices pushed stocks to the brink of a bear market.
Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9 trillion industry has posted one losing year, in 2002, when funds fell 1.45 percent amid the 23 percent decline by the Standard & Poor’s 500 Index.
Managers attracted a net $16.5 billion during the first three months of the year, down from $30.4 billion in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15 billion to hedge funds.
“We don’t see investors pulling the plug across the board and putting their capital into cash,” Munoz said.
Independent- Hedge funds turned in their worst first-half performance in almost two decades because of the credit crunch and the onset of a bear market in stocks.
Hedge funds declined by an average 0.7pc in June, bringing the year-to-date loss to 0.75pc, data compiled by Hedge Fund Research show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9trillion (€1.2tn) industry has posted one losing year, in 2002, when funds fell 1.45pc.
"Equity markets have made for an incredibly difficult environment,” said Mark Dampier, an analyst at Hargreaves Lansdown Stockbrokers in Bristol, who tracks the money-management industry.
Managers attracted a net $16.5bn during the first three months of the year, down from $30.4bn in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15bn to hedge funds.
CNNMoney.com- Hedge funds hate to see their names in the headlines, but lately, they’ve been the ones breaking the news about companies they invest in.
Daniel Loeb’s Third Point LLC disclosed in a Monday regulatory filing that Maguire Properties Inc. (MPG) had received a buyout offer for about $20 a share, a level the stock hasn’t traded at since March. Third Point’s disclosure sent shares of Maguire, a real-estate investment trust, up more than 15% early in the day to above $14, before it fell back with the rest of the market. The bid turned out to be for $20.25 a share by a private company, Pacific Office Properties, The Wall Street Journal reported later Monday.
The filing by Third Point, which owns 8.8% of Maguire shares, wasn’t the first of its kind. In late May, 24% Calpine Corp. (CPN) holder Harbinger Capital Partners disclosed in an open letter that NRG Energy Group Inc. (NRG) had made an $11 billion offer to Calpine, an offer that Calpine later rejected. At a time when activist investors are trudging through a bear market along with the rest of the investment community, hedge-fund activists are getting more involved in trying to fetch buyout offers, and in many cases they appear to be communicating with the would-be buyers.
Reuters- Billionaire hedge fund manager George Soros said on Wednesday the current rebound in stock markets is only a bear market rally because monetary authorities are unlikely to be able to handle the credit crisis.
Soros told a seminar at the London School of Economics, "The prevailing market opinion is that this crisis is like previous ones. … Markets have been rallying on that. But I think it’s actually just a bear market rally based on a false conception the authorities can handle all these crises.
"This time the ability of the authorities to handle the crisis is constrained — they’ll not be able to avoid a recession," he said.
