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.
Bloomberg – James Pallotta and Christopher Pia, hedge-fund managers who recently struck out on their own, are discovering just how much the global financial crisis is reducing investors’ appetite for risk.
Pallotta, who split from Tudor Investment Corp. last month, and Pia, who spent 13 years managing money for Moore Capital Management LLC, probably will raise about $500 million apiece this year, according to brokers who provide loans and administrative services to hedge funds. Michael Ryan, who left Credit Suisse Group AG to open Jai Capital Management, will top out at around the same amount, according to the brokers, who asked not to be identified because the funds are private.
Investors, who put more than $1 billion each into seven new hedge funds last year, are scaling back after the industry posted its worst year on record in 2008. Whether it’s a big-name manager like Boston-based Pallotta or a newcomer, that threshold will be harder to cross this year than in the boom of 2002 through 2007.
Forbes – Major Wall Street firms placed large bets against Morgan Stanley using credit-default swaps, two days after Lehman Brothers Holdings Inc sought bankruptcy protection, the Wall Street Journal said, citing trading records.
The firms included Merrill Lynch & Co, Citigroup Inc, Deutsche Bank AG and UBS AG, according to the paper.
The paper said that a close examination of the trading revealed that the swaps played a critical role in magnifying bearish sentiment about Morgan Stanley.
Bloomberg – Wolver Hill Japan Multi-Strategy Fund, run by Deutsche Bank AG’s former prime brokerage sales chief in Tokyo, resisted the worst month for the nation’s stocks in almost 15 years to be little changed in September.
The $11 million fund of hedge funds, which invests in 14 hedge funds with a combined $5.8 billion of assets, slipped 1.4 percent in September based on preliminary figures, said Ed Rogers, chief executive officer of Wolver Hill’s local advisory firm, Rogers Investment Advisors Y.K. The Topix index of 1,714 companies tumbled 13 percent.
Foreseeing a decline in equity prices, Wolver Hill made a shift during the past year into hedge funds that use trading- focused strategies, and away from so-called long-short funds that depend on rising and falling stock prices, Rogers said. Trading- focused funds, including so-called event-driven strategies, trade securities of companies going through events such as mergers, acquisitions and management changes.
Los Angeles Times – Big Wall Street investment banks have designed and marketed schemes enabling non-U.S. taxpayers, including offshore hedge funds, to evade millions of dollars in taxes each year on U.S. stock dividends, Senate investigators have found.
Some banks have been crafting for more than 10 years transactions designed to enable their foreign clients to dodge U.S. taxes on dividends, while the Internal Revenue Service failed to act to prevent the abuse, two senators say.
A yearlong investigation by a Senate Homeland Security and Governmental Affairs subcommittee, whose results are to be made public Thursday, found that the evasion of dividend taxes adds up to billions of dollars in revenue lost to the U.S. Treasury over the past decade.
IRS Commissioner Douglas Shulman is scheduled to testify on the issue at a hearing Thursday by the investigative subcommittee. Executives of Lehman Brothers Holdings Inc., Morgan Stanley and Deutsche Bank, and from several hedge funds also are expected to appear as witnesses.
New York (HedgeCo.Net) – The private equity firm Carlyle Group will liquidate its lone hedge fund, after stating that it failed to achieve “critical mass.”
The fund, Carlyle-Blue Wave Partners Management LP, was a multi-strat fund launched by Rick Goldsmith and Ralph Reynolds. The two managers previously served as co-heads of global equity derivatives at Deutsche Bank.
"This is an orderly liquidation to ensure fair and equitable treatment of all investors," said Carlyle spokesman Chris Ullman.
The fund was among many to suffer losses fueled by the credit crisis that starting brewing last summer. After posting losses in 2007, the fund looked to be turning around and even showed gains of 2 percent in 2008. However, Carlyle said they could not keep up with the cost associated with staff and infrastructure and decided to go forth with the liquidation.
According to a statement published on the company’s website, the fund was "launched in a challenging market and [has not] been able to achieve the critical mass of assets under management necessary to support a multi-strategy fund infrastructure."
Assets under management are now estimated at $600 million, $300 million less than its peak.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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The Business Sheet- After spending nine months trying to close a $450-million film financing deal to offset the cost of 30 upcoming movies, Paramount has been forced to give up the chase.
The studio was working with Deutsche Bank to try to arrange what would be its third slate film-financing arrangement, but after the bank was unable to syndicate the senior debt part of the funding, the deal has come to a screeching halt ,and Deutsche Bank has decided to shutter its pioneering film-financing operation, according to the Financial Times.
Over the past four years more than $13 billion has poured into Hollywood from once-rich hedge funds, private-equity firms and investment banks in the form of co-financing deals with practically every major Hollywood studio. In fact, both Deutsche Bank and Paramount were early participants in such deals, with Paramount completing the first of these slate deals with Merrill Lynch in 2004 and Deutsche Bank following soon thereafter with a $600 million deal between Sony Pictures Entertainment, Universal and Ryan Kavanaugh’s Relativity Media.
Bloomberg- John Devaney is liquidating hedge funds at his United Capital Markets Holdings Inc. after failing to meet a margin call from Deutsche Bank AG.
Deutsche Bank seized and auctioned off collateral after the Horizon group of funds failed to meet the bank’s demands, according to a letter to clients obtained by Bloomberg News yesterday. The funds were frozen a year ago because of wrong-way bets on mortgage securities.
“The survival of the funds and any potential recovery for their investors has been dependent on these lenders continuing their relationships with the funds,” Devaney wrote in the letter dated July 9. United Capital is based in Key Biscayne, Florida.
Financial Standard- DWS Investments could well be one of the pioneers of a new era in hedge funds when it launched a new product that offers daily liquidity and pricing to retail investors.
DWS Investments, Deutsche Bank’s global retail asset management arm, last week launched the DWS Strategic Value Fund (Enhanced Liquidity) – a product designed to give exposure to an actively managed, multi-strategy, fund-of-hedge funds.
According to Jody Fitzgerald, investment specialist at DWS Investments, the underlying DWS Strategic Value Fund will face no changes to its operations or strategy as a direct result of the heightened liquidity.
“The liquidity is being synthetically organised outside the fund. The Strategic Value Fund is the underlying product, and sitting outside the fund are investment certificates issued by Deutsche Bank. These certificates are the ones that will provide the liquidity," said Fitzgerald.
