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Seeking Alpha – "In my view they didn’t do what they set out to do … which was to hedge. I saw a few hedge funds that did much worse than my long-only fund, which is rather ironic," [Veritas Asset Management manager Ezra Sun] said.
The losses have disappointed many investors who had expected positive returns in all market conditions, and hefty withdrawals of somewhere between a fifth and a third of the industry are widely expected at the end of the year. There was the risk people could perceive hedge funds as a "rip-off" because they had been charging high rates on the implicit promise they could deliver absolute returns, but did not deliver when global markets collapsed.
West Palm Beach (HedgeCo.net) – The Energy Hedge Fund Center (EHFC) announced that it has added a ‘green’ hedge fund directory to its product inventory. EHFC’s Directory of Energy Hedge Funds was launched four years ago, but with the interest in ‘green’ hedge funds, the company has created a new green directory for investors. The directory includes carbon, renewable, cleantech, forestry, water and weather derivative funds.
"We decided that now was the time for a standalone green directory and will be offering it for prepublication in January 2009," said Peter Fusaro, co-principal of the EHFC. "The market is now large enough and growing to warrant this service with over 100 green hedge funds."
"EHFC has received innumerable requests for such a product this last 12-months or so as investor appetite for environmental and alternative energy has increased," reports Dr. Gary M. Vasey, Co-Principal, EHFC. "As a result we have complied with that demand and have now added a new directory that focuses on just the ‘green’ hedge funds."
Alex Akesson
Editor for 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!
West Palm Beach (HedgeCo.net) – A survey conducted by Job Search Digest, publishers of Hedge Fund Jobs Digest, revealed a shift in the hedge fund industry. Given the current state of the market, the results tell an interesting story and show that key players in hedge fund careers knew trouble was on the horizon earlier this year.
Some findings of interest are that despite no significant increase in compensation, there was a substantial increase in satisfaction with hedge fund compensation. This indicates that well before Wall Street’s meltdown, hedge fund employees knew the market had shifted. This year’s report reveals that 42% of hedge fund employees are happy with their current level of compensation – up from a mere 25% last year.
The survey also found that pay is not correlating with fund performance. When the fund performs well, employees are paid well – most of the time. The hedge funds reporting this year performed well with the majority reporting more than 10% return (and many reporting over 25% return). firms reporting flat performance (that is, zero return) had the highest average pay.
Although the hedge fund industry is often referred to as a meritocracy, many respondents to the survey indicated their bonus is disconnected from their individual performance and, instead, based on overall firm performance.
Job Searcg Digest also found that people are attracted to hedge fund careers because of a huge potential upside. Last year, dissatisfaction with compensation was primarily driven by the desire for greater upside. Now, with all the nervousness in the market, many hedge fund employees feel lucky simply to still be working in the industry.
Alex Akesson
Editor for 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!
West Palm Beach (HedgeCo.net) – Leaders across the hedge fund industry gathered together and raised more than $1.7 million at the 100 Women in Hedge Funds 2008 New York Charity Gala at Cipriani in New York City last Wednesday night.
"We’re pleased that 100 Women in Hedge Funds has been able to support Dr. Freeman and the Center’s extraordinary programs,"Mimi Drake, a Director of the Board of 100 Women in Hedge Funds said, "Through the hard work, dedication and perseverance of the Gala committee, led by Gala Chair, Kristin Mott, we’re now able to help support these critical health initiatives in the New York, Chicago and San Francisco regions, three regions where our own 100 Women in Hedge Funds’ membership is well represented."
All proceeds from the evening will go to support the Ralph Lauren Center to expand its existing Screening and Patient Navigation Programs in the areas of breast, cervical and colon cancer and leverage its expertise to establish two satellite Patient Navigation Programs in medically underserved communities in Chicago, Illinois, and in San Francisco/Oakland, California.
The Patient Navigation Program was pioneered over seventeen years ago in Harlem by the Center’s founder and president, Harold P. Freeman, MD. A cancer surgeon in Harlem for more than 40 years, Dr. Freeman is a nationally recognized authority on the interrelationship of race, poverty and cancer. He served as the Chair of the US President’s Cancer Panel for 11 years under Presidents Bush and Clinton, and is a past President of the American Cancer Society.
Dr. Freeman said, "We know that poor and uninsured Americans are much more likely to die of cancer. Responding to this challenge and despite a severe economic downturn, 100 Women in Hedge Funds, in one festive evening at Cipriani’s, raised more than $1.7 million to support the life saving Patient Navigation programs of Ralph Lauren Center for Cancer Care and Prevention. The funds will be used to promote timely access to diagnosis and treatment of cancer for underserved populations in Harlem, NY, Chicago and San Francisco. Many lives will be saved."
Sonia Gardner, Effecting Change Award Honoree, said "I am honored and humbled to be in the same company as so many past honorees and I want to thank the Board of Directors of 100 Women in Hedge Funds for this wonderful honor. It’s a testament to everyone who supported the event that, despite these difficult times, they all made the effort to support such a meaningful cause as the Ralph Lauren Center for Cancer Care and Prevention. In a business like ours, which is literally defined by volatility and risk, I’ve found it to be essential, irrespective of what is going on around you, to keep things in perspective and to always remain calm and focused. While this obviously is being put to the test in these unprecedented times, it’s an important principle whose power cannot be overstated."
Generous contributions were made by the 2008 Chairs, Avenue Capital Group and Ricks & Ray Partners LLC, and 2008 Vice Chairs, Blue Ridge Foundation, New York, Eton Park, Moore Capital Management and an anonymous benefactor — as well as other corporations and individuals who generously supported the event.
In addition to last week’s New York Gala, 100 Women in Hedge Funds also hosted a successful Charity Gala in London and fundraiser in Geneva in September this year. These charity events raised over £630,000 ($1.2 million) for Wellbeing of Women, a UK charity focused on women’s health issues. Wellbeing of Women was one of two charities selected by the 2008 Lord Mayor’s appeal, and through the generosity of the industry and volunteer efforts of its members, 100 Women in Hedge Funds’ contribution represented the largest single donation to the Appeal this year.
West Palm Beach (HedgeCo.net) – Coming in the December 1, 2008, issue of The New Yorker, “Anatomy of the Meltdown”, John Cassidy provides a comprehensive look at the progression of the economic crisis and speaks with Ben Bernanke, the chairman of the Federal Reserve, who tells Cassidy, “I and others were mistaken early on in saying that the subprime crisis would be contained.
Bernanke, who began his tenure as Fed chairman in 2006 by upholding the hands-off free-market principles of his predecessor, Alan Greenspan, “was more concerned about inflation and unemployment, the Fed’s traditional areas of focus, than he was about the growth of mortgage securities,” Cassidy writes.
While some economists warned that a nationwide housing slump could trigger a recession, Bernanke and his colleagues thought this was unlikely. In August 2007, after trading in the mortgage-securities market had dried up, Cassidy writes, Bernanke finally “realized that the subprime crisis posed a grave threat to some of the country’s biggest financial institutions and that Greenspan-era policies were insufficient to contain it.”
He and the Fed came up with a two-part plan (later referred to as the Bernanke Doctrine): they lowered the federal funds rate and instituted novel programs to lend money directly to institutions. Dean Baker, of the Center for Economic and Policy Research, tells Cassidy, “He was behind the curve at every stage of the story. He didn’t see the housing bubble until after it burst. Until as late as this summer, he downplayed all the risks involved.”
In early 2008, the Fed was faced with the collapse of Bear Stearns, which Bernanke and Treasury Secretary Henry Paulson elected to save by helping facilitate the sale of the company to J. P. Morgan at a cut rate and absorbing its twenty-nine-billion-dollar portfolio of subprime securities. “It quickly became clear that an important precedent had been set: the Bernanke doctrine now included preventing the failure of major financial institutions,” Cassidy writes. “I think we did the right thing to try to preserve financial stability,” Bernanke tells Cassidy. “That’s our job. Yes, it’s moral-hazard-inducing, but the right way to address this question is not to let institutions fail and have a financial meltdown.”
The Bear Stearns rescue brought widespread criticism from the media, conservative economists, and other Fed officials. Bernanke was also criticized when the Fed moved to prop up Fannie Mae and Freddie Mac, as the move was seen as a poor use of taxpayer money. Cassidy writes, “Bernanke couldn’t say so publicly, but he agreed with some of the critics. For years, the Fed had warned that Fannie and Freddie were squeezing out competitors and engaging in risky mortgage-lending practices.” Yet, Cassidy notes, “despite their financial problems, Fannie and Freddie still had many powerful allies in Congress, and Bernanke was determined that the plan be approved quickly, in order to restore confidence in the markets.”
In late August, 2008, “Bernanke still believed that his finger-in-the-dike strategy was working,” Cassidy writes. “A lot can still go wrong, but at least I can see a path that will bring us out of this entire episode relatively intact,” he told a visitor to his office in August. Then, in September, Bernanke and Paulson were faced with the collapse of Lehman Brothers. “Remarkably, once the potential bidders dropped out, Bernanke and Paulson never seriously considered mounting a government rescue of Lehman,” Cassidy writes. “Bernanke and other Fed officials say that they lacked the legal authority to save the bank.” “It’s really hard for me to accept that they couldn’t have come up with something,” Baker tells Cassidy. “They’ve been doing things of dubious legal authority all year. Who would have sued them?” “At the time, a popular interpretation of Lehman Brothers’ demise was that Bernanke and Paulson had finally drawn a line in the sand,” Cassidy writes, but, less than forty-eight hours later, the Fed agreed to extend up to eighty-five billion dollars to the failing insurance giant A.I.G.
“We felt we could say that this was a well-secured loan and that we were not putting fiscal resources at risk,” a senior Fed official tells Cassidy, who notes that A.I.G. was also a much bigger and more complex firm than Lehman Brothers was. Yet the bailout of A.I.G. could not calm the markets. “The subprime virus was infecting parts of the financial system that had appeared immune to it—including the most risk-averse institutions,” Cassidy writes.
On September 17th, Bernanke asked Paulson to accompany him to Capitol Hill and make the case for a congressional bailout of the entire banking industry. “We can’t keep doing this,” Bernanke told Paulson. “Both because we at the Fed don’t have the necessary resources and for reasons of democratic legitimacy, it’s important that the Congress come in and take control of the situation.” “It was a very important step,” Bernanke tells Cassidy. “It greatly diminished the threat of a global financial meltdown. But as Hank Paulson said publicly, ‘You don’t get much credit for averting a disaster.’ ” Yet there is indication that the disaster may not have been averted. “Last week, the stock market plunged to its lowest level in eleven years, auto executives flew into Washington on their corporate jets to demand a bailout, and Wall Street analysts warned that the political vacuum between Administrations could create more turmoil,” Cassidy writes.
“Paulson’s and Bernanke’s efforts to prop up the financial system have so far had little effect on the housing slump, which is the source of the trouble. Until that problem is addressed, the financial sector will remain under great stress.”
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West Palm Beach (HedgeCo.net) – According to data released by Hedge Fund Research (HFR), the global financial and economic crises accelerated in October, contributing to continued losses in the hedge fund industry, with the HFRI Fund Weighted Composite Index falling nearly 6% for the month.
“Performance of the hedge fund industry has declined over 17% since October 2007, making the current performance drawdown the largest in history,” said Kenneth J. Heinz, President of Hedge Fund Research. “The industry has now registered five consecutive months of losses, another inauspicious first. Consolidation is likely to continue into 2009 as investors across all asset classes indiscriminately liquidate assets to move portfolios into cash holdings.”
Investors withdrew over $40 billion from hedge funds in the month of October which, in addition to $115 billion in performance-based asset losses, reduced the industry capital base by $155 billion. Assets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of Q4 2006.
As of the end of Q3 2008, HFR estimates the entire hedge fund industry to contain more than 10,000 funds, which includes more than 7,400 single-manager funds. October losses follow a challenging third quarter during which global hedge fund capital fell by $210 billion.
The largest capital reductions during the month came from Funds of Hedge Funds, from which investors withdrew over $22 billion. Funds of Hedge Funds have underperformed the overall industry so far this year, with the HFRI Fund of Funds Index posting an 18.50% decline, compared to a loss of 16% for the HFRI Fund Weighted Composite Index.
Performance losses were most significant in funds focused on Emerging Markets, Relative Value Arbitrage and Energy/Basic Materials equities.
Short Selling has posted a strong gain of over 22% for the year. Macro Systematic strategies, which employ quantitative trend-following programs, gained over 6.5% in October and nearly 15% year to date.
Fifty-two percent of October capital outflows were from firms with greater than $5 billion under management; these largest funds represent only 5.5% of the number of funds in the industry but control over 58% of all hedge fund capital.
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West Palm Beach (HedgeCo.net) – Hedge fund Manager OakRun Capital LLC, has announced the launch of a receivables refactoring fund, the ‘Short Term Fund’.
The ‘Short Term Fund’, a Cayman Islands exempted fund, launched on October 1st and came in at 9.48% annualized in its first month. The fund’s objective is to generate above average current income with a lower overall credit risk profile and maintain a stable NAV.
With JP Morgan & Wachovia Bank as Custodian, the fund has a 1% management fee, 10% performance fee, quarterly redemptions, an initial lock-up period of 6 months and a minimum investment of $1,000,000. Shares are offered for subscription to eligible non-U.S. persons.
Managed by a board of directors responsible for the overall supervision and control, the fund has engaged OakRun Capital to perform management and administrative functions.
"We do not believe that simply managing for relative performance is satisfactory to our clients or ourselves." says Scott Rhodenizer, Founder, CEO, and Chief Investment Officer, "While we work to outperform the markets, we strive to do so without excessive risk.”
The fund will seek to achieve its objective through a process known as factoring. In markets for debt instruments, higher relative yields generally indicate greater levels of credit risk than lower yielding instruments. However, OakRun believes that the trade receivables purchased by the fund present an opportunity to achieve higher yields with moderate risk.
Rhodenizer is former Managing Director at Deutsche Bank Securities with over 16 years of experience within the investment industry. He advised on over $2.5 billion in institutional assets at Deutsche Bank Securities in Miami, Florida and has experience in traditional and structured investments, such as fixed income securities, derivatives, global equities, and commodities.
At least 50% of the portfolio is insured by Euler American Credit Indemnity, an Allianz company and insurer of domestic and foreign accounts receivable covering US sales in excess of $150 billion annually. Euler is North America’s leading credit insurer, rated AA- by Standard & Poor’s. It is a subsidiary of Paris-based Euler incorporated in 1891 with current net assets in excess of $3.0 billion.
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West Palm Beach (HedgeCo.net) – Pharos Financial Advisors Limited, a specialist emerging markets fund manager, announced that it has been granted a license by the Dubai Financial Services Authority (DFSA) to operate as an authorised firm within the Dubai International Financial Centre (DIFC).
Founded in 1997 by US national, Peter M. Halloran, with seed capital from Soros Fund Management and CS First Boston, Pharos Financial Group currently runs three funds – the Pharos Russia Fund, the Pharos Small Cap Fund, and the Pharos Gas Investment Fund.
"We are delighted to receive a license from DFSA, particularly as the first ever fund manager with a Russian/CIS focus to join DIFC," Halloran said, "Pharos intends to fill the niche as the market leader in emerging markets fund management. Already we have seen tremendous appetite from GCC investors for our Russian-focused investment opportunities."
Prior to founding Pharos Financial Group, Halloran was the principal contributor toward building the #1 ranked CS First Boston equity and fixed income brokerage businesses in Russia and the CIS. He has been a leader in the development of the Russian capital markets since their inception in 1994, bringing more than $8 billion to the markets through debt, equity and private placements including Russia’s first local IPO and more than $2 billion of privatisation initiatives.
Welcoming Pharos to DIFC, Nasser Al Shaali, CEO, commented, "We welcome Pharos Financial Group to the Dubai International Financial Centre. DIFC will provide Pharos with a supportive environment to advance their business growth in the Middle East. The world-class regulatory framework in DIFC will give them additional credibility as a specialist emerging market fund manager."
The Pharos investment team brings more than 90 years of combined expertise in emerging markets to its new operations in DIFC. Moreover, Pharos has sat on 40 seats of Russian company boards. Two Pharos Funds were ranked among the top 15 hedge funds globally by Bloomberg and Eurohedge. Currently, the three Pharos funds are ranked 1-2-3 among best performers in Russia this year.
The Dubai International Financial Centre (DIFC) is an onshore hub for global finance. It bridges the time gap between the financial centres of Hong Kong and London and services a region with the largest untapped emerging market for financial services. In just three years, over 700 firms have registered at the DIFC.
Pharos Financial Group ranks as the world’s leading fund manager having a focus on Russia and the CIS with a successful track record of over 11 years. With offices in Moscow and now Dubai, Pharos Financial Group has produced superior absolute returns over the years while providing institutions and private investors an opportunity to gain exposure in the emerging markets of Russia and the CIS.
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Pittsburgh Tribune Review – On Oct. 5, philanthropist and hedge fund billionaire Stanley Druckenmiller sat in his New York den, watching the Steelers play in Jacksonville.
Two weeks before, he yanked an offer worth more than $800 million to buy the fabled Pittsburgh franchise, and now the quarterback of his beloved Black and Gold was scrambling to escape the clutches of the Jaguars, en route to a narrow 26-21 victory in Florida.
But during every commercial, Druckenmiller scrambled to a nearby room, where computer screens tracked the daytime tumult of Asia’s financial markets — Tokyo’s Nikkei 225 average crashing more than 11 percent, Hong Kong’s Hang Seng index tanking, the Bombay Sensex plummeting.
West Palm Beach (HedgeCo.net) – Receivables Exchange, the world’s first online marketplace for real-time trading of accounts receivable, today announced that it has launched its proprietary patent-pending trading platform to conduct live trading of accounts receivable.
“The Receivables Exchange is a phenomenal idea that has hit the asset based finance industry by storm,” said Michael Scanlon, Managing Director of HedgeCo.net and Member of the Board for The Hedge Fund Association. “Through its centralized, transparent marketplace, it is transforming an industry that has long been based on one-to-one relationships, effectively making the sale of commercial receivables a completely transparent and globally competitive marketplace.”
At The Receivables Exchange, U.S. businesses (Sellers) are able to increase their cash flow and free up their working capital by having their outstanding receivables bid on in real-time by a global network of institutional investors (Buyers).
“The Receivables Exchange was founded on the fundamental belief that America’s small and mid-sized businesses should have better access to working capital,” said Justin Brownhill, co-founder and chief executive officer of The Receivables Exchange. “In today’s credit crisis, we’re hearing from CEOs and CFOs across the country that the need has never been greater for them to identify alternative funding sources to reinvest into their businesses in order to maintain their success.”
Companies of all sizes – from under $10 million to over $150 million – have been signing up to use their receivables to accelerate cash flow. Members span a diverse range of dozens of industries, including manufacturing, technology, transportation, distribution and staffing – all realizing the strategic advantage of monetizing their accounts receivable, particularly in today’s troubling credit crunch.
Commercial banks, hedge funds and asset-based lenders can take advantage of the centralized, competitive marketplace to realize a stable, high growth investment opportunity.
“The Receivables Exchange allows us to extend our asset-based finance investment strategies to include short-term receivables,” said Sam Adams, managing director of Cedar Lane, a New York based asset based hedge fund. “The Exchange offers a unique opportunity to obtain returns better than money-market but with shorter tenures than the traditional entertainment and media loan positions in our funds’ portfolios. Through The Receivables Exchange platform we can invest funds on a short-term basis to a qualified pool of Sellers at a more attractive rate of return than cash alternatives without diverging from our investment strategy.”
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West Palm Beach (HedgeCo.net) – Pure Capital Limited, a quantitatively-driven hedge fund specializing in “targeted non-correlation” saw strong performance from their “Pure Bespoke” customized portfolio solutions in October – with client account performance ranging from +4% to +10% for the month.
Pure Capital’s year-to-date average performance across all products was +26% at month-end October 2008. Medium term correlation coefficients ranged from -0.15 to -0.80.
"We have a range of quantitative techniques through which we both deconstruct and analyze portfolio performance." Anthony Limbrick, Pure Capital’s Chief Investment Officer said, "Once portfolio performance drivers have been specified, customized portfolio solutions are built using a series of proprietary building blocks, each of which is designed to address specific types of pay-offs".
In September the Paris-based EDHEC Risk and Asset Management Research Centre published a report on overlay hedging in fund of funds. The report, authored by David E. Kuenzi, Remy Chaudhuri and Zhihui Dong of Glenwood Capital investments concluded that “a hedging capability removes a significant constraint from FoFs” and “should have the net result of improving alpha, allowing for more unique and idiosyncratic portfolios, and for more creative structured products”.
Limbrick highlighted the benefits to a European fund of fund of implementing a Pure Bespoke solution – “if one were to use the Eurekahedge European fund of funds index as a fund of fund proxy, our Pure European BetaMatch program could have reduced fund of fund losses from almost 19% year-to-date to less than 1%. Not only would performance have been improved, but there would have also been more cash available for redemption needs. We also give our clients the choice of upside beta exposure if they require it”.
In response to a question regarding the type of client exposures hedged by the Pure Capital, Limbrick said the Pure Bespoke portfolio solutions typically address “pervasive equity beta exposures or potential gap risk issues but we do look forward to widening the approach to address a range of more exotic or dynamic exposures”.
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New York (HedgeCo.Net) – South Florida-based hedge fund Palm Beach Finance Partners LP says it lost more than $1 billion to the company run by famed fraudster Tom Petters.
Petters headed Minnesota-based Palm Beach Finance Holdings Inc. before being charged in September with money laudering, obstruction of justice and mail and wire fraud that were used to fund his extravagant south florida lifestyle.
Petters allegedly masterminded a scheme that bilked over $3 billion out of trusting investors by setting up fake companies in which he supposedly was invested in. Petters has been slammed with lawsuits in recent months, forcing a judge to freeze any further lawsuits until things can be sorted out.
According to the Palm Beach Post, five investors in Palm Beach Finance Partners have appointed New York law firm Sadis & Goldberg to probe deeper into whether the hedge fund properly managed their funds and whether or not the highly recommended due diligence was performed.
Petters, who currently resides in a Minnesota jail far from his $9 million oceanfront mansion, insists he is innocent. He currently has over 30 civil suits pending against him.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
