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.
The Australian – Hedge funds who invested in Channel Nine’s owner PBL Media are unhappy about a rescue package to refinance the group’s $4.3 billion in debt, The Asian Wall Street Journal has reported.
Private equity group CVC Asia Pacific, the owner of 75 per cent of PBL Media, is "scrambling" to prevent PBL Media from defaulting on its $4.3 billion in debt, the paper said. If the group did default, PBL Media (the owner of Channel Nine and Australia’s largest magazine group ACP) could be placed in the hands of its bankers.
The Australian last week revealed CVC was trying to negotiate a rescue package, which included raising an extra $325 million from its banks, of which about $250 million would go towards repaying PBL’s debt.
PBL Media’s debt is held by nearly 40 creditors, including global banks and hedge funds.
Reuters – Blackstone Group LP has cut the size of its planned Asia-focused hedge fund because the global financial crisis has led to redemptions, the Wall Street Journal said citing people familiar with the situation.
Blackstone, which manages private equity, real estate and hedge funds, would cut the fund size to about $200 million from a range of $500 million to $1 billion, the paper said.
New York-based Blackstone, about one-10th owned by China’s sovereign wealth fund, has scaled back its plans for the fund at a time when hedge funds around the world are facing redemption pressure, with some forced to shut down, the Journal said.
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.
Wall Street Journal – In 2006, Lawrence Summers resigned as president of Harvard University and took a position as a part-time managing director with D.E. Shaw Group, a New York hedge fund with a reputation as one of the most secretive trading outfits in the world.
D.E. Shaw is known for using sophisticated computer-based quantitative strategies to make money on fleeting movements in the stock and bond markets. The fund has been a top performer, returning 15% to 20% a year over the long term, and in two decades has grown into a global powerhouse. But like many funds, it has taken hits in the credit crisis.
New York (HedgeCo.Net) – Private-equity firm CVC Asia Pacific, who owns 75 percent of PBL Media, is trying to prevent the company from defaulting on its $4.3 billion in debt, according to the Asian Wall Street Journal.
PBL Media, the owner of massive Australian magazine group ACP and Australia’s Channel Nine, could be placed under the control of its bankers if they default on the debt; something CVC is frantically trying to stop.
According to an article in The Australian, PBL’s debt is distributed among almost 40 creditors, including many hedge funds and global banks. CVC is trying to formulate a rescue package that would include raising $325 million from its banks, $250 million of which would go directly to paying PBL Media’s debt.
The Asian Wall Street Journal also reported that several of the large banks might also be on board to stop the default "which could result in their having to take a charge against earnings for the bad loans.” These banks include UBS, Credit Suisse, Goldman Sachs, Calyon, ABN AMRO and several other Australian banks.
However, some of the hedge funds who are invested in PBL aren’t too thrilled about CVC’s rescue plan, which entails creditors granting PBL a “covenant holiday” of 18 months. The Journal stated that “because hedge funds are required to mark their investments to market every day, the funds have little to gain from the CVC plan.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Wall Street Journal – Down in the morning, up in the afternoon. Or is it the other way around? The topsy-turvy stock market is tough to read.
In the last year, the Dow Jones Industrial Average has briefly been over 13,000 and below 8,000. The past month has felt like the Cyclone roller coaster on Brooklyn’s Coney Island — lots of ups and downs, the whole rickety thing feeling like it’s going to crash at any minute.
BloggingStocks – Congress will bring in a bunch of big hedge fund managers like George Soros and ask them why they make so much money. It will also try to figure out if they control too much of the trading on Wall Street and borrow too much money from banks putting them at risk if the hedge funds default.
According to The Wall Street Journal, "Already, momentum is building to monitor hedge-fund activities more closely and curtail some trading activities, through greater regulatory oversight and lower borrowing limits, industry insiders said."
The government may be going a little too far here. For starters, hedge funds are private institutions with the exception of a couple which have gone public. To a large extent what they pay their traders is based on a formula which their customers accept. These fees are not forced on anyone. It is not an odd analogy to say that a farmer who makes $100 million because he owns 50,000 acres of corn has reaped what he deserves for his labor. But, he is not going to be in front of Congress testifying about what he made. Free enterprise has given him his reward.
Seeking Alpha – It’s a tough world out there – I saw in the Wall Street Journal the average hedge fund lost 18% in October. Considering what their mandate is i.e. hedge – that is amazing. September was awful as well. We see stories of hedge funds that are performing well (in this market losing 10% in a year is "great") and still facing redemptions because their investors need the cash…. as Ross Perot famously said… there is a "giant sucking sound" in our capital markets.
In a world hard up for cash, even hedge-fund winners can wind up losers. Such is the fate of major credit fund Blue Mountain Capital Management, whose investors have begun yanking investments despite the fund’s performance this year, a modest 2.4% loss, compared with an average 20% loss across all funds. Blue Mountain is a major player in the credit markets, with assets of $5.5 billion invested in bank loans, bonds and credit-default swaps. Its primary fund, the $3.1 billion Credit Alternatives Fund, had lost 2.4% this year through Friday.
Performance was largely beside the point for many Blue Mountain investors, who need access to cash. Theperverse effect is that some investors have begun raiding their better-performing investments, giving the laggards a chance to recover.
CNBC – About half of the investors in T. Boone Pickens’ energy-oriented equity hedge fund have asked to withdraw their money on the heels of losses of about 60 percent this year, the Wall Street Journal said, citing people close to the matter.
Pickens and his investment fund have lost $2 billion since peaking in late June, Pickens told the CBS program ’60 Minutes’ on Sunday.
His fund, BP Capital, will have about $400 million to $500 million after expected withdrawals, the Journal said.
A few weeks ago, Pickens moved the fund almost entirely into cash to help ride out the volatility in the energy patch, the paper said, citing people close to the matter.
Business Day South Africa – Examiners with the US Federal Reserve have questioned Wall Street counterparties about their exposure to debt and other holdings of Citadel Investment Group, The Wall Street Journal reported at the weekend.
Citadel denied the report.
Citing people familiar with the matter, the j ournal said the Fed questioned the counterparties in at least two instances in recent days.
But Katie Spring, a spokeswoman for Citadel, denied the rumours that the Fed had spoken to the hedge fund’s counterparties specifically about Citadel and possible problems with its debt.
Wall Street Journal – Some high-profile Bain Capital credit-investment funds are choking on losses of as much as 50%, said people familiar with the matter, the latest revelation in a day of shake-ups across the hedge-fund business.
The private-equity firm’s credit affiliate, Sankaty Advisors LLC, has lost between 40% and 50% across two funds that bought up highly secured corporate loans, these people said. The two vehicles had roughly $4 billion in assets just a few weeks ago, and used a relatively low amount of borrowed money to fund their investments.
Steep losses have also hit London hedge fund Centaurus Capital LP, which Wednesday offered its investors a chance to cut their fees. And, at Tudor Investment Corp., one of the oldest and best-regarded hedge funds, fund manager James Pallotta finalized a plan to run his own firm separate from longtime colleague Paul Tudor Jones.
New York (HedgeCo.Net) – After a disappointing year, Citadel will launch several new hedge funds in hopes of countering the losses of their main hedge fund.
The multi-strat $10 billion Kensington Global Strategies Fund has fallen over 30 percent this year. CEO Ken Griffin attributed some of that loss to the temporary ban on short selling, saying it “created material dislocations across many of our portfolios and disrupted our ability to assume and manage risk.”
After much speculation and some bad press, Griffin warned investors last week that returns on the fund would experience “significant volatility” in the next few weeks.
The new funds will focus more on global macro, convertible arbitrage and fixed income strategies, according to the Wall Street Journal.
Griffin told investors, "The financial crisis dramatically raised the cost of borrowing and reduced the availability of credit to market participants, materially reducing the value of cash assets as compared to the value of derivative instruments.” He went onto explain how he did not foresee the financial crisis that has unfolded this past year.
While the Kensington Fund will still be available to investors, many clients are interested in allocating their assets across numerous strategies.
Citadel was founded in 1990 and manages over $20 billion in capital.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
