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 – Massachusetts will cut investments in hedge funds after its public pension plan lost a record 24 percent on all assets in the fiscal year ended June 30.
The state pension plan’s board of trustees voted today to lower the amount of money invested in hedge funds to 8 percent, or about $3 billion of the $37.7 billion it oversaw at the end of June, from 12 percent, which is about $4.5 billion. The vote reversed a five-year effort by the pension system to boost returns by expanding such alternative investments.
”We all have to understand we’re making a bet on what assets will do well,” said state Treasurer Timothy Cahill, chairman of Massachusetts’s pension reserve investment management board. “Ultimately, we don’t make decisions based on the short-term, but we get measured on the short-term.”
World Radio Switzerland – Several major hedge funds in London say they’re considering moving abroad, notably to Switzerland. They are angered by a proposition from the European Union that would require more accountability and limit the amount of money they can borrow. Switzerland is an attractive destination because it is easier to register and launch a hedge fund, and subsequent regulation is less constraining. Does that mean this is the wild west for shady financial institutions? No, say the experts. It just means Switzerland has struck a better balance between flexibility and oversight. Lucas Chambers reports for WRS.
West Palm Beach (HedgeCo.net) – The Swedish state pension platform, PPM, is including Salus Alpha funds in their premium pension portfolio with immediate effect. The Salus Alpha funds that were chosen are UCITS III compliant, and meet the strict requirements regarding transparency, daily liquidity and adequate administration procedures set up for the Premium Pension Authority.
By launching the first UCITS III fund that tracks a hedge fund index in September 2007, Salus Alpha paved the way for hedge funds as an optimal portfolio component for retirement investment, by adding multi-manager alternative investment products, the returns can be increased while decreasing the risk.
The Swedish pension system is divided in three parts; income pension, guaranteed pension and premium pension. For the premium pension the pension saver has a number of funds to choose from. Every pension saver can decide in which fund and what amount of money he wants to invest. At the moment the Premium Pension Authority’s fund holdings of 5.8 million pension savers are valued at a total of 27.5 Billion Euro ($36.7 billion).
By including these funds in the portfolio the Swedish Premium Pension Authority confirmed the market leadership of Salus Alpha in the regulated alternative investment sector.
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Reuters – General Motors Corp (GM.N) and Ford Motor Co (F.N) posted more than $27 billion of net losses in the first half of 2008 — and that was before a deepening economic slowdown pushed industry sales beyond 15-year lows.
What either automaker will report for an encore in the third quarter could be overwhelmed by the potential merger of Chrysler LLC into GM or various other scenarios of some or all of the Auburn Hills, Michigan automaker being sold.
Both are expected to post dismal third-quarter results on Friday, capping off a disastrous week that started with reports that U.S. auto sales plunged to the lowest annualized rate in a quarter century in the first month of the fourth quarter.
Analysts on average expect GM and Ford to post losses of roughly $2 billion each for the third quarter excluding one time items, according to Reuters Estimates.
Houston Chronicle – Boone Pickens, the billionaire founder of BP Capital LLC, said 15 percent of his hedge funds’ holders have asked for the option to withdraw their money after he lost more than $1 billion in energy trades this year.
Pickens, who manages funds linked to energy commodities and equities, said his equity fund has taken a "real hit" as oil company stocks and oil prices have plummeted.
"I feel like all my fingers are mashed in the door right now," Pickens, 80, said on CNBC today. "I’m trying to get someone to open the door for me."
The Wall Street Journal reported last week that Pickens was having his worst performance in 10 years, with his funds losing about $1 billion.
"It’s more than that now," Pickens said.
Pickens said his funds require a 90-day notice to withdraw money, "so if we can recover in the fourth quarter," people might reconsider exiting.
Reuters – Singapore sovereign wealth fund Temasek Holdings, which has pumped billions of dollars into ailing lenders such as Merrill Lynch, said it may invest more in Western banks if the opportunity arose.
The fund also said its assets rose 13 percent in the year to March, despite a sharp drop in equity markets that started in the fourth quarter of last year.
Chairman S Dhanabalan told Singapore entrepreneurs on Thursday that the fund had taken a 5-7 year view on its near-$6 billion (3.2 billion pounds) investment in Merrill Lynch and described the U.S. broker as an institution with a good management and business.
"If there is an opportunity to invest, we will look at it," Dhanabalan said in response to a Reuters question on whether the firm was prepared to put more money into Western lenders.
The Money Times – Last year, I read an article in which David Herro outlined his rationale for owning shares of UBS in his Oakmark International fund. He focused on the value of its wealth management unit, which delivers stable earnings and benefits from the spread of wealth across the globe. Fair enough, but UBS’ most recent quarterly results show the bank’s abysmal performance in other areas is now tarnishing its crown jewel.
After a fourth straight quarterly loss due to subprime writedowns, UBS’ Wealth Management unit suffered net outflows of 19.3 billion Swiss francs ($18.8 billion) — its first net outflows since the fourth quarter of 2000.
In response, the bank is reversing its "one bank" strategy by giving increased autonomy to its three businesses: Investment Banking, Wealth Management, and Asset Management. The initiative could pave the way to a spinoff or sale of the investment banking business.
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.
Star Tribune- Minneapolis Star Tribune- A terrible year for financial stocks isn’t keeping Ameriprise Financial Inc. from growing. The Minneapolis-based financial planning and insurance company announced Monday that it will acquire the asset management firm J&W Seligman & Co. Inc. for $440 million.
Seligman, based in New York, manages an $18 billion portfolio of mutual funds, closed-end funds, hedge funds and institutional accounts.
Ameriprise financed the deal with cash on hand; it had $3.8 billion in cash as of December. The transaction is expected to close in the fourth quarter and will add to earnings and return on equity in 2009, Ameriprise said.
Bloomberg- A sharp decline in a Fifth Third Bancorp hedge fund investment led to more than $300 million in charge-offs the bank took in the last two quarters, according to a Bloomberg report.
Cincinnati-based Fifth Third had already said that it took a pretax charge of $144 million in the first quarter and a $177 million charge in last year’s fourth quarter as a result of the declining value in its portfolio of bank-owned life insurance, which it takes out to cover its employees.
Fifth Third (NASDAQ: FITB) said in its first-quarter earnings release that the charge was caused by "further deterioration in the values of the underlying investments of the policy, reflecting widening credit and municipal spreads during the quarter."
