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.
Courthouse News Service – The founder and general partner of a $5 billion hedge fund used the company’s CFO as a scapegoat when investors found out he used their money to buy a private Gulfstream jet, the former CFO claims in Federal Court. Perry Gruss claims that Daniel Zwirn, of D.B. Zwirn and Co., told him he had to leave the company so Zwirn could remain ”pearly white” and ”bullet proof.”
Zwirn and Co. once managed more than $5 billion in assets. Gruss claims its founder began to live the life of an ”investment magnate,” including the private jet, ”scores of professional and personal assistants,” and a vacation home on the East End of Long Island.
Bloomberg – Tokio Marine Holdings Inc., Japan’s biggest casualty insurer, plans to trim hedge-fund investments and shift more of its portfolio in the industry to strategies such as macro and long-short equity funds.
Tokio Marine & Nichido Fire Insurance Co., a unit of Tokio Marine Holdings with 8.4 trillion yen ($90 billion) in assets, will trim its holdings in hedge funds “slightly” this year from about 100 billion yen at the end of March, said Eisuke Shigemura, who runs the firm’s hedge-fund investment group. He declined to quantify the planned reduction.
HedgeCo.net (West Palm Beach) – Hedge funds attracted $19 billion of fresh capital (gross) in June, marking their second consecutive month of net inflows of $6 billion. Nearly 75% of all reporting hedge funds are in the black for H12009, with event driven funds up an impressive 19% (YTD), on average, according to Eurekahedge.
Gross inflows into hedge funds totalled a healthy $19.2 billion (or 1.5% of end-May assets), about two-thirds of which were negated by redemptions of $13 billion. A good portion of these redemptions (nearly $5 billion) represented the assets withdrawn by funds of hedge funds, which continued to witness redemption pressures as investors are increasingly opting to invest directly into hedge funds for better returns and capital protection, as well as relatively lower fees.
The Eurekahedge Hedge Fund Index gained 9.5% while the Standard and Poor 500 rose 1.8% over 1H2009. Since Jan-2007, hedge funds are up 10.4%, while the Standard and Poor 500 is down over 35%.
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CNBC – People who invested with Bernard Madoff were greedy and happy to accept high returns without probing too much in the way these were achieved, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday.
"I’m sympathetic for people losing money but I think this pejorative term of being greedy still applies," Hendry told CNBC.com. "There was an implicit greed in not questioning and just accepting unnatural returns."
"They didn’t show the requisite amount of fear that would have generated the curiosity to investigate," he said, adding that for every one Madoff investor, there were ten who stayed on the sidelines.
Times Online – One of the most senior fund managers at Prudential has attacked hedge funds as selfish and devious and blasted derivatives as “the scourge of the modern age”.
Tom Dobell, who manages the £3 billion Recovery Fund for M&G, the insurer’s asset management unit, made the remarks in letters sent this month to the fund’s 100,000 investors.
The salvo came amid evidence that hedge funds are poised to deliver their best first-half returns in a decade, bouncing back from a disastrous spell last autumn.
Reuters – Dow Jones futures dipped 0.1 percent, S&P 500 futures were down 0.01 percent while Nasdaq futures traded 0.02 percent higher on Monday morning at 4:45 a.m. EDT, pointing to a flat opening for Wall Street’s main equity indexes.
With corporate earnings and economic data calendars virtually void of potentially market-moving events, the focus will be on the sentencing of confessed swindler Bernard Madoff.
At a court hearing due to begin at 10 a.m. EDT, U.S. District Judge Denny Chin is expected by legal observers to sentence Madoff, 71, to an effective life term in prison.
Globe and Mail – The ranks of the world’s millionaires shrank at the fastest rate in 2008, with North America suffering the biggest wealth loss worldwide, according to a survey by Capgemini SA and Merrill Lynch & Co.
The global slump in property and equity markets last year cut the number of millionaires by 15 per cent to 8.6 million, wiping out two years of increases, the firms said in their 13th annual World Wealth Report published Wednesday. The value of the world’s millionaires’ assets slid 20 per cent to $32.8-trillion (U.S.), after a 9.4-per-cent increase the previous year, the survey said.
Wall Street & Technology – Although talk of the swine flu has largely been out of the media for the past few weeks, a rush of new cases of the H1N1 virus is expected to hit financial centers in the fall and winter " and organizations, and in particular hedge funds, need to be well prepared for a pandemic.
Bob Guilbert, managing director of marketing and products at Eze Castle Integration (booth 1804), which provides outsourced IT technology and services for hedge funds, says his firm has been taking a proactive approach to the pandemic.
We recently learned of two major hedge fund transactions that we thought were worth highlighting here on the blog. Firstly, John Paulson is at it yet again. The prominent hedge fund manager has been in the media a lot recently given all the portfolio moves he has made. His latest move includes purchasing distressed mortgage securities.
Paulson & Co
This isn’t necessarily new news from the Paulson camp, as he had mentioned before that he had been covering some of his mortgage-related short positions and was getting constructive on the sector. He thinks that there is now possibly some value in the type of assets he was previously short. The major distinction though is that he was short sub-prime securitizations previously, but now is getting long jumbo and prime securitizations, which are typically of better quality. So, it appears he is getting constructive on a sector that he made so much money on the short side the last few years.
Independent – Hedge funds Apollo and Octavian have been quietly building up a position in ProSieben, one of Europe’s biggest commercial broadcasters. The move could lead to a showdown with private equity owners Permira, the Damon Buffini-run giant, and Kohlberg Kravis & Roberts (KKR). Lord Hollick, who was chief executive at former Daily Express owner United Business Media, represents KKR on the ProSieben board.
It is understood that Apollo and Permira have been buying the struggling German broadcaster’s debt on the cheap. Sources suggested that the pair had been paying only around 30cents for every euro of debt, allowing them to become, in effect, major creditors. "Apollo and Octavian have been buying up debt that is trading at distressed levels and I can see them taking on Permira and KKR over the direction of ProSieben," said a source.
Barrons – A big question surrounding BlackRock’s $13.5 billion purchase of Barclays Global Investors, including its iShares exchange-traded-funds business, is how effectively a passive management group can work with an active one.
The combined firm will have more than 9,000 employees in 24 countries. Barclays will retain a 19.9% stake in the firm, which will manage a combined total of $2.7 trillion in assets.
"For two large, successful asset managers, it’s never an easy task to integrate," says Charles Rauch, analyst at Standard & Poor’s, which lowered its long-term credit rating on BlackRock a notch, to single-A-plus, citing "real" integration risk, among other things. However, some of the risk is mitigated by the fact that BlackRock and BGI have few overlapping operations, he adds.
Reuters – DE Shaw & Co, one of the world’s largest hedge fund managers, fired about 25 administrative and support staff on Tuesday and reassigned other employees in an effort to boost efficiency, people familiar with the situation said.
The job cuts represent a small portion of the New York-based firm’s 1,700 employees and do not affect the "front office," according to the sources, who were not authorized to speak on personnel matters by closely held Shaw.
