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.
PerthNow – Mr Geffen tried to acquire a 19 per cent stake in the New York Times Company that was held by Harbinger Capital Partners, the activist hedge fund, but was rebuffed, it emerged overnight.
Since 1896, the newspaper has been controlled by the Ochs-Sulzberger family, whose members maintain their grip with a separate class of super-voting shares.
However, the dominance of the family, headed by Arthur Sulzberger, has come under pressure as advertising has collapsed and losses have mounted, which have led to speculation that The New York Times may be sold.
CNN Money – Hedge funds may be struggling and closing up shop in the current market environment, but Goldman Sachs Group Inc. (GS) was able to make more money tending to the funds’ needs this year than last.
The company, which on Tuesday reported its first quarterly loss since it went public a decade ago, was able to post a 19% gain in revenue in its securities services operations for the three months that ended Nov. 28, compared to the same period last year. The business also turned in record net revenues for all of fiscal 2008 at a time when Goldman’s normally high-octane trading and principal investing line was down by 71% for the year.
Goldman’s security services business is dominated by its prime brokerage operations, whose clientele comes primarily from hedge funds. Competitor Morgan Stanley (MS), which runs a similar prime brokerage business that turned in record net revenues last quarter, reports its earnings on Wednesday.
Though hedge funds have been hard-hit by customer redemptions and market losses, Goldman was able to generate more revenue this year because its securities services business mix became more profitable, Chief Financial Officer David Viniar told analysts during a conference call.
Bloomberg – The financial crisis is imposing heavy burdens on the hedge-fund industry, and the strain has become more visible. By the end of last week, about 100 hedge funds imposed restrictions on withdrawals. Many funds have become financial roach motels: Investors can put their money in, but they can’t get it out.
Deregulation has taken a lot of blame for this financial crisis, but an interesting footnote is that the lightly regulated hedge-fund industry has stayed healthy enough to avoid the bailout game.
But are rising redemptions a sign that hedge funds may need a handout, too?
It’s small wonder that some funds have decided to put the brakes on. Morgan Stanley estimates that redemption requests are running at 15 percent to 30 percent of total hedge-fund assets.
Seekingalpha.com This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series.
Next up, we have Andreas Halvorsen’s Viking Global. Andreas Halvorsen is one of the many ‘Tiger Cub’ fund managers we cover here on the blog. ‘Tiger Cubs’ are the progeny of legendary investor and hedge fund manager Julian Robertson of Tiger Management. Many of the critical members of Tiger started their own funds, and Halvorsen is no different. We’ve already covered a few other ‘Tiger Cub’ portfolios in our hedge fund tracking series, including Stephen Mandel’s Lone Pine Capital, Lee Ainslie’s Maverick Capital, and John Griffin’s Blue Ridge Capital.
Although both Andreas Halvorsen of Viking Global and Stephen Mandel Jr. of Lone Pine Capital both learned the tricks of the trade under Robertson in their time at Tiger Management, both have taken what they’ve learned and added their own spice to the value oriented, yet growth at a reasonable price (G.A.R.P.) tolerable investment style. Halvorsen attended Williams College and received his MBA from Stanford, while his work history includes stays at Morgan Stanley and Tiger.
The major broker-dealers have been decimated, with only Morgan Stanley and Goldman Sachs remaining independent and solvent.
There are daily fears of hedge funds facing the equivalent of a bank run, as investors scramble to withdraw their cash. Those private-equity firms, such as Blackstone and Fortress, which had entered the public markets to take their positions alongside the investment banks are now trading at massive discounts to their IPO values.
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.
New York Times Blogs – Duff Capital Advisors has recently laid off dozens of its employees and is holding off on its plans to raise as much as $1.5 billion just eight months after the hedge fund firm began business, according to people briefed on the actions.
The Greenwich, Conn.-based firm was started in March by Philip N. Duff, a former chief financial officer of Morgan Stanley, with $500 million of capital from the New York private equity firm Lindsay Goldberg. At the time, Duff Capital said then that it was in discussions with several financial institutions to provide seed money for its investment strategies, beginning in the past spring.
While the firm is still in discussions with clients and some potential investors, it has failed to find any new capital so far.
Reuters – Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual investor.
The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 percent this week, a person familiar with the matter said on Thursday.
Discussions so far have been internal, and some options –such as entering into a merger where other executives end up running the company — are unpalatable to managers at Citigroup, the person said. The bank’s board of directors is set to meet on Friday, and Morgan Stanley is not
CNBC – The head of Morgan Stanley’s prime brokerage arm in Asia, Kurt Baker, has left the firm amid the slump in Asia’s hedge fund industry, a source with direct knowledge of the situation said on Wednesday. A spokesman for the U.S. bank declined to comment. But the source confirmed Baker was no longer coming into the office.
His departure comes after Morgan Stanley last week announced a further round of job cuts, including 10 percent of staff in its institutional securities unit, its main business, and 9 percent in asset management. The cuts are in addition to roughly 4,800 jobs eliminated since the middle of 2007 by what was once Wall Street’s second-largest investment bank.More than 100,000 financial services jobs have been eliminated worldwide over that time.
Morgan Co-President James Gorman said at the time the firm plans to "reshape" operations including prime brokerage, which lends securities and provides other services to hedge funds. Morgan Stanley and Goldman Sachs Group Inc were widely regarded as the two leading prime brokerages in Asia in recent years. But industry sources said hedge fund clients moved assets from the firms in the wake of Lehman Brothers Holdings Inc’s bankruptcy, which raised questions about the stability of investment banks.
Reuters – Traditional long-only mutual funds are set to dominate shareholder registers again as the hedge fund industry shrinks and retail investors continue to stay away, according to Morgan Stanley.
Meanwhile, with institutions, including hedge funds, deleveraging aggressively, emerging markets equity issuance is set to fall to 10 percent of total volume in Europe, Middle East and Africa in 2009 from one quarter this year, the bank told the Reuters Global Finance Summit.
"Traditional classic long-only funds, which used to be the main part of shareholder registrar in the 1990s, will become more important," said Emmanuel Gueroult, head of EMEA equity capital markets.
"The hedge fund industry is deleveraging…Access to credit is difficult."
Times of India – Can the wealthy trust their wealth managers any more after losing 30 to 60% of their wealth during the current global financial crisis?
The world’s top banks including brands like Morgan Stanley, UBS, Barclays and Standard Chartered operating in Asia are desperately struggling to find a suitable answer to this question.
It is interesting to see the usually suave and self-confident community of private bankers looking dazed and fearful of survival. There is already a run on deposits with some of Asia’s wealthy pulling out money from accounts of private banks. The future looks dismal. Some of the world’s top banks have either gone bust or merged with others to stave off closure.
"Professional advisers have failed to prove their worth," Peter Flavel, senior managing director of The Standard Chartered Private Bank told a conference of wealth managers in Singapore on Friday. "The players have changed in a way that was unimaginable a few months back. They will continue to change," he said.
