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.
HedgeCo.net (West Palm Beach) – Swedish hedge fund manager, Brummer and Partners, is expanding its offering of hedge funds by launching Karakoram, a new long-short Asia fund today.
The new hedge fund will take both long and short positions in liquid equities on Asian markets such as Hong Kong, China, India, South Korea, Taiwan and Singapore. The Fund will base its positions on fundamental equity research, complemented with transaction-focused macroeconomic-analysis.
The fund’s aim is to consistently deliver a positive return for its unitholders, regardless of stock market performance in general, with a better risk-adjusted return than that of traditional equity portfolios.
Domiciled in Singapore, Ee Toh Chia is the Managing Director and a Partner of the hedge fund management company and is responsible for the management team. Ee Toh has 15 years of experience from Asian capital markets and has been involved in the management of the Zenit Fund’s Asian holdings since January 2008.
Karakoram has approximately SEK 300 million ($39 milllion) in assets under management. As Karakoram is a Bermuda-based fund a minimum investment of one million kronor ($131,000) is required. Brummer Multi-Strategy will initially invest a small proportion of its fund capital in the Karakoram Fund.
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Reuters – U.S. Treasury debt prices jumped on Tuesday, pushing the benchmark note’s yield down to fresh five-decade lows, after the Federal Reserve slashed interest rates near zero and vowed to extend its quantitative easing measures.
In an unprecedented move, the Fed cut its target for overnight interest rates to a target of zero to 0.25 percent, the lowest on record.
"The decision is setting the Treasury market rallying because of a more dramatic move than the market expected," said Haag Sherman, co-founder and managing director of Salient Partners in Houston, Texas. "The Fed has been sending a message it will throw everything it has at deflation," and Tuesday’s aggressive rate cut and policy statement reinforced that message, he said.
The benchmark 10-year Treasury note’s price, which moves inversely to its yield, jumped 1-16/32, pushing its yield down to a five-decade low of 2.35 percent <US10YT=RR>, versus 2.52 percent late Tuesday.
"The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level," said the policy-setting Federal Open Market Committee in its accompanying statement.
The Olympian – Asian stock markets turned in a mixed performance Friday, but most recoiled from their lows despite a grim profit forecast from Toyota and sluggish U.S. economic data. European markets opened higher.
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Many of Asia’s bourses showed surprising resilience – notably in Hong Kong, South Korea and Singapore – given the overnight drop on Wall Street, as lower-priced shares attracted buyers and lending markets showed more signs of mending.
Bloomberg – At 5-foot-4 and 48 years, Nissim “The Miracle” Tse is the shortest and oldest of 34 boxers signed up for this year’s Hong Kong Hedge Fund Fight Nite.
Calling himself “a financial warrior,” Tse likens boxing to his daytime job as a co-founder and head of trading for Hong Kong-based Pi Investment Management Ltd., a unit of London hedge fund manager RAB Capital Plc.
“It’s mental, it’s physical, it’s crazy, it’s stressful,” Tse said in an interview. “But it all happens very quickly, just like you are managing a hedge fund.”
The annual charity fight tonight, in its second year, takes place amid the most severe financial crisis since the 1930s and with the hedge fund industry bracing for its biggest annual loss since Hedge Fund Research Inc. started to keep data in 1990.
The fight night aims to raise HK$1 million ($129,000) to repair children’s facial deformities and combat crime and juvenile delinquency in low-income and immigrant communities. The event beat the same target last year.
Reuters – GAM, the hedge fund firm owned by Julius Baer AG, is preparing to launch a distressed debt fund of funds after watching asset prices reach "extreme levels", a company letter seen by Reuters said.
In a letter to investors seen by Reuters on Monday, GAM chief executive David M. Solo said: "We are completing a thorough review of a range of the best managers in the U.S. and Europe so as to create a diversified vehicle to benefit from this unique opportunity."
In the letter dated Oct. 2, Solo said GAM clients had been requesting a distressed fund for more than a year. That the firm is now preparing to dip its toe in the water could encourage other players in the field to feel asset prices are nearing bottom.
A source familiar with the plans indicated that a launch for the fund has been mooted for the end of this year or early in 2009, although that was subject to change. The source could give no figure for target assets under management.
International Herald Tribune – In May, David Einhorn, an outspoken hedge fund manager, took the microphone at a large industry gathering and laid out his case against the investment bank Lehman Brothers.
The firm, he told the crowd, had used "accounting ingenuity" to avoid large write-downs and remained tainted by bad commercial real estate investments. Einhorn stood to profit by convincing people of his view: He had been betting against Lehman’s stock, which stood at around $40 when he spoke, since July 2007.
In the four months that followed, the tactic known as short-selling, in which an investor bets on a decline in a stock price, played a role in hastening a fire sale of Lehman’s shares – an erosion that ultimately helped bring the venerable 158-year old firm to its knees.
At emergency meetings led over the weekend by Timothy Geithner, the president of the Federal Reserve Bank of New York, and Treasury Secretary Henry Paulson Jr., the heads of major financial institutions said they feared short-sellers would now capitalize on the climate of fear surrounding Lehman and target other financial firms. They raised the idea of having the Securities and Exchange Commission reinstate a temporary rule to limit short-selling, according to two people who were briefed on, but did not attend, the meetings.
Bloomberg – Kenneth Heebner, manager of the top-ranked U.S. stock mutual fund, is seeking as much as $5 billion for his first hedge fund.
Heebner, who has worked in the mutual-fund business almost four decades, formed a private investment partnership in June called Wayfarer Capital LP, according to Aug. 14 regulatory filings. The size of the fund, which had raised $73 million from wealthy investors and institutions, may vary from the target, Wayfarer Capital said in the filings.
A private fund would free Heebner from most regulatory oversight and allow him to buy or sell any assets, unlike mutual funds, which are more tightly controlled. Hedge funds also charge higher fees, including a cut of investment profits.
“He has wanted to do this for a long time,” said Janine Hermsdorf, who retired in December as the head trader at Heebner’s Boston-based Capital Growth Management LP after working with him for 27 years. “This was just the time to go ahead.”
Martha McGuire, a spokeswoman for Capital Growth Management, declined to comment on the filings by Wayfarer Capital with the U.S. Securities and Exchange Commission and state regulators. Stephen McShea, an attorney in the Boston office of Dechert LLP, the law firm that helped set up the partnership, also declined to comment.
Heebner’s CGM Focus Fund had the best performance among diversified U.S. stock mutual funds this year through June 30, gaining 17 percent including dividends, compared with the 12 percent decline by the Standard & Poor’s 500 Index, according to data compiled by Chicago-based Morningstar Inc. The fund has since fallen 29 percent, while the benchmark index is off 3.9 percent, illustrating the swings that often accompany Heebner’s approach to stock-picking.
New York (HedgeCo.Net) – Treasury Secretary Henry Paulson outlined a plan yesterday that may give some power to the U.S. government when hedge funds come to the end of the road.
Paulson said that in the event of trouble, he wanted “"additional powers to manage the resolution, or wind-down, of large non-depository financial institutions, such as larger hedge funds, so as to limit the impact of a failure on the broader financial system."
Paulson has long been an advocate of tighter hedge fund regulation and an increased authority of the Federal Reserve. He had recently stated that the Fed should have extended control over risky financial instruments such as hedge funds so that they may “intervene to mitigate systemic risk in advance of a crisis.”
This stance has made him the target of heightened criticism by those who think the government should cease to intervene in times of trouble, referring of course to the Fed backed purchase of Bear Stearns by JPMorgan. Though others say the bank’s demise never would have happened if two of its major hedge funds hadn’t collapsed that past summer. Since massive hedge fund implosions shake the entire economy, Paulson hopes that his plan can provide balance and regulation to quell those instances in the future.
"Over the last several weeks, the need to move more quickly toward an optimal regulatory structure that establishes a prudential financial regulatory system, focused on promoting long-term market stability has become all the more apparent," he added.
Though the speech didn’t directly target hedge funds, the rhetoric mirrored the tone of his recent attempts to vamp up regulation of risky investments and to shed light on the often ambiguous industry. He responded to critics saying, “I’m playing the hand I’ve been dealt.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Jacksonville, Florida-based Advantage Capital Equity Solutions is set to unveil its new asset based lending hedge fund at the end of this month according to an article published in FINalternatives.
The Advantage Capital Equity Fund II will locate nonperforming assets and purchase them at a discounted rate such as real estate taken over by banks following foreclosures. Since the subprime fallout hit states like Florida and California the hardest, the fund will start focusing on those geographical areas initially.
“We see a bottoming of the real estate market six to 18 months out but that doesn’t really affect us,” said Bob Parsons, Senior Vice President. “As far as California and Florida are concerned, I live in Florida and we’re starting to see some stabilization in pricing in Jacksonville. There’s no bottom in sight yet for high-rise condos in south Florida but we don’t lend on high rises.”
ABL funds are gaining popularity, mostly because they tend to thrive in the current market conditions. Florida and California have record numbers of foreclosures and show no signs of slowing down anytime soon. The foreclosures left an array of opportunity for investors to purchase the properties far below face value. Other asset based lending hedge funds focus on providing loans to developers who are in a pinch and cannot get quick financing from a bank. The hedge funds then tack on high interest rates and build up their pool of capital. If the borrower fails to pay back the debt, the property is then seized by the hedge fund.
The hedge fund has a $100 million target. It follows the launch of their private equity fund, Advantage Capital Equity Fund I, which was launched in May. The firm is seeking a seed investor for the p.e. fund, hoping to raise $74 million.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
Independent- The UK’s financial watchdog has targeted hedge funds for the second time this month, demanding more disclosure for those trying to build anonymous stakes in companies using a complex derivative, in a bid to combat market failure.
The move to force disclosure of contracts for difference (CfDs), which comes just weeks after the regulator brought in disclosure rules for short positions in certain circumstances, will leave some hedge funds "fuming", according to one market expert. CfDs and shorting are tactics predominantly used by hedge fund investors.
The Financial Services Authority outlined plans yesterday for investors to disclose their positions if they have built up more than 3 per cent in a company through CfDs. Under the new rules, investors must disclose a position, whether held through shares or CfDs or a combination. Previously there had been no requirement to disclose any CfDs positions other than when the target was in a takeover process.
BEIJING (Reuters) – Bank of Communications Schroders Fund Management Co is aiming to raise up to 1 billion yuan for its first overseas fund later this month, despite sliding global financial markets, two company sources said.
Poor market conditions have sapped interest in funds launched recently under China’s Qualified Domestic Institutional Investor QDII.L scheme, which offers residents the chance to diversify their portfolios by buying global stocks and bonds.
In May, Yinhua Fund Management Co raised just 417 million yuan for China’s seventh QDII fund from a fund-management firm, far below its $2 billion target.
One of the sources said Bank of Communications Schroders was under pressure from the securities regulator to start marketing its first fund if it wanted to secure permission to launch others later.
FINalternatives- Godvig Capital’s Iraq-focused Babylon Fund finished May up 2.7%, bringing its year-to-date gains to 5.2%.
The fund’s portfolio included stakes in hotels, banks and breweries last month, according to portfolio manager Björn Englund, who said he has been solicited to take on board seats but has refrained from doing so.
“Our board policy stays for now, but might have to change in the future,” he said.
Last month, Englund said he continued to slowly add to the portfolio’s Iraq Stock Exchange exposure because of the “sizable inflow” into the fund, and intends to soft close the fund later this year “should assets rise faster than our target.”
