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 – Credit Suisse Group AG, which sold its Japanese asset management unit in June, will offer alternative investments including private-equity funds to attract the nation’s $800 billion in pension money.
Tokyo-based Credit Suisse Securities (Japan) Ltd., the Japanese brokerage unit of Switzerland’s second-largest bank, won approval on Oct. 2 from Japan’s Financial Services Agency to act as an investment management firm, according to Akira Takahashi, the head of the brokerage’s asset management group. The unit in August hired BlackRock Inc.’s Shinichiro Sato to head a six-member investment team, Takahashi said.
Director of Finance online – Lyxor says their Hedge Fund Index was up 1.53% in January. Lyxor is an asset management group wholly-owned by Socieìteì Geìneìrale.
According to a report released today the top performing strategies over the month of January were Fixed Income Arbitrage (+4.19%), Special Situations (+4.08%) and CTAs Short Term (+3.30%).
Reuters – Former American International Group Inc executive Joseph Cassano is under investigation by U.S. prosecutors for possibly misleading auditors and investors about subprime mortgage-related losses, according to a Bloomberg report citing people familiar with the probe.
The report said investigators are asking auditors at PricewaterhouseCoopers about memos they wrote last fall on how Cassano and other AIG executives valued contracts protecting $62 billion in mortgage-backed securities.
Reuters – Fidelity Investments’ Harry Lange, manager of its one-time star Magellan fund, made what now looks like a poorly timed move in June: he nearly doubled his holdings of AIG.
Lange, who has already seen other financial bets sour, driving the $35.2 billion (19.6 billion pound) fund down 17.3 percent since July, may be just one of several fund managers to get burned by American International Group Inc’s meltdown.
Though it’s unclear where Magellan’s holding stood when the government launched its $85 billion government bailout of the giant insurer on Tuesday, Lange in June boosted the fund’s holdings of AIG to $865.1 million from $475 million in May.
And that was just a piece of the substantial 5.81 percent stake, or 156 million shares, held by Fidelity, the world’s biggest mutual fund company, as of the end of June, according to Reuters data.
New York (HedgeCo.Net) – Just one day after reaffirming their stance they would not rescue America International Group Inc., the Fed has agreed to lend the collapsing insurer $85 billion in exchange for a 79.9 percent majority stake.
The Fed justified the move, stating “a disorderly failure of AIG could add to already significant levels of market fragility.” The two-year loan will assist AIG in “meeting its obligations,” although the government has the right to halt dividends to common and preferred stockholders. Parts of the company may also be broken off and sold to pay off the debt.
The move came after a whirlwind week of plunging share pricing and other Wall Street firms trying to stay afloat. With the recent bankruptcy of Lehman Brothers and Bank of America’s purchase of Merrill Lynch hanging in the background, AIG looked to be another casualty of the credit crunch.
The federal government had urged AIG to seek a private investor, not wanting to use taxpayer funds to support a bailout. However, fears of larger worldwide market implications forced the Fed to retract on that belief while denying any aid to Lehman Brothers, who collapsed this week.
Fears of systematic risk and greater market turmoil have been the catalyst for many actions taken by the federal government as of late. Just weeks ago, the Fed stepped in and took over Fannie Mae and Freddie Mac after it was clear the companies could not weather the mortgage crisis. Earlier this year, the Fed helped to facilitate the purchase of Bear Stearns by JPMorgan by providing the needed financing.
AIG has agreed to an interest rate that is 8.5 percentage points above the three-month London Interbank Offered Rate, putting it at about 11.4 percent.
After helping AIG avoid surpassing Lehman as the largest bankruptcy ever filed, the U.S. government has now spent over $700 billion in efforts to stabilize the markets and reverse the damage caused by the housing crisis.
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
Portsmouth Herald News – The Federal Reserve resisted a cut in interest rates Tuesday and then forged a plan to take over American International Group Inc. and rescue the insurance giant from the brink of bankruptcy with an extraordinary $85 billion loan.
The moves, along with a slight rebound on Wall Street, offered some respite after the chaos that shook the financial system Monday when investment house Lehman Brothers declared bankruptcy and the Dow Jones industrials suffered its biggest point drop since the 2001 terrorist attacks.
Investors worried that a failure by AIG, the world’s largest insurer, would set off even more financial turmoil.
The Federal Reserve said in a statement it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.
It also could "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said.
"The president supports the agreement announced this evening by the Federal Reserve," said White House spokesman Tony Fratto. "These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy."
New York (HedgeCo.Net) – In an effort to stave off bailout rumors, the Federal Reserve is urging American International Group Inc. to find private investors and warns that they should not expect a loan from the central bank. However, talks have become increasingly difficult in the wake of all three major ratings agencies casting a shadow of doubt of the company.
AIG had its key credit ratings cut late on Monday to A minus, down from AA minus by Standard & Poors, due to the huge losses the company has endured from its mortgage-backed investments and credit derivatives. S & P warns that they could face further ratings cuts, unless they ”implement further liquidity options” and/or complete ”the successful sale of at least a portion of its business assets.”
Meanwhile, Moody’s cut AIG’s ratings to A2, down from AA3 while Fitch Ratings cut their ratings to A, down from double A minus.
The ratings cut could potential cost AIG billions from collateral payments on its derivatives trades.
Governor David Patterson facilitated a deal between AIG and New York state insurance regulators when he allowed the company access to $20 billion of assets from its subsidiaries to use as collateral against any needed loans. Patterson is hoping this will prevent a repeat of what happened with Lehman Brothers Holding Inc. and Bear Stearns.
Shares of AIG were trading as low as $3.50 on Monday and closing at $4.76, down over 60 percent.
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
Bloomberg – Just when American International Group Inc. shareholders figured things couldn’t get worse at the world’s largest insurer, profit from the company’s private equity and hedge fund investments is evaporating.
Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker.
The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.
