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.
New York (HedgeCo.Net) – The infamous collapse of the two $1.8 billion Bear Stearns hedge funds that many believe helped spark the credit crisis is still being investigated, and now other banks and individuals are being probed in the process.
According to those familiar with the matter, prosecutors are now looking at the offering memorandum of the funds, a set of documents usually constructed by the legal team that list strategies and other pertinent information, along with investigating the individuals who prepared them.
Ralph Cioffi and Matthew Tannin, both hedge fund managers for the now defunct funds, have had criminal charges filed against them in federal court. The two men allegedly defrauded investors in the hedge funds by neglecting to communicate the sharp losses they were experiencing due to their exposure to mortgage backed securities and hefty amounts of leverage. Cioffi was also charged with insider trading.
Investors who experienced losses in the fund have a number of cases against Bear Stearns. Barclays Bank PLC also filed a suit last year after losing approximately $400 million in the funds.
The High Grade Structured Credit Strategies Fund and the High Grade Structured Credit Strategies Enhanced Leverage Fund collapsed last summer amidst the subprime mortgage fallout. The funds had sought liquidation in the Cayman Islands, possibly hoping to shield some assets from creditors. That request was denied in U.S. Court.
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
Reuters – Hedge fund Ore Hill Partners, which specialises in credit strategies, has barred clients from redeeming their money from its flagship offering, imposing a freeze just as investors clamored for an exit, the company said on Friday.
The firm, half owned by Man Group, the world’s largest publicly traded hedge fund, put up a so-called gate provision on its roughly $1.2 billion (650 million pound) Ore Hill International portfolio this week, limiting the amount of withdrawals after investors sought the return of roughly $300 million, said an investor who asked not to be identified.
Heavy redemptions for September triggered an automatic gate, said Sophie Sophaon, a spokeswoman for the fund. Fund directors are considering what measures to take that will be in the best interest of all investors, she added.
New York (HedgeCo.Net) – New York-based Ore Hill has suspended investor redemptions after hefty withdraws set off an “automatic gate.” The $1.2 billion Ore Hill International Portfolio, which is partially owned by hedge fund giant Man Group Plc, was frozen after investors sought to redeem about $300 million.
The credit strategies fund posted a loss of about 6.5 percent this year, after an unimpressive 2007 in which the fund returned a mere 1.8 percent. A board meeting has been planned to discuss the next course of action. Often, hedge fund will suspend redemptions in an effort to wait out unfavorable market conditions. Other times, it serves as a precursor to the eventual closing of the fund.
This year has proven to be one of the toughest for the hedge fund industry, with hedge funds down as a whole 3.5 percent, according to data from Hedge fund Research. Like many other funds, Ore Hill experienced losses stemming from the credit 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
A posh part of London or New York can be suitable, as in Pershing Square Capital, Cheyne Capital and Thames River Capital.
Or you could choose something slightly aggressive such as Tiger Capital, Citadel Capital or Centaurus. Among the big financial firms, it is voguish to squeeze as many meaningless words as possible into the title of a hedge fund. Length is not a sign of quality, however; a Bear Stearns hedge fund which went from $642m to zero was called the "high-grade structured credit strategies enhanced leverage fund".
2 Get a brass plaque in the Cayman Islands
Nearly all hedge funds are legally registered in tax havens to avoid both the taxman and to skirt regulatory hurdles – the sunny climes of the Caymans and Bermuda are particularly popular. Theoretically, a fund registered in London would have to register with the Financial Services Authority, but this has never actually happened. An FSA spokeswoman says: "Nobody ever registers hedge funds in the UK. If somebody did, we’d be scratching our heads over how to deal with it. We’d have to devise something."
3 Set your fees
The real fun starts here. Hedge funds are enormously lucrative – their standard fee arrangement is "two and 20". This means that as a fund manager, you can take 2% of clients’ money up front before you do anything, then keep 20% of any appreciation on the value of your fund. For successful hedgies, that means a phenomenal payday. For example, if a fund raises $1bn from investors and achieves a 30% rise in value over a year, the fund’s management earns $78.8m. Crispin Odey – one of London’s leading hedge fund managers – has just paid himself £28m after his firm successfully negotiated the credit crunch to make more than £55m profit in the past financial year. Most of the remaining £27m will be shared among Odey Asset Management’s 11 other partners. The fund manages around £2.7bn of assets.
New York (HedgeCo.Net) – The two managers behind Bear Stearns’ infamous failed hedge funds have surrendered to face charges, in what will be the first criminal lawsuit stemming from the subprime mortgage fallout.
Ralph Cioffi, 52, and Matthew Tannin, 46, are part of an indictment resulting from a yearlong federal securities fraud investigation, according to a law enforcement official who spoke to The Associated Press.
Although Tannin’s lawyer is quick to pronounce his innocence, the two men are accused of misleading investors about market conditions and the risks associated with the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and the High-Grade Structured Credit Strategies Master Fund.
Using heavy leverage, the funds invested in subprime-mortgage backed securities that started to plummet in value amidst the record number of foreclosures. The managers are accused of hiding performance information as the fund started to lose value rapidly, even citing it as “positive” at specific low points.
After a $1.6 billion failed rescue attempt by Bear Stearns, the funds were shut down in June 2007, leaving investors with nothing more than an apology.
This isn’t the first time Cioffi and Tannin have been hit with allegations. After the implosion of the funds, Barclays Bank, backed by other investors sued Bear Stearns, claiming they were misled about the funds as well.
Susan Brune, Tannin’s lawyer states, "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
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) – Troubles keep arising for Bear Stearns, even after its demise and the resulting takeover by JPMorgan Chase. It seems investors are still targeting Bear after the implosion of their two failed hedge funds last year that kicked off the subprime mortgage crisis.
Federal prosecutors, along with the SEC, may bring criminal charges against Ralph Cioffi and Matthew Tannin, who ran the High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and the High-Grade Structured Credit Strategies Master Fund.
The two funds at one point managed upwards of $20 billion, with a majority of their assets invested in subprime-mortgage backed securities. As homeowners started defaulted on their mortgages at record rates, these securities plummeted in value, and creditors started to demand more collateral.
Even an influx of $1.6 billion by Bear Stearns could not save the funds, and assets were subsequently frozen. Both funds eventually filed for bankruptcy with only a small portion remaining of investor’s money.
A failed request at a Cayman Islands liquidation sealed the deal for Bear, who no longer could shield the fund’s assets from investors.
The question arises of whether or not Bear Stearns overstated their securities values to shareholders. At times, the two managers were quoted as reporting the performance of the funds as “positive,” when in reality, it was down as much as 38%.
According to the Wall Street Journal, securities fraud charges may be filed against the two men by next week.
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
The Wall Street Journal – A group of four law firms has filed additional investor arbitration claims against Bear Stearns Cos. and a fund manager alleging the firm was less than candid with investors in one of its hedge funds.
"Our investigation indicates that officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at this hedge fund, for an extended period of time before it imploded and that the victims of this nefarious scheme included both individual investors and professional money managers from around the world," said Steven Caruso of Maddox Hargett & Caruso, one of the law firms.
The claims were filed with the Financial Industry Regulatory Authority on behalf of investors in Bear Stearns’ High Grade Structured Credit Strategies Fund. Last summer the fund failed along with the company’s High-Grade Credit Enhanced Leveraged Fund, costing investors $1.6 billion.
