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.
LiveMint (WSJ) – After the global financial meltdown of the last year, hedge funds have been under considerable stress globally. The operations of all such funds have been viewed as being non-transparent, not subject to regulatory oversight, and high-risk, high-return operations that are run away from the limelight of financial markets.
The very nature of their operations has made them costly, in the sense that payments of upfront 2% fees and 20% of profits are the norm rather than exception. There have also been several scandals connected with hedge funds in the last year, most notably the Bernie Madoff one, which has reduced investor confidence in these funds and their operations.
West Palm Beach (HedgeCo.net) – Hedge fund operational due diligence provider, Castle Hall Alternatives, published its latest White Paper, ‘From Manhattan to Madoff: the Causes and Lessons of Hedge Fund Operational Failure.’
The Paper’s analysis and findings are based on HedgeEvent, a comprehensive, web-based database of more than 300 operational events, now available to Castle Hall’s due diligence clients. HedgeEvent supplements HedgeDiligence, the firm’s existing client web portal.
Chris Addy, Castle Hall’s CEO, said “the colossal fraud perpetrated by Bernie Madoff, together with a number of other recent cases, has made investors acutely concerned by the risk of operational ‘blow ups’. However, there has been little systematic study of operational failure, meaning that investors have limited guidance as to the extent of this problem.”
“The creation of HedgeEvent, which has taken more than two years to compile, has enabled us to summarize key metrics related to hedge fund operational failure” said Addy. “From Manhattan to Madoff analyzes operational events by number, estimated loss, causal factor and by the strategy of the funds involved.”
HedgeEvent contains 327 cases of hedge fund operational failure through June 30, 2009. Madoff, with an estimated financial impact of $64 billion, is by far the largest; the remaining cases have an aggregate estimated financial impact of approximately $15 billion. Of the 327 operational events, 121 have an estimated impact of $10 million or more, and 31 of at least $100 million.
“While operational failures are material – Madoff spectacularly so – it does not seem that fraud is pervasive in the hedge fund industry” said Addy. “Investors should, however, be very focused on the lessons which can be learned from those hedge funds which did generate large losses. Many of these were well established firms which attracted capital from reputable investors.”
Across all Events, the most common causes of operational failure are theft and misappropriation followed by existence of assets (the manager claimed to own fake securities or operated a Ponzi scheme where reported assets did not exist). The most common strategies subject to operational failure are long / short equity followed by managed futures. It is notable that investors have traditionally viewed these strategies, holding largely exchange-traded securities, as straightforward with low operational risk.
Forbes – Hedge fund managers Lloyd Khaner, Stephen Roseman and Ken Shubin Stein discuss changes in the industry post-Bernie Madoff.
The next video will include a discussion between three hedge fund managers and Intelligent Investing assistant editor David Serchuk. In the wake of the Bernie Madoff scandal, hedge funds remain a charged topic among investors. Often considered secretive investments for the super wealthy, there is no doubt hedge funds wield enormous influence on our financial markets. Currently there are some $1.8 trillion in assets under management at hedge funds, as more and more investors scramble back in. But why should anyone invest in them? What value do they offer?
West Palm Beach (HedgeCo.net) – AlphaMetrix, LLC, a $1.8 billion managed account platform for institutional and accredited investors, today announced the hiring of Richard Meade, 39, as Executive Director of Client Relations. This new position was created to ensure a high quality customer experience for AlphaMetrix’s fast-growing roster of investors. Meade has over 16 years of experience in the futures industry, covering operations, client services, client technology and sales.
“Interest in the AlphaMetrix managed account platform, along with our research, risk management and due diligence services, has grown dramatically since Bernie Madoff scandal,” said Aleks Kins, CEO of AlphaMetrix.
“With this growth comes a need to ensure that our current and prospective managed account clients have as positive an experience as possible when working with us. From being a client of Richard’s for several years, I know firsthand his ability to provide clients a unique combination of technological sophistication and a personal touch. He’s a great asset for our team.”
Before joining AlphaMetrix, Meade was COO and later CEO of UBS Managed Fund Services, helping launch and run the UBS managed futures platform. In addition, he also managed many key relationships for UBS’ top institutional clients, especially those in the managed futures and hedge fund space.
Prior to UBS, Meade ran Futures Client Services at Goldman Sachs, where he partnered with the firm’s top clients to create new web-based solutions to streamline operations around trade reconciliations, cash and margin managements, trade and position monitoring and other critical areas.
Meade received his BA in Modern Languages from the University of Nottingham.
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New York Daily News – Ezra Merkin should have known better, a lawsuit claims.
The Park Avenue hedge fund king funneled investments to Bernie Madoff and received millions in fees Merkin knew were the spoils of a massive Ponzi scheme, a lawsuit filed Thursday claims.
U.S. Bankruptcy Court trustee Irving Picard sued Merkin to recover the $557.8 million Merkin and his Gabriel Capital Corp. have withdrawn from Madoff’s firm since 1995.
Denver Post – Topps Co. will feature Charlie Ponzi and Bernie Madoff in a series of trading cards due out on June, covering the "world’s biggest hoaxes, hoodwinks and bamboozles."
Unfortunately, scores of lesser Ponzi schemers will never stack in this deck.
Like Wayne Puff.
I don’t know who gives millions of dollars to a guy named Puff. But last week this 61-year-old founder of a New Jersey real estate company pleaded guilty to bilking more than $80 million from hundreds of people.
Guardian Unlimited – Andres Piedrahita, a London-based fundraiser for Bernie Madoff’s fraudulent empire, is among high society figures facing increasing pressure to explain how they missed warning signs around the disgraced hedge fund manager.
Piedrahita, who has homes in Belgravia, New York and Majorca, channelled billions of dollars from Europe into Madoff funds through so-called feeder fund Fairfield Greenwich, where he is a partner. Fairfield has emerged as the largest loser from the Madoff scandal, with potential losses of $7.5bn – more than half its assets under management. The company, founded and controlled by Piedrahita’s father-in-law Walter Noel, is based in New York but investors from Europe are believed to have provided 68% of managed assets.
Seeking Alpha – The one group of investors that’s been vilified more than any other by the business press and government officials alike in 2008? Hedge fund managers.
After years of rapid growth in terms of both assets and numbers of funds in operation, the hedge fund industry has taken a PR black eye this year. Media reports would have you believe that the industry is about to collapse in size, see its revenue drop dramatically through fee reductions and become heavily regulated to protect unsuspecting investors from another Bernie Madoff scam.
Hedge funds certainly make an easy target. They’ve had a bad year, along with every other retail and institutional investor. But the industry is about to grow dramatically over the next five years. This coming year will mark the beginning of the next wave of this industry’s growth.
