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Bloomberg – There’s not a lot of light in Paulson & Co.’s 28th-floor headquarters on a drizzly November afternoon. The Alexander Calder sculpture and multicolored prints have been shipped to the firm’s new offices six blocks south. Darkness envelops the New York skyline.
The Dow Industrials have lost a total of 929 points over two days, and the jobless rate is poised to hit 6.5 percent. And John Paulson, who oversees $36 billion in hedge fund assets, isn’t exactly Mr. Sunshine either.
“You have deterioration in almost every asset class,” Paulson says. “You’re looking at declines in housing prices, the health of manufacturers and the earnings of various companies. There are rising delinquencies in auto loans and commercial real estate.”
ITNews- Recent second quarter figures from the Cayman Islands Monetary Authority (CIMA), have confirmed the achievement of a key milestone by the Cayman Islands financial services industry, with more than 10,000 investment funds currently registered in the jurisdiction.
At the end of June 2008 there were 10,037 funds on CIMA’s register, compared with 9,681 at the end of the previous quarter and 8,972 at the mid point of 2007. The current annual growth rate of 12% in net new hedge funds, which takes cancellations into account, is particularly striking in the context of the deterioration in global markets following the sub-prime meltdown and associated credit crunch.
"This is yet another round of impressive statistics from CIMA," said Mark Lewis, senior investment funds partner at Walkers. "The 10,000 barrier has been breached as hedge funds continue to be formed in the Cayman Islands, which remains the clear jurisdiction of choice for investment managers and their advisers around the world.
New York Post- Taxpayers are all but certain to take a hit on the securities the Federal Reserve accepted as part of JPMorgan Chase’s takeover of Bear Stearns, according to a report by a hedge fund that is an investor in JPMorgan.
The reports comes as the Fed said last week said it valued the bundle of assets it accepted as collateral for the $28.8 billion loan at $28.9 billion as of June 26.
That’s a drop of 3.7 percent from earlier this year.
JPMorgan is on the hook for just the first $1.15 billion of value below the loan amount – with the taxpayers having to make good for any additional deterioration in value of the collateral.
"We expect that the loss will exceed the $1 billion exposure for JPM," the hedge fund said in the report, a copy of which has been seen by The Post on the basis of not identifying the name of the fund.
Reuters- The credit crisis is not over, and losses in the financial sector are set to be around $1.3 trillion, according to star hedge fund manager John Paulson, who says he remains short credit.
In its twice-yearly report in April, the International Monetary Fund had said total potential losses on both subprime and other loans as a result of the credit crisis could reach $945 billion. Paulson, who earned $3.7 billion in 2007 according to Alpha Magazine by going short the subprime sector during the U.S. mortgage meltdown, also said a deterioration in consumer spending was set to drive the U.S. economy into recession this year.
Bloomberg- Hedge funds may be forced to sell bonds and asset-backed debt amid tighter lending standards and poor returns, the European Central Bank said in its six-monthly Financial Stability Review.
Volatile financial markets, investor redemptions and difficulties meeting margin calls have resulted in a “challenging period” for the $1.9 trillion industry and that will continue, the ECB said in the report published today.
“Some leveraged credit-focused hedge funds have been particularly badly hit,” the ECB said. “Moreover, many hedge funds still remained vulnerable to tougher lending stances of prime brokers and a further deterioration in financial markets. Further de-leveraging and forced sales in credit and other asset markets cannot be excluded.”
Bloomberg- A sharp decline in a Fifth Third Bancorp hedge fund investment led to more than $300 million in charge-offs the bank took in the last two quarters, according to a Bloomberg report.
Cincinnati-based Fifth Third had already said that it took a pretax charge of $144 million in the first quarter and a $177 million charge in last year’s fourth quarter as a result of the declining value in its portfolio of bank-owned life insurance, which it takes out to cover its employees.
Fifth Third (NASDAQ: FITB) said in its first-quarter earnings release that the charge was caused by "further deterioration in the values of the underlying investments of the policy, reflecting widening credit and municipal spreads during the quarter."
