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Bloomberg – Massachusetts will cut investments in hedge funds after its public pension plan lost a record 24 percent on all assets in the fiscal year ended June 30.
The state pension plan’s board of trustees voted today to lower the amount of money invested in hedge funds to 8 percent, or about $3 billion of the $37.7 billion it oversaw at the end of June, from 12 percent, which is about $4.5 billion. The vote reversed a five-year effort by the pension system to boost returns by expanding such alternative investments.
”We all have to understand we’re making a bet on what assets will do well,” said state Treasurer Timothy Cahill, chairman of Massachusetts’s pension reserve investment management board. “Ultimately, we don’t make decisions based on the short-term, but we get measured on the short-term.”
New York (HedgeCo.Net) – Saying that GM is in the “worst shape,” Senate Banking Committee Chairman Christopher Dodd told the struggling automaker that they’ve got to consider new leadership if they want to receive federal aid. The comments prompted many to believe he was referring in fact to GM CEO Richard Wagoner, whom Dodd said “has to move on,” on CBS’s “Face the Nation.”
President-elect Barack Obama didn’t exactly reaffirm Dodd’s position, but said at a Chicago press conference that if management “doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”
Congress will reconvene this week to discuss the proposed $15 billion rescue plan that would hopefully salvage both General Motors and Chrysler. Although they are closer to finalizing a plan of action for the troubled companies, they are still met with reluctance from certain individuals.
Alabama Senator Richard Shelby, who has been outspoken about his disdain for any auto rescue plan, is supporting a filibuster that would put a halt to the legislation and instead prompt a lengthy debate about the issue.
Dodd, however, realizes it is a time-sensitive issue and focused during the interview on the fact that the auto industry could completely sink in the next few weeks if nothing is done. “Even if people don’t like this idea, none of us want to wake up January 1st and discover we don’t have an industry to save.” According to the Connecticut Senator, 1 out of every 10 jobs in the U.S. is either directly or indirectly related to the American auto industry.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Senate leaders will vote today on the $700 billion bailout package, after some key changes were implemented including tax breaks and higher limits for insured bank deposits.
The new limit proposals are something that both candidates and President Bush agree upon, leading some to believe that the bailout package, in its current incarnation, will finally be passed through Congress.
Though the details of the plan are not readily available, lawmakers are hoping that the changes will appeal to those republicans who were knocked the first proposal, while keeping the democrats who are otherwise against generous tax incentives for businesses.
“It has been determined, in our judgment, this is the best thing to move forward,” said Democratic Senator Harry Reid of Nevada.
While the bill has certain new elements to it, including extensions of unemployment along with tax credits for low income home-owners, the basic principle of the government purchasing $700 billion worth of bad debt and eventually re-selling them remains the same. The bill also has some room for new additions, though Christopher Dodd, Chairman of the Senate Banking Committee warns, “Opening this up all over again to other things may doom it.”
Markets tanked following the rejection of the initial proposal on Monday, with the Dow Jones industrial average plummeting 778 points. Though the markets regained some vigor on Tuesday, many lawmakers felt a strong urgency to get a plan passed.
The FDIC currently insures up to $100,000 per account. The new proposal might see an increase in that amount to $250,000.
House Speaker Nancy Pelosi is confident about the new plan, telling President Bush that “Working together, we are confident we will pass a responsible bill in the very near future.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – The U.S. Securities and Exchange Commission, seeking to jumpstart a hunt for suspected manipulation of financial stocks, will require hedge fund managers, brokerages and institutional investors to describe under oath their bets on the firms.
Investors with “significant” trades in the companies’ securities or credit default swaps must disclose their positions and provide “certain other information” in written statements, the regulator said yesterday. SEC spokesman John Nester declined to say who would receive the requests.
The SEC issued a series of emergency measures, rules and warnings to hedge funds this past week as lawmakers including Senate Banking Committee Chairman Christopher Dodd and executives such as Morgan Stanley Chief Executive Officer John Mack said traders may be spreading misinformation and using abusive tactics to attack companies. On Sept. 17, the agency said it may also force funds to hand over their communications.
