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.
European Voice – Europe may be laying the foundations for the next financial bubble, through its monetary, industrial and regulatory policies.
In the midst of the worst crisis in half a century, it is easy to forget that the real problem is not the bust but what preceded it: a boom filled with bad investments.
The boom was a natural consequence of too much easy money for too long. That policy was itself a response to the bursting of the dotcom bubble, to which Alan Greenspan and the Federal Reserve responded by cutting interest rates from 6.5% to 1% – and keeping them that low for a whole year. The result was a market drowned in cheap money.
Wall Street Journal – Some numbers are so big you just have to stand back and admire them. An investment banker claiming $550 million of fees in a single year is just such a number.
The number is staggering for an industry in which a great year means an investment banker brought in $25 million in fees and $40 million of fees makes a Wall Streeter a star.
Then there is Merrill Lynch banker Andrea Orcel laying claim to bringing in more than 13 times that for his firm, or $550 million in fees, according to this Wall Street Journal article by our colleague Susanne Craig. That earned Orcel a 2008 bonus of $33.6 million–down just a smidge from the $38 million he received in the M&A boom year of 2007.
Investment bankers’ bonuses are based in large part on the credit the individual bankers claim for the deals they worked on. As today’s Page One Journal article notes, Orcel won a big one-time bonus of $12 million in 2007 just for advising the Royal Bank of Scotland Group-led $101 billion acquisition of Dutch bank ABN Amro.
Times Online – Oaktree Capital Management, a specialist investor that targets heavily indebted companies owned by buyout groups, has sealed its first big investment in Britain.
The American-based Oaktree, which has just under €1.8 billion (£1.6 billion) to spend on distressed European companies, said on Tuesday that it had signed a deal to buy a large stake in Countrywide, the estate agency chain taken private for £1 billion at the height of the buyout boom by Apollo, the US private equity fund.
The deal, in which lenders to Countrywide will write off nearly £600 million of its debt mountain, will raise hopes that distressed investors could begin to make an impact on Britain’s stalled buyout market.
Forbes – Commodity prices will remain low for a long time, possibly up to 7 years because of the global recession and falling demand, hedge fund Red Kite told a British newspaper.
Michael Farmer founder of Red Kite, a big player in the industrial metals markets, told the Financial Times the world economy has gone from boom to bust and that markets are going to be bust for a while.
MIGHT two-and-twenty become one-and-ten? Since 1990 the number of hedge funds has grown by 14 times to over 7,000, but abundance has not lowered prices. Funds typically still charge clients a management fee of 2% of assets and 20% of any profits above a given hurdle. Rough calculations suggest that in the boom year of 2007, hedge funds globally received $33 billion in management fees alone—roughly equivalent to the bonus pool paid by Wall Street’s securities industry.
That may now be changing. The average hedge fund lost 18% during 2008, according to Hedge Fund Research, an analysis firm. Assets fell by a quarter, reflecting both losses and client redemptions, which are expected to accelerate. To prevent fire sales, perhaps a third of funds have restricted client withdrawals. Giving clients temporary fee cuts has helped sweeten this pill.
Al-Bawaba – Never before in its short history was the hedge funds community confronted with the challenges nor the pressures it is facing today, following a six-year boom,with Madoff’s scandal coming as the icing on the cake following the US financial crisis.
With investors already becoming more demanding with regards to fees, transparency and regulation, these and other industry standards are expected to become topics of contention within this once powerful industry globally and in the region. Investors, regulators and hedge fund managers are expected to have compelling debates on all these issues at the 10th Hedge Funds World Middle East Conference taking place this year from 10 to 12 March 2009 at Madinat Jumeirah in Dubai.
Reuters HK – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital TPG.UL, wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
Reuters – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital , wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
"Since a lot of hedge funds have a side pocket with a two- to three- to four-year lock-up period, that means that liquid assets are under great pressure," Bonderman said. "And guys like us who have the capital should be buying them."
Asia would emerge from the global downturn earlier than elsewhere and was well-positioned for recovery, said Bonderman, TPG’s founding partner.
Boston Globe – On Day 2 of the fall auction season, a Russian masterpiece expected to sell for up to $3 million at auction did not find a buyer yesterday, further underscoring the impact of the global financial crisis on the art market.
Not one hand went up when "View of St. Petersburg" by Alexei Petrovich Bogoliubov was offered at Sotheby’s morning sale of important Russian works from the impressionist and modern periods.
Many other works sold at or below their presale estimates; others did not sell at all.
It was the second day of lackluster bidding at the annual fall art season. On Monday, Sotheby’s kicked off the season with masterpieces by Edgar Degas, Kazimir Malevich, and Edvard Munch that fetched impressive prices. But a high percentage also went unsold – 25 works did not sell while 45 did.
Professional Pensions – RMB Asset Management has launched a diversified target fund in a bid to help schemes manage funding volatility.
The asset management firm said the multi-manager RMB Diversified Target Return Fund has exposure to equities, bonds and alternatives such as commodities, hedge fund of funds and property.
It is aimed at both defined benefit and defined contribution pension schemes – and is targeting return of LIBOR (London interbank offered rate) plus 3pc over rolling three year periods.
The underlying managers are researched and monitored by RMB’s multi-manager research team which is headed up by chief executive officer Tom Joy.
International Herald Tribune- Hedge fund managers are looking to global macro funds to try to steer clear of the mess created by the credit crisis while cautiously dipping into a small pool of more risky assets, a Reuters poll found.
Stormy markets have torn through the hedge fund market this year, forcing many to shut up shop and others to tumble, but most have still managed to keep well ahead of the severe double-digit losses suffered by global stock markets in the first half of the year.
The quarterly survey of 13 managers who invest in a basket of hedge funds and manage a total of about $150 billion in assets showed global macro funds leading the way through 2008 as they tend to benefit from periods of high volatility.
Typically global macro funds bet on the direction of markets, currencies or debt, and commodities.
Guardian.co.uk- Funds of hedge fund managers are looking to global macro funds to try and steer clear of the mess thrown up by the credit crisis while cautiously dipping their toes in a small pool of more risky assets, a Reuters poll found.
Stormy markets have torn through the hedge fund market this year, forcing many to shut up shop and others to tumble, but most have still managed to keep well ahead of the severe double digit losses suffered by global stock markets in the first half of the year.
The quarterly survey of 13 managers which invest in a basket of hedge funds and manage a total of around $150 billion in assets showed global macro funds leading the way through 2008 as they tend to benefit from periods of high volatility.
