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.
Opalesque – In the newly released research report by Massachusetts-based firm Finadium "Trends in US Equity Finance Costs for Hedge Funds and Other Borrowers" author Josh Galper notes that the current cost of securities borrowing has many funds looking at their financing costs with fresh eyes.
"Firms just looking into the situation are behind the game, but not all is lost; there will be many opportunities to make, and lose, money in equity finance in the years to come," says Galper.
The growth of various fund fees such as equity borrowing comes at a time when many funds have seen decreases in budget resources due to investor redemptions and/or negative performance.
Bloomberg – Japan’s attempts to end financial turmoil failed to lure hedge funds back to its swap markets, leaving premiums paid by domestic borrowers near a record, RBS Securities Japan Ltd. said.
Hedge funds, which lost more than $400 billion through withdrawals and market losses since June, pulled out of Japan’s swap markets after the failure of Lehman Brothers Holdings Inc. led to a seizure in global credit, said Tatsuo Ichikawa, a senior strategist at RBS in Tokyo. Japan’s banks were charged record premiums this month to swap London borrowing rates for those set in Tokyo as a slumping economy exacerbated concern about the health of the nation’s companies.
Newsday – The latest development in the mortgage market fomenting outrage in the streets and condemnation across the media spectrum is the spectacle of rich investors — Wall Street traders, hedge fund operators, even former executives of the detested Countrywide Financial Corp. — buying up delinquent home loans, reworking terms for borrowers, and selling them off to new investors at a handsome profit.
Bloomberg – Ellington Management Group LLC, the hedge-fund firm focused on mortgage bonds, sued Ameriquest Mortgage Co. and other ACC Capital Holdings units over soured subprime home loans.
Funds run by Old Greenwich, Connecticut-based Ellington saw the value of $354 million of investments in securities backed by the loans “largely lost” following misrepresentations about the debt’s risks, according to a complaint filed Jan. 14 in federal court in New York.
Ellington joins M&T Bank Corp. and HSH Nordbank AG in turning to the courts to recoup losses from bad mortgage bonds. Insurers including PMI Group Inc. and MBIA Inc. have sought to recover or block claims through lawsuits. Ameriquest’s lending failed to meet its own guidelines when it didn’t verify borrowers’ employment, ignored past late payments and misstated whether they lived in properties, according to the complaint.
The defendants’ “liability arises not from increasing default rates associated with a general economic downturn, but from their fraud — from lying to Ellington about the riskiness of the loans,” Ellington said in the complaint.
Defendants in the lawsuit against Ameriquest, parent ACC Capital Holdings and other related companies — once collectively the largest U.S. subprime lender — include businesses bought by Citigroup Inc. in 2007, according to the complaint. The suit didn’t name Citigroup.
domain-B – Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200-billion programme intended to support consumer credit.
The new programme is aimed at injecting credit for consumers and small businesses including auto loans and credit cards will be launched in February.
The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before.
The New York Fed will offer loans under the TALF on a monthly basis. On a fixed day each month, borrowers will be able to borrow by means of one or more loans by indicating for each loan the eligible collateral, the desired amount, the desired interest rate format — fixed or floating.
