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.
Boston – The state pension fund climbed 2.6 percent in September to finish the month with a $41.5 billion balance, according to a preliminary staff assessment.
“I feel a lot better this year than I did a year ago. Last year, Lehman had gone bankrupt, we were on the eve of the worst thing I’ve seen in my life as far as investments go,” said Stan Mavromates, chief financial officer of the Pension Reserves Investment Trust, which funds benefits for state retirees, at a Tuesday meeting. “All arrows are pointing up. We didn’t emotionally react to anything.”
Khaleej Times – Hedge fund assets may be on the rebound after a year of massive redemptions, Goldman Sachs Group Inc Chief Financial Officer David Viniar told analysts on Tuesday, although the prime brokerage business will remain under pressure.
“Assuming (hedge fund) performance stays OK — which it has been through the first half of this year — it feels like we are pretty much through the redemption cycle, and it actually looks like you are going to start to see some money flowing into hedge funds,” he said during a conference call.
The hedge fund business suffered record withdrawals at the end of 2008 as markets imploded, sending the industry’s assets under management down by about 40 percent.
AP – The Chief financial officer of Freddie Mac, one of the mortgage giants at the heart of the nation’s financial meltdown, was found dead in his basement early Wednesday morning in what police said was an apparent suicide.
David Kellermann, 41, apparently hanged himself in his suburban Washington home, said a law enforcement official familiar with the investigation. He asked not to be identified because the investigation was ongoing.
Kellermann was promoted last September when the government seized the mortgage company and ousted its top two executives. Neighbors said Kellermann had lost a noticeable amount of weight under the strain of the new job. Some neighbors said they suggested to Kellermann should quit to avoid the stress, but Kellermann responded that he wanted to help the company through its problems. The neighbors did not want to be quoted by name because they didn’t want to upset the family.
North Country Gazette – The brother of the former chief financial officer of the bankrupt hedge fund firm Bayou Group LLC has been sentenced to 21 months in federal prison of his role in concealing a $400 million fraud.
Matthew Marino, brother of Daniel Marino, was also ordered to pay $60 million in restitution.
Prosecutors say that Marino knew about the fraud on the investors in the now-collapsed Bayou Hedge Funds and took steps to conceal it. His brother is serving 20 years for the scheme as is Bayou co-founder Samuel Israel.
Reuters – Internet firm Yahoo Inc is "not opposed" to doing a deal that would potentially sell its search business, Chief Financial Officer Blake Jorgensen said on Wednesday.
But he said the search business is deeply intertwined with Yahoo’s other online products and properties, and so any deal, whether a partnership or a sale, would be done for the right reasons and the right economics.
"It’s extremely difficult to draw a line down the middle of the organization and split it into two pieces," Jorgensen told the Goldman Sachs Technology and Internet conference.
He did not mention specifically Microsoft Corp, which has repeatedly said it was interested in doing a search deal with Yahoo to compete against market leader Google Inc.
Xconomy – Vertex Pharmaceuticals has been around the block with biotech hedge funds. These are the people who aim to get rich trading volatile stocks second-to-second, and make big bets, long or short, on whether an experimental drug will work. Now that Vertex has passed some of the riskiest stages of drug development, the company figured it was time for steady, buy-and-hold investors to support the next phase, as it morphs into a commercial player.
That was one of the insights that I gathered yesterday in a conversation with Vertex chief financial officer Ian Smith. He was in a pretty good mood—as you might be too, if you’d just helped your company raise $320 million in a secondary stock offering. The financing is important because it gives Vertex (NASDAQ: VRTX) enough cash to operate until it introduces its lead drug to the market and starts generating positive cash flow, according to analyst Thomas Russo of Robert W. Baird & Co. Especially in the midst of a recession, that’s good news for Vertex’s 1,300 employees in Cambridge, MA, and 200 in San Diego.
Times of the Internet – Hedge funds have gained ammunition for complaints against German sports car maker Porsche after it said it made almost 400 million euros (514 million dollars) in bets on German blue-chip stocks, a press report said on Monday.
The Financial Times quoted Porsche chief financial officer Holger Haerter as saying that the company had gained 392 million euros in its 2007/2008 fiscal year from trading in options on German stocks, in addition to controversial gains from trades in VW shares.
"We have also arranged share options to generate liquidity. The underlying shares were referring to DAX (Frankfurt blue-chip index) companies and not to Volkswagen," the FT quoted Haerter as telling an annual general meeting.
Bloomberg - Philip Duff, Morgan Stanley’s former chief financial officer, last month fired 80 of the 100 people at his 11-month-old hedge fund, and now he’s looking to sublet excess office space in Greenwich, Connecticut.
Record losses and terminations at hedge funds like Duff Capital Advisors have reduced Connecticut’s tax revenue, and that means the city schools in Bridgeport, 25 miles north, may soon have less space. Facing an anticipated $12 million drop in state aid, Superintendent John Ramos says he may close some of his 35 schools.
Officials across the state face similar cuts. After income- tax-fueled surpluses that totaled $3.6 billion from 2004 through last year, Connecticut’s budget now has a $1.1 billion gap, according to state Comptroller Nancy Wyman. The deficit is forecast to grow by $6 billion by 2011. Quarterly taxes on bonuses and capital gains — which make up 40 percent of income tax collections — dropped 20 percent in one year to $568.2 million last month, Governor Jodi Rell said.
Reuters – Hedge fund firm Duff Capital Advisors, launched last year to help pension funds, endowments and insurers meet long-term funding obligations, laid off most of its staff, a person familiar with the matter said on Thursday.
The company remains in business and is now focusing mostly on providing risk analysis and advice, said the person who was not authorized to speak about the matter publicly. Previously Duff Capital also offered hedge fund products.
The company once had about 100 people working for it.
Hedge fund industry veteran Phil Duff, a former chief financial officer at Morgan Stanley and top executive at famous hedge fund firm Tiger Management, set up Duff Capital Advisors in March 2008, shortly before the financial crisis exploded. He launched the firm only a few months after having sold his previous firm, FrontPoint Partners, to Morgan Stanley.
KWCH.com – A prominent New York law firm is expected to seek bankruptcy protection.
That’s according to a receiver appointed to run the firm — which has been scandalized by charges that its founder was behind a massive fraud.
The receiver also predicted that the founder — Marc Dreier — will soon seek bankruptcy protection as well.
Dreier was jailed last week after being charged in a criminal complaint and by the Securities and Exchange Commission in the alleged sale of fraudulent promissory notes.
He’s accused of an elaborate charade aimed at convincing three hedge funds that the investments were real.
Prosecutors have estimated total loses could top $380 million.
Ananova - Royal Bank of Scotland says it is facing a potential loss of £400m after a Wall Street banker was charged with a massive alleged fraud.
US prosecutors say Bernard Madoff has confessed to defrauding investors of $50bn (£33bn) in a giant pyramid scheme that collapsed in the global financial crisis.
RBS, in which the British government now has a majority stake, says it has exposure through investments in hedge funds that invested with Mr Madoff.
It is one of a number of banks that face big losses in the suspected fraud.
Santander, the Spanish bank that owns Abbey and Alliance and Leicester, said it had more than 2.3bn euros (£2.08bn) worth of exposure.
Reuters – Former American International Group Inc executive Joseph Cassano is under investigation by U.S. prosecutors for possibly misleading auditors and investors about subprime mortgage-related losses, according to a Bloomberg report citing people familiar with the probe.
The report said investigators are asking auditors at PricewaterhouseCoopers about memos they wrote last fall on how Cassano and other AIG executives valued contracts protecting $62 billion in mortgage-backed securities.
