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.
Reuters – Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and "binding" authority over executive compensation, including the ability to "claw back" money already paid, and he is weighing how and whether to use that power.
Feinberg told Reuters that Citigroup Inc included the contract of energy trader Andrew Hall in submissions due Friday by seven major companies still locked in the federal government’s TARP Program.
Feinberg said he hasn’t looked at Hall’s contract, which reports have said could pay him as much as $100 million this year.
The Associated Press – Shares of Bank of America shot up Thursday as a new executive at the bank, as well as a prominent hedge-fund manager, decided to place big bets on the company by buying up blocks of shares.
Shares jumped $1.07, or 6.7 percent, to close at $17.
Sallie Krawcheck, the former Citigroup Inc. executive hired last week as part of a management shake up at the Charlotte, N.C.-based bank, bought more than $1 million worth of the bank’s shares on Wednesday, according to a filing with the Securities and Exchange Commission on Thursday.
Reuters – A brash Kuwaiti financier facing a fraud suit by U.S. authorities was found dead Sunday in an apparent suicide that sent shockwaves through the Gulf Arab financial sector.
A security source told Reuters that Hazem Al-Braikan appeared to have died from a single gunshot wound to the side of the head, while a policeman standing outside Braikan’s house said the well-connected financier, 37, had shot himself.
Braikan was the chief executive of Al Raya Investment, which is 10 percent owned by Citigroup Inc, and had been at the center of a financial scandal that erupted last week.
Bloomberg – Asian hedge funds are attracting growing interest from investors as managers focusing on the region outperform global peers, said Andrew Hill, director of prime finance for Asia-Pacific markets at Citigroup Inc.
“There are pockets of proprietary money looking to be put to work in Asia,” Singapore-based Hill said in a June 12 interview. “There is going to be an outsized investment back into Asia. Some of the big pensions are going to be looking at Asia; it’s coming onto the radar screens.”
Asia-focused hedge funds gained 12.4 percent in the first five months of the year, outpacing returns in the U.S. and Europe, according to Eurekahedge Pte. That’s a reversal from last year, when clients withdrew almost $24 billion from the region’s hedge funds as managers posted bigger losses than global peers, the Singapore-based industry data provider reported.
Bloomberg – Chrysler LLC, needing lender concessions by March 31, isn’t negotiating with its banks because it can’t persuade them to discuss trading loans for uncertain equity, people familiar with the companies’ actions say.
Chrysler must reduce its debt by $5 billion by getting creditors such as JPMorgan Chase & Co. to trade debt for an ownership stake or by changing loan terms in order to be viable, the Auburn Hills, Michigan-based automaker said on Feb. 17 in a plan submitted to the U.S. Treasury.
Banks have little incentive to trade their loans, and the only other creditors Chrysler lists that could take more equity for debt are the U.S. government and the United Auto Workers union, which already has agreed in principle to reduce its obligation by 50 percent.
“It’s going to be a tough sell to get the banks to give up their position for worthless equity,” said Don Workman, a bankruptcy attorney at Baker & Hostetler LLP in Washington. “The best Chrysler can hope is that the government is going to force them to do it.”
The banks, which include Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and JPMorgan, would be first to be repaid in the case of a bankruptcy. By taking equity in exchange for debt, the banks would lose that standing they now have. The caveat is that each of the banks has taken U.S. government aid from the Troubled Asset Relief Program and may be subject to Treasury’s influence, Workman said.
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.
Globe and Mail – Joe E. Lewis, the late American nightclub comic and inveterate horse player, once quipped: "I hope I break even. I need the money." That could very well become a mantra in the hedge fund world, where even the best and brightest of managers with impressive track records have been suffering through some of their worst results in years.
In the first three months of this year alone, 170 funds in the United States went out of business, and that was before things got really bad. Globally, hedge funds ended the first half with their most dismal performance in a decade. And then came the selloff in resource stocks, which brought misery to commodity funds, one of the few bright spots earlier in the year. July ended up being the worst month for futures in more than five years.
Scotia Capital’s Canadian hedge fund index, a useful measure of performance, was off 8.6 per cent on an asset-weighted basis last month, bested by both the gloom-laden TSX composite and S&P 500 indexes.
Globe and Mail – GMP Securities enjoyed a solid debut with its new and much-scrutinized hedge fund.
GMP Diversified Alpha Fund, a multi-strategy fund launched last year by the investment dealer, published its first set of performance numbers Thursday as part of the parent income trust’s financial results.
The fund, which is run in part by GMP’s star stock trader and vice chairman Michael Wekerle, posted a 6.2 per cent return over its first three months of operation, a quarterthat ended June 30. The fund has $196-million of assets.
Over the same period, the benchmark Scotia Capital Canadian hedge fund index returned 5.93 per cent over the same period on an equal weighted basis, and 9.93 per cent on an asset weighted basis that puts more emphasis on performance at the larger domestic hedge funds.
GMP’s venture into the hedge fund world has drawn attention on the Street because of Mr. Wekerle’s dual role as both a part of the hedge fund team and head of the dealer’s equity desk.
Reuters Singapore – Investors almost halved the money they put into Asia-focused hedge funds in the second quarter compared to the first three months of the year as a selloff in stocks hurt appetite for risky assets, data showed.
Asia-focused hedge funds received a net $530 million (268 million pounds) from investors in the April-June quarter, down from $1 billion in the first quarter, Chicago-based Hedge Fund Research said in a statement released late on Thursday.
Asian hedge funds grew by approximately $200 million to $100.48 billion, up just 0.25 percent from the first quarter, as inflows were mostly offset by a decline of nearly $320 million due to poor performance.
Reuters – Investors almost halved the money they put into Asia-focused hedge funds in the second quarter compared to the first three months of the year as a selloff in stocks hurt appetite for risky assets, data showed.
Asia-focused hedge funds received a net $530 million from investors in the April-June quarter, down from $1 billion in the first quarter, Chicago-based Hedge Fund Research said in a statement released late on Thursday.
Asian hedge funds grew by approximately $200 million to $100.48 billion, up just 0.25 percent from the first quarter, as inflows were mostly offset by a decline of nearly $320 million due to poor performance.
"Asian hedge fund investors reacted to continuing market volatility by adjusting allocations opportunistically to those regional markets that had posted sharp year-to-date losses," said Kenneth Heinz, president of Hedge Fund Research.
Bloomberg – Hedge funds turned in their worst first-half performance in almost two decades as the collapse of subprime-mortgage bonds and rising commodity prices pushed stocks to the brink of a bear market.
Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9 trillion industry has posted one losing year, in 2002, when funds fell 1.45 percent amid the 23 percent decline by the Standard & Poor’s 500 Index.
Managers attracted a net $16.5 billion during the first three months of the year, down from $30.4 billion in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15 billion to hedge funds.
“We don’t see investors pulling the plug across the board and putting their capital into cash,” Munoz said.
Independent- Hedge funds turned in their worst first-half performance in almost two decades because of the credit crunch and the onset of a bear market in stocks.
Hedge funds declined by an average 0.7pc in June, bringing the year-to-date loss to 0.75pc, data compiled by Hedge Fund Research show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9trillion (€1.2tn) industry has posted one losing year, in 2002, when funds fell 1.45pc.
"Equity markets have made for an incredibly difficult environment,” said Mark Dampier, an analyst at Hargreaves Lansdown Stockbrokers in Bristol, who tracks the money-management industry.
Managers attracted a net $16.5bn during the first three months of the year, down from $30.4bn in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15bn to hedge funds.
