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 Blogs – It seems that private equity fund sales are heating up so much they need their own market.
SecondMarket said today it is opening trading in limited partnership interests in private equity funds, venture capital funds, hedge funds and fund of funds (the intention to launch into this market was reported a few weeks ago by our sister publication peHUB).
The firm also hired Jeffrey Bollerman, previously at Citigroup Wealth Management, to help lead its LP interest market.
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.
West Palm Beach (HedgeCo.net) – Global alternative asset manager, GLG Partners LP, is teaming up with two of the founding partners of London hedge fund Pendragon Capital, Kaveh Sheibani and Julian Harvey Wood, to focus on event driven strategies.
In addition, GLG Partners LP will become the investment manager of the funds and accounts managed by Pendragon Capital. Before founding and managing Pendragon Capital with Gordon Lawson, Kaveh and Julian had worked together managing European proprietary trading in equities at Salomon Brothers (subsequently Citigroup).
"Kaveh and Julian are both highly experienced, event driven professionals and we expect that this team will greatly enhance and expand GLG’s own event driven franchise," Emmanuel Roman, Co-CEO of GLG commented.
As of September 30, 2008, GLG managed net AUM of over $17 billion.
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Reuters – Three European banks on Sunday announced a total of about $3.8 billion in exposure to an investment fund run by Bernard Madoff, the U.S. investor accused of running a $50 billion "Ponzi" scheme.
The largest banks of both Spain and France, Santander and BNP Paribas, and Swiss private bank Reichmuth & Co became the latest parties to detail possible losses over investments made with Madoff, who was arrested in New York on Thursday in the alleged fraud.
Santander put its client exposure at over 2.33 billion euros ($3.09 billion). BNP Paribas said it could face a potential loss of 350 million euro from exposure to Madoff-linked investments. And Swiss private bank Reichmuth & Co said it had about 385 million Swiss francs at stake, around $325 million.
West Palm Beach (HedgeCo.net) – Hedge fund Trian Partners said that they will buy about 49.4 million shares of fast-food operator Wendy’s/Arby’s Group for $4.15 per share, or about $205 million.
The hedge fund and their affiliates now own about 21.6% of Wendy’s/Arby’s, or 52.1 million shares, up from its previous 11.1% stake. In November, Trian Fund Management L.P., led by billionaire investor Nelson Peltz, Peter W. May and Edward P. Garden, said it would buy shares of the fast-food restaurant business for about $4.15 per share.
The deal was subject to certain conditions, including that there would not be a decline of more than 10% in the Dow Jones Industrial average or the S&P 500 index after Nov. 5. Another condition was that Wendy’s/Arby’s shares would not lose 10% of their value.
Triarc Cos. Inc., which operates Arby’s and was run by billionaire investor Nelson Peltz, bought Wendy’s in a deal that closed in September.
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New York (HedgeCo.Net) – Activist investor Carl Icahn purchased another 6.8 million shares of Yahoo stock last week at a price tag of about $67 million, further boosting his already vast stake in the company to almost 5.5 percent.
According to a filing with the Securities and Exchange Commission, that stake is equal to 75.6 million shares in the Internet giant, or about $870 million.
The Corporate Raider has been outspoken about his beliefs that Yahoo should strike a deal with Microsoft Corp. in hopes of better competing with Google. Although no merger talks are currently in the works, some believe Icahn is still pushing for the deal.
Icahn was also vocal about his desire to dump Jerry Yang, saying that the former Yahoo CEO did everything he could to discourage a deal with Microsoft. Yahoo is currently seeking a replacement for Yang after he stepped down on November 17. Yang had previously rejected a $31-a-share offer by Microsoft earlier this year, prompted Icahn and other board members to question his leadership.
After news circulated on Friday that Icahn had increased his stake in the struggling company, Yahoo shares rallied almost 9%, up to $11.51 in the shortened trading session. Icahn may be trying to reverse the massive losses he incurred this year, after shares of Yahoo plummeted almost 60 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Petroleumworld.com – The hedge fund of billionaire investor George Soros increased its stake in Brazilian state-run oil company Petroleo Brasileiro ( Petrobras) to 21.1 million American Depositary Receipts as of Sept. 30 from 11.5 million at June 30.
Soros Fund Management LLC made the move as the ADRs tumbled during the quarter to about $44 from about $71 each. Although the fund added nearly 10 million ADRs to its Petrobras stake, the value of the holding only rose to $930.7 million from $811.5 million.
Since the end of the quarter, Petrobras ADRs have fallen further, closing on Friday at $21.45.
Newark Star-Ledger – Prompted by criticism from a prominent state lawmaker, the head of the state’s Division of Investment yesterday defended his decision to invest $144 million in pension funds in a BlackRock Inc.-managed hedge fund in the past two weeks, saying the state needed to act quickly to protect its stake and possibly reap big returns.
Senate President Richard Codey (D-Essex) questioned the transparency of the process, taking issue with the state putting $49.5 million in the hedge fund on Oct. 17 — an amount just shy of the $50 million threshold that requires a review by the state Investment Council. On Friday, the state invested another $94 million in pension funds in the BlackRock venture, following a special meeting of the Investment Council.
New York (HedgeCo.Net) – CSX is finding themselves in the middle of another battle, this time with a shareholder who is suing the railroad company along with hedge funds TCI and 3G Capital Partners.
Shareholder Deborah Donoghue is seeking the recovery of “short swing” profits from sales conducted by the two hedge funds between August and September 2007. She is hoping to recover profits from the sale of shares by the funds, before they announced their plan to launch a proxy battle and shake up the Board of Directors.
Donoghue is claiming that TCI and 3G sold 2 million shares of CSX stock and within six months, bought a large amount of shares and derivatives equal to shares of CSX common stock at lower prices.
“Such profits are recoverable on behalf of CSX by plaintiff as a shareholder of CSX, the latter having failed or refused to act in its own right and for its own benefit,” stated the complaint.
Donoghue isn’t the only one who believes the hedge funds didn’t act in good faith. CSX has been in a battle with the two funds ever since they exerted their controlling stakes to take over four board seats on the Jacksonville, Florida based company after a drawn out proxy battle.
CSX had argued that the funds “secretly coordinated” their fight to gain the seats on the board while failing to disclose their full stake in the company. The judge eventually ruled with the hedge funds, allowing them to vote their shares at the company’s annual meeting in June.
Hedge funds are not required to report to the Securities and Exchange Commission, thus these “short-swing” profits were not publicized.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Investors Chronicle – Activist investor Laxey has sunk its claws into yet another Aim-traded overseas property fund. Having built up a 9 per cent stake in Indian township developer Hirco, it wrote to management this week demanding they take action to address the whopping 90 per cent discount to net asset value (NAV) at which the shares were trading.
Laxey is calling for Hirco to use cash held in subsidiary companies to mount a share buy-back programme to address the discount. The news caused Hirco’s shares to bounce 8 per cent to 79p, but this remains woefully below the last stated NAV of 682p, and 79 per cent lower than a year ago. Laxey’s intervention follows hot on the heels of action from fellow activist Carrousel. It is targeting Indian real estate fund Trikona, calling for a break-up and return of cash to shareholders. Trikona is trading at a 72 per cent discount to its last stated NAV.
Activists have also recently jumped on board Equest Balkan Properties, Spazio, Bulgarian Land Development and NR Nordic and Russian Properties – and these won’t be the last.
Times Online – Hedge funds were heading for a full-blown row with the German Government last night as it emerged that funds sitting on tens of billions of euro losses after short-selling Volkswagen could go bankrupt.
Porsche, VW’s biggest shareholder, stands to pocket a quick €6billion (£4.7billion) profit from the short-selling.
The London-based Alternative Investment Management Association (Aima), the hedge fund trade body, said yesterday that it planned to ask the European Union to clamp down on a controversial German legal loophole that allowed Porsche secretly to take its VW stake to almost 75 per cent.
Andrew Baker, Aima deputy chief executive, said: “This sounds somewhat irregular. If you tried that in this country, there would be a number of questions to be answered.”
Globe and Mail – Since many hedge fund managers like to drive Porsche roadsters, it’s somehow appropriate that the German auto maker just ran them down.
The European hedge fund community took a pounding Monday covering short positions in Volkswagen. Shares in the auto company doubled Monday on a short squeeze that came after Porsche announced it had used derivatives to build a 74 per cent stake in VW. That move brought a long-running takeover near the finish line, and also meant portfolio managers betting on a drop in Volkswagen shares had to cover positions.
In their rush to cover shorts, often at massive losses, hedge funds pushed up the value of Volkswagen by 123 per cent on Monday, briefly making the auto maker the largest company on earth. Shares subsequently slipped, but ended the day up 25 per cent.
