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.
West Palm Beach (HedgeCo.net) – Securities and Exchange Commission Chairman Christopher Cox announced a meeting of the International Organization of Securities Commissions (IOSCO) Technical Committee today, Monday, November 24 by teleconference to discuss urgent regulatory issues in the ongoing credit crisis.
"In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences," said Chairman Cox. "This high-level coordination among international regulators will allow us to review the steps we have taken thus far and ensure that our ongoing and future actions are effective and mutually reinforcing."
The Technical Committee meeting will consider Short Selling and the effectiveness of recent regulatory responses in reducing manipulative short selling without stifling legitimate short selling activity, also explore possible coordination on rules relating to naked short sales, in particular with regard to position reporting and delivery and pre-borrowing requirements.
The teleconference also covers Under-Regulated or Unregulated Products. Development and disclosure principles to promote transparency in OTC markets for derivatives and other financial instruments which will contribute to enhanced investor protection and mitigating systemic risk.
The meeting also will focus on Credit Rating Agencies. Assessing members’ progress in adopting rules based on IOSCO’s revised Code of Conduct, and accelerating work on developing a common examination module.
Also to be covered are the International Accounting Standards, ensuring that the process of developing international accounting standards continues to take account of the interests of investors.
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Reuters – Blaming lax regulation for what turn into the worst U.S. financial crisis since the Great Depression, Rep. Barney Frank vowed on Monday to police banks and hedge funds more actively to avoid future financial meltdowns.
Frank, the powerful chairman of the House Financial Services Committee who has been credited with largely shaping the $700 billion bailout plan, also said he expects the cost of to be much less.
Frank said next year’s agenda will include capping runaway executive compensation, imposing restrictions on certain financial instruments and regulating certain areas of the market that are current not restricted.
"It was the lack of regulation that led to this crisis … We have to step in and impose regulations that will not allow this to happen again," Frank, a Massachusetts Democrat, said at a news conference in Newton, Massachusetts.
New York (HedgeCo.Net) – The SEC has targeted hedge funders David Myatt and William Eichengreen, both of Directors Performance Fund, with charges of fraud.
The two men allegedly took $25 million of their investment advisors money and put it into a “prime bank” scheme. This kind of scheme generally involves investors fraudulent claims that funds will be used to purchase “prime” financial instruments, usually in overseas markets, with the promise of high returns. Most of the time, neither the instruments nor the markets they supposedly trade on through special “access” even exist. In this case, Myatt and Eichengreen promised returns in excess of 10% per week with minimum risk.
Eichengreen then falsified documents pertaining to performance while lying about the fund strategy and asset allocation. The hedge fund also raked in performance fees that were based on the doctored numbers.
Investors in the fund should receive their money back, after a previous suit resulted in the court being responsible for distributing the assets back to investors. Myatt also previously pleaded guilty to an obstruction of justice charge that was brought against him in connection with this hedge fund.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.net) – SGAM (Société Générale Asset Management) Alternative Investments launched the SGAM ETF T-Rex (for total return exposure), on Euronext Paris.
"It is possible to build a portfolio of dynamic strategies designed to replicate overall allocations in the hedge funds industry," SGAM says, "and thus attempt to replicate performances by taking up equivalent positions in these asset classes."
The portfolio invests in the main asset classes of equities, bonds and currencies, and is managed dynamically using liquid financial instruments such as futures. The new fund has no minimum subscription, and offers real-time liquidity and total transparency. Launched in a mutual fund format in August 2007, the strategy in an ETF format offers investors a choice between the subscription/redemption channel of a traditional fund and the flexibility of a real-time stock market negotiation via the ETF.
"Based on the concept of alternative beta, involving the replication of estimated hedge fund allocations in traditional asset classes," SGAM says, "academic studies show that hedge fund investments can on the whole be broken down into long/buy positions and short/sell positions in traditional asset classes."
The allocation process of the SGAM ETF T-Rex portfolio is based on a quantitative model, created by SGAM AI’s structured asset management team. The model automatically calculates the allocation that optimises correlation to the index, composed of more than 2,000 hedge funds tracked in the HFR database. Positions are reviewed every month.
Société Générale Asset Management had EUR 309 billion ($452 billion) in assets under management at the end of June, including EUR 50 billion ($73.2 billion) in alternative investments.
SGAM Index is a wholly owned Société Générale Asset Management subsidiary that offers passive management, differentiated index management, structured ETFs and alternative beta products, and whose funds are commercialised by SGAM Alternative Investments.
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New York (HedgeCo.Net) – Treasury Secretary Henry Paulson outlined a plan yesterday that may give some power to the U.S. government when hedge funds come to the end of the road.
Paulson said that in the event of trouble, he wanted “"additional powers to manage the resolution, or wind-down, of large non-depository financial institutions, such as larger hedge funds, so as to limit the impact of a failure on the broader financial system."
Paulson has long been an advocate of tighter hedge fund regulation and an increased authority of the Federal Reserve. He had recently stated that the Fed should have extended control over risky financial instruments such as hedge funds so that they may “intervene to mitigate systemic risk in advance of a crisis.”
This stance has made him the target of heightened criticism by those who think the government should cease to intervene in times of trouble, referring of course to the Fed backed purchase of Bear Stearns by JPMorgan. Though others say the bank’s demise never would have happened if two of its major hedge funds hadn’t collapsed that past summer. Since massive hedge fund implosions shake the entire economy, Paulson hopes that his plan can provide balance and regulation to quell those instances in the future.
"Over the last several weeks, the need to move more quickly toward an optimal regulatory structure that establishes a prudential financial regulatory system, focused on promoting long-term market stability has become all the more apparent," he added.
Though the speech didn’t directly target hedge funds, the rhetoric mirrored the tone of his recent attempts to vamp up regulation of risky investments and to shed light on the often ambiguous industry. He responded to critics saying, “I’m playing the hand I’ve been dealt.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
