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.
Morningstar.ca – Hedge fund managers, once the swashbuckling frontiersmen of international finance and subject of fawning cocktail party banter, have quickly gone from hero to goat. As the global credit bubble burst with a vengeance in 2008, so too did the oft-touted myth that these alternative strategies could deliver positive results in any market.
But those claims painted the universe with too broad a brush. There has always been a difference between arbitrage funds that isolated structural inefficiencies, and speculators that either didn’t hedge or used the ability to short stock as a means of leveraging directional bets. Clearly it should never have been expected that a fund that was short financials and long commodities, as many hedge funds were last year, would have a market neutral, "absolute return" profile. The majority of Canadian offerings fall into that camp, so it’s no surprise we’ve seen stark declines among many of our homegrown funds.
Bloomberg – The annual Hedge Funds Care benefit – - backed by Kenneth Tropin and Michael Vranos — will downsize from a black-tie dinner to a cocktail party tomorrow night in New York.
The nonprofit, which aids child-abuse prevention programs, is hoping a laidback atmosphere will encourage some donors to write bigger checks — and allow jobless hedge-fund managers to network while eating mini-hot dogs and shrimp instead of filet mignon.
“A formal, sit-down dinner wouldn’t have been the most appropriate thing to do when times are so bad,” Kathryn Conroy, the organization’s executive director, said in a telephone interview.
Reuters – Two activist hedge funds of Dillard’s Inc are demanding access to inspect the retailer’s books and records, seeking greater transparency from the department store chain’s executives and family members.
Dillard’s shares jumped 18 percent in Monday morning trading.
Barington Capital has been calling on the Little Rock, Arkansas retailer to take steps to improve financial results and governance practices since at least June 2007.
The hedge funds own around 5 percent of Dillard’s class A stock. The Dillard family own most of the company’s class B stock, which allows them to nominate eight of the company’s 12 directors.
New York (HedgeCo.Net) – Barclays Bank Plc has sued Chicago-based Ritchie Capital Management and the hedge fund’s principal Thane Ritchie, accusing them of concealing a $150 million investment in the controversial and now collapsed Petters Group Worldwide LLC.
According to the complaint filed on November 18th, Thane Ritchie gave the go-ahead to invest “significant sums” from two of Petters’ hedge funds, at a time when the funds were “supposed to be winding down.”
Barclays is seeking $380 million they believed they are owed from Ritchie and 19 other related businesses.
“Barclays’ lawsuit lacks merit as a matter of law and is premised upon inaccurate and misleading factual contentions,” said Justin Meise of River Communications who handled Ritchie’s public relations. “We will vigorously defend this baseless action.”
Tom Petters, head of the now bankrupt Petters group is being held without bail in a Minnesota jail after suspicions of leading a $3 billion fraud. Although Petters is in custody, he has not yet been charged with anything.
Ritchie has claimed that they lost a total of $275 million in the Petters matter. Ritchie Structured Investments Ltd. And Ritchie Targeted Investments Ltd, the two hedge funds being targeted by Barclays, are ironically not listed on Petters’ debt schedule.
Ritchie set a precedent earlier this year when a Chicago judge denied a request by investors to open up Ritchie’s books after its Multi-Strategy Fund experienced losses.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York Post – The heat is getting turned up under Alan and Philip Milton, the brother team that runs Greenwich-based Windmill Management and its embattled SageCrest hedge funds.
A lawyer for an investor in the SageCrest II hedge fund is threatening to fight the Miltons’ Chapter 11 filing for the $500 million fund – claiming the duo made the court filing last Sunday night, in part, to head off the possible appointment of a forensic accountant to probe the fund’s books.
WoodCreek Capital, was due in court Aug. 18, the day after the Miltons filed to liquidate their funds, to seek a pre-emptive lien on some of SageCrest assets and access to inspect their books.
WoodCreek had filed a $5.8 million lawsuit against the Miltons’ fund claiming the duo had reneged on a promise to honor their withdrawal from the fund.
Los Angeles Times – Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.
But when the Commodity Futures Trading Commission examined Vitol’s books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising was the massive size of Vitol’s portfolio — at one point in July, the firm held 11% of all the oil contracts on the regulated New York Mercantile Exchange.
The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.
The CFTC, which learned about the nature of Vitol’s activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81% of the oil contracts on the Nymex.
New York (HedgeCo.Net) – Bear Stearns has triumphed in a case involving disgruntled investors seeking $141 million for the losses they incurred following the collapse of the Manhattan Investment Fund Ltd., a hedge fund where Bear served as the prime broker.
The fund, which filed for Bankruptcy in 2000, started experiencing losses almost immediately after its launch in 1995. After shorting technology stocks to no avail, fund manager Michael Berger issued false documentation showing profits and gains and ultimately collected $575 million from investors. Berger pleaded guilty in 2000 to securities fraud.
The suit against Bear Stearns was an attempt to hold hedge funds’ prime brokers responsible for investigating fraudulent clients. However, it was ruled that Bear Stearns had acted in good faith. The eight person jury in Manhattan concluded on June 27th that Bear was not liable for failing to see the discrepancies in the hedge fund’s books.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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