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.
New York Times – Ahead of a scheduled trial next month, prosecutors have identified “direct evidence” that they say shows a former hedge fund manager, Ralph Cioffi, used his investment in a fund he controlled to obtain a $4.2 million line of credit for a Florida real estate project.
In a series of filings in Federal District Court in Brooklyn last week, prosecutors said Mr. Cioffi fraudulently pledged assets in the hedge fund he ran as collateral for a real estate loan from Busey Bank. Executives at Bear Stearns Asset Management, the division that housed the fund, told prosecutors they denied Mr. Cioffi’s request to pledge part of his assets for the loan because it could create a conflict of interest with other clients in the fund.
Bloomberg – Former Bear Stearns Cos. hedge fund manager Ralph Cioffi, indicted for an alleged fraud that helped bring down the securities firm, attempted to use his $2 million redemption from a fund he supervised as collateral for a condominium, U.S. prosecutors said.
Cioffi, 53, also ”rarely” heeded compliance trading measures, the government said in a court filing in Brooklyn, New York, federal court. Cioffi and another former Bear Stearns hedge fund manager, Matthew Tannin, 47, were indicted last year for misleading investors about the health of two hedge funds that failed in July 2007, costing investors $1.6 billion. The implosion helped trigger the credit crunch and the eventual sale of Bear Stearns to JPMorgan Chase & Co.
Los Angeles Times – Derek Anderson and Victor Kubicek, producers of Warner Bros.’ and Sony Pictures’ May release ”Terminator Salvation,” have filed a pair of $30-million lawsuits: One against Santa Barbara hedge fund Pacificor, which lent them money to buy the rights to the science-fiction film series, and another against a former employee of Pacificor who helped arrange the loans.
The suits come as Halcyon Co., which is owned by Anderson and Kubicek, has been attempting to raise money to continue operating, according to several people familiar with the situation. The duo also are developing a fifth ”Terminator” film, two sources said.
If they don’t prevail in the suit or raise enough money to pay back Pacificor, however, they may not get the chance to make another movie. According to the complaints, the hedge fund may end up taking control of the ”Terminator” rights, which served as collateral for its loans.
Stuff - Wealth managers at Citi are telling their clients to watch for a burst of hedge fund activity in bad assets.
The wealth investor says in its most recent note that the biggest opportunity for hedge funds is probably around the Public-Private Investment Fund, which is part of the huge U.S. plan to stabilise the financial sector.
The idea is that the U.S. government will lend money to investors to buy up toxic assets from banks, thus setting a market price.
Citi notes that the loans are non-recourse ones, which means that any default is limited to the actual cost of whatever collateral is require.
StreetInsider.com – Connecticut State Treasurer Denise Nappier is moving forward with a plan to invest in hedge funds after losing $5 billion of pension assets this year.
Nappier will begin allocating up to 8% of the $20 billion she oversees for public sector employees and teachers into hedge funds after the state’s investment advisory council approved the plan later today.
Ironically, Connecticut, which has many of the world’s largest hedge funds, is one of the few states that doesn’t invest its public pension in the asset class.
The three retirement funds Nappier controls are heading for the worst annual performance since at least 1991, according to treasurer’s office data. Bloomberg reported asset values fell 19.5% to $20.7 billion from $25.9 billion between July 1 and the end of October.
USA Today – It is last call for investors to ask for their money back from poorly performing hedge funds. Whether that is a bullish or bearish sign for battered stocks is anyone’s guess.
Wall Street hopes the passing of the Nov. 15 deadline — the last day for many investors to make a request to redeem hedge fund shares payable at year’s end — could mark the beginning of the end of "forced selling" by funds to raise cash. If the selling recedes, it could help lift some of the downside pressure on stocks. Forced selling has been blamed for sharp stock price swings and plunging asset values in the financial crisis.
Investors have redeemed an estimated $85 billion from hedge funds through the end of the third quarter, says Charles Gradante, co-founder of hedge fund adviser Hennessee Group.
Bloomberg – Some hedge fund managers provided inaccurate information to investors in newsletters and monthly fact sheets, Hong Kong’s Securities and Futures Commission said.
In one instance, the hedge fund manager excluded the fund’s largest stock holding from its top five investments because of “oversight,” the regulator said in a statement issued late yesterday to all licensed hedge fund companies in the city. In other cases, the managers misstated the funds’ debt ratios and net asset values “to a limited extent.”
The findings were results of a recent SFC inspection of eight small locally established hedge fund managers overseeing $5 million to $800 million and employing three to 30 people. The regulator didn’t identify the managers involved. Ernest Kong, a SFC spokesman, declined to provide further comments.
Regulators worldwide have been increasing oversight over the $1.7 trillion hedge fund industry amid a crisis that has laden the world’s largest banks and securities firms with more than $670 billion of losses and led to the failure of Lehman Brothers Holdings Inc. Hedge funds are bracing for the industry’s worst year in almost 20 years and trying to stem investor withdrawals.
West Palm Beach (HedgeCo.net) – Funds of listed hedge funds are no longer providing reliable rates of return as the credit crunch continues – despite having been marketed as risk-free investments.
Analysis from Citywire shows that the sector has declined by 1.8% in net asset values (NAVs) so far in 2008, with funds losing much of the growth they enjoyed last year prior to the onset of the financial crisis.
The news gets still worse in terms of share prices in funds of hedge funds – which are seven% down on the year.
Increased market volatility is thought to have cancelled out the advantages invested in listed hedge funds enjoy, such as having a permanent base of capital.
Speaking to the news source, Simon Elliott, head of research at Wins, commented: "Performance across the board has been disappointing this year and the difference between NAV and share price performance gives you an idea of how premiums have evaporated and discounts widened.
"They have held up pretty well in NAV terms, but investors are exposed to the share price and it makes a big difference to returns."
West Palm Beach (HedgeCo.net) - Hedge fund advisory firm D5 announced the launch of two new accounts, with each promising capacity of $50 million, for a possible $ 100 million on additional capital for the firm. The new accounts coincide with the hiring of mathematician and scientist Andrew Vizcarra as Director of research.
"Andrew’s 10 years in the study and teaching of mathematics and statistics is a great asset to our research department and is a wonderful compliment to the fundamental nature of our strategy." Theodore Dumbauld, founder of D5 said, "Mr Vizarra will focus on both the enhancement of our current strategy and the exploration of universe expansion."
D5′s strategy utilizes a relative value strategy, trading only a unique set of securities for which net asset values can be calculated.
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!
