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 – Despite the industry’s record losses in 2008, hedge funds generally aren’t lowering their fees without concessions from investors, such as longer lock-up periods and commitments of at least $100 million, money managers and consultants tell Bloomberg News.
While Larry Powell, deputy investment chief for the $16 billion Utah Retirement Systems, could crow at a June industry dinner in New York that more than half of Utah’s 40 hedge-fund managers agreed to changes in their fees, with four adopting his recommendations, top-performing managers haven’t adjusted yesteryear’s top-dollar fees, Bloomberg says.
USA Today – A Spanish banking giant that channeled $3 billion of its clients’ funds to Bernard Madoff has agreed to repay more than $235 million it withdrew from the confessed Ponzi scheme architect in the months before the scam collapsed in December.
Pending federal bankruptcy court approval, the deal announced Tuesday by a hedge fund investment subsidiary of Banco Santander would boost the amount recovered to help repay Madoff’s victims past the $1.2 billion mark.
The settlement would return 85% of the total sought from Spain’s largest bank by Irving Picard, the court-appointed trustee seeking Madoff’s assets for redistribution to thousands of victimized investors worldwide. Picard has so far issued more than $100 million in repayment commitments, a fraction of the total losses.
Guardian.co.uk – Investors are highly concerned about potential debt problems in unlisted European real estate funds, causing them to drastically cut back equity commitments to the sector, an industry body said on Thursday.
In a survey of investors, 88 percent said they were either "very concerned" or "concerned" about property funds breaching covenants, INREV (the European Association for Investors in Non-listed Real Estate Vehicles) said in an industry conference held in Greece.
American Chronicle – Morgan Stanley Alternative Investment Partners has raised $1.14 billion in commitments for its new private equity fund of funds, Morgan Stanley Private Markets Fund IV.
The capital raised for the new fund represents a nearly 15% increase over that of Morgan Stanley Private Markets Fund III, which was closed in 2006, the company said.
istockAnalyst.com – Mutual funds and hedge funds are very similar. An investor puts $10,000 into a mutual fund or hedge fund, and the manager uses that $10,000—along with the rest of the fund’s capital—to buy and sell securities.
Though often shrouded in mystery, hedge funds are pretty easy to understand. A mutual fund has to register with the Securities and Exchange Commission; a hedge fund does not. Why? Hedge funds are exempt from registration because they generally operate under one of two exemptions provided by the Investment Company Act of 1940:
Section 3(c)(1): Hedge funds are exempt from registration if they have "not more than one hundred" investors, all of which are accredited investors; or,
Time – Here’s one upside to a down market: a number of historically prominent mutual funds that long ago shut their doors to new investors are reopening.
It’s been years since anyone without an existing account could put money into some of the best-known names in the business, like Sequoia Fund, Dodge & Cox Stock, Longleaf Partners, Fidelity Magellan, Artisan Mid Cap Value, Oakmark Equityand Income, Vanguard International Explorer and Third Avenue Small-Cap Value.
Using commodities to hedge potential losses in stock markets has not worked lately, and the tighter link among assets these days means diversification benefits may not be as great as before.
Hedge funds, pension funds, mutual funds and wealthy individuals who invested in commodities on the theory that they move independently of other asset classes watched helplessly as the global economic nosedive turned commodities, once the top asset class, into the year’s worst performer after equities.
Those who have studied commodities and longtime investors in energy, metals and grains say that in ordinary times, these markets make good alternatives to stocks.
TheStreet.com – "Desperate times call for temperate measures" might be a (corrupted) saying that describes a prudent approach to the maelstrom of the stock market.
Mass redemptions resulting from turmoil in the hedge fund industry are a major factor in the market’s outsized swings in recent weeks. So it might seem ironic that three of the highest-rated mutual funds, as measured by TheStreet.com Ratings, are essentially hedge funds for Everyman.
Reuters – Traditional long-only mutual funds are set to dominate shareholder registers again as the hedge fund industry shrinks and retail investors continue to stay away, according to Morgan Stanley.
Meanwhile, with institutions, including hedge funds, deleveraging aggressively, emerging markets equity issuance is set to fall to 10 percent of total volume in Europe, Middle East and Africa in 2009 from one quarter this year, the bank told the Reuters Global Finance Summit.
"Traditional classic long-only funds, which used to be the main part of shareholder registrar in the 1990s, will become more important," said Emmanuel Gueroult, head of EMEA equity capital markets.
"The hedge fund industry is deleveraging…Access to credit is difficult."
Because of the recent market turmoil, many hedge-fund investors have questions regarding what regulations are applicable to hedge funds, and how to withdraw their money from their hedge-fund investments if they want out. Indeed, hedge funds often present many different barriers to withdrawal, and there are essentially no regulatory prohibitions on these barriers.
Perhaps the best way to understand the regulations that apply to hedge funds is to compare them with mutual funds. Mutual funds are investment companies that are required by law to register with the U.S. Securities and Exchange Commission (SEC) and, therefore, are subject to stringent regulatory oversight. Virtually every aspect of a mutual fund’s structure and operation is subject to regulation under four federal laws, including the Securities Act of 1933, the Investment Company Act of 1940, the Securities Exchange Act of 1934 and the Investment Advisers Act. The Investment Company Act regulates the structure and operation of mutual funds and forces funds to safeguard their portfolio securities.
Bloomberg – Hedge fund managers, after enduring the industry’s worst month in a decade, are seeking to explain to investors what went wrong and what they are doing about it.
“We clearly underestimated several things, most importantly the tsunami of redemptions that are being delivered to hedge funds as investors line up to get out of these funds as well as record outflows from equity mutual funds,” Jeffrey Gendell, who runs Greenwich, Connecticut-based Tontine Associates LLC, wrote in an Oct. 1 letter to clients.
“I am not a nervous person by nature, but should have been under the circumstances,” wrote Gendell, whose Tontine Partners LP fund plunged 59 percent in September, leaving it down 67 percent for the year, according to investors. Gendell, 49, had expected shares of steel, engineering, airline and chemical companies to appreciate because of falling oil prices. Instead they plummeted.
CNBC – Given the troubles in the market, we’re all worried about losing a chunk of our savings, whether it’s wrapped up in mutual funds, hedge funds or individual stocks. But how do you know when to bail on your fund (or fund manager) instead of just sticking out the volatility? Carmen offered some guidelines on Wednesday for distressed investors wondering when’s the right time to get out.
If you’re invested in a mutual fund, you’re probably seeing losses across the board. It’s important to look at the fund relative to other benchmarks, though, not just how it is performing against the Dow Industrials. If your fund has lost 10% or more relative to rival funds, Carmen suggested it might be time to pull the plug.
For hedge funds, be aware that it takes more time to redeem your investments. Do a gut check, Carmen said. If you feel uneasy about how your money is performing, that’s a sign. Trust your instincts as well as the overall performance of the fund.
