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.
eFinancialCareers UK – Times are still not good for junior quants and mathematical PhDs who aspire to work in investment banks. With banks pulling back from complexity, there’s less need for their talents.
Mark Davis, a professor of maths at Imperial College, says lots of his students still want to work in finance, but they’re also being forced to contemplate defence, pharmaceutical work, and the consultancy branches of accountancy firms.
One recruiter says quants who can’t get into financial services are also to be found in “systematic gambling” at the likes of Betfair and Ladbrokes, where they analyze data in the same way hedge funds do.
Guardian.co.uk – "Parts of the current complexity arises from the existence of distressed debt investors who sometimes see commercial advantage from using an insolvency process to organise the sale of the viable part of a business to a solvent buyer leaving behind the least profitable parts," Tony Lomas, chairman of PwC Business Restructuring, said.
Vulture funds buy debt in struggling firms at a significant discount – sometimes at 20p in the pound – expecting that when the company breaches its loan covenants and falls into administration, a sale of assets may repay debt at a higher price.
guardian.co.uk – Hedge fund investors may face an expensive tug-of-war with managers, according to a new research paper that suggests they could lose as much as 15 percent of their initial investments should they be unable to exit when they want.
Hedge fund investors have rarely been allowed to pull their cash out immediately, but now they are sometimes being told that they may not be able to pull it out at all as the industry faces its worst-ever returns.
Dozens of prominent hedge funds, including Fortress Investment Group LLC and Tudor Investment Corp, have recently restricted redemptions in some of their portfolios.
This trend is not only aggravating but also extremely pricey, Nicolas Bollen, a professor at Vanderbilt University’s Owen Graduate School of Management, said in an interview.
Reuters UK – Hedge fund investors may face an expensive tug-of-war with managers, according to a new research paper that suggests they could lose as much as 15 percent of their initial investments should they be unable to exit when they want.
Hedge fund investors have rarely been allowed to pull their cash out immediately, but now they are sometimes being told that they may not be able to pull it out at all as the industry faces its worst-ever returns.
Dozens of prominent hedge funds, including Fortress Investment Group and Tudor Investment, have recently restricted redemptions in some of their portfolios.
Reuters – Even hedge-fund managers with portfolio gains are in trouble this year.
Dozens of managers who are outperforming the market and their troubled rivals with gains of as little as a few percent or as much as nearly 100 percent are facing a surge of withdrawals as investors try to exit during the worst bear market since the Great Depression.
Connective Capital, a Palo Alto, California-based hedge fund, treated investors in its short strategy to an eye-popping 85 percent gain this year as its benchmark Nasdaq Index slumped 42 percent. Still, clients asked manager Robert Romero to return roughly 20 percent of their capital.
New York Times – Hedge funds are facing many agonies. They are tortured by redemptions. Then there are “high water marks,” another now-troublesome part of their model. They need to fix such flaws if they are to fight another day.
The list of funds blocking investors from withdrawing their money is growing daily. Tudor Investment, the Fortress Investment Group and dozens of others have done so, at least temporarily. The rationale is to protect the fund’s remaining investors, who can be harmed if the fund needs to deplete its cash balance or sell assets at fire-sale prices.
New York Times Blogs – Duff Capital Advisors has recently laid off dozens of its employees and is holding off on its plans to raise as much as $1.5 billion just eight months after the hedge fund firm began business, according to people briefed on the actions.
The Greenwich, Conn.-based firm was started in March by Philip N. Duff, a former chief financial officer of Morgan Stanley, with $500 million of capital from the New York private equity firm Lindsay Goldberg. At the time, Duff Capital said then that it was in discussions with several financial institutions to provide seed money for its investment strategies, beginning in the past spring.
While the firm is still in discussions with clients and some potential investors, it has failed to find any new capital so far.
Reuters – Hedge fund managers could play a key role in jump starting the ailing U.S. economy if Washington offers them appropriate tax breaks, a prominent hedge fund industry lawyer said on Tuesday.
Sitting on billions of dollars in cash, dozens of hedge funds are looking for investments at the same time cash- strapped small and mid-sized companies search for new money to help them stay in business.
Together these unlikely partners could find a way to escape a debilitating liquidity crisis that threatens to push the country further into its deepest financial crisis since the Great Depression, Perrie Weiner, a partner at law firm DLA Piper told Reuters in an interview.
"There is a way out, but the answer lies not with the current government rescue plan, but rather with hedge funds," Weiner, who advises dozens of hedge funds as international co-chair of DLA Piper’s Securities Litigation group said one day before speaking about the topic at an industry conference.
Reuters UK – Dozens of hedge funds have told investors they cannot get their money back right now as managers try to limit a wave of redemptions to safeguard all their clients’ investments — as well as their own futures.
Only a few months ago, hundreds of the world’s estimated 9,000 hedge fund managers made it tough for wealthy investors to put money into their funds by requiring high investment minimums of $1 million (617,500 pounds) or more and charging heavy fees.
Now managers are making it hard for investors to get out.
"Everyone is looking at their gate provisions (mechanisms that limit redemptions) and what rights they have to close their gates," said Timothy Mungovan, a partner who advises hedge funds at law firm Nixon Peabody LLP. "It is a phenomenon that has been occurring for some time and is picking up pace now."
Bloomberg Europe – Lehman Brothers Holdings Inc.’s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business.
John James, who runs the Chicago-based firm with $25 million of assets, didn’t buy Lehman stock or debt. Instead, his potentially fatal mistake was to rely on the bank’s prime brokerage in London, a unit that provides loans, clears trades and handles administrative chores for hedge funds. He’s one of dozens of investment managers whose Lehman prime-brokerage accounts were frozen when the company filed for protection from creditors on Sept. 15.
“We’re probably going out of business and liquidate, game over,” James, 59, said. “We’ve lost 70 percent of our assets.”
The list of funds trapped in the Lehman morass keeps growing. London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman, according to an investor letter.
Reuters – The Federal Reserve acted on rumors last month and called Credit Suisse Group to see if it had pulled a credit line from Lehman Brothers Holdings Inc, The Wall Street Journal said citing people familiar with the matter.
Credit Suisse told Federal Reserve officials that there was no truth to the rumor and it had no intention of pulling the line of credit, the paper cited the people as saying.
A person familiar with the rumor told the Journal that it was circulating in early July.
Fed officials contacted Credit Suisse last month, but it is unclear whether the move occurred before or after the U.S. Securities and Exchange Commission subpoenaed dozens of hedge funds and financial firms about four Lehman-related rumors, the paper said.
Star News Online- Dozens of hedge funds, private equity groups and other investors have plunged into the beaten-down mortgage market in recent months, buying tens of thousands of distressed loans and foreclosed properties around the country. They hope to profit from the woes of banks and other investors holding mortgages that have plummeted in value as home values sink and defaults soar.
They are buying them from Wall Street investment banks eager to rid themselves of bad assets. Merrill Lynch & Co., for example, said this week it would sell mortgage-linked investments once valued at $30.6 billion for just $6.7 billion to Lone Star Funds, a distressed-debt investor in Dallas.
Many of the hedge funds, run by former Wall Street and lending industry executives, claim they can do a better job than banks or other investors of modifying mortgages at terms that consumers can afford.
