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.
This is Money – Institutional investors are still running scared from hedge funds after last year’s bloodbath, figures from sector giant Man Group show.
They pulled a net £2bn from Man Group in the first quarter of its financial year. Confidence in hedge funds has been rocked by their poor performance of late.
Keith Baird, analyst at Oriel Securities, said 2008 destroyed the entire theory of hedge funds ability to produce positive returns in any market. He said: ‘The illusion was shattered.’
Bloomberg – Hedge fund managers gathering in Monaco this week said they have work to do to regain investors’ confidence after the industry’s record losses last year.
“We have to prove as an industry that we can provide absolute returns again,” Pierre Lagrange, co-founder of hedge fund GLG Partners Inc., told some of the 750 delegates at the GAIM International hedge fund conference in Monte Carlo. “We have to show that in the next year or two we can strike back.”
Hedge funds tumbled 19 percent in 2008, the worst year since Chicago-based Hedge Fund Research Inc. began keeping records almost two decades ago, prompting investors to pull money, and funds to shut or impose limits on withdrawals. Funds have started to rebound this year, rising 9.4 percent through May, according to the HFRI Fund Weighted Composite Index.
NineMSN – Ospraie Management is launching two funds focusing on commodities and other liquid securities just eight months after it was forced to close its flagship fund amid huge losses on commodities trades.
The US hedge fund’s move, announced in a letter to investors, is a sign of growing confidence within the hedge fund industry.
"After much reflection and with a number of lessons learned, we see a set of opportunities today that we believe could create significant value for investors in coming years," Dwight Anderson, Ospraie’s founder, wrote in a letter last week obtained by the Financial Times.
The Ledger – Anxiously assembled at the most perilous moment for the global economy since the Great Depression, the world’s financial powers pledged more than $1 trillion Thursday for emergency loans to combat spreading chaos. But they rebuffed President Barack Obama’s bid for new stimulus spending and made no guarantees of success.
"This was the day the world came together to fight back against global recession," declared British Prime Minister Gordon Brown, the summit host, as he led a choreographed show of unity designed to boost confidence in homes and boardrooms everywhere. "This is just the beginning," added Obama.
No one promised an immediate impact, and all agreed much remained to be done.
The Columbus Dispatch – The hedge-fund industry, battered and humbled by the market downturn, no longer is planning to fight an increased role for government in regulating and inspecting the secretive investment pools.
Opposition has melted away as the market decline and prominent frauds have shattered the confidence of the pension funds, university endowments, charities and wealthy individuals who invest in the exclusive investment pools.
New York Times – The billionaire financier Carl C. Icahn put another $250 million into his hedge fund at the beginning of the year after suffering further losses in the fourth quarter on investments in Motorola and Yahoo, according to a letter he sent to investors.
The Icahn Fund Ltd. was down about 33 percent through the end of January after plummeting 22 percent in the fourth quarter, according to the letter. After receiving more than $1 billion in redemption requests from investors, Mr. Icahn put $250 million of his own cash into the fund in November to avoid selling shares to meet the redemptions.
Trying to instill confidence in his investors, Mr. Icahn decided to make another $250 million cash injection into the fund on Jan. 1. Still, over the last five months, Icahn Capital’s funds under management have shrunk by about $2.5 billion.
The losses are likely to affect the publicly traded Icahn Enterprises fund, which reports earnings on Thursday.
Bloomberg – Hedge fund Eastbourne Capital Management LLC nominated five directors to the board of Amylin Pharmaceuticals Inc. and is supporting a slate put forward by investor Carl Icahn, after it “lost confidence” in leadership of the maker of the Byetta diabetes drug.
Eastbourne, which owns 12.5 percent of San Diego-based Amylin, said in a letter to management yesterday that the company’s board needs to be “significantly strengthened” after the stock fell almost 80 percent since Oct. 5, 2007. In November, Eastbourne said it was talking with Amylin about options including “a possible acquisition by a third party.”
Reuters – The G30, a group of high-profile economists and policy-makers, on Thursday called for changes in international financial regulation to help avoid future meltdowns, but its recommendations were vague and non-binding.
In findings that made no reference to the issue of executive compensation, the group of bankers and policy-makers indicated that big firms that pose a risk to the entire system should be subject to particularly close scrutiny.
The global economy has been reeling from a financial crisis that began with a popping U.S. housing bubble and has since infected the entire financial system, shaking confidence and breeding mistrust.
Bloomberg – It has been a year of record misery: the largest bankruptcy, bank failure and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out.
The biggest loss and the hardest thing to recover, though, may be something that can’t be precisely measured — confidence in the markets and the firms that rely on them.
“The wholesale funding model lost its credibility,” said David Hendler, senior analyst at New York-based CreditSights Inc. “That started the semi-nationalization of funding in the financial markets. It’s a real chink in the armor of capitalism as supposedly the best process for allocating capital. The government is now deciding who gets access to capital.”
Evening Standard – Veterans of the secretive $1.5 trillion (£1 trillion) industry say the $50 billion Madoff fraud could bring about sweeping changes in the way the authorities monitor activity.
"This is an Enron moment for hedge funds," said Peter Rup, chief investment officer at New York hedge fund Orion Capital Management. "Regulation would be welcome, primarily from a trust standpoint."
Enron, once the world’s largest energy-trading firm, collapsed in 2001 amid allegations of accounting fraud. Less than a year later, US lawmakers passed the Sarbanes-Oxley Act, which set tighter corporate accountability rules for publicly traded companies.
Suggestions for rule changes for hedge funds include strengthening whistleblower programmes and imposing capital requirements similar to those for mutual funds. Rup and others argue this would restore confidence in the market.
