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.
Bloomberg – President Barack Obama sent Congress his plan to rein in the $592 trillion over-the-counter derivatives industry, a measure that would cut into a profitable market for banks led by Goldman Sachs Group Inc. and JPMorgan Chase & Co.
The proposal issued yesterday would pressure derivatives users such as banks and hedge funds to move away from opaque customized contracts by imposing higher capital and margin requirements on the instruments. Standardized derivatives would be moved to regulated exchanges or trading platforms and sent through official clearinghouses, according to the draft measure.
CNBC – The Obama administration has sent legislation to Congress that would bring hedge funds and other private pools of capital under government supervision.
The proposal calls for the Securities and Exchange Commission to oversee hedge, private equity and venture capital funds. By registering with the SEC, their books would be open to federal inspection and they would be subject to disclosure requirements to investors and creditors.
Charleston Daily Mail – The Connecticut Senate has voted to require hedge funds and private equity funds located in the state and doing business here to disclose certain conflicts of interest to customers.
Supporters of the bill, which passed on a 24-12, party-line vote, say it’s needed because Congress hasn’t done enough to protect consumers and regulate the hedge fund industry.
Sen. Robert Duff, a Norwalk Democrat, says if Congress passes similar legislation before Dec. 31, the Connecticut bill would no longer be needed.
24/7 Wall St. – Citigroup has gone to the Treasury to beg for bonuses for some of its most important traders, people who make the banks extraordinary amounts of money. The Treasury’s reaction will probably be that it wants to stay out of a fight with Congress and avoid negative public opinion and will turn the request down.
That would be a mistake.
Wall St.’s primary argument for keeping a high level of compensation for its best investment bankers and traders is that, if they leave, overall losses at banks could get worse. People can be profit centers. The most successful ones help offset the red ink created by the series of poor decisions that big financial firms made about mortgage-backed paper and commercial credit loans. It is easy to assess the value of the best traders by looking at a bank’s books.
Lethbridge Herald - The top cop at the U.S. Securities and Exchange Commission is leaving the government less than a week after receiving an angry dressing-down before Congress over the agency’s failure to detect a massive alleged fraud scheme.
The SEC said Monday that Linda Thomsen is leaving to pursue opportunities in the private sector, but did not provide further details. She has been the agency’s enforcement director since May 2005, under two previous SEC chairmen.
A replacement for Thomsen wasn’t named. The leading candidate was Robert Khuzami, a former federal prosecutor who is managing director and general counsel of investment firm Deutsche Bank.
TheAdvocateOne year ago, former U.S. Rep. Richard Baker, R-Baton Rouge, stepped out of Congress to become the chief lobbyist for the trillion-dollar hedge fund industry and walked right into the economic tornado swirling through the nation.
“I don’t have too many irons in my fire,” Baker recently said. “I have too many fires in my irons.”
Now head of the Managed Funds Association in Washington, Baker’s one-year ban on lobbying former colleagues in Congress ended Monday.
He now expects to be going to Capitol Hill frequently to appear as a witness at congressional hearings. Neither Baker nor the association disclosed his salary, although some media report it to exceed $1 million a year.
International Herald Tribune – Two senior senators have introduced legislation to impose U.S. government oversight on hedge funds.
The legislation by Senator Carl Levin, a Democrat of Michigan, and Senator Charles Grassley, a Republican of Iowa, was filed Thursday while the administration of President Barack Obama prepared a broader legislative overhaul of the regulatory system, including an effort to regulate hedge funds more tightly.
State regulators and a panel created by Congress to oversee the $700 billion Troubled Asset Relief Program issued separate but similar regulatory proposals Thursday. The proposals also seemed to mirror closely many of the provisions that administration officials say will be part of their plan.
Reuters – State regulators urged Congress on Thursday to restore their authority to protect investors from fraud in the banking sector and to beef up oversight of hedge funds.
Hedge fund advisers should be subject to the same kind of scrutiny as investment advisers, the North American Securities Administrators Association told reporters.
The NASAA said Congress should give the Securities and Exchange Commission explicit authority to regulate the $1.4 trillion industry, which has the potential to destabilize markets.
Forbes – It’s been foul weather for hedge-heads. Redemptions are rampant, performance is drooping, the Securities and Exchange Commission briefly banned short-selling, and Congress summoned them to do some ‘splaining.
But the really bad stuff is yet to come. Hedge funds are coming under attack from popular culture. In fact, the two uber-villains of Candace Bushnell’s new book, One Fifth Avenue, are hedge-heads.
Dailyrecord.com – A judge presiding over civil claims filed against disgraced financier Bernard Madoff says he may be willing to consider extending relief from an investors’ fund to those who invested in Madoff’s business through third parties.
OAS_AD(‘ArticleFlex_1′);U.S. District Judge Louis L. Stanton told Daniel R. Goldenson and his wife in a letter dated Dec. 24 and made public Monday that their request to be eligible for relief from the Securities Investor Protection Corporation comes "early in the large and complex procedures which are underway with respect to Madoff’s affairs."
He said that before considering the issues involved in changing the terms of SIPC’s coverage, he would need a formal application and briefing from SIPC, the Securities and Exchange Commission, a trustee for Madoff’s business and representatives of investors.
The SIPC, which was created by Congress and funded by the securities industry, can give customers up to $500,000 each if it is determined their money was stolen. A telephone message seeking comment from the SIPC was not immediately returned Monday.
Bloomberg – D.E. Shaw & Co. LP, the investment firm run by David Shaw, and Farallon Capital Management LLC limited withdrawals by clients, joining more than 80 hedge-fund managers to impose restrictions in the past two months.
D.E. Shaw, which oversees $36 billion, capped redemptions from its Composite and Oculus funds, said two people familiar with the New York-based company. Farallon, a $30 billion firm based in San Francisco, did the same with its biggest fund after investors asked to get back more than 25 percent of their money.
The firms are two of the biggest to block withdrawals, known as putting up gates, so they aren’t forced to liquidate investments at distressed prices to raise cash. New York-based Fortress Investment Group LLC said yesterday it froze an $8 billion fund after getting redemption requests for 40 percent of its assets. Tudor Investment Corp., the Greenwich, Connecticut, firm run by Paul Tudor Jones, locked the $10 billion BVI Global fund last week ahead of plans to split the fund into two.
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."
