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Forbes - In the December issue of Dan Wiener’s newsletter, "The Independent Adviser for Vanguard Investors," Wiener interviews James Barrow, lead manager for $31 billion Vanguard Windsor II, and learns that the venerated value manager believes that hedge fund liquidations should cease by the end of the year, taking a good deal of volatility and downward pressure out of the markets.
Barrow told Wiener that: "All of that money the banks loaned the hedge funds is getting called in. They are selling these guys out. Not only are these guys getting redeemed by their investors, they’re getting redeemed by their lenders. I don’t know how long this has to go on–it’ll obviously be over by the end of the year, but it could be pretty bloody between now and then."
Forbes - A group of Dillard’s Inc. investors is asking the family that controls most shares in the department store chain for corporate records containing information on family and business relationships and perks given to directors or executives of the department store chain.
The request was detailed in a filing with the Securities and Exchange Commission and comes as softening consumer spending has many retailers, including Dillard’s, posting weak sales ahead of the crucial holiday season.
Forbes - German Chancellor Angela Merkel on Thursday called on the European Commission to quickly approve Germany’s planned aid for lender Commerzbank as part of its bank rescue package.
Germany is in a dispute with the Commission over whether the aid for Commerzbank complies with the terms of the 500 billion euro ($633.4 billion) rescue fund that the EU has approved.
Forbes - Fortress Investment Group pulled up the portcullis on its Drawbridge funds Wednesday, but it’s stock is under seige.
Fortress Investment Group’s directors voted to temporarily suspend pending redemptionsafter investors asked to pull out roughly $3.5 billion by year’s end from its Drawbridge funds, nearly as much as the vehicles have in assets.
Forbes - Financial assets have become so cheap because of the credit crisis that now is a good time to scoop up bargains, the head of one of the world’s biggest hedge funds, Avenue Capital, said on Wednesday.
‘Now is a phenomenal time to buy, assuming you think we’re not in a depression,’ Marc Lasry, chairman and CEO of the company, said at the 2008 Clinton Global Initiative meeting in Hong Kong.
‘We’re looking at valuations we think are extremely low. Unless the unthinkable happens, you’ll be fine,’ he said, referring to the investment environment.
Forbes - Major Wall Street firms placed large bets against Morgan Stanley using credit-default swaps, two days after Lehman Brothers Holdings Inc sought bankruptcy protection, the Wall Street Journal said, citing trading records.
The firms included Merrill Lynch & Co, Citigroup Inc, Deutsche Bank AG and UBS AG, according to the paper.
The paper said that a close examination of the trading revealed that the swaps played a critical role in magnifying bearish sentiment about Morgan Stanley.
Forbes - Hedge funds are to the modern stock market as sun spots were to electronics in the 1960s: a convenient scapegoat when things go wrong without an evident cause. But they probably aren’t to blame for last week’s poor showing on Wall Street, and rumors of the industry’s demise are likely premature.
There has been speculation that funds are currently under pressure to sell stocks because Saturday was 45 days from the end of the year. Traditionally, some hedge funds have given their shareholders a month and a half to make their intentions of annual sales known.
Forbes - Business software company Epicor Software Corp. said Monday it will not pursue a $566 million buyout offer from shareholder Elliott Associates LP.
Hedge funds Elliott Associates and Elliott International LP offered to buy Epicor Oct. 1 for $9.50 per share, representing a 20.4 percent premium to the stock’s closing price of $7.89 on Sept. 30. Based on Epicor’s 59.6 million outstanding shares as of Aug. 1, the deal would be worth roughly $566 million.
At the time, the offer was still well below the stock’s 52-week high of $14.04 reached last October.
The hedge funds own 10.2 percent of Epicor.
In a letter to Elliott, Epicor President and Chief Executive Thomas F. Kelly said the company has a roadmap of products planned over the next 18 to 24 months and has the opportunity to establish itself further in the market and grow.
Forbes - The hedge fund sector has to date weathered market volitality better than the banking sector, since no large bellwether hedge fund has yet gone bankrupt. Nonetheless, hedge funds are expecting a wave of redemptions, as investors move to safer investments and reconsider their commitments to the sector.
Hedge fund sector resilience? Whereas banking sector difficulties have provoked a host of policy responses, including Treasury Secretary Henry Paulson’s now-moribund $700 billion bailout package–no hedge fund problem has yet necessitated a similar systemic response. The apparent resilience of the sector is particularly striking given that recent estimates suggest that the $2 trillion hedge fund industry accounts for approximately 30% of U.S. equity and bond trades (although volatile market conditions have led many managers to shift greater percentages of their holdings into cash-equivalents).
Forbes - It’s hard to fathom. But as lousy returns start pouring in, managers of some of the most successful hedge funds in recent years are apologizing for their dismal showing.
"The last quarter has been abysmal," wrote TPG-Axon Capital Manager Dinakar Singh, highlighting the sentence in bold and underlining the word abysmal. "And we are sorry to have let you down with the terrible performance of the portfolio." TPG-Axon is down about 20% through September, say market players. A spokesman declined to comment.
Greenlight Capital, well-known for its long-time bearish position on Lehman Brothers, acknowledged to investors that "we made some mistakes. … In hindsight, our suggestion from last quarter’s letter to go to cash and go to the beach would have been the better option."
Forbes - In light of the higher risks which are sweeping global markets, Finvest Asset Management is set to launch a new capital protected offering for investors who are seeking to generate annual returns of between 12-20 percent in a low risk structure.
The total offering is for $500 million and is open to non-U.S. investors only. It is anticipated, based on early interest in the product, that the product will be oversubscribed. The capital protected investment vehicle will be protected by a AAA institution which will not have any association with an investment bank or exposure to sub-prime which has been a crippling factor to global markets, and an issue of concern through the current credit crunch crisis. In an environment where cash is king, and several high profile hedge funds have experienced blow outs, this capital protected product offers investors an alternative possibility of security and the ability to earn above average risk adjusted returns.
Forbes - Lobbyists for the $2 trillion hedge fund industry made a last ditch effort Wednesday to convince U.S. securities regulators to let an emergency order prohibiting short selling in more than 950 financial firms expire Thursday.
"The orders have not prevented price declines of financial institutions, volatility in the securities of these firms, or the failure of a financial institution," said Richard Baker, president of hedge fund lobby group Managed Funds Association.
Baker said the emergency orders have increased volatility, reduced liquidity and abruptly halted capital-raising, including through the issuance of convertible securities.
But a number of securities law experts expect the Securities and Exchange Commission to extend the ban beyond Thursday because of the current fragile state of the markets.
Under the SEC emergency measures, short selling in the U.S.-listed financial firms stocks has been prohibited for about two weeks.