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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).
Boston Globe - Morgan Stanley and Goldman Sachs are responding to the credit crisis with a system that uses the market’s view of their own creditworthiness as a basis for lending decisions, the Financial Times reported.
Wall Street’s second-largest investment bank Morgan Stanley is essentially tying its promise to provide financing to hedge fund clients to the price of credit insurance on its own debt, it said.
If the cost of the protection rises to a certain level, that would trigger a reduction in Morgan Stanley’s commitments to hedge funds, the quoted people familiar with the situation as saying.
The message is that "if our firm is in trouble, we would rather fund ourselves than fund you (hedge funds)," the paper quoted a brokerage executive with knowledge of the arrangements as saying.
Times Online - The Christofferson Robb hedge fund is in talks to sell one of Britain’s largest proposed offshore wind farms less than a year after it bought the project.
Utilities and financial buyers have bid for the £800m Thanet wind farm, off the coast of Margate in Kent, after its owner began negotiations with potential partners about the building and financing of the project. The 300MW site is expected to begin operation next year and will provide power for up to 240,000 homes, increasing the UK’s total offshore wind power capacity by 30%.
“We need a lot of debt and equity to finance this and in the course of those discussions parties have said they would like to buy it all,” said Mark Petterson of Warwick Energy, the site developer. Christofferson Robb declined to comment.
The developers have increased the value of the project in the past year, gaining planning consent, debt commitments and a connection slot to the national grid. The hedge fund paid £47m for the site last year but is expected to pocket as much as £80m if it sells.
Bloomberg - Dow Kim, the former head of trading and investment banking at Merrill Lynch & Co., dropped plans to start a hedge fund after investors backed out, according to two people with knowledge of the matter.
Kim had been in discussions with institutions that had agreed to invest about $1 billion combined in his Diamond Lake Investment Group LP, said the people, who asked not to be identified because the talks were private. The New York-based firm had hired 30 people based on the commitments.
The evaporation of credit and declines surpassing 20 percent in some stock markets caused the initial investors to change their minds, said the people. Kim had planned a multistrategy hedge fund that would trade everything from equities to bonds to currencies.
FINalternatives- The $154.5 billion New York State Common Retirement Fund last month made commitments to a trio of hedge fund and private equity managers.
The CRF committed €150 million (US$233 million) to CVC European Equity Fund V and $50 million to Levine Leichtman Capital Partners IV, a $4 billion middle-market, woman-owned private equity shop.
The fund last month also made a $1 million commitment to Clarium Capital, a global macro hedge fund, through one of its funds of hedge funds, which was not disclosed for competitive reasons