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.
Detroit News – President Barack Obama is ready to roll out an overhaul of the intricate rules and systems that govern America’s troubled financial institutions, proposing the most ambitious revision since the Great Depression.
The goal is to prevent a recurrence of the economic crisis that erupted in the United States and exploded last fall with devastating consequences still reverberating around the world.
Unlike the government’s temporary ownership stake in automakers and major financial companies, the regulatory changes set to be announced Wednesday are designed to be permanent. They could result in a major realignment of power and authority among government agencies that set the rules for banking, lending and investing and touch American lives through daily transactions, from credit cards to mortgages and mutual funds.
domain-B – Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200-billion programme intended to support consumer credit.
The new programme is aimed at injecting credit for consumers and small businesses including auto loans and credit cards will be launched in February.
The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before.
The New York Fed will offer loans under the TALF on a monthly basis. On a fixed day each month, borrowers will be able to borrow by means of one or more loans by indicating for each loan the eligible collateral, the desired amount, the desired interest rate format — fixed or floating.
Commodity Online – Steep performance losses and record investor capital redemptions reduced the size of the hedge fund industry by $210 billion in 3Q08. This represents the largest historical quarterly decline in assets, according to data released the other day by Hedge Fund Research, (HFR), a leading source of hedge fund information and performance data.
Analysis compiled using HFR Database shows investors withdrew over $31 billion in third quarter, the largest net capital redemption in the industry’s history. At the end of the third quarter, total industry capital stood at $1.72 trillion, down from $1.93 trillion at the end of second quarter..
The third quarter withdrawals entirely offset the capital inflows into hedge funds during the first half of the year, bringing year-to-date net capital flows to a decline of $2.5 billion. The decline in industry assets also exceeds the entire amount of investor capital inflow from 2007, which was a record $194 billion.
Reuters UK – The bankruptcy filing of Lehman Brothers is another blow for the hedge fund industry, but at least the damage is limited from here for funds exposed the U.S. investment bank.
Even legendary fund manager George Soros, who runs around $18 billion (10 billion pounds) in assets, is likely to have been affected after raising his stake in the investment bank to 9.5 million shares in the second quarter.
A spokesman for Soros Fund Management declined to comment on the composition of their portfolio.
British activist hedge fund Algebris is also likely to have been hit by the fall in the share price of Lehman, once the fourth-largest U.S. investment bank.
The hedge fund firm owned just over 4.45 million shares at end-June, Thomson Reuters data show. Algebris sold its stake this year, a spokesman said, declining to give further details.
On Wall Street – Assets held in hedge funds grew 4.41% during the second quarter, to $2.973 trillion, according to data released Monday.
HedgeFund.net reported in its survey of hedge administrators that investors allocated $34.21 billion to hedge funds in the quarter and performance gains added $91.28 billion of asset value.
The dollar amount of fund liquidations during the quarter was larger than that of fund launchings by an estimated $8.52 billion; this was the third-highest level of fund closures on record.
Despite liquidations, large funds appear to have attracted enough capital to expand the industry overall at an organic growth rate of 11.06% from a year earlier.
InvestmentNews – Emerging-market strategies gained some momentum during the quarter ended June 30, but are still struggling, according to Hedge Fund Research Group LLC of Chicago.
HFR reported today that emerging-market hedge funds took in $995 million during the second quarter, reflecting a 66% increase over the $597 million worth of inflows into the strategy during the first quarter of the year.
But the inflows into the category paled in comparison to the year-ago quarter, when emerging market hedge funds took in $3.7 billion.
If the current pace of asset flows continues through the end of the year, the emerging-markets strategy could experience its worst year for investment flows since 2000, when the category had net outflows.
A new report released Monday by HedgeFund.net estimates the assets under management by hedge funds have reached nearly $3 trillion.
According to the report, hedge fund assets increased 4.41 percent last quarter, in spite of rough equity markets, to reach $2.973 trillion. The report combined data from a bi-annual survey of hedge fund administrators and information from HedgeFund.net’s database of more than 8,400 funds.
Peter Laurelli, vice president of Channel Capital Group which owns HedgeFund.net, said hedge fund assets will probably top $3 trillion sometime in the next couple of quarters, depending on performance.
Fund performance accounted for $91.28 billion being added to hedge funds last quarter, while investors placed an additional $34.21 billion in new assets with hedge funds. One dark spot for the industry was that liquidations of funds last quarter exceeded assets in newly established funds by $8.52 billion. Second quarter saw the third-highest level of hedge fund closures on record.
"It’s a natural evolution of the industry if you have funds that are not performing well," Laurelli said. "When you go through a period like we’ve had where there have been some large losses in the industry, you’re going to have fund closures. That doesn’t mean that the industry is contracting, it just means that there is some turnover."
Reuters UK – Fund firm BlackRock held onto the top spot for net sales of British funds to retail investors in the second quarter, according to industry data, helped by sales of its hedge fund-style UK Absolute Alpha fund.
BlackRock had 879.2 million pounds of net sales, up from 713.6 million pounds in the first quarter, according to Lipper Feri’s Fund Sales Report.
The report comes as the funds industry faces lower sales due to volatile and falling markets and investor caution. According to the Investment Management Association, net retail sales were 139.5 million pounds in June, down from 747.8 million pounds a year before.
International Herald Tribune – Blackstone Group, manager of the world’s largest leveraged-buyout fund, said Wednesday that second-quarter profit beat analysts’ estimates as gains from hedge funds offset a decline in private-equity takeovers.
Net economic income, a measure that excludes some compensation costs, fell 75 percent to $165.6 million, or 15 cents a share, from $655 million, or 58 cents, a year earlier, the New York-based Blackstone said. That exceeded the average estimate of 8 cents a share by 10 analysts in a Bloomberg survey. Revenue declined 63 percent to $353.7 million.
Blackstone’s fees from buying and selling companies have plunged as buyouts of more than $2 billion dried up and initial public offerings fell to their lowest in four years. Investors backed away from the debt used to finance LBOs in the fallout from the collapse of subprime-mortgage securities in the second half of last year.
New York Times – The Blackstone Group may be best known as an immense private equity firm, but the firm’s earnings report on Wednesday made it clear that Blackstone has been buoyed by its hedge fund operations.
Blackstone reported $165.6 million in profit for its second quarter, excluding costs tied to its initial public offering last June. That represented a nearly 75 percent drop from the same period last year, a consequence of the troubles still plaguing the credit markets. On the basis of generally accepted accounting principles, the firm reported a pretax loss of $185.5 million.
Yet Blackstone’s results, which amount to 15 cents a unit, still beat the average analyst estimate of 8 cents a unit, according to Bloomberg News.
Other publicly traded alternative-asset managers also reported quarterly earnings on Wednesday. Och-Ziff Capital Management, a big hedge fund, said it earned $93.3 million, while GLG Partners, a large hedge fund based in London, reported profits of $44.2 million. Both figures exclude costs related to the firms’ public offerings.
Reuters Singapore – Investors almost halved the money they put into Asia-focused hedge funds in the second quarter compared to the first three months of the year as a selloff in stocks hurt appetite for risky assets, data showed.
Asia-focused hedge funds received a net $530 million (268 million pounds) from investors in the April-June quarter, down from $1 billion in the first quarter, Chicago-based Hedge Fund Research said in a statement released late on Thursday.
Asian hedge funds grew by approximately $200 million to $100.48 billion, up just 0.25 percent from the first quarter, as inflows were mostly offset by a decline of nearly $320 million due to poor performance.
Reuters – Investors almost halved the money they put into Asia-focused hedge funds in the second quarter compared to the first three months of the year as a selloff in stocks hurt appetite for risky assets, data showed.
Asia-focused hedge funds received a net $530 million from investors in the April-June quarter, down from $1 billion in the first quarter, Chicago-based Hedge Fund Research said in a statement released late on Thursday.
Asian hedge funds grew by approximately $200 million to $100.48 billion, up just 0.25 percent from the first quarter, as inflows were mostly offset by a decline of nearly $320 million due to poor performance.
"Asian hedge fund investors reacted to continuing market volatility by adjusting allocations opportunistically to those regional markets that had posted sharp year-to-date losses," said Kenneth Heinz, president of Hedge Fund Research.
