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.
MSN Money UK – Northern Rock was the darling of the UK mortgage sector, but fuelled its rapid growth by borrowing in money markets and selling on its mortgage debts rather than customer deposits.
The eruption of the credit crunch in August 2007 as banks clamped down on risks shattered its business model and forced it to seek emergency aid from the Bank of England.
Independent – The collapse of Lloyds’ share price on Friday afternoon was deeply upsetting – and not just for shareholders in the bank.
Two weeks ago, those annoying folk at Paulson & Co, the hedge fund that has made a fortune from the credit crunch, took a sizeable short position in the bank. It looked like a duff bet: having sold Lloyds short at about 65p, the fund watched as the bank’s share price climbed to about 125p. And then the HBOS loss was disclosed and Lloyds plunged to 61p on Friday. That calamitous drop will have earned Paulson tens of millions of pounds. Darn it.
Bankers at the Japanese investment bank Nomura are cock-a-hoop at having earned fat fees advising Chinalco on its £200bn investment in the mining giant Rio Tinto. For various cultural and historical reasons, it is pretty unusual for Japanese companies to win work from China, so this was a breakthrough deal for Nomura. It was secured by the mining team that Nomura acquired when it bought bits of Lehman last year. In every cloud there’s a silver lining.
West Palm Beach (HedgeCo.net) – Playing a hedge fund banker turned killer, Dougray Scott stars in the ‘credit crunch’ movie: New Town Killers. It being shown for the first time in Scotland tonight as part of the Glasgow Film Festival’s fifth anniversary.
Filmed in Edinburgh’s streets, according to UK’s DailyRecord, the movie is high octane, violent and bloody. New Town Killers was made for only £1 million and with perfect timing, as it has already been dubbed the first credit-crunch movie of 2009.
It shows Dougray as a cold-hearted hedge fund banker who turns killer for kicks, playing a 12-hour game of hunt, hide and seek with underprivileged people, according to the paper.
"In creating a scenario where the well-heeled and privileged prey on the poor and deprived, director Richard Jobson is clearly wearing political concerns on his sleeve in his latest film, and is to be admired for it." Says Michael Hayden, of the British Film Institute, "Yet New Town Killers is not bleeding-heart social commentary, but an ambitious and kinetic thriller, a tension-packed joyride through Edinburgh streets; it is obvious Jobson knows the city well, and that he loves it, he presents it wonderfully."
Also in the film is James Anthony Pearson, Joy Division guitarist and actress Liz White, in debt and playing the banker’s game for cash. It also stars Joely Richardson, Vanessa Redgrave, Eddie Izzard, Jason Priestley and Brian Cox as Dougray’s dad, Dennis.
Dougray said, "The fact that Jobson wrote this before all the banking collapses is incredible. The film gets a cinema release in June.
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guardian.co.uk – The shadow business secretary, Kenneth Clarke, has become the latest victim of the credit crunch after losing his job on the board of a hedge fund, the Guardian has learned.
Clarke, who was parachuted back on to the Tory frontbench to beef up the party’s handling of the financial crisis, has been axed from the board of Centaurus Capital as the sector faces its worst crisis in decades.
The hedge fund, which like other investment companies faces huge withdrawals of cash from clients anxious about plunging stock markets, has scrapped its advisory board, which also included José María Aznar, the former Spanish prime minister.
BusinessWeek – With the price of gold racing higher over the past two months, more investors are coming around to the notion that the precious metal may be the best option to protect against a possible economic catastrophe. Among the surprise new buyers? Star hedge fund manager David Einhorn.
Gold rose steadily from its November 2008 low of $682 to close at $910.70 on Jan. 26, a five-month high. Despite selling off about $10 an ounce over the next two days, investors, it seems, have realized that much of the Federal Reserve’s plan for fighting the credit crunch and reviving the economy are also likely to bolster gold’s prospects.
guardian.co.uk – Secretive hedge fund barons, blamed by many for undermining Britain’s financial stability, will be unmasked on Tuesday when they are forced into the public spotlight by the powerful Treasury select committee.
As suggestions grow that hedge funds have made huge sums shorting UK bank stocks and sterling, the billionaire Chris Hohn and Liberal Democrat-supporting tycoon Paul Marshall will be quizzed on whether the predicted decimation of hedge funds as a result of the financial crisis could destabilise the global economic system further.
Hedge fund bosses will argue that they manage "only" £1.3 trillion of cash, which is less than a large fund manager, and that not one hedge fund has received a public bail-out. In addition, of the 150 bans or censures levelled by the Financial Services Authority since 2005, only two have involved hedge funds. They will also say that there have been numerous examples of hedge funds shorting sub-prime assets ahead of the credit crunch.
Reuters – The government is considering injecting as much as 10 billion pounds into Northern Rock to use the nationalised bank to ramp up mortgage lending, the Daily Telegraph reported.
The Treasury has yet to make a final decision on the plan, which may also see the bank hiring new staff, the newspaper reported in its Friday edition.
Spokesmen for the Treasury and Northern Rock, which is due to unveil a new business plan in the next few weeks, could not immediately be reached for comment.
Northern Rock became the first British casualty of the credit crunch in September 2007 when the bank, heavily dependent on wholesale markets for its funding, revealed that it had been forced to seek emergency support from the Bank of England.
The bank was nationalised in early 2008 after attempts to find a private sector buyer fell through.
WalesOnline – Last week saw the return of the credit crunch’s bogey product: short selling.
The practice was banned by the Financial Services Authority last September after it was blamed for wiping millions off the value of bank shares, betting as it did that prices would fall as the recession bit deeper.
At the end of Friday last week, on the day of its re-introduction, a familiar pattern had re-emerged. Barclays closed down some 25% (although the bank reported that its profits would be “well ahead” of the £5.3bn predicted by some forecasts), while RBS fell by 13%.
The Independent – Since the credit crunch began, hedge fund managers have become one of the most maligned sections of society, held responsible for the economic pain which all of us now feel. Never mind a row of shrubs, they should probably start managing a line of sandbags and an air-raid shelter.
So it is not surprising that Christian Smith, editor of a journal dedicated to this indescribably wealthy and secretive group, informs its readers that Hedge magazine is intended to be their "safe haven". In a letter from the editor, he writes: "If there’s one thing everybody needs right now, it’s good news and plenty of it, and we’re here to serve it up in spades."
Alongside articles about art collecting, fine wines and cricket, are full-page advertisements for Pershing yachts, luxury watches and Australian pink diamonds. The cover star is the usually reclusive, Mike Platt, the CEO of Europe’s thirdlargest hedge fund management company, BlueCrest, who the magazine has persuaded to give an interview about his interest in cutting-edge art. That’s quite a scoop.
