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.
West Palm Beach (HedgeCo.net) – Convertible Arbitrage: Shifting Gears (more found here at HedgeCo/blogs) discusses the strategy’s ability to generate positive returns both during the declines in equity markets in January and February, as well as during the global market rallies in March and April.
Convertible Arbitrage went from being one of the worst-performing strategies in the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) in 2008, to one of the best-performing strategies in the first quarter of this year. Many believe that the fundamental and technical reasons for convertibles’ devaluation in 2008 may correct as credit markets begin to stabilize and if deleveraging continues to abate.
Bloomberg – Goldman Sachs Group Inc., unbowed by the securities industry’s worst year since the Great Depression, increased its trading bets at the fastest rate on Wall Street.
Goldman Sachs’s so-called value-at-risk, the amount the New York-based bank estimates it could lose from trading in a day, jumped 22 percent to $240 million in the first quarter, twice what Morgan Stanley stands to lose, company reports show. VaR climbed 2.8 percent in the same period at JPMorgan Chase & Co. and dropped 14 percent at Credit Suisse Group AG.
Alibaba News Channel – Investors generally put aside recent worries about the world economy and banking industry woes on Thursday, sending global stocks higher and reversing safety flows into the Japanese yen.
Mixed earnings plagued European markets, however, with Credit Suisse posting better-than-expected profits and engineering group ABB missing forecasts and giving a cautious outlook.
Euro zone purchasing managers provided the latest "green shoots" data to suggest some economic recovery. They signalled stabilisation in their sectors but also record job losses.
West Palm Beach (HedgeCo.net) – Credit Suisse announced the launch of a new Global Macro Replication Index which aims to capture the risk/return characteristics of the Credit Suisse/Tremont Global Macro Hedge Fund Index.
The new index enables investors to gain liquid, transparent insight into the global macro hedge fund sector.
"Due to a frequent lack of transparency, hedge fund investors found themselves exposed to numerous unforeseen risks in 2008, and problems were only exacerbated when liquidity dried up just as investors needed it most. Yet despite the drawbacks, hedge fund returns remain positive relative to equities and hedge funds continue to serve as an effective portfolio diversifier. Many investors have been left seeking liquid, transparent and cost effective solutions for gaining access to the asset class," Credit Suisse delcared.
Dr. Jordan Drachman, Head of Research for Credit Suisse Alternative Beta Strategies, said, “In the wake of current investor sentiment, replication strategies are gaining in popularity for their ability to provide similar risk/return characteristics to a well diversified portfolio of hedge funds, while avoiding certain drawbacks of hedge fund investing such as illiquidity, lack of transparency and headline risk.” Drachman added, “We are currently seeing increased interest in the Global Macro sector, as the strategy has a history of producing positive performance during market downturns and has been the top performing hedge fund sector since the inception of the Credit Suisse/Tremont Hedge Fund Index in 1994.”
The Global Macro Replication Index joins the existing Long/Short Equity Replication Index to become the second in a suite of Alternative Index Replication (AIR) products. Together, the indices offer insight to two of the largest and most popular hedge fund sectors in the current market environment.
Professor Bill Fung, a key research advisor to Credit Suisse’s alternative beta efforts, stated “In developing a replication index, it is imperative that researchers understand the in-depth intricacies of hedge fund sectors and individual manager performance.” Fung went on to say, “The team has access to superior data through the Credit Suisse/Tremont Hedge Fund Index. Together with regular contact with hedge fund managers, this combination provides practical insight into the behavior of hedge fund strategies and adds a level of fundamental analysis to the quantitative construction of the Index. This is particularly important in the Global Macro space which is dominated by managers that engage in dynamic strategies in an ever changing market environment; and these managers have done so successfully during very challenging times historically as well as more recently.”
Index values are finalized daily and quoted on Bloomberg under the symbol AIRI. Performance, descriptions, statistics and downloadable price history can be found on the newly launched Credit Suisse Alternative Beta website,www.credit-suisse.com/alternativebeta.
Credit Suisse has helped pioneer the measurement of alternative beta for more than a decade. By bringing together indexing expertise, an academic partnership with key research advisors and extensive global resources, Credit Suisse continues to lead the industry in developing alternative index replication products.
Bloomberg – UBS AG, Switzerland’s largest bank, nominated former Finance Minister Kaspar Villiger as chairman of its board of directors, replacing Peter Kurer after one year amid a probe into whether it helped wealthy Americans evade taxes.
Kurer’s departure comes less than a week after UBS called former Credit Suisse Group AG Chief Executive Officer Oswald Gruebel, 65, out of retirement to replace CEO Marcel Rohner. Villiger, 68, will step down from board positions at Swiss Reinsurance Co, Nestle SA and Neue Zuercher Zeitung if elected by shareholders on April 15, the Zurich-based bank said today.
UBS is being sued by the U.S. over the names of as many as 52,000 clients, after agreeing last month to hand out details of a few hundred customers to avoid prosecution on a charge that it helped rich Americans dodge taxes. The bank is cutting 11,000 jobs after more than $50 billion in losses from the credit crisis, and clients withdrew $195 billion of assets last year.
“This is a clean slate,” said Christian Stark, an analyst at Credit Agricole Cheuvreux in Zurich who has an “underperform” rating on the stock. “Villiger hasn’t got the banking experience, but his political background may be useful in dealing with the U.S. and European Union.”
UBS rose 37 centimes, or 3.7 percent, to 10.26 francs by 1:02 p.m. in Swiss trading. The bank has lost 84 percent of its market value in the past two years and posted the biggest ever loss by a Swiss company earlier this year.
Business Standard – Spooked by increasing performance losses and record investor redemptions, the global hedge fund industry saw net outflows worth $158.91 billion in the fourth quarter of calendar year 2008, the highest level since 1994.
According to a report by fund tracking firm Lipper, global hedge fund assets are estimated to have decreased from $1.5 trillion in September to $1.29 trillion at the end of December 2008.
All hedge fund sub-strategies posted negative money flows (outflows) in the three-month period with cumulative net outflows in 2008 as the industry witnessed a collapse in global equity markets, liquidity issues and failure of a number of key institutions.
In absolute terms, the performance of Credit Suisse/Tremont hedge fund index in Q4 2008 registered -10.21 per cent, the second worst quarterly performance since the start of the index. The index had posted 10.33 per cent negative returns during the third quarter. "A majority of hedge fund managers were hit by panic selling and deleveraging that followed, combined with changes in broker requirements and the enforcement of a ban on short selling in certain financial stocks," said the Lipper report.
In US dollar terms, the largest hedge fund sub-strategy outflows were experienced by long/short equity at $42.52 billion.
Reuters – One of the bizarre effects of Bernard Madoff’s alleged $50 billion fraud is that it has boosted the performance of one group of hedge funds when measured against their peers, industry insiders said.
At least one major index, the CS/Tremont equity market neutral index, has been distorted by the failures of three large funds or fund groups which were index components: Kingate, Fairfield Sentry and Rye Select.
"The values of these funds have been taken to zero and we have no plans to restate them, nor to create additional indexes which exclude these funds," said Elaine Bourke, an associate at Credit Suisse/Tremont Hedge Index.
DST International – One group of hedge funds has had its performance boosted in comparison to its peers as a result of the Bernard Madoff scandal, according to a number of industry insiders.
Due to the failures of three large funds or fund groups – Fairfield Sentry, Kingate and Rye Select – which were components in the Credit Suisse/Tremont equity market neutral index, the listing has been distorted.
As such, the surviving funds are able to claim they have outperformed the index’s benchmark, Reuters notes.
This is London – Colin Sharpe, 31, disgraced himself at the West End charity ball by making a pass at Joe Delvaux’s wife.
When Mr Delvaux, 28, stepped in to defend her, Sharpe smashed a beer bottle over his head, Southwark crown court heard. The blow narrowly missed his eye and an artery and left him needing at least six stitches.
Sharpe was one of hundreds of guests at the party hosted by financial services giant Credit Suisse at the since-closed Paper nightclub in the Cafe Royal, Piccadilly, on 11 July last year.
Bloomberg – James Pallotta and Christopher Pia, hedge-fund managers who recently struck out on their own, are discovering just how much the global financial crisis is reducing investors’ appetite for risk.
Pallotta, who split from Tudor Investment Corp. last month, and Pia, who spent 13 years managing money for Moore Capital Management LLC, probably will raise about $500 million apiece this year, according to brokers who provide loans and administrative services to hedge funds. Michael Ryan, who left Credit Suisse Group AG to open Jai Capital Management, will top out at around the same amount, according to the brokers, who asked not to be identified because the funds are private.
Investors, who put more than $1 billion each into seven new hedge funds last year, are scaling back after the industry posted its worst year on record in 2008. Whether it’s a big-name manager like Boston-based Pallotta or a newcomer, that threshold will be harder to cross this year than in the boom of 2002 through 2007.
Dow Jones Deutschland – While hedge funds suffer from redemptions and closures amid volatile markets, some firms are taking advantage of falling valuations and market dislocations to launch new funds.
Mark Fuchs, chief executive of Singapore-based Fuchs Capital Partners, said in an interview with Dow Jones Newswires that he is launching a hedge fund focused on trading blue-chip, large-capitalized Southeast Asian stocks in the region in two months.
Fuchs, the former head of Credit Suisse Group’s (CS) Southeast Asia equities division, has teamed up with two other Southeast Asian veterans: Winston Loke, who was previously Credit Suisse’s Chief Operating Officer for Asia-Pacific ex-Japan, Australia equities and Mark Maroongroge, most recently a portfolio manager with London-based hedge fund HBK Capital Management. He declined to elaborate on the size of the fund, however, other than to say it will start off "modest" in size but would eventually be "significant."
Bloomberg - Myojo Asset Management Japan Co., whose assets shrank 86 percent in 2008, plans a new fund focused on global technology stocks as the firm rebuilds after the hedge fund industry’s worst year on record.
Noriya Nishi, a former technology analyst at Credit Suisse Group AG in Tokyo, will run the Myojo Super Cycle Fund, set to start on March 1. Nishi, 44, said in an interview yesterday he’ll use a long-short strategy, betting on rising and falling stock prices of firms including NEC Corp. and Intel Corp.
Myojo joins U.S. funds including Prentice Capital Management LP and Tontine Associates LLC in seeking to raise money after the $1.5 trillion hedge-fund industry contracted about 20 percent in 2008. It will start with “several hundreds of millions of yen,” including Nishi’s own money, and invest in 55 Japanese technology-related stocks and 25 companies abroad.
