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Bloomberg – Dalton Investments LLC, the Los Angeles-based hedge fund with 70 percent of its assets in Japan, is starting a 50 billion yen ($550 million) fund that will invest in U.S. distressed assets, taking advantage of low prices.
The fund has raised about 10 billion yen from U.S. investors and will begin marketing in Japan by the end of March, said Junichiro Sano, chief executive officer of Dalton’s local unit. It will invest in bonds sold by U.S. companies that once had AAA ratings and have since been downgraded below investment grade, aiming to profit from the high yields on the debt.
Dalton, co-founded by James Rosenwald and Steven D. Persky in 1998, aims to raise its assets under management after they fell 23 percent to about 100 billion yen this year amid the biggest financial market losses since the Great Depression. Global financial institutions have posted about $989 billion in writedowns and credit losses linked to the U.S. mortgage market collapse, pushing corporate bond yields higher.
New Yorker – “Death by a thousand cuts.” “Fire-sale liquidation.” “A vortex of selling.” No matter how people described the market collapse that hit a month ago, the message was the same: it felt like there was nowhere to go but down, and it felt like we’d be going there forever. (Given last week’s dip, it still does.)
Beginning on September 29th, the U.S. stock market fell on nine of the next ten trading days, plummeting twenty-six per cent; then, after a short, sharp rally, it lost ten per cent more in less than two days.
Explanations for the crash often focussed on the hysteria and panic that periodically seem to seize investors. But the madness of crowds wasn’t the whole story. In a healthy market, there are countercyclical forces—mechanisms and institutions that go against the general market trend and encourage diversity of thinking—that make it harder for feedback loops and vicious cycles to take hold. Lately, though, many of these institutions and mechanisms have become procyclical: instead of countering trends, they amplify them.
Bloomberg- Asian hedge funds are increasing their use of multiple prime brokers after the U.S. subprime mortgage market collapse heightened the risk of relying on a single investment bank for brokerage services, an AsiaHedge survey found.
Hedge funds that are managed in Asia or invest primarily in the region awarded 326 shared mandates to prime brokers, 36 percent more than last year, according to Bloomberg calculations based on information in AsiaHedge’s 2007 and 2008 Asian prime brokerage surveys. The pace of growth exceeded the less than 20 percent increase in sole mandates to 778 in the past year.
Rising delinquencies in the subprime market that led to the near collapse of Bear Stearns Cos., once among the top three Wall Street prime brokers, have forced the world’s largest banks and securities firms to post more than $400 billion of asset writedowns and credit losses since the beginning of last year.
Bloomberg- Asia’s expanding hedge fund industry will probably create tens of thousands of jobs in the next five years, even as investment bank recruitment dries up after the U.S. subprime mortgage market collapse, said Sheridan Mather, a managing director of recruitment firm Pinnacle International Ltd.
“We’re seeing some streamlining at the moment. We’re seeing some of the not so well-performing funds closing down,” London- based Mather said in an interview with Bloomberg TV today. “But we’re seeing massive growth of the established guys.”
The world’s biggest banks and securities firms cut 83,000 jobs in the 10 months to May as U.S. subprime mortgage delinquencies seized up the global credit market, according to data compiled by Bloomberg.
Independant- European Union Financial Services Commissioner Charlie McCreevy has defended hedge funds in relation to the fallout from the US subprime mortgage market collapse.
The move comes in tandem with a report commissioned by French President Nicolas Sarkozy which states that France should join a German initiative asking the European Union’s executive arm to propose measures boosting hedge fund transparency.
Berlin has been pushing for the creation of a code of conduct for hedge funds within the group of Eight club of industrialised nations, even though regulators show little appetite for imposing tougher rules on the industry. Mr McCreevy is considered a general critic of regulation in financial markets.
