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Washington Post - The European Union will this week take the first step toward new rules governing high-risk hedge funds, the EU’s financial services chief said Monday.
EU Commissioner Charlie McCreevy, long opposed to regulating the funds, is bowing to calls from the G-20 group of the world’s leading industrialized and emerging economies and many European politicians for more oversight for hedge funds that invest large sums and often operate in near secrecy.
He said the European Commission would consult European financial firms and others, sparking a debate that might see regulators eventually come up new rules.
He said he wanted to focus on the risks hedge funds might pose to the financial system if current rules were left in place. EU regulators also have to define hedge funds and consider how they should deal with hedge funds based in jurisdictions with little supervision, he said.
West Palm Beach (HedgeCo.net) - Iraq and the Babylon Fund sailed fairly unscathed through the panicky financial markets in September, according to CEO Robert Torkelund.
“Our strategy to focus on sticky money instead of any cheap hot money flow, has paid off so far,” says Torkelund, “Iraqi investments are not for the faint-hearted, of course. A financial crisis more or less, now and then, is business-as-usual for many of our experienced pre-frontier institutional investors. In fact, Babylon Fund’s AUM is still on the rise - early this month reaching ATH - and no redemptions have been requested so far."
There was less to celebrate in absolute terms though, as the monthly return came in at a negative 5.9% m/m. (another -3.5% for mid-month Oct). The fund’s losses in September were primarily a result of the bear sentiment. For example, Iraqi bonds lost heavily, with its USD-yields spiralling back into double-digit territory, as did all oil prospecting companies.
Inside Iraq, markets stayed mainly flat in September: Top 15 companies by Mcap, making up a full 70% of total Mcap, lost a few percentages on average. The diversification process from other Mid-Eastern investors, which was anticipated during the Dubai boom times already, seems instead to have started now instead.
The Babylon fund is a high risk $23.6 million investment fund with a $100.000 minimum investment. Managed by Godvig Capital and Björn Englund the fund has a 2% management fee.
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Bloomberg - Public pension funds in the U.S. are increasing bets on high-risk hedge funds and real estate in an attempt to fill deficits in retirement plans and make up for their worst performance in six years.
New York Comptroller Thomas DiNapoli is asking lawmakers to increase a cap limiting the amount of so- called alternative investments in the state’s Common Retirement Fund, the third-biggest U.S. public pension at $153.9 billion. South Carolina’s retirement system adopted a plan in February to invest as much as 45 percent of its $29 billion in hedge funds, private equity, real estate and other alternatives, from nothing 18 months ago.
“We need some more flexibility,” DiNapoli said at an Aug. 4 press conference in Albany. The Common Retirement Fund, whose 2.6 percent gain in the year ended March 31 was its worst since 2003, is authorized to invest as much as a quarter of its assets in alternative investments. DiNapoli declined to say how much he wants the limit increased. The fund doesn’t have a deficit.
New York (HedgeCo.Net) - At a time when most investors are becoming increasingly weary of high risk hedge funds, public pension funds are upping their stake, hoping to make up for recent lackluster performances.
New York State has a cap that limits the amount of alternative investments in the state’s Common Retirement Fund, valued at $153.9 billion. Comptroller Thomas DiNapoli is urging lawmakers to increase that cap, saying that “we need more flexibility.”
The Common Retirement Fund has followed in the footsteps of other lagging pension funds, posting only a 2.6 percent gain for the year ending March 31. As of now, the fund may allocate up to 25 percent of its capital to alternative investments. DiNapoli did not state how much he wanted that number increased.
Public funds manage over $2 trillion in assets and are actively seeking ways to garner larger returns. However, some argue that market conditions are not favorable enough to start taking wild risks with taxpayer money. Alternative Investments may include hedge funds, private equity funds, or anything that invests in real estate and/or commodities such as oil or gold.
One of Amaranth Advisor’s major investors was the state of Massachusetts, who allocated a substantial amount from its Pension Reserves Investment Trust Fund. When the fund imploded thanks to some bad bets magnified by massive amounts of leverage, followed by the closing of Sowood Capital Management the following summer, the state fund was out $80 million.
In Orange County, the Employees’ Retirement System has invested 7% of their assets into the reputable BlackRock, as well as to Pacific Alternative Asset Management Company. The fund of funds will handle over $200 million of assets. In addition, South Carolina may invest over $13 billion of their total assets worth $29 billion in hedge funds and other alternative investment vehicles.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Turkish Daily News - Hedge funds, which have reached an estimated asset volume of $2 trillion globally by attracting investor’s interest with their rapidly changing asset allocation and high risk appetite, are about to be accessible to investors in Turkey.
Oyak Securities, Garanti Bank, the Turkish lender co-owned by General Electric Co., and İş Investment are the first institutions that have obtained approval to establish hedge funds since the introduction of the permit in March.
Preparations for the necessary infrastructure are now complete and hedge funds will be available to investors in Turkey this autumn, said Emrah Yücel, fund manager at İş Investment. Fluctuation of global markets for the past year will not have a negative impact on hedge funds, Yücel added, noting that the current economic situation makes such funds even more attractive to investors.