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Seeking Alpha - If someone was asked to name a fund in the global macro game, undoubtedly Tudor Investment Corp or Moore Capital Management would be among the most frequent responses. The global macro strategy has fared well in the world of hedge funds. Paul Tudor Jones’ Tudor Investment Corp has earned an annualized return of greater than 20% over the span of two decades.
Louis Bacon’s of Moore Capital Management shares the same accolade. And, while they are both down this year, they have fared much better relative to many of their peers and the market indexes in general. Tudor’s flagship fund finds itself -5% for the year, while Moore was -2.9% year-to-date through November as we noted in our November hedge fund performance update.
But, in a never-ending quest for outperformance, Tudor and Bacon want more. And, in order to accomplish that, they see it fit to return to their roots.
Reuters - Even some strong hedge fund managers may not survive the ongoing credit crisis due to a lack of funding or credit, the president of hedge fund John W. Henry & Co. said on Tuesday.
"There are going to be some firms that have good strategies that were strong in terms of discipline and their strategy itself, but may not survive this because they don’t have the assets or the funding to be able to survive," Ken Webster, president of the firm, said at the Reuters Investment Summit in New York.
The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades.
Wall Street Journal - In 2006, Lawrence Summers resigned as president of Harvard University and took a position as a part-time managing director with D.E. Shaw Group, a New York hedge fund with a reputation as one of the most secretive trading outfits in the world.
D.E. Shaw is known for using sophisticated computer-based quantitative strategies to make money on fleeting movements in the stock and bond markets. The fund has been a top performer, returning 15% to 20% a year over the long term, and in two decades has grown into a global powerhouse. But like many funds, it has taken hits in the credit crisis.
Time - Benjamin Graham was well prepared for the Crash of 1929. The now legendary investor had hedged his bets: he would buy preferred stock in a company and sell short common stock in the same company. When stocks crashed in October 1929, common shares fell much faster than preferreds, and Graham made a lot of money off short sales.
But after the crash, most of those preferred shares seemed so cheap that Graham couldn’t bear to part with them, he wrote in his memoirs. They kept falling, and his profit soon turned to a loss. His fund (equivalent to a modern hedge fund) ended the year down 20%. In 1930 it dropped 50.5%; in 1931 16%; in 1932 3%. "The stock market," as Graham resignedly put it in the first edition of his book with David Dodd, Security Analysis (1934), "is a voting machine rather than weighing machine."
It had actually begun voting along with Graham by then — his fund gained 50% in 1933, and he did spectacularly well for himself in the next two decades. "In the short run, the market is a voting machine," he later took to saying, "but in the long run, it is a weighing machine."
Telegraph.com.UK - Sources close to Mrs Lagarde said that she had called the US Treasury Secretary - a close personal friend - well before the ailing bank’s collapse imploring him to act, but he chose not to.
Lehman Brothers’ demise sparked the biggest shake-up on Wall Street in decades and sent shock waves around the world that triggered a massive bailout plan in Britain and Europe.
Mrs Lagarde - attributed with playing a key role in brokering a bailout deal among G7 finance ministers in Washington last weekend - dubbed Mr Paulson’s decision to let the bank go under "horrendous" as it triggered panic in markets and banks to the brink of a 1929-style financial meltdown.
In an interview with the Daily Telegraph, she warned that the world’s hedge funds could be the next institutions to be hit by the financial turmoil.
Pioneer Press - Tom Petters, who spent two decades building the Petters Group Worldwide into a far-flung empire with $2 billion in sales and 3,200 employees, resigned Monday amid a federal investigation into allegations of fraud at one of his companies.
The move came days after federal authorities raided company offices, homes and vehicles of people connected to the business as they searched for evidence of an alleged scam dating back to the mid-1990s at Petters Co. Inc., a unit of Petters Group.
"Events of the last few days have made it impossible for me to continue as the leader of these companies," Petters said in a statement released to employees. "My first concern is that these companies continue to go forward and that you as employees feel secure about working here," he said.
Petters no longer would be involved in day-to-day operations of Petters Group or its independent operating companies such as Polaroid or Sun Country Airlines, the statement said.
Proactive Investors UK - The top thirty gainers for the London Stock Exchange (‘LSE’) read out like a roll call for the British and Irish financial industry, after the Financial Services Authority (‘FSA’) announced late last night that it was imposing a temporary ban on short selling financial stocks. Groups with short positions over 0.25% in the 29 companies included in the ban will have to declare their positions by Tuesday.
Not surprisingly, the FTSE 100 roared to life this morning, climbed a whopping 340 points, or 7.1% to 5225 by 10:30am, the biggest single day gain in more than two decades. The surge higher was lead by financial institutions, which have been offered a temporary reprieve from the usually lucrative tactic by hedge funds to short sectors out of favour with the market. Even large spread betting firms, like CMC Markets, informed private investors this morning that it was not accepting any new short bets on financial stocks, as under normal circumstances, it would hedge those bets, but can no longer do so.
Wall Street Journal - In another sign of the changing power dynamics between hedge funds and their investors, funds are offering to cut fees if investors agree to stay put.
Camulos Capital LP in a letter last week asked its investors to promise to keep nearly $2 billion in place with the firm for another year as part of a restructuring. Camulos, the letter said, will take a 1.25% management fee, instead of the standard 2% fee, on most assets. If the fund makes money starting Oct. 1 through 2010, the firm will keep 10% of most profits, not the 20% that is typical of hedge funds and that Camulos investors previously agreed to pay, the letter said.
Meanwhile, Ore Hill Partners LLC, a New York money manager with about $2.8 billion in hedge-fund assets, also told clients it is ready to deal. It offered a sliding scale of fees depending on how long investors would commit money to its Ore Hill International Fund Ltd.
With returns lower this year at many hedge funds, there has been much talk of investors demanding better terms. But until now, there have been few reports of hedge funds actually changing their model.
Lowering fees can make it hard for funds to keep top analysts and traders, who often are paid out of profits, and it can undercut a fund’s prestige. Just last year, investors were begging to get into hot funds. But with hedge funds having their worst year in nearly two decades, investors are getting antsy.
Asia Times - In olden days, explorers sailing the world’s oceans in search of new profit opportunities navigated the unknown by means of looking to the heavens and guiding by the stars. Today, investors still attempt to navigate the dark waters of turbulent economic times with guidance from the stars, namely the satellites in the heavens that carry the world’s three major international financial information broadcast networks, General Electric’s CNBC, Bloomberg’s Bloomberg TV and News Corp’s Fox Business Channel.
Fox Business is under a year old; Bloomberg TV is basically an adjunct of the company’s core data terminal business on every trader’s desk in the world; CNBC, on the air in one form or another for about two decades now, is insanely profitable; advertisers pay a lot more to reach its audience of millionaires with money to burn than they do to reach the people at home in the afternoon.
Bloomberg - Just when American International Group Inc. shareholders figured things couldn’t get worse at the world’s largest insurer, profit from the company’s private equity and hedge fund investments is evaporating.
Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker.
The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.
Bloomberg - Hedge funds turned in their worst first-half performance in almost two decades as the collapse of subprime-mortgage bonds and rising commodity prices pushed stocks to the brink of a bear market.
Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9 trillion industry has posted one losing year, in 2002, when funds fell 1.45 percent amid the 23 percent decline by the Standard & Poor’s 500 Index.
Managers attracted a net $16.5 billion during the first three months of the year, down from $30.4 billion in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15 billion to hedge funds.
“We don’t see investors pulling the plug across the board and putting their capital into cash,” Munoz said.
Independent- Hedge funds turned in their worst first-half performance in almost two decades because of the credit crunch and the onset of a bear market in stocks.
Hedge funds declined by an average 0.7pc in June, bringing the year-to-date loss to 0.75pc, data compiled by Hedge Fund Research show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9trillion (€1.2tn) industry has posted one losing year, in 2002, when funds fell 1.45pc.
"Equity markets have made for an incredibly difficult environment,” said Mark Dampier, an analyst at Hargreaves Lansdown Stockbrokers in Bristol, who tracks the money-management industry.
Managers attracted a net $16.5bn during the first three months of the year, down from $30.4bn in the fourth quarter, Hedge Fund Research reported. Investors have become less tolerant of losses and are shifting assets to traders who have shown they can thrive in turbulent markets, said Antonio Munoz, who runs EIM Management USA in New York, which farms out $15bn to hedge funds.