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.
New York Post – With just two large investment banks remaining – Morgan Stanley and Goldman Sachs – questions are growing over who might step into the suddenly emptier playing field.
Many Wall Street watchers are pointing to the looming presence of large hedge funds and private-equity firms, which have been stealthily encroaching on many of Wall Street’s traditional lines of business for years now.
"I think the new Wall Street is not going to be on Wall Street," said Ferenc Sanderson, a hedge fund researcher at Thomson Reuters. "The headquarters of Citadel is in Chicago," he said.
Indeed, the $20 billion Citadel Investment Group is more often compared to Goldman these days.
Last year, Citadel branched into providing administrative and technical support to other hedge funds, not unlike the investment banks. Citadel also has a unit that executes trades for retail brokerages, akin to market makers like Morgan Stanley and Merrill Lynch.
It’s a far cry from the small operation Ken Griffin had when he founded Citadel with a modest $1 million in trading money in 1990.
Reuters – Hedge fund firm Citadel Investment Group said on Tuesday it had hired two senior sales executives from Merrill Lynch, the investment bank that is being sold to Bank of America for $50 billion.
Chicago-based Citadel, which manages around $18 billion in assets, said in a note that Tobias Gehrke and Anita Nassar had been hired to lead Citadel’s capital development efforts in Europe, the Middle East and Northern Africa.
Nassar worked as head of central banks and sovereign wealth funds at Merrill, while Gehrke led the government institutions group for the firm’s equities and alternatives businesses. A growing number of professionals have been leaving investment banks for hedge funds, which are increasingly seen as a safer option, since the credit crisis began last summer.
Globe and Mail – Once viewed as a safe haven, crude oil has lost its lustre as investors bet that the crisis in financial markets will hurt an already weakened global economy and drive down petroleum demand.
At the same time, speculators who piled into oil and other commodities on the way up have reversed course, as brokerages and hedge funds are being forced to liquidate those positions to buttress their balance sheets, traders said yesterday.
Lehman Brothers Inc. and Merrill Lynch & Co. Inc. are both major players in the crude oil markets, and both companies are expected to unwind their positions after Lehman sought bankruptcy protection and Merrill agreed to be acquired by Bank of America.
Crude prices fell sharply yesterday on futures markets in London and New York after hurricane Ike blew through the Gulf of Mexico without doing major damage to U.S. oil production there.
New York (HedgeCo.Net) – Despite valiant efforts to find investors and stay afloat the credit crisis, Lehman Brothers Holdings Inc. is now at the center of the biggest bankruptcy filing in history.
The fourth-largest investment bank filed for Chapter 11 protection in a Manhattan court today, after write downs stemming from the subprime mortgage fall-out that it helped create proved to be too much to take.
Lehman, who was the largest underwriter of mortgage-backed securities, listed over $613 billion in debt, including over $157 billion owed to unsecured creditors and over $155 billion owed to bondholders.
"The uncertainty, particularly among the banks through which the company clears securities trades, ultimately made it impossible for the company to continue to operate its business,” said Chief Financial Officer Ian Lowitt in the filing.
Shares of Lehman were trading as low as 29 cents this morning; a fitting finale after losing 94 percent of its market value this year. Treasury Secretary Henry Paulson and the Federal Reserve had been trying to come up with a deal that would keep Lehman afloat. Paulson made it clear that he did not want to use taxpayer money to bail out Lehman.
While London-based Barclays looked to be interested in investing in Lehman, they pulled out yesterday amidst concerns over the lack of guarantees from the U.S. government to protect against losses on assets. Bank of America then followed suit, withdrawing from talks with Lehman only to acquire Merrill Lynch shortly thereafter.
Lehman was planning on selling a majority stake in their asset-management unit for around $4 billion. While talks are still in the works, no conclusion has been reached. Speculations that more losses were to come coupled with its liquidity crunch have prevented any sale from taking place as of yet and ultimately led to the demise of the bank.
Lehman now joins Bear Stearns and Merrill Lynch in the group of banks that were "too big to fail,” that couldn’t weather the credit crunch.
Lehman’s assets are listed at $639 billion. They have about 25,000 employees worldwide.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – The SRM Global Master Fund, headed by former UBS AG star trader Jonathan Wood, is down about 85% over the course of its two-year tenure, according to a report by the Wall Street Journal.
Launched in September 2006, the fund grew fast, raising over $3 billion in assets in what was one of the largest European hedge fund kick-offs ever. The fund held long equity positions in companies that were involved in takeovers, mergers or restructurings.
Mr. Wood’s stellar UBS reputation earned him the trust of many affluent investors. However, venturing into a hedge fund is very different territory. Investors agreed to higher than normal lock up periods, some as long as five years, apparently not too concerned about potential risks. Now many are barred from cashing out or even cutting their losses.
The SRM fund has had a string investments gone sour. They held a major stake in Northern Rock, which was nationalized by the British Government last year, causing shares to plummet. Wood is currently seeking a judicial review.
Adding to the unlucky investments is the stake that SRM held in Countrywide. The mortgage lender was taken over by Bank of America for a deal that Wood thought undervalued them greatly. Bank of America ended up with a steal, purchasing Countrywide for $2.5 billion.
One notable investor in SRM is UBS, who in addition to providing their prime brokerage services, allocated about $500 million to the fund.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Merrill Lynch and Citigroup, two banks that have already written down billions in losses, will buy back $30 billion in auction-rate securities as part of an agreement with regulators.
This comes after the threat made by New York Attorney General Andrew Cuomo, who said he would sue Citi for misleading trusting investors about the high risks associated with such securities.
Merrill then followed suit, and other big names firms like Morgan Stanley and Bank of America are expected to strike their own deals with state regulators and the SEC in the near future.
These securities, which accounted for nearly $350 billion, are backed by municipal bonds and other forms of debt, and were peddled as being “safe.” However, the credit crunch blindsided most banks, and those securities were quick to plummet in value.
Citi has to shell out the most cash, agreeing to purchase $7.5 billion in securities and promised to purchase another $12 billion from institutional investors. On top of it all, they were slapped with $100 million in fines. Merrill has agreed to buy back $10 billion in the auction-rate securities.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
West Palm Beach (HedgeCo.net) – Alternative investment platform, Altegris Investments, has plans to expand their research team under the leadership of Mr. Allen Cheng, an accomplished hedge fund investment professional with extensive industry experience.
Cheng joins Altegris as Managing Director, Research and Investments, and will be a member of the Altegris Investment Committee, with responsibility for evaluating investment strategy and completing product review for the Altegris platform of alternative investments.
"Allen’s breadth of experience in alternative investments, with both major financial institutions as well as private investment firms, complements the deep knowledge base of our research team," said Jon Sundt, President of Altegris Investments. "We are dedicated to maintaining a world-class research team, under Allen’s expert leadership, to accomplish our mission of providing high quality alternative investments to wealth managers and high net worth investors."
Cheng joins Altegris from his recent role as Managing Director, Head of Fund of Funds Portfolio Management at Bank of America’s Alternative Investment Group. He has significant experience in the alternative investment industry, particularly in the area of identifying, selecting, and monitoring hedge fund managers across multiple investment disciplines.
"Altegris offers clients a unique, open-architecture platform of alternative investments, supported by extensive review and ongoing monitoring," said Cheng. "I am energized by the opportunity to join this team specializing in alternative investments and to expand our in-depth research capabilities."
The Altegris team finds, selects and negotiates capacity with selected hedge funds, managed futures funds, and other alternative investments. Currently, investors have allocated more than $2.4 billion in trading level to alternative investments available through the Altegris platform. The Altegris Group of Companies includes Altegris Investments, APM Funds, and other affiliates.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
West Palm Beach (HedgeCo.Net)- A recent Bank of America Survey of high net worth Americans indicates that US investors understand the risk and rewards of hedge fund investments. Many expressed greater satisfaction over the last 12 months with their holdings in alternatives, including hedge funds, venture capital, real estate and private equity, than their more traditional investments, including stocks and bonds.
Surveying more than 400 high net worth investors with greater than $3 million in investable assets, 267 held investments in alternatives overall, including 92 who held investments in hedge funds or hedge funds of funds. Nearly one-third (32%) of the data collected focused on the attitudes of individuals with investable assets of $10 million or more.
The findings also indicated a positive relationship between satisfaction with alternative investments and the length of time the investments were held. Investors with 10 or more years of experience in alternatives were almost twice as likely as those with fewer than 10 years of experience to be "extremely satisfied” with their total portfolio since their initial investment.
Negative stories published about hedge funds appear not to have deterred experienced hedge fund investors, according to the survey’s findings. When asked if negative publicity about hedge funds impacted their investment decisions, 44 percent of those invested in hedge fund vehicles said no and only 20 percent said yes.
"Our study demonstrates that, despite the portrayal of hedge fund investors as risk-takers investing in aggressive managers," David Bailin, president of Bank of America Alternative Investment Solutions, said, "Many high net worth investors have a realistic understanding of the risks associated with their holdings and realize that large alternatives managers are institutional in their investment approach and the quality of their investment professionals.”
Bloomberg- Wall Street is losing its top oil analysts as securities firms suffer record losses and hedge funds offer the promise of higher pay.
Morgan Stanley’s Douglas Terreson and Citigroup Inc.’s Doug Leggate, ranked first and second by Institutional Investor on coverage of the biggest oil companies, left their positions, the banks said. Geoff Kieburtz, the No. 3 analyst for oilfield contractors, is leaving Citigroup. Robert Morris, the top-ranked analyst for independent oil companies such as Anadarko Petroleum Corp., left Bank of America earlier this year.
Exxon Mobil Corp., Anadarko and other oil stocks rose to all-time highs this year as crude futures surged 46 percent to a record $139.89 a barrel and natural gas jumped 73 percent. The exits also came as banks and securities firms cut more than 83,000 jobs after the collapse of the subprime mortgage market led to $390 billion in writedowns and losses.
Bloomberg- Bank of America Corp. agreed to sell its prime brokerage unit that serves hedge funds to BNP Paribas SA, France’s biggest bank, for as much as $300 million after profit at its investment bank tumbled.
BNP Paribas’s purchase price includes some goodwill, Todd Steinberg, head of equities and derivatives in Paris-based BNP Paribas’ Americas unit, said in an e-mail. The division provides record-keeping, securities lending and secured financing to more than 500 hedge funds and has 320 employees, he said.
Reuters) – Starting a hedge fund was long considered the road to riches for money managers, but the path has become much rockier in the last months.
"It is materially harder to start a hedge fund today than it was two or five years ago," said David Bailin, who heads Bank of America Corp’s alternative investments group, which invests with roughly 100 hedge fund managers.
A few years ago, when wealthy investors wrote checks more easily, their enthusiasm helped assets in the loosely regulated hedge fund industry double to $1.8 trillion in three years. In the boom days, an Ivy League degree plus a stint at a prominent Wall Street investment bank were often thought to be the main ingredients for a successful new fund launch.
