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 (HedgeCo.net) – According to investors, hedge fund manager John Paulson, who through Paulson& Co., has raised over $1 billion for clients, has plans to launch a fund dedicated to buying up shares of bullion-related investments.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
Bloomberg – The decline in energy demand and drop in German electricity prices may have ended, according to the chief executive officer of hedge-fund manager Energy Capital Management BV.
“The forward prices are at lows, the spot prices are at lows,” CEO Marcel Melis said yesterday at an energy markets and derivatives conference in London. “One thing is for sure — energy consumption will not decrease anymore.”
Reuters – Hedge fund Citadel Investment Group claims it is owed $470.5 million on derivatives contracts it held with Lehman Brothers, according to a claim filed in a New York bankruptcy court last week.
Citadel, which manages around $12 billion in assets, claims it is owed the money in its Citadel Equity Fund. The filing said the claim was at least partly based on a guarantee, but did not give details.
Bloomberg – Edward Filippi, previously with Lehman Brothers Holdings Inc., raised $35 million for a hedge fund investing in energy, metals and agricultural derivatives.
The Ground Zero Strategic Commodities Fund may begin trading in the first quarter of next year, according to Filippi, who spent a year selling commodity investment products for Lehman. The fund wants to hire a portfolio manager and an operations officer.
Bloomberg – President Barack Obama sent Congress his plan to rein in the $592 trillion over-the-counter derivatives industry, a measure that would cut into a profitable market for banks led by Goldman Sachs Group Inc. and JPMorgan Chase & Co.
The proposal issued yesterday would pressure derivatives users such as banks and hedge funds to move away from opaque customized contracts by imposing higher capital and margin requirements on the instruments. Standardized derivatives would be moved to regulated exchanges or trading platforms and sent through official clearinghouses, according to the draft measure.
Times Online – Guardian Media Group, the owner of The Guardian and The Observer newspapers, lost £24m last year on botched currency trading as it tried to protect hedge-fund investments.
The newspaper publisher, which is considering closingThe Observer, the world’s oldest Sunday newspaper, was caught out by the dollar’s rapid rise against sterling which led to a £24m loss.
The investments were made out of a £200m investment fund designed to spread GMG’s risk away from volatile advertising markets.
Sources said the fund was never intended to make a profit in its first year and the losses were the result of a ”mark to market” valuation at the end of March. However, the scale of losses from derivatives investments, which contributed to a £90m annual group loss, will alarm its left-leaning readership.
Times Online – One of the most senior fund managers at Prudential has attacked hedge funds as selfish and devious and blasted derivatives as “the scourge of the modern age”.
Tom Dobell, who manages the £3 billion Recovery Fund for M&G, the insurer’s asset management unit, made the remarks in letters sent this month to the fund’s 100,000 investors.
The salvo came amid evidence that hedge funds are poised to deliver their best first-half returns in a decade, bouncing back from a disastrous spell last autumn.
Bloomberg – Dear investor, our statutory obligations demand that we update you on how well we’ve taken care of your money here at Coin-Toss Investment Management.
Attached to this missive is a picture illustrating our fund’s performance this year, showing how wonderfully our back- to-basics approach is working after the derivatives-inspired lunacy of recent years. We’re calling our new strategy “mark- to-flatline” — slow and steady, it sure beats floundering on the double-black expert slopes of last year’s chaotic madness.
Reuters – Mellon Capital Management, which invests money for pension funds and others, plans to launch a new hedge fund in August, a top executive said on Tuesday.
The new portfolio, which is slated to become the group’s flagship hedge fund offering, will invest in currencies, commodities, stocks, bonds and derivatives.
"This will be the first time that Mellon Capital will offer clients a commodity alpha source," said Eric Goodbar, the firm’s hedge fund strategist.
Forbes – There should be regulation for areas which have previously been excluded from supervision such as hedge funds, investment banks and derivatives, European Central Bank Executive Board Member Lorenzo Bini Smaghi said on Friday.
‘There is no problem of over-regulation at the moment but there is a need to regulate areas that are not regulated,’ he said at an event in Milan.
Reuters – Hedge funds are crawling back to life after a turbulent 2008 that has almost halved their assets, and fewer but stronger survivors are set to regain their leverage to chase bargains in a less competitive environment.
Hedge funds, which manage their portfolios aggressively with various advanced strategies including derivatives to gain higher returns, suffered double-digit losses last year after global stocks and commodities tumbled because of the credit crisis.
As a result of client redemptions, the amount of investor capital managed by single-manager hedge funds might have halved to close to $1 trillion by mid-2009 from the 2008 peak of $2 trillion (1.2 trillion pounds), according to the European Central Bank.
West Palm Beach (HedgeCo.net) – In a bizarre hedge fund story sent to me by a reader, an ex JP Morgan Director and ex trader for hedge funds Tudor and Brevan Howard has been traced by his ex wife’s investigators to Singapore where he allegedly has done work for JP Morgan.
According to the Sydney Morning Herald, Simon Sywak, who now lives in a Sydney suburb, was caught on video working in Singapore for the investment bank. Sywak had gotten out of paying maintenance for his children in Britain by saying he was a trainee bus driver and so poor he was forced to live with his mother-in-law.
Sywak’s ex wife, Helen Sywak, has started bankruptcy proceedings in Australia for $250,000 of court costs he failed to pay.
"If he doesn’t pay this amount in the next few weeks, it will bankrupt him and he will have to drop his case suing Westpac Bank for $1.3 million and upwards." Helen said in a letter to the Editor.
Sywak is suing derivatives trader Westpac in Sydney in the Federal Court, arguing that it still owes him a $1.3 million sign-on bonus that it had promised him, however he never started work with the bank because he failed its probity checks, according to the Herald.
His side of the story has yet to surface.
Alex Akesson
Edtior for HedgeCo.Net Email: alex@hedgeco.net
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