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.
CNBC – Another of the once giant hedge funds is all but closing its doors. Atticus Capital founder Timothy Barakett, 44 years of age, is shuttering his flagship fund and returning $3 billion in capital to his investors. The roughly $1 billion left, Barakett’s personal fortune, will be managed by him in a so-called “family office”. Atticus will keep its European fund (not managed by Barakett), with roughly $1.5 billion under management, open.
Barakett says the decision was a personal one, driven by his desire to spend more time with his family. I don’t doubt it. But, I can’t help wondering whether Barakett’s exit is also due to the fact that most of the $3 billion he’s returning to investors is below its high water mark.
Citywire.co.uk – The polished doors of the poshest hedge fund offices in St. James’s Park have been closed to humble private client managers in recent years.
As the good times rolled the retail market place was of little interest to hedge funds. But now hedge fund managers have been reduced to crowd control stewards – gradually shepherding assets out of their funds – they are discovering the benefits of diversifying into the private client market.
New York Times – Two weeks from now, a seven-year-old hedge fund called Alson Capital Partners will return around $800 million to its investors, and shut its doors for good.
The fund was founded and managed by Neil Barsky, 51, a former Wall Street Journal reporter-turned-Morgan Stanley analyst, who started his first hedge fund in 1998, just as the “hedge fund decade” was gaining steam. He was an old-fashioned stock picker who ran Alson Capital as a classic “long-short” stock fund, meaning that he bought companies he thought had good long-term prospects, while shorting companies he thought were likely to fall off the cliff. At its peak, Alson Capital had $3.5 billion under management, charged a 1.5 percent management fee, took 20 percent of the profits, and, when you include Mr. Barsky’s predecessor fund, produced compounded annualized returns of 12.11 percent a year. It’s fair to say he’s made a pretty penny.
Forbes – You’d be hard pressed to find anyone but limousine drivers and beaten-down investors shedding tears for the end of the hedge funds’ golden age.
The average hedge fund lost 18% last year, and one in seven shut its doors, according to Chicago’s Hedge Fund Research. The people who run these funds have, deservedly or not, come to symbolize an unsavory version of Wall Street greed that focused on accumulating vast wealth with little accountability or oversight.
Reuters – Hedge fund assets will continue to shrink this year, falling as much as two-thirds from their 2007 peak, but investors will return and assets will rebound when the economy revives, Alex Ehrlich, global head of prime services at Swiss bank UBS, said on Monday.
Last year was the hedge fund industry’s worst ever, as asset values plunged and investors pulled out record amounts of cash. These trends, which forced hundreds of funds to close their doors and some to impose redemption curbs, are likely to continue this year before the industry rebounds, Ehrlich said at the Reuters Private Equity and Hedge Funds Summit in New York.
"All this proves is that the hedge fund industry is cyclical," he said. "But the idea of the death of the hedge fund industry is crazy. The industry will rebound, though it will not rebound to peak levels."
Ehrlich, who runs one of the world’s largest prime brokerages, said that in just the past year hedge fund assets have fallen from roughly $2 trillion to as low as $1 trillion.
CNNMoney.com – In what looks like a sign of the hard times in the hedge fund world, AQR Capital Management – one of the industry’s biggest names – is opening its doors to the retail market.
In January, the investment management firm launched its Diversified Arbitrage Fund, its first mutual fund. Its Class I shares are up just 0.15% through the end of February, but that doesn’t look so bad compared with the S&P 500, which dropped 12.5% during the same period.
AQR says it wants to give average investors access to strategies that were once only available to hedge fund clients. While the fund may not be designed as a main holding, David Kabiller, co-founder of AQR with Cliff Asness, John Liew and Robert Krail says it can help individual investors balance out their portfolios.
Bloomberg – Millennium Partners LP, the $13.5 billion hedge-fund firm run by Israel Englander, plans to return $1 billion to investors who asked for their cash back by year-end, according to two people familiar with the matter.
The redemptions, equal to 7.4 percent of client assets, would have been higher except the New York-based firm limits redemptions in any quarter, said the people, who asked not to be identified because the information is private. A spokeswoman for Millennium declined to comment.
Millennium lost about 3 percent this year through October, the people said, compared with hedge funds’ average decline of 16 percent, according to data compiled by Hedge Fund Research Inc. Two percentage points of Millennium’s loss were caused by assets frozen in the September bankruptcy of Lehman Brothers Holdings Inc., one of the people said.
Newsday – A federal judge has ordered a detailed physical and mental health evaluation for hedge-fund swindler Samuel Israel III before deciding whether he’s competent to plead guilty for skipping out on prison.
Judge Kenneth Karas accepted a joint recommendation from defense lawyer Barry Bohrer and prosecutor Sarah Krissoff to send Israel, 49, to a medical prison in Butner, N.C. He said the exam could take 90 days.
Israel, who appeared in court with a bandaged hand, is "on board" with the recommendation, Bohrer said.
He said Israel needs "a full medical and psychological evaluation." The judge said he hoped it would "get to the bottom of whatever it is that is ailing him."
Boston Globe – A federal judge barred Samuel Israel, the convicted founder of hedge fund firm Bayou Group LLC, from entering a plea to bail jumping, saying his addiction to methadone may have impaired his judgment.
A US judge cited Bayou Group founder Samuel Israel’s methadone addiction and his ability to understand the proceedings.
Israel, who sought to plead guilty yesterday in US District Court in White Plains, N.Y., told US District Judge Kenneth Karas that his ability to understand the proceedings was "60 to 70 percent."
Prosecutors said the 49-year-old faked suicide and fled the day he was to begin a 20-year sentence for his conviction in a $400 million fraud.
"I have to be satisfied that you’re competent," Karas said, rejecting the plea to one count of failure to appear. "The fact that there is some doubt about that makes it imprudent to go forward today."
Financial Times- When hedge fund manager and convicted fraudster Samuel Israel III disappeared this month, leaving nothing but the message "suicide is painless" scrawled in the dust on his car, you can be sure his life assurer did not pay out – not least because police believe he was trying to fake his death.
Another type of insurance policy might soon help investors caught up in scams such as the $400m Mr Israel sucked out of Bayou Management.
At the least, the new products being created should provide hedge fund investors with peace of mind amid widespread fear of fraud in the industry.
Today, a second insurance product begins offering hedge fund investors cover for fraud losses, as Integro, a New York insurance broker, and Amber Partners, a risk rating agency for the industry, aim to capitalise on the fear of swindlers.
"While they [frauds] are not frequent within our industry, they occur enough that it causes investors to consider it seriously," said Reiko Nahum, chief executive of Amber.
Financial Times- When hedge fund manager and convicted fraudster Samuel Israel III disappeared this month, leaving nothing but the message "suicide is painless" scrawled in the dust on his car, you can be sure his life assurer did not pay out – not least because police believe he was trying to fake his death.
Another type of insurance policy might soon help investors caught up in scams such as the $400m Mr Israel sucked out of Bayou Management.
At the least, the new products being created should provide hedge fund investors with peace of mind amid widespread fear of fraud in the industry.
Today, a second insurance product begins offering hedge fund investors cover for fraud losses, as Integro, a New York insurance broker, and Amber Partners, a risk rating agency for the industry, aim to capitalize on the fear of swindlers.
International Herald Tribune- The girlfriend of a missing hedge fund swindler was arrested Thursday and charged with helping him elude his sentence on the day he was supposed to begin serving 20 years in prison.
Debra Ryan was charged with aiding and abetting the escape of Samuel Israel III.
Federal agents said Thursday that Israel took off in a white recreational vehicle carrying a motor scooter and his belongings. Officials said he might be at RV parks, campgrounds or highway rest areas, possibly using the names Sam Ryan or David S. Clapp.
