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.
HedgeCo.net (West Palm Beach) – State Street Corporation released two papers on alternative investments as part of its Vision series of thought-leadership reports. The papers examine two key components of alternative investments, hedge funds and private equity, and their future prospects amid the global economic downturn.
While both industries have been hard-hit by the financial crisis, they will likely adapt to the changed investment environment and continue to provide significant long-term opportunities for institutional investors, State Street says.
“With so much debate within these sectors as complexity has heightened over the past year, we want to help identify the actual market conditions and trends that will determine the future of hedge funds and private equity,” said Jack Klinck, executive vice president and global head of State Street’s Alternative Investment Solutions team. “The research and insights presented in these reports will help institutional investors as they make their investing decisions.”
“New Views of the Hedge Fund Industry” cites two major trends affecting the industry: a migration to third-party administration and custody services and increased regulatory oversight. While hedge fund redemptions are expected to continue through 2009, according to the report, “anecdotal evidence suggests that investors are starting to regain confidence.”
“The hedge fund industry will emerge from the financial crisis – smaller, in terms of the number of funds, but eventually larger in terms of assets under management,” the report states.
State Street’s second Vision paper, “Private Equity at the Cross Roads,” notes that although the industry is currently under pressure from the financial crisis and recession, “many believe that private equity is about to enter a new phase of more sustainable growth. Over the long-term, investors and governments will look to private equity for its significant capital resources, management expertise, and high risk tolerance to help restore economic strength as impaired assets are wound down and fresh investments are required for new and expanding businesses.”
With approximately $252 billion in hedge fund assets as of March 31, 2009, State Street provides a complete set of servicing and management solutions for hedge funds, including recordkeeping, fund accounting, valuation, risk management and regulatory reporting.
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West Palm Beach (HedgeCo.net) – LoanInsights, a San Francisco-based financial services and technology company, has hired James Sias as Director of Business Development. Sias will be responsible for working with banks, hedge funds and US government entities to help them leverage the newly launched LoanInsights SMART (Secured Mortgage Asset Resolution Tool).
The new SMART platform enables financial institutions, investors and the government to value and manage optimally the $1 trillion-plus in so-called “toxic assets” that are a primary cause of the nation’s severe economic downturn and continue to be a major drag on the hoped for recovery.
"James’ real-world experience will be critical to our efforts in reaching out to hedge funds, banks and other investors to demonstrate how our new tools can help them effectively and profitably manage their distressed mortgage assets,” said Jonathan Strike, President and Co-Founder of LoanInsights. “In addition, with his deep knowledge of the mortgage industry and underlying process, James clearly understands what the various players need to do now to solve the toxic assets problem and help get credit flowing again."
The LoanInsights team has been working for the past eight months with investor groups, including hedge funds and private investors, to test the SMART process and technology platform in beta mode. During this time, the investors realized an unleveraged annual return on equity in excess of 30% on those portfolios analyzed and liquidated through the platform. In addition, the homeowners who were part of the program refinanced into lower, fixed-rate mortgages, and in some cases actually reduced their overall mortgage balances.
Alex Akesson
Editor for HedgeCo.Net Email: alex@hedgeco.net
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West Palm Beach (HedgeCo.net) – "The bright side of an economic downturn is that business people are branching out on their own," said Adam Stark, president of Stark Business Solutions. "We have made it seamless for enterprising individuals to establish new businesses without significant expense and with very little risk. We are looking forward to helping grow the business community in Scarsdale."
Customized trading floors have been installed to accommodate hedge funds and trading operations along with mahogany furnishings. SBS operates three other executive suites in Westchester: White Plains, Mount Kisco and Harrison. More than 100 people attended the opening event.
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Business24-7 – Middle East hedge fund investors expect emerging markets, the US and Asia (excluding Japan) will outperform in 2009 despite economic downturn, according to a survey conducted across the Mena region.
The survey, conducted by an investment placement specialist Capintro Partners, said the family offices are allocating a larger percentage of their portfolio to hedge funds than to other institutions. It said investors in the region prefer funds with larger asset sizes, longer track records and higher levels of liquidity.
West Palm Beach (HedgeCo.net) – Financial News is hosting the the Investors India Summit 2009 on the 19th and 20th May in London with Indian hedge fund provider Axience as its media partner.
The summit is aimed at delivering insight into the domestic as well as global development of India while identifying the potential hurdles and risks of doing business in the country. In this process, it intends to examine the possible impact of a global economic downturn on India as well as provide a unique meeting point and networking platform for all those doing or wishing to do business with or in India.
The conference will cover keynote discussions on varied subjects like ‘The global challenges of the 21st century’, ‘Global Indian Investments’, ‘Development of Financial Markets in India’, ‘India – Fertile ground for Private Equity’, etc. It will also discuss case studies on diverse topics like Capital markets, Infrastructure, Technology, Media, Telecommunication, Real Estate, etc.
Approximately 500 delegates including senior executives representing reputed firms from across the globe are expected to attend this summit.
Financial News has appointed Axience, an India-based business services firm, as its Media Partner for the conference. Its key clients include global investment banks, asset management, hedge fund and private equity firms, leading consultancies and governmental agencies.
"We are glad to partner with Financial News for this key industry event which promises to bring industry, regulators, agencies and financial services firms together. Though doing business in and with India has been a topic of interest since quite sometime now, yet we still lack platforms which bring various parts of industry together. Financial News Summit 2009 fills in that gap," said Hemant Jain, CEO of Axience.
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Bloomberg – Ellington Management Group LLC, the hedge-fund firm focused on mortgage bonds, sued Ameriquest Mortgage Co. and other ACC Capital Holdings units over soured subprime home loans.
Funds run by Old Greenwich, Connecticut-based Ellington saw the value of $354 million of investments in securities backed by the loans “largely lost” following misrepresentations about the debt’s risks, according to a complaint filed Jan. 14 in federal court in New York.
Ellington joins M&T Bank Corp. and HSH Nordbank AG in turning to the courts to recoup losses from bad mortgage bonds. Insurers including PMI Group Inc. and MBIA Inc. have sought to recover or block claims through lawsuits. Ameriquest’s lending failed to meet its own guidelines when it didn’t verify borrowers’ employment, ignored past late payments and misstated whether they lived in properties, according to the complaint.
The defendants’ “liability arises not from increasing default rates associated with a general economic downturn, but from their fraud — from lying to Ellington about the riskiness of the loans,” Ellington said in the complaint.
Defendants in the lawsuit against Ameriquest, parent ACC Capital Holdings and other related companies — once collectively the largest U.S. subprime lender — include businesses bought by Citigroup Inc. in 2007, according to the complaint. The suit didn’t name Citigroup.
NEW YORK, January 21, 2008 – Hedge Funds Care, a global non-profit organization which raises funds and awareness within the hedge fund industry for programs that work to prevent and treat child abuse, announced today that it will hold its 11th Annual New York Open Your Heart to the Children Benefit on Wednesday, February 11th, 2009 at Cipriani 42nd Street (110 East 42nd Street, New York City). This year’s highly anticipated event will include an elaborate cocktail reception and the presentation of the Hedge Funds Care Award for Caring to Kenneth G. Tropin, the Founder of Graham Capital Management, for his organization’s kind and generous support over many years. The Co-chairs for the event are John M. Budzyna, President and Chairman of Hedge Funds Care, and Dean Backer, Managing Director, Goldman Sachs & Co.
Since the first benefit in 1998, Hedge Funds Care has distributed over $18 million in more than 500 grants in the United States and abroad. Currently the New York benefit, which raised almost $2.2 million in 2008, supports 44 grants to organizations that deal with child abuse and neglect in New York City, Westchester, Connecticut and New Jersey. Through the ongoing generosity and commitment of hedge fund industry professionals and investors, Hedge Funds Care looks forward to continuing to offer support to existing grantees while also expanding support to new programs.
“In the current economic downturn, child welfare agencies across the country are concerned about an increase in abuse and neglect cases, while government funding for these agencies is down,” stated John Budzyna, President and Chairman of Hedge Funds Care. “Our work at Hedge Funds Care is more vital than ever before, since we know historically that child abuse increases with rising unemployment. We urge hedge fund industry professionals to support the Open Your Heart to the Children Benefit by purchasing tickets, placing an ad in the program journal, underwriting portions of the event, or making a direct donation to Hedge Funds Care.”
“Each year, Hedge Fund Care provides grants to over 100 organizations worldwide that are working to alleviate child abuse through prevention, treatment, education, research, and advocacy,” stated Rob Davis, Founder and Chairman Emeritus of Hedge Funds Care. “Yet with 3.3 million reports of child abuse each year in the U.S., it remains critical that each of us connected to the industry, and concerned about children, do our part.”
The 11th Annual New York Open Your Heart to the Children Benefit is also an excellent opportunity to connect and build relationships with like-minded peers in the hedge fund community. Attendees will include hedge fund investors, service providers and senior professionals, including some of the most recognized and respected investment managers in the industry.
About Hedge Funds Care – Preventing and Treating Child Abuse:
The principal mission of Hedge Funds Care is to support efforts to prevent and treat child abuse. Hedge Funds Care is a charity raising funds and awareness within the hedge fund industry. Through its regional and international fundraising events, Hedge Funds Care generally grants the funds raised at each event within the local region to organizations selected and evaluated on the basis of their ability to address child abuse. Funds are raised through annual Open Your Heart to the Children Benefits and other events in Atlanta, Boston, Chicago and the Twin Cities, Denver, New York, San Francisco and Los Angeles, Cayman Islands, London, and Toronto and through personal donations. Money raised is distributed locally to community based nonprofit organizations that provide:
PREVENTION services to at-risk children and families
TREATMENT for children who have been physically or sexually abused and support services to non-offending family members
EDUCATION to enhance awareness and understanding of abuse and neglect for children, parents, and professionals in the community
Forbes – Private equity investors in Asia are increasingly fearful of fraud within their portfolio companies as the global economic downturn puts mounting pressure on firms in the region.
The global financial crisis has already caused significant damage to private equity-backed companies in Asia, with shares plunging and demand drying up for everything from electronics to manufactured goods.
But corporate fraud, a scourge that can be more prevalent and harder to detect in emerging economies such as China and India, can quickly turn a bad private equity investment into a disaster.
North by Northwestern – By the start of his 9 a.m. class, Weinberg freshman Brian Levin has begun watching his investments.
When the markets open, he checks his models to try to predict what will happen in the markets, and then starts formulating investment positions. He calls other professionals and traders on the floor of the Chicago Board of Trade to see what they’re doing that day, or if there are any rumors going around the trading community. He adjusts his investment positions throughout the day until 3 p.m. when the equity market closes.
Levin has been investing since he was 13 years old. Three years ago, he took on clients and founded the hedge fund BDL Capital Advisors, which he still runs today — when he’s not in class. Levin has over forty clients, an office in Vernon Hills, IL, and a snazzy website. Despite the current economic downturn, 2008 was BDL Capital Adviser’s best year yet financially.
Reuters – Officials from the Federal Reserve and the European Central Bank on Sunday vowed to fight the damaging effects of deflation as the global economy suffers a deep and lengthy recession.
In just a few months, central bankers’ concerns have flipped from fighting inflation to staving off possible deflation — a condition in which falling prices cause consumers and businesses to delay purchases, resulting in an even steeper economic downturn.
Both Janet Yellen, president of the San Francisco Federal Reserve Bank, and Lucas Papademos, vice president of the ECB, highlighted the risks of deflation at the annual meeting of the American Economics Association.
Seeking Alpha – In 1997, some observers feared an impending global recession as a result of the headwinds stemming from the Asian financial crisis. However, within two years, those fears had dissipated and were replaced with new concerns of irrational exuberance.
In contrast, the U.S. economic downturn beginning in 2008 initially appeared to be relatively benign. Most observers believed that a moderation in U.S. economic growth was essential to prevent an over-heating of the global economy. It was further believed that the problems confronting the U.S. economy were of its own making and would have little effect on global economic growth.
To be sure, some economists did forecast a U.S. recession in 2008 as a result of mounting home foreclosures. Such forecasts were however widely dismissed as being unduly alarmist during the first quarter of 2008.
Reuters – Hedge funds are keeping borrowings and risk low and seeking sanctuary in safe-haven assets during the current market turbulence, but some are beginning to see opportunities to make attractive investments.
The events of the past few days — the collapse of Lehman Brothers, the $50 billion sale of Merrill Lynch to Bank of America and the $85 billion rescue of AIG — have hit funds’ returns and caused many to cut back their bets.
"Managers have been reining in leverage given the extreme volatility in the market. Sentiment is so bad, people are loath to make big bets," said Jack McDonald, chief executive of hedge fund service provider Conifer Securities.
Eclectica Asset Management, co-founded by high-profile hedge fund manager Hugh Hendry, told Reuters its hedge fund had 140 percent of net asset value invested in mid- and long-dated German bunds.
