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Reuters - Clients of Spain’s BBVA Patrimonios have cut hedge fund exposure by more than two-thirds over the past year after disappointing returns, says its chief investment officer, who believes the industry is in meltdown.
"Appetite for hedge funds has diminished dramatically," Enrique Marazuela told the Reuters Wealth Management Summit, adding that hedge funds had not met his clients’ return and risk expectations.
"The idea customers had about hedge funds was that they were going to have absolute returns and hedge funds controlled the risks."
However, hedge fund returns have disappointed many investors this year in high market volatility.
Hedge Fund Research’s HFRI index fell 4.68 percent in September, its second worst month after August 1998’s 8.7 percent drop, taking the year-to-date loss to 9.41 percent.
Reuters - Union Bancaire Privee has cut its exposure to hedge funds and industry performance has disappointed, while other assets look more attractively-priced, a top executive said.
Christophe Bernard, the Swiss-based firm’s head of asset management, also told the Reuters Wealth Management Summit that the industry, estimated at $2.6 trillion, could shrink by one-third over the coming quarters as investors withdraw assets.
"The extent of what’s happening this year is unseen in the industry," he said, adding the industry’s problems are more drawn out than during 1998’s demise of Long Term Capital Management and Russian crisis or losses it sustained in 2001 and 2002.
"Hedge funds are meant to produce absolute returns. If we say nothing happens (by the end of the year) it will be down 10-11 percent. The basic function of hedge funds will have failed."
Reuters - John Thain, the Merrill Lynch & Co Inc chief executive who engineered the firm’s sale to Bank of America Corp, will head investment banking, securities and wealth management at the new company — at least for now.
But analysts don’t expect Thain, who has now led two major Wall Street companies, to remain in his new job for long. They expect him to aim to succeed Bank of America (BAC.N) Chief Executive Ken Lewis, 61, or seek a CEO job elsewhere.
"The fact is that he’s a CEO — he’s not going to stay long," said Greg Donaldson, director of portfolio strategy at Donaldson Capital Management in Evansville, Indiana.
Thain, 53, was previously CEO at NYSE Euronext Inc (NYX.N) and before that was president and chief operating officer at Goldman Sachs Group Inc (GS.N).
Wealth Bulletin - Nearly 70% of hedge funds don’t have a clear succession planning structure in place, a study by wealth management experts Russ Alan Prince and Hannah Shaw Grove has shown, according to a report in The New York Times.
he survey, which was sponsored by Rothstein Kass, covered 349 US hedge funds in recent months to evaluate how ready players in this lightly regulated industry are to manage top-level changes.
Less than 25% of the respondents admitted to having a smooth transition regime and fewer than 30% said they are equipped to handle the death of a managing partner.
New York (HedgeCo.Net) - Writedowns from major banks have reached the $500 billion mark, only one year after the subprime fallout forced mortgage-backed securities to plummet in value. And it’s not over. Some economists estimate that number will ascend upwards to $2 trillion by the time all the damage is done.
UBS, the European bank hit hardest by the U.S. fueled mortgage crisis, announced its second quarter losses yesterday to be $6 billion, most of which can be attributed to subprime-backed assets.
This marks the fourth consecutive quarterly loss that the Zurich-based bank has posted. UBS has previously written down over $35 billion since the credit crisis started last summer.
Other major banks are dealing with the same dilemmas. Wachovia has already experienced over $22 billion worth of write downs, while Merrill Lynch and Citigroup each have written down over $50 billion.
The current probe launched by New York Attorney General Andrew Cuomo isn’t helping either. Since major banks are now being forced to buy back bad auction-rate securities, many financial institutions are finding themselves in way over their head. In addition to the subprime-related mess, UBS has to allocate $20 billion to buy back the shoddy securities from disdained clients.
In an attempt to restructure, UBS also announced it will separate some key divisions of the company. The investment bank, which has been experiencing the major losses, will pull away from the bank’s wealth management and asset management divisions.
UBS hopes to give each section “maximum strategic flexibility.” While some speculate UBS is positioning themselves to be sold, chairman Peter Kurer has insisted that the companies are not for sale.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (Hedgeco.net)- HedgeCo Networks has just launched the next chapter within their network of companies, HedgeCo Employment Solutions. As a top tier recruiting firm, HedgeCo Employment Solutions secures the finest candidates in the hedge fund and financial services industry and matches them to corresponding employers.
HedgeCo Employment Solutions is unlike other recruiters and staffing agencies in many regards. It is more than just a database of qualified candidates. It is an extended network of potential employees, found only through HedgeCo’s existing relationships that extend deep into the hedge fund community.
Through years of experience working in the financial field, HedgeCo has built and maintained relationships with individuals from all sectors within the industry. These candidates may not even consider themselves available and won’t be found on job boards or employment websites. However, they have aligned themselves with HedgeCo to present premier opportunities to them should they occur.
"Clients trust our ability to facilitate that perfect ‘fit.’ Employers come to us with the expectation of securing highly sought after candidates and employees come to us knowing that we have the tools to take their careers to the next levels," says Evan Rapoport, Managing Partner for HedgeCo Networks.
"Extensive screening and background checks are all a part of the diligence process applied to every applicant. By the time the candidate reaches the potential employer, a rigorous discovery process has already taken place along with a compatibility assessment, " states Matthew Deering, Managing Director of HedgeCo Employment Solutions.
Fields of placement include hedge funds, private equity, venture capital, investment banking, fund marketing, compliance, wealth management and human resources, to name a few. Positions include analysts, portfolio managers, traders, CFO/COO, business development leaders and numerous others that span the entire spectrum of the hedge fund industry.
Hedge Funds Review Magazine- In early 2007 HNWIs bet heavily on riskier asset classes. However further into the year, financial market turmoil and economic uncertainty intensified and HNWIs began to shift their investments to safer, less volatile asset classes.
Exposure to property and hedge funds was reduced in favour of safer investments, according to the “World Wealth Report” from Merrill Lynch and CapGemini.
An increasing proportion of hedge fund assets are coming from institutional investors instead of wealthy clients. This is shifting the main drivers of the industry’s growth.
“This year’s report found that the number of high net worth individuals, and the amount of wealth they control, continued to increase in 2007, with the greatest wealth being created in the emerging markets of India, China, and Brazil,” said Nick Tucker, market leader for the UK and Ireland, global wealth management arm at Merrill Lynch.
Independent- Citigroup is coming under pressure to bail out investors in one of its troubled hedge funds, in another embarrassment for a company already among the biggest losers from the credit crisis.
The company has begun quietly asking private clients to accept a $250m compensation package, in return for dropping legal claims against the company. Banks which have sunk an estimated $1.6bn into the fund are also examining their legal options.
The problems stem from Citigroup’s Falcon Strategies hedge fund, an investment vehicle that traded mortgage bonds, government debt and a range of credit derivatives, which began experiencing big losses when the credit markets ran into difficulties last summer. Thousands of Citigroup clients – advised to invest in the fund by brokers at its Smith Barney wealth management division – face being wiped out.
The company has begun quietly asking private clients to accept a $250m compensation package, in return for dropping legal claims against the company. Banks which have sunk an estimated $1.6bn into the fund are also examining their legal options.
The problems stem from Citigroup’s Falcon Strategies hedge fund, an investment vehicle that traded mortgage bonds, government debt and a range of credit derivatives, which began experiencing big losses when the credit markets ran into difficulties last summer. Thousands of Citigroup clients – advised to invest in the fund by brokers at its Smith Barney wealth management division – face being wiped out.