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) – SEC Chairman Christopher Cox has launched a probe into his own agency after it surfaced that complaints made to employees regarding the possible misconduct of Bernard Madoff were never investigated.
Saying that specific allegations had been made to certain members of the SEC staff since at least 1999, Cox expressed his disdain that nobody had apparently followed up with the complaints of what eventually became a $50 billion Ponzi scheme.
“I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them,” Cox said.
The probe will be headed by Inspector General H. David Kotz and will look into the SEC’s internal policies and focus on areas of improvement, in addition to delving into the agency’s personal contacts with members of the Madoff family and business.
Cox also said that any agency staff members who had close personal contacts with Mr. Madoff will not participate in the SEC’s investigation of his company.
Cox confirmed in his statement what officials said last week following the arrest of Madoff; that he kept false books and other documentation to cover up his scheme to investors.
Madoff used new capital coming into his firm to pay returns to existing clients. He was arrested last week after confessing to his sons that his company, Bernard L. Madoff Investment Securities, was a “one big lie,” and a “giant Ponzi scheme," duping many large and reputable hedge funds and financial institutions.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – The largest hedge fund run by Citadel Investment Group has fallen 30 percent this year stemming from losses tied to convertible bonds. The $10 billion Kensington Global Strategies Fund has been hit hard by the credit crunch, prompting CEO Kennith Griffin to warn investors that returns may be extremely volatile in the next few weeks.
Yesterday, Mr. Griffin sent a letter to investors stating that September was the “single worst month, by far, in the history of Citadel. Our performance reflected extraordinary market conditions that I did not fully anticipate, combined with regulatory changes driven more by populism than policy.”
Rumors of the lagging performance were so strong that Mr. Griffin was forced to set the record straight. He also cited the temporary ban of short selling as one of the reasons for the losses, saying it “created material dislocations across many of our portfolios and disrupted our ability to assume and manage risk.”
Yesterday, Dealbreaker.com had published some of the swirling rumors highlighting Citadel’s problems, fueling fear and speculation in the market. The website eventually took the post down after Citadel expressed their disdain. Dealbreaker wrote: “We removed the citadel post after it was brought to our attention that it was a baseless rumor, and was irresponsible to repeat.”
Dealbreaker had pointed out that the fund uses 4 to 1 leverage, down from 7 to 1 earlier this year. Although they noted that this was high, it is not uncommon for hedge funds to use this much leverage, though some choose to use none. To put it into perspective, Long Term Capital Management and its infamous collapse used 25 to 1 leverage, or for every $1 they had, they borrowed $25.
Citadel was founded in 1990 and manages over $20 billion in assets throughout locations in the United States, Asia, England and Bermuda.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – The $700 billion rescue plan proposed by the Treasury and backed by President Bush seems to be greeted with disdain by republicans and democrats alike. After excruciatingly long hearings and even an emergency meeting with the two presidential candidates, an agreement was still not reached as to how the rescue will play out.
“There will ultimately be $700 billion available, but how soon and with what other steps, are still being debated,” House Financial Services Committee Chairman Barney Frank told reporters.
Some issues that lawmakers are trying to come to terms on include executive compensation, foreclosures, accountability, regulation, and how taxpayers can be provided equity stakes in the companies whose rescues they would be helping to fund.
Some republicans are pushing for financial institutions to purchase insurance on mortgage-backed securities, while the Treasury is opting for a plan where the government would instead purchase the bad debt.
"I don’t believe this Paulson plan will solve the problems, it might exacerbate them,” said Richard Shelby, a Republican member of the Senate Banking Committee.
Experts agree that unless the majority of the party hops on board with the president, it’s unlikely this will be passed through congress.
“Ms. [Nancy] Pelosi will not bring a partisan bill to the floor,” Frank said. “If the House Republicans continue to reject the president’s approach then there is no bill.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – After months of on-again off-again talks between Yahoo and Microsoft, the possibility of a merger looks to be back on.
According to the Wall Street Journal, Microsoft said they may be interested in restarting talks if the internet giant’s board was replaced, a move that billionaire tycoon Carl Icahn has been striving to achieve.
"If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," Yahoo said in a recent statement.
Icahn had launched a proxy battle to replace Yahoo CEO Jerry Yang and other members of the Yahoo board after they originally rejected Microsoft’s first offer for $47.5 billion. Icahn blamed it on Yang’s personal disdain for Microsoft and said they were not acting in the shareholders best interest. Backed by a few prominent hedge funds who also acquired massive shares in Yahoo, it looked as if Icahn was going to score a victory only to have talks cool shortly thereafter.
While some shareholders are reluctant at how Icahn would manage the company, others are urging him to push for fewer seats on the board. Yahoo’s annual shareholder meeting will be held on August 1st.
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
