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.
FT Alphaville – Centaurus Capital is running down its flagship hedge fund after investors with the London activist failed to back an emergency restructuring. Centaurus, founded by former BNP Paribas traders Bernard Oppetit and Randy Freeman, will now repay the bulk of investors in the $1.2bn Centaurus Alpha fund, with only a handful expected to remain.
The failure to persuade half the investors to lock up their money until June, in return for lower fees, is a surprise as others – including the flagship funds of RAB Capital and Henderson – have won investor backing for similar proposals.
Reuters UK – Robust returns for a group of powerful hedge funds that thrived for years using sophisticated trading programs may be a thing of the past after a "Black Swan" event hit global markets this year.
The carnage in financial markets worldwide, what many viewed as a so-called Black Swan event because it was out of the ordinary and had severe repercussions, has scorched returns for most of these funds. That forced them to embrace new models that place less capital at risk and employ little or no leverage.
With the failure of many investment systems that ran on algorithms created by mathematicians-turned-traders, quantitative funds, also known as "quants" are also veering away from models with longer-term horizons. They have instead focused on high-frequency strategies, or very short-term trades that often are executed in seconds.
Reuters – Up to half of Russian hedge funds could go out of business as the financial crisis sends investors fleeing and the stock market continues to fall, according to industry experts.
Speaking at the Russia Alternative Investment Summit on Wednesday, Simon Fentham-Fletcher, head of fund of hedge funds at Raiffeisen Bank, said in a worst-case scenario, 50 percent of Russian hedge funds could close.
The primary source of failure will be a lack of funding as performance deteriorates and investors redeem their money, he said.
"If they’re not well-capitalised they can’t look after themselves properly. It’s expensive to run a hedge fund out of Russia and you can eat into your reserves very quickly," said Fentham-Fletcher, who is based in Moscow.
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."
RightSide Advisors- Nimbleness and creativity are qualities rarely ascribed either to America’s financial regulators or to Congress. Perhaps that is one reason why both groups continue to fumble over how to deal with hedge funds, which typically exhibit both in abundance. These lightly regulated pools of private capital employ an array of complex trades, frequently shifting strategies and, in theory, generating above-average returns.
The argument for more regulation is twofold. First, nowadays it is not only a few aficionados of the investment world who are exposed to them but a growing number of people—either directly, if they are rich enough, or through their pension funds. Secondly, some hedge funds are so large that a big one’s failure could threaten the financial system.
Montreal Gazette- IndyMac Bank is under investigation by the FBI for possible fraud involving home loans made to risky borrowers, the Associated Press reported yesterday, citing an unnamed law enforcement official.
The report said it was not immediately clear how long the FBI’s probe of the bank has been ongoing but the probe is focused on the company and not individuals who ran the thrift institution.
U.S. banking regulators seized mortgage lender IndyMac Friday after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.
