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.
Reuters – Large dealers in the $26 trillion credit default swap market are blocking CME Group’s CME.N efforts to clear trades, in a bid to retain their "oligopoly" over the market, hedge fund BlueMountain Capital Management said on Monday.
Central clearing of CDS trades is viewed as imperative to removing risks associated with the potential failure of a large counterparty. Fears of margin losses helped spur a run on Bear Stearns Cos and Lehman Brothers and sparked government calls for mandatory clearing of standardized CDSs.
Los Angeles Times – When a well-known investment advisor gave the Securities and Exchange Commission some unsolicited advice this week about protecting investors in hedge funds, he had already been talking to the agency about his own behavior.
About half an hour before Charles J. Gradante issued a public call Wednesday for the SEC to "reduce fraud and systemic risk" in the hedge fund industry, the SEC charged him with failure to perform due diligence on the Bayou hedge funds — one of the industry’s biggest scams in recent years.
Marketwatch – When the $9.2 billion Connecticut hedge fund Amaranth Advisors collapsed in 2006, securities attorneys jumped all over each other to express gleefully how the markets absorbed such a mega-fund failure.
In fact, the markets did soak up the implosion fairly well.
However, two and a half years later, policymakers aren’t so sure the volatile and fragile markets of 2009 could handle another mega-hedge fund collapse.
Bloomberg – Japan’s attempts to end financial turmoil failed to lure hedge funds back to its swap markets, leaving premiums paid by domestic borrowers near a record, RBS Securities Japan Ltd. said.
Hedge funds, which lost more than $400 billion through withdrawals and market losses since June, pulled out of Japan’s swap markets after the failure of Lehman Brothers Holdings Inc. led to a seizure in global credit, said Tatsuo Ichikawa, a senior strategist at RBS in Tokyo. Japan’s banks were charged record premiums this month to swap London borrowing rates for those set in Tokyo as a slumping economy exacerbated concern about the health of the nation’s companies.
CNN.com – The girlfriend of a convicted hedge fund manager who disappeared last year, leading to speculation that he had committed suicide rather than report to prison, pleaded guilty on Tuesday to helping him, according to federal prosecutors.
Debra Ryan pleaded guilty to "aiding and abetting Samuel Israel III’s failure to surrender to serve his sentence on June 8, 2008," according to the U.S. Attorney’s Office for the Southern District of New York.
With the guilty plea, she avoids a trial but still faces up to 10 years in prison. But the judge indicated Tuesday that she will most likely face about four to 10 months in prison, federal prosecutors said.
Lethbridge Herald - The top cop at the U.S. Securities and Exchange Commission is leaving the government less than a week after receiving an angry dressing-down before Congress over the agency’s failure to detect a massive alleged fraud scheme.
The SEC said Monday that Linda Thomsen is leaving to pursue opportunities in the private sector, but did not provide further details. She has been the agency’s enforcement director since May 2005, under two previous SEC chairmen.
A replacement for Thomsen wasn’t named. The leading candidate was Robert Khuzami, a former federal prosecutor who is managing director and general counsel of investment firm Deutsche Bank.
Indianapolis Star – Paul Volcker, an adviser to President Barack Obama, urged "fundamental changes and reform of the financial system" that will help the U.S. economy recover from its crisis and promote future growth.
The former chairman of the Federal Reserve called for "particularly close regulation and supervision" of large commercial banks and other financial institutions whose failure would cause a breakdown in the banking system. Volcker, testifying to the Senate Banking Committee on Wednesday, reprised recommendations from the Group of 30 last month. Volcker spearheaded that report.
guardian.co.uk – Hedge fund investors may face an expensive tug-of-war with managers, according to a new research paper that suggests they could lose as much as 15 percent of their initial investments should they be unable to exit when they want.
Hedge fund investors have rarely been allowed to pull their cash out immediately, but now they are sometimes being told that they may not be able to pull it out at all as the industry faces its worst-ever returns.
Dozens of prominent hedge funds, including Fortress Investment Group LLC and Tudor Investment Corp, have recently restricted redemptions in some of their portfolios.
This trend is not only aggravating but also extremely pricey, Nicolas Bollen, a professor at Vanderbilt University’s Owen Graduate School of Management, said in an interview.
Reuters UK – Hedge fund investors may face an expensive tug-of-war with managers, according to a new research paper that suggests they could lose as much as 15 percent of their initial investments should they be unable to exit when they want.
Hedge fund investors have rarely been allowed to pull their cash out immediately, but now they are sometimes being told that they may not be able to pull it out at all as the industry faces its worst-ever returns.
Dozens of prominent hedge funds, including Fortress Investment Group and Tudor Investment, have recently restricted redemptions in some of their portfolios.
New York Times – Hedge funds are facing many agonies. They are tortured by redemptions. Then there are “high water marks,” another now-troublesome part of their model. They need to fix such flaws if they are to fight another day.
The list of funds blocking investors from withdrawing their money is growing daily. Tudor Investment, the Fortress Investment Group and dozens of others have done so, at least temporarily. The rationale is to protect the fund’s remaining investors, who can be harmed if the fund needs to deplete its cash balance or sell assets at fire-sale prices.
Forbes – Fortress Investment Group pulled up the portcullis on its Drawbridge funds Wednesday, but it’s stock is under seige.
Fortress Investment Group‘s directors voted to temporarily suspend pending redemptionsafter investors asked to pull out roughly $3.5 billion by year’s end from its Drawbridge funds, nearly as much as the vehicles have in assets.
Bloomberg – D.E. Shaw & Co. LP, the investment firm run by David Shaw, and Farallon Capital Management LLC limited withdrawals by clients, joining more than 80 hedge-fund managers to impose restrictions in the past two months.
D.E. Shaw, which oversees $36 billion, capped redemptions from its Composite and Oculus funds, said two people familiar with the New York-based company. Farallon, a $30 billion firm based in San Francisco, did the same with its biggest fund after investors asked to get back more than 25 percent of their money.
The firms are two of the biggest to block withdrawals, known as putting up gates, so they aren’t forced to liquidate investments at distressed prices to raise cash. New York-based Fortress Investment Group LLC said yesterday it froze an $8 billion fund after getting redemption requests for 40 percent of its assets. Tudor Investment Corp., the Greenwich, Connecticut, firm run by Paul Tudor Jones, locked the $10 billion BVI Global fund last week ahead of plans to split the fund into two.
