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.
Norwalk Advocate – It could be six months to a year before major investors start pumping money back into the market, according to a survey by Quinnipiac University and Greenwich Roundtable, which represents hedge fund investors who control or manage more than $1 trillion in assets.
The survey of 89 private and institutional investors was conducted from Jan. 26 to Feb. 6.
Osman Kilic, a Quinnipiac professor of finance, said it’s important for these investors to engage in the market because they provide funding for many Main Street businesses.
Bloomberg – MBIA’s split of its bond- insurance business was challenged by hedge funds alleging the move hurts owners of about $240 billion of debt while benefiting stock investors, executives and some policyholders.
The reorganization, in which MBIA stripped $5.4 billion of assets and its U.S. municipal business from a unit that now mainly insures only structured-finance bonds, “represents the height of insidious greed,” the Aurelius Capital Management and Fir Tree Partners funds said in a lawsuit filed today.
Daily Guide – Foreign investors in the Nigerian capital market withdrew some $4 billion from the Nigeria Stock Exchange and precipitated its steep decline, the Exchange’s Director General, Professor Ndidi Okereke-Onyiuke has said.
Appearing before the joint Senate Committees on Finance, Capital Market, Banking, Insurance and other financial institutions investigating the economic crisis facing the country, Mrs Okereke-Onyiuke said in 2008, foreign hedge fund managers went out and withdrew their investment of N556 billion due to the financial crisis in their countries.
Okereke, who was responding to questions posed to her by Senators as to the reasons why share prices in the stock market kept crashing despite assurances by financial managers that the fundamentals of the nation’s economy are strong, said hedge fund managers were shocked by the global financial crisis and quickly withdrew their investments from Nigeria and took it back to their countries.
San Francisco Gate – Friday, January 9, 2009 Alexander James Trabulse, 61, was taken into custody Monday, according to U.S Customs and Border Protection officials. He appeared later that day before U.S. Magistrate Elizabeth Laporte in San Francisco and is to return to court today.
He was arrested three days after federal prosecutors charged him with mail fraud in a complaint filed in U.S. District Court in San Francisco.
Authorities said Trabulse sent account statements to investors in his Fahey Fund that inflated the hedge fund’s returns by as much as 200 percent, while using investor money to purchase cars and finance shopping sprees for family members.
New York (HedgeCo.Net) – Those who push for greater transparency of the hedge fund industry had a victory this week, when an EU official all but declared that funds in the European Union will be regulated.
Charlie McCreevy, the bloc’s internal market commissioner, launched a public discussion on whether or not hedge funds need stricter oversight. Though McCreevy has said in the past that no greater oversight is needed for hedge funds, the majority of those present disagreed.
“We don’t need more consultation. We need regulation. We know exactly what are the problems,” said ex-Prime Minister of Denmark Poul Nyrup Rasmussen, who shares the view that short-selling by hedge funds have had a hand in prompting turmoil in the market.
The results of the consultation, which is still underway, are expected to be known in early 2009. Though most hedge funds fall outside the EU, London is home to several large hedge funds and many portfolio managers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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.
The Daily Deal - Lehman Brothers Holdings may have gone bankrupt eight weeks ago, but the filing continues to reverberate throughout the financial world and even in some unexpected places like the National Football League’s New York Giants. The latest to join the ranks of the exposed are hedge funds. All those 140,000 failed or reconciled credit derivative swaps trades that PricewaterhouseCoopers is involved in identifying could hit the hedge funds and numerous other Lehman clients next month.
According to the Financial Times, four unnamed U.S. hedge funds are likely to close in mid-December because they cannot access holdings held at the London arm of Lehman Brothers. All of the shares and loans cannot be accessed so that PwC can unravel those CDS’s.
Bloomberg – JO Hambro Capital Management Ltd., which oversees about $3.5 billion of assets, will close one of its two hedge funds partly because a bet against Volkswagen AG shares backfired, people familiar with the situation said.
The $240 million Trident European Fund dropped 25 percent in October, its worst month since starting a decade ago, mainly after a bet on a drop in Volkswagen shares went awry, said the people, who declined to be identified because the firm doesn’t disclose returns. The fund has slumped 39 percent this year after posting average returns of 8.4 percent annually since its inception.
Poor performance, dollar gains sapping European investment returns and investors moving assets from medium-sized companies all contributed to the fund’s closure, Suzy Neubert, a spokeswoman for JO Hambro in London, said in an e-mailed statement.
Bloomberg – Money manager John Paulson has started buying beaten-up mortgage bonds as hedge funds stumbled for a fifth straight month.
Paulson, 52, is purchasing debt backed by home loans after generating sixfold returns last year with help from bets against subprime mortgages, investors in his funds said. Paulson’s Advantage Plus fund rose 29 percent this year through October, while the Eurekahedge Hedge Fund Index, which tracks more than 2,000 funds that invest globally, dropped about 12 percent.
“Paulson’s timing is typically very good,” said Louis Gargour, chief investment officer of LNG Capital LLP, a London- based hedge fund that invests in distressed credit markets.
Bloomberg – BNP Paribas SA, France’s biggest bank, won prime brokerage business in Asia with hedge fund CQS (U.K.) LLP as it seeks to lure clients in the region from rivals.
The new contract with CQS, a London-based hedge fund manager that has an office in Hong Kong and oversees about $7.5 billion, adds to BNP Paribas’s existing relationships with major hedge funds in the region, according to Talbot Stark, global head of BNP Paribas hedge fund relationships. He declined to name other existing clients.
“We have prime brokerage relationships with three or four of the market leaders in Asia that are outperforming their peers and look to be longer-term survivors in the Asian hedge fund market,” Stark, 43, said in a telephone interview yesterday. “We’re in discussions with several other key players that are making decisions to change their prime brokerage providers and are seeking alternative providers that are established and committed to the region.”
Reuters London – Hedge funds are starting to move back to the practice of marking complex structured credit instruments to their financial models because market prices are unreliable, says financial advisory firm Duff & Phelps.
James De Bono, managing director at Duff & Phelps, London, which helps hedge funds and banks value assets, told Reuters in an interview that funds are moving to marking to model because in illiquid markets the range of broker prices can be too wide to be very meaningful.
The valuation of hedge funds’ holdings has become an increasingly important issue as liquidity dries up for some assets markets while hedge funds themselves face redemption pressures.
Bloomberg – Permal Group temporarily blocked clients from taking money out of two hedge funds that invest with NWI Management LP while NWI changes its redemption rules, according to two people familiar with the matter.
The firm, based in London, froze the $700 million Permal Fixed Income Special Opportunities Ltd. and $350 million Permal Global Opportunities Ltd. funds, said the people, who asked not to be identified because the decision wasn’t publicly disclosed. Both Permal funds reinvest with NWI.
NWI, which oversees $2.8 billion, was hit with a surge in redemptions, the people said, in part because the New York-based firm allows investors to pull their cash each month. Most hedge funds limit withdrawals to every 90 days, and NWI is now changing its policy, the people said. Hari Hariharan, who runs NWI, declined to comment.
