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.
Securities Industry News – Hedge fund manager Philip Goldstein, who successfully curbed the Securities and Exchange Commission’s attempts in 2006 to regulate hedge funds, has lost a “freedom of speech” case against the state of Massachussetts.
A Massachussetts court on Sept. 30th ruled that the state’s fop financial regulator,the Massachussets Secretary of the Commonwealth was allowed two years ago to order Goldstein to stop unqualified investors from looking at his firm’s website for information on the funds his firm, Bulldog Investor, manages. William Galvin, the secretary of the commonwealth, had also ordered Goldstein to pay a $25,000 fine.
The case — Suffolk Superior Court Civil Action No. 07-1261-BLS2, Bulldog Investors General Partnership, et al. vs William F. Galvin, Secretary of the Commonwealth of Massachussetts –involved an unsolicited request for information through the Bulldog website in January 2007 by a Massachusetts resident who did not qualify under current securities law to receive such information because of insufficient net worth.
Forbes – Britain’s financial regulator on Wednesday banned guaranteed banker bonuses of more than one year, as it leads a global crackdown on a culture of excessive risk-taking that has destabilised economies.
The Financial Services Athourity (FSA), which has been slammed for failing to address problems that led to the near collapse of the financial system last October, also said two thirds of bankers’ bonuses should be spread over three years to discourage short-term decision-making.
Bloomberg – Hedge funds and other investors who short-sell shares in Britain’s financial companies must continue to disclose their trades, the U.K.’s financial regulator said.
A reporting requirement put in place by the Financial Services Authority in January will continue until new short- selling rules come into place, the agency said in a statement today. The requirement had been due to lapse on June 30. The new set of rules is expected to come into force in 2010.
“Keeping the disclosure requirements will continue to enhance transparency and limit the potential for market abuse, while details of a long-term regime for short-selling are being drawn up,” said Sally Dewar, the FSA’s managing director of wholesale and markets.
Bloomberg – Billionaire investor George Soros’s Soros Fund Management LLC was fined 489 million forint ($2.2 million) for attempting to manipulate the share price of OTP Bank Nyrt., Hungary’s largest bank, the country’s financial regulator said.
The Soros fund attempted on Oct. 9 to “send out false or misleading signals about a security’s supply and demand or its share price” and short sold OTP shares, the regulator, known as PSZAF, said in a statement late yesterday. The short selling caused the shares to drop 14 percent in the final 30 minutes of trade, the regulator said.
Short-sellers sell borrowed securities, hoping to profit by repurchasing them later at a lower price and then returning them to the owner. Budapest-based OTP is Hungary’s largest lender.
Wall Street Journal – Experts say hedge funds are not responsible for the wholesale selloff in U.K. financial stocks which saw shares in the four remaining major banks dive to record lows earlier this week and prompted renewed calls to the U.K. financial regulator to reintroduce a ban on the short-selling of financial stocks.
While Lloyds Banking Group (LYG), HSBC Holdings PLC and Royal Bank of Scotland Group PLC (RBS) all closed in positive territory Wednesday with Barclays PLC (BCS) only down 0.07%, all four had had massive falls Monday and Tuesday.
guardian.co.uk – The Independent’sJeremy Warner is not convinced and argues that the failure is entirely their own. In the Daily Telegraph, Richard Fletcher explains that though Horlick blames US regulators for their lack of oversight her clients should be asking her some tough questions. In The Times, Daniel Finkelstein says what you need to understand about Charles Ponzi’s scheme is that when he started it, it wasn’t a Ponzi scheme. It just got out of hand.
David Wighton says the sums involved are breathtaking. He suggests there must be a worry that other boom-time frauds will now be exposed by the bust. David Aaronovitch says by last week he was ready for Bernard Madoff. He had read JK Galbraith’s The Great Crash 1929 and taken his point that in boom times the rate of embezzlement grows because the promised rewards don’t seem as absurd as they actually are and the rate of discovery falls off. In the Daily Mail, Alex Brummer says that the £33bn fraud by Madoff could spell the end for the most controversial investment vehicles of recent years: hedge funds.
Daily Telegraph – Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia.
The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system.
Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.
Investors pulled at least $43bn (£25bn) from US hedge funds in September, according to TrimTabs Investment Research. This is nearly five per cent of the global sector’s estimated $2 trillion in total assets.
Telegraph.com.UK – Sources close to Mrs Lagarde said that she had called the US Treasury Secretary – a close personal friend – well before the ailing bank’s collapse imploring him to act, but he chose not to.
Lehman Brothers’ demise sparked the biggest shake-up on Wall Street in decades and sent shock waves around the world that triggered a massive bailout plan in Britain and Europe.
Mrs Lagarde – attributed with playing a key role in brokering a bailout deal among G7 finance ministers in Washington last weekend – dubbed Mr Paulson’s decision to let the bank go under "horrendous" as it triggered panic in markets and banks to the brink of a 1929-style financial meltdown.
In an interview with the Daily Telegraph, she warned that the world’s hedge funds could be the next institutions to be hit by the financial turmoil.
Daily Telegraph – Lawyers are being galvanised on behalf of a raft of hedge funds which claim the financial watchdog has illegitimately extended its powers and caused "wide-spread capital destruction."
One said: "The FSA’s remit is to maintain orderly markets – the markets were working fine, only the banks were going bust. With one swoop, the regulators have wiped out perfectly legitimate businesses and have cost some funds millions. They have gone for the big political hit without a thought for the damage they are wreaking. There may be unintended consequences but it’s outrageous and illegal."
The backlash follows a week in which the multi-billion pound hedge fund industry has been plunged into crisis. Prime brokers in London estimated that 35 per cent of European hedge funds were organising emergency measures to avoid closing funds as a ban on short-selling has hamstrung managers at a time when they need flexibility to survive.
Daily Telegraph – As short-selling is banned to protect Britain’s banks, Gordon Rayner names the men who have made millions from the financial crisis
As 70,000 employees of HBOS wonder which of them will still have jobs this time next month, they will no doubt be looking for someone to blame for the extinction of their once great employer.
As the dust settled yesterday on the ruins of Britain’s fifth-biggest banking group, there was little doubt as to the immediate cause of their misery – the hedge fund billionaires who have made a killing by playing poker with their livelihoods.
Daily Telegraph – Stanley Fink, the former boss of Man Group, who became one of the City’s best-known financiers, is teaming up with Lord "Cashpoint" Levy to make a spectacular comeback to the hedge fund industry he quit last year.
Known as the "Godfather" of British hedge funds, Fink is to become chief executive of International Standard Asset Management (ISAM), a small London-based commodities trader. Lord Levy, the former Labour treasurer who was Tony Blair’s special envoy to the Middle East, is to be chairman of the group.
It will be Levy’s first high-profile role since being embroiled in Labour’s cash-for-honours’ scandal two years ago.
The pair plan to build ISAM, which currently has two funds trading in gold and fixed income, into a substantial player in the hedge fund world.
The return of Fink will be a major talking point in the City.
Daily Telegraph – Cerberus, the American hedge fund, has sold its stake in Merchant Equity Partners, the owner of the MFI furniture chain, to Hilco and Goldman Sachs.
The secretive investment firm was one of the original backers of MEP but is understood to have sold its stake in the furniture chain’s owner several months ago. It is believed that its stake was split between Goldman and Hilco, the turnaround specialist, both of which were existing MEP backers.
MEP was launched by Henry Jackson, a former investment banker, and has made two acquisitions in the furniture retail sector.
