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.
Guardian.co.uk – Boris Johnson, who is leading the fight against a European crackdown on City financiers, faced accusations of being “bought off” today, when it emerged that more than half the money donated to his mayoral campaign came from the financial sector including hedge funds and private equity.
Johnson has criticised the EU’s so-called “hedge fund directive,” draft rules published in the spring which would limit debt levels for alternative investment managers, such as hedge funds, and force them to be more transparent.
Nasdaq – A key U.S. House lawmaker on Thursday unveiled draft proposals to bolster the U.S. Securities and Exchange Commission’s powers, to federally regulate hedge funds and to establish a federal insurance office.
The three drafts are the latest to be circulated by House Financial Services Capital Markets Subcommittee Chairman Paul Kanjorski, D-Pa., who is among the lawmakers playing a major role in working to enact broad new regulations for the financial sector. Last week he unveiled a controversial bill which would make it easier to sue credit-rating firms in an effort to hold them more accountable for the quality of their ratings.
The New York Times – London’s mayor, Boris Johnson, an advocate of protecting the city’s financial sector from over-regulation, will take the fight to protect Britain’s hedge fund and private equity industry to Brussels this Wednesday, The Daily Telegraph reported.
Mr. Johnson is scheduled to meet with senior members of the European Parliament and Charlie McCreevy, the head of internal markets for the European Commission, in an effort to thwart potential regulation in the form of a draft European directive, which includes radical proposals on fund-raising and capital requirements.
Reuters – A brash Kuwaiti financier facing a fraud suit by U.S. authorities was found dead Sunday in an apparent suicide that sent shockwaves through the Gulf Arab financial sector.
A security source told Reuters that Hazem Al-Braikan appeared to have died from a single gunshot wound to the side of the head, while a policeman standing outside Braikan’s house said the well-connected financier, 37, had shot himself.
Braikan was the chief executive of Al Raya Investment, which is 10 percent owned by Citigroup Inc, and had been at the center of a financial scandal that erupted last week.
The Australian – The move wades the US into a fierce battle between the UK and other parts of Europe over how tough regulation should be. Some nations, led by Germany and France, are calling for wholesale regulation of financial services in the wake of last fall’s crisis, but the UK says that overly stringent rules would damage its large financial sector and close off US and other funds to European investors.
The US and UK are lining up to change the European Union’s proposed Alternative Investment Funds Directive, a sweeping bid to overhaul regulation of hedge funds, private equity and other alternative investment funds.
Reuters UK – Britain’s Financial Services Authority (FSA) plans to triple some of the fines it imposes on financial sector wrongdoers as part of a crackdown on offences such as mis-selling and insider dealing.
The bigger fines are designed to deter firms and individuals from breaking market rules by making the costs of doing so prohibitively high, the FSA said in a statement on Monday.
"By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules," FSA director of enforcement Margaret Cole said.
New York (HedgeCo.Net) – Hedge funds gained 1.37 percent in March, according to data compiled by the Hennessee Group LLC. It was a successful month for the equity markets at well, with the S&P advancing 8.54 percent, the NASDAQ climbing 10.94 percent, and the Dow Jones advancing 7.73 percent.
"Hedge funds with a focus on the financial sector may potentially outperform in 2009," said Co-Founder of Hennessee Group Charles Gradante. "Not only did Citigroup and Bank of America announce a profitable January and February, but the borrowings at the Fed discount window have been steadily declining. It is possible that the banking crisis of confidence can unwind as quickly as it unfolded."
According to the data, the long/short equity index advanced 1.6 percent, thanks to programs launched by the U.S. government aimed at helping the banking sector. The arbitrage/event driven index gained 1.34 percent, with credit opportunities aplenty and many managers increasing stakes in bank debt, high yield and convertible bonds.
The global macro index saw a steady increase of .74 percent. The Hennessee Group pointed to the fact that many macro managers posted losses on their short-term Treasuries trade after the Fed announced they would buy $300 billion in U.S. Treasuries, which prompted buying and drove down yields.
This puts the YTD gain for hedge funds at just over 1 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.net) - London hedge fund manager ACP Partners, which is soon to merge with TriAlpha Investment Advisors, said that their long/short eguity strategy fund, ACP Financial Opportunities, has beaten its benchmark by over 65% in its first six months.
Since the fund launch on 1 September 2008 through 28 February 2009, the new fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9%. Its benchmark, the S&P 1200 Global Financials, returned -60.7% over the same period, and the HFRI Equity Hedge Index -22.2%.
"Financials account for around 20% of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors." Stephen Greene, partner and CIO of the ACP’s Multi Manager business, said, "Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value."
"The key to achieving positive returns has been portfolio construction. The portfolio was specifically structured to benefit from the expected market volatility as we placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation. Unusually, our fund was one of only a very few fund of funds to be market neutral over this period of turmoil." Greene concluded.
As examples, the portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises. The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition. Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.
The fund has a minimim investment of $1,000,000 (or equivalent) with quarterly redemptions, and a managment fee of 1% and performance fee of 10%.
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Associated Press – President Barack Obama is trying to dampen a fire he once stoked, urging a more tempered response to public furor over bonuses paid to executives of the publicly rescued insurance giant American International Group.
Obama is virtually certain to use Tuesday’s prime-time news conference to continue an effort that began over the weekend: cooling the anti-AIG ferocity, now that it threatens to undermine his efforts to bail out the nation’s deeply troubled financial sector.
Obama’s tone changed dramatically after the House voted last week for targeted taxes to take back most of the $165 million in bonuses paid to AIG executives. Many lawmakers felt Obama had encouraged their step, because he called the bonuses reckless, outrageous and unjustified.
In the White House, however, the situation seemed to be spinning out of control. Some fellow Democrats questioned the constitutionality and wisdom of the House’s action. Executives of other troubled companies signaled they would not make deals with a federal government that revises agreements after they are signed.
On Sunday, Obama told CBS’ "60 Minutes" the House’s plan to slap a special tax on the AIG executives would be unconstitutional. Borrowing a line from his Feb. 24 speech to Congress, he said he would not "govern out of anger."
Private Equity Hub – Wealth managers at Citi are telling their clients to watch for a burst of hedge fund activity in bad assets.
The wealth investor says in its most recent note that the biggest opportunity for hedge funds is probably around the Public-Private Investment Fund, which is part of the huge U.S. plan to stabilise the financial sector.
The idea is that the U.S. government will lend money to investors to buy up toxic assets from banks, thus setting a market price.
Stuff - Wealth managers at Citi are telling their clients to watch for a burst of hedge fund activity in bad assets.
The wealth investor says in its most recent note that the biggest opportunity for hedge funds is probably around the Public-Private Investment Fund, which is part of the huge U.S. plan to stabilise the financial sector.
The idea is that the U.S. government will lend money to investors to buy up toxic assets from banks, thus setting a market price.
Citi notes that the loans are non-recourse ones, which means that any default is limited to the actual cost of whatever collateral is require.
U.S. News & World Report – Andrew Lo, hedge fund manager and director of MIT’s Laboratory for Financial Engineering, is a long-time student of investor behavior, especially the sort that belies the notion that markets move with cool efficiency. Particularly today, he sees animal spirits lurching about in some worrisome ways that could have long-term consequences for markets and the economy. "The big message is that right now all, of us are in a state of emotional shell-shock," he says. That goes for investors, regulators, bankers, and anyone else unlucky enough to get caught up in the fear and uncertainty flowing through the current financial crisis.
In this two-part Q&A with U.S. News, Prof. Lo discusses the best way to build a robust regulatory system for the financial sector (part one is here.) Below, he considers what massive changes in the investment landscape over the past few years might mean for your investments:
