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Herald – When you think about future financial stability, ask yourself this contrarian question: Why is it that the nefarious hedge funds, supposedly the bad boys of the financial world, actually came through last year’s crisis in relatively good shape?
It was widely predicted that these funds, which invest huge pools of capital for their wealthy clients, would have a crackup like that of the regulated banks. Some did go under, but the general catastrophe never happened. Why? The answer partly is that the hedge funds still had to live by the old capitalist rules: There was no lender of last resort to bail them out. So these unregulated managers turned out to be more cautious than the regulated ones.
West Palm Beach (HedgeCo.net) – In a statement outlining the Cayman Islands financial position, the Hon. McKeeva Bush, Leader of Government Business/Premier Designate issued a statement regarding recent media coverage suggesting that the Cayman Islands is bankrupt, “We can confirm that these accusations are incorrect,” she said.
Although Cayman’s two main industries, tourism and financial services, are significantly affected, “We are confident that the strength and resilience which has contributed to Cayman’s significant growth over the past 40 years will continue to serve the country well.”
The Government’s efforts include the cutting of Government expenditure, customs duties, licence fees, and a number of other indirect taxes.
The government has also implemented an aggressive inward investment programme through private sector partnerships which will result in a number of new infrastructure projects and other developments. These will result in the region of $3 billion of inward investment in the short to medium term.
“In three weeks time we will be presenting our Budget which will continue to maintain Cayman’s sound financial stability. The Cayman Islands is well placed to take advantage of the global economic recovery and we are committed to continuing the success of our indirect tax system which has served the country so well over its history.” McKeeva Bush concluded.
Alex Akesson
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HedgeCo.net (West Palm Beach) – Hedge fund founder J. Winder Hughes, III, has joined wastewater treatment and power generation technology company, ThermoEnergy Corporation, on the Company’s Board of Directors.
Hughes is the Managing Director of the private equity firm of Hughes Capital Investors, LLC. In 2000, Hughes formed the Focus Fund, LP, a Florida-based, highly concentrated equity partnership that focuses on publicly-traded emerging growth companies. Over the past two years, the Focus Fund has become one of the largest investors in ThermoEnergy Corporation.
"We are extremely pleased that Mr. Hughes accepted our invitation to join the board of ThermoEnergy Corporation," said Dennis C. Cossey, ThermoEnergy’s Chairman and CEO. "With his extensive background in corporate finance and investment banking, Mr. Hughes represents a tremendous resource on which the ThermoEnergy management team can rely on."
"Given that the Company is on the cusp of commercial prosperity with its wastewater treatment business and at the forefront of achieving value-creating milestones with its Babcock-Thermo Carbon Capture joint venture," said Mr. Hughes, "I look forward to working with the management team to strengthen the company’s financial stability and improve business performance for the benefit of all its stakeholders."
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
PR Inside – “Hedge fund managers naturally seek international as well as national investors. To continue to do so in today’s evolving regulatory environment, managers are likely to need to establish operations in the EU for EU domiciled investors, in the US for US investors and offshore for international investors,” said Ogier partner Peter Cockhill.
Citing the various reports and legislative proposals put forward by governments and global regulatory bodies such as the OECD and IOSCO, and tracing these proposals back to their origins, the Ogier seminars drew several conclusions as to potential results.
“Transparency is the new paradigm,” added James Bergstrom. “In the near future only those offshore financial centres (‘OFCs’) which meet the regulatory and tax transparency requirements of the new Financial Stability Board will be permitted to participate in the international financial system.”
Courthouse News Service – President Obama’s plan to overhaul financial regulations, to prevent a repeat of the country’s credit and banking catastrophe, is laid out in a "nearly final" 85-page document the president is expected to reveal today.
Among other things, the president proposes creating a National Bank Supervisor to oversee all federally chartered banks; strengthening capital requirements for banks; requiring hedge funds and other private pools of capital to register with the SEC; and regulating derivatives, including credit default swaps.
The plan would give the Federal Reserve more authority over large financial institutions that could threaten the financial system, and give the Federal Deposit Insurance Corp. greater power to seize and break up such institutions.
The document proposes five "key objectives;" 1. Promote robust supervision and regulation of financial firms; 2. Establish comprehensive supervision and regulation of financial markets 3. Protect consumers and investors from financial abuse; 4. Improve tools for managing financial crises; and 5. Raise international regulatory standards and improve international cooperation.
The first objective of the plan calls for "new authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks."
West Palm Beach (HedgeCo.net) – “We welcome the publication of the Turner Review, which is an impressive and comprehensive piece of work." Andrew Baker, Chief Executive of The Alternative Investment Management Association (AIMA), said, "It is about the banking system’s role in the current financial crisis and as such its principal focus is the banks, not the hedge fund industry. We are grateful to Lord Turner for his even-handed and measured approach and for not making hedge funds the scapegoat for this crisis."
"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.
We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.
Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.
We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”
AIMA has more than 1,200 corporate members worldwide, based in 43 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby’s position may be weaker than it has been in recent years.
For one thing, many hedge funds simply do not have the financial clout — and therefore carry the associated risks seen by some politicians — that they once did.
guardian.co.uk – Secretive hedge fund barons, blamed by many for undermining Britain’s financial stability, will be unmasked on Tuesday when they are forced into the public spotlight by the powerful Treasury select committee.
As suggestions grow that hedge funds have made huge sums shorting UK bank stocks and sterling, the billionaire Chris Hohn and Liberal Democrat-supporting tycoon Paul Marshall will be quizzed on whether the predicted decimation of hedge funds as a result of the financial crisis could destabilise the global economic system further.
Hedge fund bosses will argue that they manage "only" £1.3 trillion of cash, which is less than a large fund manager, and that not one hedge fund has received a public bail-out. In addition, of the 150 bans or censures levelled by the Financial Services Authority since 2005, only two have involved hedge funds. They will also say that there have been numerous examples of hedge funds shorting sub-prime assets ahead of the credit crunch.
Seeking Alpha – If you happen to be in need of Vaseline and find that your local pharmacy is sold out, never fear. Chances are, the entire stock has been purchased by your friendly neighbourhood hedge fund manager. If you ask nicely, perhaps he’ll let you borrow a tub or two.
One of the signal trends of the past month or so has been the sharp decline in the oil price. Part of this is likely attributable to the China/global growth slowdown theme that Macro Man has highlighted recently, and part of it is likely a result of some sort of dollar strength feedback loop, which itself is at least partially attributable to a softening of the ECB’s rhetoric.
On the face of it, it would appear that the hedge fund world has dodged a bullet in oil. After all, the CFTC data has shown net speculative positioning to be fairly light over the past month or two, and even slightly negative for the last few weeks.
