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Bloomberg – The global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.
“It’s very clear that there is going to be significant consolidation in the hedge-fund industry,” said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies. “Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”
Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion, Singapore-based Eurekahedge said, based on preliminary figures taken from 41 percent of the funds it surveys. It said hedge-fund assets shrank by $110 billion to $1.65 trillion in October.
New York (HedgeCo.Net) – Gabriel Capital and founder Ezra Merkin have been sued for their exposure to Ponzi-schemer Bernard Madoff by a disdained investor.
Scott Berrie, who has $500,000 tied up in one of Gabriel’s funds, claims that Gabriel lied to investors when they marketed that they hold a “diverse portfolio of securities,” which “falsely implied that the general partner was actively pursuing the partnership’s strategy in a prudent manner by using numerous and diverse investments.”
Berrie also alleges that Merkin, who heads up GMC financing arm GMAC LLC, neglected at least 27 percent of its investments, the chunk of which was invested with Madoff.
Berrie filed a class-action lawsuit yesterday in a federal court in Manhattan.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters – Three European banks on Sunday announced a total of about $3.8 billion in exposure to an investment fund run by Bernard Madoff, the U.S. investor accused of running a $50 billion "Ponzi" scheme.
The largest banks of both Spain and France, Santander and BNP Paribas, and Swiss private bank Reichmuth & Co became the latest parties to detail possible losses over investments made with Madoff, who was arrested in New York on Thursday in the alleged fraud.
Santander put its client exposure at over 2.33 billion euros ($3.09 billion). BNP Paribas said it could face a potential loss of 350 million euro from exposure to Madoff-linked investments. And Swiss private bank Reichmuth & Co said it had about 385 million Swiss francs at stake, around $325 million.
Bloomberg - The global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.
“It’s very clear that there is going to be significant consolidation in the hedge-fund industry,” said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies. “Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”
Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion, Singapore-based Eurekahedge said, based on preliminary figures taken from 41 percent of the funds it surveys. It said hedge-fund assets shrank by $110 billion to $1.65 trillion in October.
San Francisco Chronicle – A major investor called on Yahoo Inc. to sell its search business to Microsoft Corp. on Wednesday, adding to the pressure on the Sunnyvale Web portal to restart talks with its rival.
Meanwhile, Yahoo agreed to water down an employee severance plan that had been criticized as extravagant, raising speculation that the company was shopping itself for a sale. The changes were made to settle a lawsuit in which shareholders accused Yahoo of devising the severance plan to foil Microsoft’s takeover bid earlier this year.
Ivory Investment Management, a hedge fund that owns a 1.5 percent stake in Yahoo, sent a letter to board members that said a sale would garner $15 billion and help restore the company’s tumbling finances.
Seattle Times – Bill Fleckenstein, a well-known Seattle investor who bets exclusively on falling stocks, is shutting his 12-year-old fund and starting a new one that will buy equities, too.
Fleckenstein said he doesn’t think the worse is over in the U.S. stock market. Yet he no longer wants to limit himself to so-called short bets.
"I’m not wildly bullish right now," he said. "The market hasn’t reached its ultimate lows, but we might be in a trading range for a long time."
Short sellers have been the best-performing hedge funds this year, up 32 percent through November, according to Chicago-based Hedge Fund Research, whose data show an industry average decline of 18 percent during that period. Fleckenstein, founder and president of Fleckenstein Capital, declined to comment on the fund’s size or its returns.
New York (HedgeCo.Net) – Chicago-based Citadel Investment Group lost 13 percent in November, according to a report published by the Wall Street Journal. This brings the hedge fund firm’s total losses to 47 percent for the year.
The losses stem in part from the company’s two largest funds, the Kensington and Wellington, which together manage about $10 billion in assets. Investor redemption requests totaling around $1 billion and plummeting values of bonds were the catalysts behind the losses.
This is the first year since 1994 that Citadel will post a loss. It is only their second loss since CEO Kenneth Griffin launched the firm in 1990. All is not grim, however. Bloomberg News reports that three other Citadel funds, who together manage about $3 billion, have climbed about 40 percent this year.
Hedge funds as a whole have posted their worst record to date this year. According to data by Chicago-based Hedge Fund Research, hedge funds have lost an average of 22 percent this year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters – Hedge fund manager John Paulson told investors that he made money again in November, leaving his biggest funds with double-digit gains for the year at a time many prominent rivals are nursing heavy losses.
Paulson’s roughly $5 billion Advantage Ltd fund gained 2.04 percent in November and is now up roughly 21 percent since January, according to an investor.
His roughly $10 billion Advantage Plus Ltd fund rose 3.19 percent in November and is now up 33.52 percent year-to-date.
istockAnalyst.com – Mutual funds and hedge funds are very similar. An investor puts $10,000 into a mutual fund or hedge fund, and the manager uses that $10,000—along with the rest of the fund’s capital—to buy and sell securities.
Though often shrouded in mystery, hedge funds are pretty easy to understand. A mutual fund has to register with the Securities and Exchange Commission; a hedge fund does not. Why? Hedge funds are exempt from registration because they generally operate under one of two exemptions provided by the Investment Company Act of 1940:
Section 3(c)(1): Hedge funds are exempt from registration if they have "not more than one hundred" investors, all of which are accredited investors; or,
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.
West Palm Beach (HedgeCo.net) – The Energy Hedge Fund Center (EHFC) announced that it has added a ‘green’ hedge fund directory to its product inventory. EHFC’s Directory of Energy Hedge Funds was launched four years ago, but with the interest in ‘green’ hedge funds, the company has created a new green directory for investors. The directory includes carbon, renewable, cleantech, forestry, water and weather derivative funds.
"We decided that now was the time for a standalone green directory and will be offering it for prepublication in January 2009," said Peter Fusaro, co-principal of the EHFC. "The market is now large enough and growing to warrant this service with over 100 green hedge funds."
"EHFC has received innumerable requests for such a product this last 12-months or so as investor appetite for environmental and alternative energy has increased," reports Dr. Gary M. Vasey, Co-Principal, EHFC. "As a result we have complied with that demand and have now added a new directory that focuses on just the ‘green’ hedge funds."
Alex Akesson
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Bloomberg – Satellite Asset Management LP, founded by former employees of billionaire George Soros, stopped client withdrawals from its three largest hedge funds and eliminated more than 30 jobs after losses reduced the firm’s assets to about $4 billion this year.
Satellite Overseas Fund Ltd., Satellite Fund II LP and Satellite Credit Opportunities Ltd. have declined as much as 35 percent in 2008, said a person with knowledge of the funds’ performance. Simon Rayler, Satellite’s general counsel, declined to comment and wouldn’t disclose how many people remain at the firm’s New York headquarters or London offices. Satellite oversaw about $7 billion for clients at the end of last year.
More than 75 hedge funds have liquidated or restricted investor redemptions since the start of the year as they cope with fallout from the global financial crisis. Investors pulled $40 billion from hedge funds last month, while market losses cut industry assets by $115 billion to $1.56 trillion, according to data compiled by Hedge Fund Research Inc. in Chicago.
