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.
Bloomberg – Bernard Madoff’s alleged Ponzi scheme may cost insurers who cover financial institutions more than $1 billion as they pay legal costs for investment managers who gave client money to Madoff, an industry executive said.
Insurers who sell such coverage never expected, or charged their clients, for the possibility of investor losses in such a massive fraud, said Greg Flood, the president of the management liability practice at Ironshore Inc., the Bermuda-based insurer.
“This isn’t supposed to happen in America,” Flood said. “There will be extraordinary losses paid for this year.” About $1 billion in claims costs industrywide “wouldn’t be too difficult to imagine.”
International Herald Tribune – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again.
Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
The Australian – After suffering one of the worst years on record, Australia’s $62 billion hedge fund industry is bracing for even tougher times in 2009 as a confluence of factors works against them, including poor performance, more regulation, further short-selling bans, and a flood of redemption requests in late 2008 that are due to be repaid right about now.
The result is that an unprecedented level of cash is being pulled out of hedge funds and funds-of-hedge-funds by investors this quarter, just as they face millions of dollars of losses from the ban on short selling.
It is no surprise, then, that a lot of lobbying is going on behind the scenes to ensure that corporate watchdog ASIC lifts the ban on short selling financial stocks on January 27.
But speculation is running hot that the ban will be rolled over and some believe it could remain until the credit crisis subsides — a move hedge funds can ill afford.
In Britain, the ban is due to be lifted on January 17, but Andrew Baker, deputy chief executive of the Alternative Investment Management Association, recently said the ban could last for the entire length of the financial crisis.
