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.
Seekingalpha.com – To understand which segments of the U.S. equity market were most affected by hedge fund selling pressures late in 2008, a good place to look is 13F filings with the SEC. These are required from institutional investment managers with US$100 million or more in securities.
Citigroup’s small and mid cap stock strategist, Lori Calvasina, reviewed recently released filings for the fourth quarter and found that small and mid cap stocks were hit hardest.
Bloomberg – Children’s Investment Fund Management UK LLP, the London-based hedge fund founded by Christopher Cooper-Hohn, sold off its shares in Mastercard Inc. and added shares of rival credit-card network Visa Inc. in the fourth quarter.
Children’s sold its 5.95 million shares, valued at $963 million on Sept. 30, of Mastercard, based in Purchase, New York. The fund bought 4.7 million shares in San Francisco-based Visa, increasing the value of its stake to $589 million as of Dec. 31, according to a filing today with the U.S. Securities and Exchange Commission.
Bloomberg – Billionaire investor George Soros’s hedge-fund firm bought more shares of Petroleo Brasileiro SA and Potash Corp. of Saskatchewan Inc. in the fourth quarter, almost doubling its holdings.
Soros Fund Management LLC bought 16 million shares of the Petrobras’ U.S. traded shares, bringing its stake to 1.45 percent, according to a filing yesterday with the U.S. Securities and Exchange Commission. The New York-based firm increased its holdings in Potash by 2.6 million shares to 2 percent in the fourth quarter. Petrobras and Potash are now the firm’s two biggest reported U.S. stocks.
Bloomberg – Hedge-fund assets will likely drop by about $192 billion this quarter after the industry posted record losses in 2008, according to estimates by UBS AG.
Global assets will likely fall to $1.215 trillion in the first quarter, said Timothy Bell, London-based head of hedge- funds advisory at UBS’s wealth management unit. Hedge-fund investors withdrew a record $152 billion in the fourth quarter, pushing industry assets to $1.407 trillion at the end of 2008, according to Hedge Fund Research Inc.
“That trend is going to keep going certainly till the end of this first quarter,” Bell told reporters in Singapore today. “Trust will be reestablished by mid-year, provided the hedge fund industry does what it’s meant to do; January was a shining example of the lack of correlation.”
Bloomberg – Australian hedge funds will attract a net inflow of cash in 2009 after record redemptions by overseas investors led to the closure of at least 10 funds in the fourth quarter, the local arm of the Alternative Investment Management Association said.
Funds that survived will see some of that money invested in March once December quarter redemptions are returned to investors, AIMA Australia Chairman Kim Ivey said in an interview.
“Getting through this period is the defining time for managers because new money in March and April may keep them afloat,” said Sydney-based Ivey, who is also managing director of private hedge fund Vertex Capital Management. “Those that came out of 2008 and showed that they could still add value are in a very good position in 2009.”
Reuters – Hedge fund GLG Partners reported a further drop in assets on Thursday and said the cycle of investor redemptions in the industry was not yet over despite its funds’ performance perking up in January.
The London-based, New York-listed firm, which last year saw star manager Greg Coffey depart, said assets under management fell 13 percent during the fourth quarter to $15 billion (10.2 billion pounds), as small inflows were negated by large performance losses.
Bloomberg – MetLife Inc., the largest U.S. life insurer, said fourth-quarter profit declined 12 percent on losses from hedge funds and real estate ventures. Shares gained in extended trading as the company beat analysts’ estimates.
Net income slipped to $985 million, or $1.20 a share, from $1.12 billion, or $1.44, in the year-earlier period, the New York-based insurer said today in a statement. Excluding some investment results, the company made 19 cents a share, six cents better than the average estimate of 17 analysts surveyed by Bloomberg.
Bloomberg – Elliott Management Corp., the $12.8 billion hedge-fund firm founded by Paul Singer 32 years ago, told clients that it bought securities from Marc Dreier, the New York lawyer jailed for alleged fraud.
Elliott lost money on promissory notes purchased in October from Dreier, who had previously done work for the company, it said in an undated quarterly letter to clients. The firm’s Elliott Associates LP fund declined 9.2 percent in the fourth quarter, its worst quarterly loss.
“There are many reasons why funds lose money, but being defrauded is among the most embarrassing and annoying,” New York-based Elliott said in the letter, a copy of which was obtained by Bloomberg News. “We continue to adapt our processes to keep several steps ahead of fraudsters, and we maintain an attitude of probing skepticism. But sometimes we get hooked, as in the Dreier case.”
Cornell Daily Sun – In the midst of the country’s economic recession, the Johnson Graduate School of Management’s Cayuga Fund, a hedge fund run by faculty and students, reported a 0.42 percent gain for the 2008 business year.
Although the fund’s investments decreased by 1.29 percent in the fourth quarter, this $12 million hedge fund, finished the year ahead, especially relative to the performance of its benchmarks. Indexes like Hedge Fund Research Equity Hedge Index and the Hedge Fund Research Equity Market Neutral Index reported 25.45 percent and 1.16 percent losses, respectively, in 2008.
istockAnalyst.com – First it was the sovereign wealth funds, controlling vast portions of American companies. Then it was the private equity cowboys who came in and took public companies private, removing them from public investment – and scrutiny.
Finally, there were the hedge funds, large pools of private money moving the markets and making stunning returns at the expense of small investors.
Just like their predecessors, who have found that they aren’t as invincible as once believed, hedge funds are having a difficult year. Seven percent of all hedge funds closed in the first three quarters of 2008 – nearly 700 of them. That doesn’t even include the fourth quarter.
Street.Com – Battered hedge funds may still be the best-looking clients out there for banks, which face a dearth of opportunities to do deals in the dead M&A and IPO markets.
The business of providing an array of services to hedge funds, known as prime brokerage, went up for grabs in 2008. It is highly specialized, expensive, and difficult to run, but potentially very lucrative. It typically accounts for about 6% of Goldman Sachs’ revenues, though that does not include ancillary benefits, like trading commissions.
In the fourth quarter, Goldman’s first money-losing effort as a public company, prime brokerage helped offset some of the damage. The $799 million the business accounted for some 15% of total revenues.
Markets Media News – The New Year is likely to see several important shifts in alternative investing, according to Don Steinbrugge, managing partner of Agecroft Partners, a global consulting and third-party marketing firm for hedge funds.
Steinbrugge said during the fourth quarter of 2008, investor demand started to shift toward market neutral strategies, as well as toward strategies that used little leverage and provided investors with transparency and liquidity. That shift will likely continue throughout 2009, he said.
Short-biased funds, which have always been a small percentage of the marketplace, surged ahead in 2008, delivering double-digit returns and capturing a larger market share of alternative investments. Steinbrugge said investors are likely to continue to invest in short-biased funds, but their growth will be at a slower pace than last year.
Commodity Trading Advisors (CTAs) are likely to see a lot of demand as well, as they also delivered double-digit returns last year and proved they are not correlated with other hedge fund strategies. Steinbrugge said, however, that does not mean traditional long-short equity funds are on their way out.
"Long-short equity funds have actually done pretty well in comparison to the S&P 500," Steinbrugge said. "I don’t think you’ll see a huge shift out of long-short equity."
