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West Palm Beach (HedgeCo.net) - The Opalesque South Africa Roundtable was held November 10th 2008 in their Cape Town Office. There, the participants also discussed the particularities of investing in Africa (ex-South Africa).
South Africa’s equity and fixed income markets displayed exemplary robustness during 2008. Many global allocators may not be aware that the South African financial market infrastructure matches or exceeds its "first world" counterparts in many respects.
The equity and fixed income markets demonstrated exemplary robustness throughout the turbulences of 2008: no short-selling ban, no trading halt and no failed trades. Offshore investors can benefit from efficient and proven ways to get pure South African alpha without taking currency risk.
During the Roundtable, portfolio managers explained new ways to construct hedges, and informed on new and upcoming products. How global investors can benefit from the "Africa story", which is probably the largest opportunity set in the new investment paradigm called "frontier investing"? How do you deal with restricted liquidity, and is Africa really uncorrelated?
The following experts participated in the Opalesque South Africa Roundtable: James Gubb, Founding Partner of Clear Horizon Capital St. John Bungey, Partner, Praesidium Capital Management James Addo, Portfolio Manager, Finch Asset Management Simone Lowe, Portfolio Manager, Thames River Capital Andy Pfaff, Founding Partner of Trendline Funds Ian Hamilton, Founder, IDS Group Ryan Proudfoot, Co-Head RMB Prime Broking Warren Chapman, Head of Peregrine Prime Broking Kevin Ewer, Portfolio Manager, Blue Ink Investments.
South African hedge fund managers and hedge fund investors share surprising insights. For example, – South African single strategy hedge funds offer transparency "far superior to anything anywhere else", according to investors – South African hedge funds suffered their first – and only until that point – net redemptions in October 2008, but only 2.5% of total assets – South Africa is the first country in the world that actually distinguishes between normal fund managers and hedge fund managers, with higher criteria required for hedge fund managers.
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New York (HedgeCo.Net) – A year-long probe launched by a U.S. Senate Committee has discovered that numerous Wall Street banks have assisted offshore hedge funds in evading millions of dollars in U.S. taxes. The Permanent Subcommittee on Investigations has concluded that Lehman Brothers, Morgan Stanley, Merrill Lynch, UBS, Citigroup and Deutsche Bank created products to skirt a law that required them to withhold the 30 percent tax on stock dividends paid to offshore investors.
While the IRS apparently turned a blind eye, the actions taken by the bank allowed these funds to sell their shares to the bank while entering into a swap contract that paid a fee to the banks in exchange for the amount of the dividend plus any gains.
"Major financial institutions have devised complex financial structures to enable their offshore clients to dodge U.S. dividend taxes," Democratic Senator Carl Levin of Michigan said in a statement Wednesday. "We need legislation to take these abusive tax-avoidance gimmicks off the market, and we need to end the silence and inaction of the Treasury and IRS in the face of rampant dividend tax dodging."
Levin went on to say, ““We are going to press the IRS to go after what is obviously a scheme.” “The IRS should be going after this. They are not.”
The Committee found that Lehman Brothers clients were able to avoid about $115 million in taxes in 2004, while total losses to U.S. revenue are estimated to be around $100 billion a year. These dividend-enhancement products earned UBS about $5 million in 2005 and $4 million for Deutsche Bank in 2007, according to the report. Morgan Stanley also raked in $25 million in revenue from the products in 2004.
"We believe we acted in good faith when we advised our clients and believe we acted appropriately under existing tax law," said William Halldin, spokesman for Merrill Lynch.
IRS spokesman Frank Keith came to the defense, stating, “The IRS intends to aggressive pursue transactions that it believes to be abusive.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – Lehman Brothers Holdings Inc., UBS AG and Merrill Lynch & Co. are among Wall Street firms that concocted derivatives and stock-loan deals to help offshore hedge funds dodge hundreds of millions of dollars in U.S. taxes, according to a U.S. Senate committee investigation.
The Internal Revenue Service looked the other way while securities firms sold complicated financial products designed to skirt a law requiring them to withhold U.S. taxes on stock dividends paid to offshore investors, said Senator Carl Levin, chairman of the Permanent Subcommittee on Investigations.
Levin, a Michigan Democrat, said he wants the IRS to pursue back taxes or penalties against Wall Street firms and their hedge-fund clients that got around a 30 percent dividend tax.
“We are going to press the IRS to go after what is obviously a scheme,” Levin said, while briefing reporters yesterday about the committee’s yearlong probe. “The IRS should be going after this. They are not. They have been pussyfooting around this.”
West Palm Beach (HedgeCo.net) – Lee Hetfield has joined ARE Asset Management LLC, a distressed credit and distressed real estate asset management company in Florida, as Portfolio Manager.
Hetfield reports that as of May 30, 2008, ARE Asset Management launched ARE Opportunity Fund, Ltd. (British Virgin Islands). The fund works in purchasing mortgage loans, the strategy is generating returns using both loan modifications negotiated with borrowers to create loan re-performance, as well as loss mitigation techniques. Re-performing loans are held for income or sold to securitizers or other investors for a gain.
Loans that cannot re-perform, resulting in “REO” or real estate owned property, are resolved via a property sale or entered into a rental income program. The fund also opportunistically invests in senior commercial loans backed by improved real estate at low LTV’s (50-65% of 90 day liquidated value, 35%-45% of BPO), through high-yielding originations made by an affiliated commercial loan originator, SeaBreeze Financial.
The investment manager currently has $110 million under management under the strategy as that of the fund, and the results since launch have been encouraging: For the month of June the BVI fund was up 1.59%, net of expenses, and July looks to be up ~1.5% (early est.). Prior to the BVI fund launch The Manager has historically managed funds for offshore investors in fixed-term, LLC structures (in the same distressed/credit opportunities strategy).
The team is spearheaded by Jeffrey Kirsch with over 30 years of experience in commercial and residential real estate. He has managed the ARE group of companies, based in Miami, FL, since their founding in 1996. At ARE, Mr. Kirsch has overseen more than $1 billion in performing and non-performing mortgage transactions and has long-standing relationships with private and public-sector sellers.
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