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Reuters – It appears nothing — not losses, redemption gates or lofty fees — can deter the rich from stashing their cash in hedge funds.
A year after crumbling markets triggered losses and fund managers drew fire for blocking redemptions, wealthy investors have not abandoned hedge funds, according to private bankers and wealth managers attending the Reuters Global Wealth Management Summit this week.
“We see continued dedication to hedge funds,” said Catherine Keating, chief executive of JP Morgan Chase & Co’s U.S. private bank, which advises families whose combined assets total $350 billion.
Reuters – Wealthy clients believe the worst of the crisis is probably over and have started to come back to higher-risk assets such as hedge funds, a top banker at JP Morgan Private Bank said on Wednesday.
Felipe Godard, Head of European International Markets at JP Morgan Private Bank, also told the Reuters Global Wealth Management Summit in Geneva he was on the lookout for buys in his region and expected double-digit revenue growth in the coming years.
“We have seen a return of risk appetite. Clients are comfortable with the risks of hedge funds if those risks are explained,” said Godard, whose bank is the world’s second-largest hedge fund manager by assets.
Breitbart.com – Banking giant UBS Wednesday defied pressure to name about 50,000 Americans holding secret bank accounts in Switzerland as the nation’s financial culture came under a withering fire.
US senators accused bankers at crisis-wracked UBS of helping wealthy Americans to flout US tax law through a variety of underhand methods down to encrypted laptops and lies to US customs officers.
But while acknowledging wrongdoing under a deal last month between UBS and US prosecutors, a top executive with Switzerland’s biggest bank said it could provide no more than 250-300 names of US account holders already handed over.
Mark Branson, the Zurich-based chief financial officer of UBS Global Wealth Management and Swiss Bank, said the group was already shutting down US-owned securities accounts and paying a 780-million-dollar fine to the US government.
"We believe that UBS has now complied with the summons to the fullest extent possible without submitting its employees to criminal prosecution in Switzerland," he told a hearing of the Senate investigations subcommittee.
Grilled by the panel’s Democratic chairman, Carl Levin, Branson said up to 48,000 accounts were held in Switzerland by US clients but that Swiss law precluded UBS from divulging any more names.
But Levin, accusing the British-born banker of being "needlessly evasive," said UBS had made a "declaration of war… against honest, hard-working taxpayers" through its illegal practices in the United States.
Broadening the fight to take in the Swiss government’s jealous protection of its banking secrecy law, the senator said: "We’re determined to fight back and end the abuses inflicted on us by those tax havens."
Under its settlement with the US Justice Department, UBS last month admitted to tax fraud by inviting rich US clients to open accounts in Switzerland and so evade declaring their income to the Internal Revenue Service.
Under its interpretation of the two nations’ tax treaty, UBS said it could only cough up the identities of 250 to 300 US account holders.
New York (HedgeCo.Net) – U.S. authorities have officially declared Raoul Weil, formerly of UBS, a fugitive.
The one-time prominent business man and former chairman of UBS’s global wealth management unit, failed to surrender to police after being charged with aiding wealthy individuals in hiding their assets from the Internal Revenue Service.
According to the original complaint, Weil, who was based in Switzerland, headed a team of bankers that aimed to help 17,000 Americans hide about $20 billion via Swiss bank accounts, in hopes of avoiding U.S. taxes.
At that time, Weil worked in UBS’s cross-border private banking business. He stepped down from the bank when the charges were made public.
The order came yesterday in a Ft. Lauderdale courtroom, where Judge James Cohn officially removed Weil, 49, from the court’s pending case list and placed him on the clerk’s fugitive list.
If convicted, Weil faces up to five years in prison and $250,000 in fines.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Seeking Alpha – If someone was asked to name a fund in the global macro game, undoubtedly Tudor Investment Corp or Moore Capital Management would be among the most frequent responses. The global macro strategy has fared well in the world of hedge funds. Paul Tudor Jones’ Tudor Investment Corp has earned an annualized return of greater than 20% over the span of two decades.
Louis Bacon’s of Moore Capital Management shares the same accolade. And, while they are both down this year, they have fared much better relative to many of their peers and the market indexes in general. Tudor’s flagship fund finds itself -5% for the year, while Moore was -2.9% year-to-date through November as we noted in our November hedge fund performance update.
But, in a never-ending quest for outperformance, Tudor and Bacon want more. And, in order to accomplish that, they see it fit to return to their roots.
Seekingalpha.com - Moore, named after Bacon’s middle name, is a $10 billion global macro set of hedge funds. The next few funds we will be covering are global macro oriented funds, which is a switch from some of the more value oriented funds we’ve been covering, like the ‘Tiger Cub’ funds including Stephen Mandel’s Lone Pine Capital, Lee Ainslie’s Maverick Capital, John Griffin’s Blue Ridge Capital, and Andreas Halvorsen’s Viking Global.
Global macro funds seek to find investments in whatever market they can gain an edge, whether it be equities, bonds, currencies, debt, commodities, and more. So, keep in mind that these equity positions only represent a portion of the fund’s overall holdings. They are not required to disclose holdings outside of equities, notes, and stock options.
West Palm Beach (HedgeCo.net) - The Russian market continued to sell off in October as the global financial crisis continued to wreak havoc everywhere, according to the Pharos Russia Fund, October was the fifth consecutive month of losses for the RTS Index, and its 36% loss was the third worst month in the history of the Russian market after August 1998 (-56%) and May 1998 (-39%).
During the month of October, the Pharos Russia Fund was down 12.9%, the Pharos Gas Investment Fund was down 12.8% and the Pharos Small Cap Fund was down 27.4%. Meanwhile the MSCI Russia Index was down 35.3% over the same period. The Russian government has been extremely pro-active during the crisis with its financing and stimulus packages. Thus far, more than $200 billion has been made available to the banking sector.
The Ruble dropped against the dollar causing the sector to suffer as it was one of the most popular investment themes of the year, with both Long Only funds and Hedge Funds heavily invested into the sector. As Hedge Fund (Emerging Market, Commodities and Global Macro) deleveraging accelerated rapidly during the month, these stocks were aggressively liquidated, causing very sharp price falls.
The last week of October also saw aggressive action from many of the main government actors on the global stage – the US Fed, ECB, IMF, Central Bank of China, Central Bank of Japan and many others all took steps to inject liquidity into their respective financial systems.
In the face of all of this aggressive government action, economic statistics and corporate results continue to paint a very gloomy picture. Again, the bottom line is that while governments and central banks are stepping in with a huge amount of stimulus, the private sector is slowing rapidly and that slowdown may overrun the extensive government efforts to keep the world economy from contracting.
It will take some time before the outcome of this battle to forestall deflation is known, so the next months look certain to continue to be extremely volatile. During this time of heightened volatility, Pharos looks to a few leading indicators to inform their next moves. The oil market needs to stabilize in order to remove pressure on the ruble. Should the oil price remain around $50/barrel or below, then a 10-15% devaluation of the ruble would be useful for stabilizing the Russian economy and its markets. From these levels, both the ruble and equity markets have become extremely sensitive to the oil price.
"We are well aware that these outcomes will take time to resolve, and remain cautious as a result," Pharos says, "Our approach to risk management here is driven by the increase in realized volatility; we size our positions with an understanding that smaller capital usage generates similar market exposures to that seen prior to the crisis. Although today’s global economy is facing some enhanced probability of a calamity, the most likely outcome is that global demand ultimately is restored. Russia will be a major beneficiary of the world being saved."
Alex Akesson
Editor for HedgeCo.Net
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West Palm Beach (HedgeCo.net) – One of the world’s largest hedge funds has temporarily halted redemptions according to reports. Tudor Investment Corp’s flagship portfolio, has been reported to have halted redemptions so they can segregate difficult-to-sell assets in the fund from those they can offload more easily.
Bloomberg reports that the move was made by the the fund to avoid having to raise cash in falling markets to pay out withdrawing investors. Tudor Investment Corp, the hedge fund manager established by Paul Tudor Jones, was also reported by Bloomberg as having temporarily suspended redemptions from the portfolio.
Tudor is reportedly allotting to the investors in Tudor BVI Global shares in Legacy, with a view to selling the assets in Legacy over time to hand money back to those clients.
Founded in 1980 by Paul Tudor Jones II, the firm currently manages $15.4 billion. The firm’s investment strategies include global macro trading, fundamental equity investing in the U.S. and Europe, emerging markets, venture capital, commodities, event driven strategies and technical trading systems.
Alex Akesson
Editor for HedgeCo.Net 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!
New York (HedgeCo.Net) – Clients of Fortress Investment Group LLC have requested to withdraw more than $4.5 billion of their assets over the next few months, according a statement released by the hedge fund yesterday.
The company reported its first annual loss since going public, mostly due to its Drawbridge Global Macro funds losing over 13 percent this year through the end of September. If investors have their way, this would take a 25 percent chunk out of the total assets under Fortress’s management.
Fortress isn’t the only hedge fund dealing with a hit of investor withdraws. The sour economy and recent credit crisis has sent a wave of panic over some investors, prompting them to rush for redemptions. Some hedge funds choose to “freeze” investor withdraws until the market takes a turn for the better, or until they can figure out how to wind down the fund in an orderly manner.
Fortress said it received $2.6 billion in redemption requests for its liquid hedge funds, which include the Drawbridge Global funds and the Fortress Commodities funds. Its hybrid hedge funds, which include the Drawbridge Special Opportunities funds which saw a drop of over 7 percent in the third quarter, and the Fortress Partners funds, will lose $1.9 billion in capital because of the withdraws.
Fortress reported a third-quarter loss of $20 million, equivalent to 4 cents a share. A year earlier, they were posting a profit of around 26 cents a share. The company currently manages $34.3 billion in assets, a 2.1 percent drop from last quarter.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Seeking Alpha – Risk management Rule No.1: if it can happen then it will happen. Hope for the best but plan for the worst. Recent events have provided good returns for some hedge funds, hard times for other hedge funds but harsher times for long only. Skilled absolute return managers don’t make money every month but they do have milder and shorter duration drawdowns than index funds.
I wrote back in January that the Dow and Nikkei would likely fall below 10,000 this year as a result of the credit crisis and owning stock index option puts has indeed been the top performing strategy this year. But those were just lucky guesses. I can’t time markets so personally I’ll be focusing on funds that can preserve capital, control drawdowns and generate alpha no matter what happens.
Flight to quality? Some real hedge funds are positive for the year even when the aggregate returns for the industry are negative. Performance dispersion is enormous in such a diverse universe. Several strategies have not been affected by prime brokers imploding, changes in short selling rules or the leverage lockdown. The best managed futures CTAs, global macro and options traders have been generating absolute returns throughout the equity and credit mayhem. Strategy diversification is so important since forecasting is difficult. Transitions from one market regime to another often requires a financial revolution. Read Complete Article
New York (HedgeCo.Net) – After a disappointing year, Citadel will launch several new hedge funds in hopes of countering the losses of their main hedge fund.
The multi-strat $10 billion Kensington Global Strategies Fund has fallen over 30 percent this year. CEO Ken Griffin attributed some of that loss to the temporary ban on short selling, saying it “created material dislocations across many of our portfolios and disrupted our ability to assume and manage risk.”
After much speculation and some bad press, Griffin warned investors last week that returns on the fund would experience “significant volatility” in the next few weeks.
The new funds will focus more on global macro, convertible arbitrage and fixed income strategies, according to the Wall Street Journal.
Griffin told investors, "The financial crisis dramatically raised the cost of borrowing and reduced the availability of credit to market participants, materially reducing the value of cash assets as compared to the value of derivative instruments.” He went onto explain how he did not foresee the financial crisis that has unfolded this past year.
While the Kensington Fund will still be available to investors, many clients are interested in allocating their assets across numerous strategies.
Citadel was founded in 1990 and manages over $20 billion in capital.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters – Shares in BH Macro, a listed feeder fund to the Brevan Howard global macro fund, Europe’s biggest hedge fund with assets of $20 billion, have sunk to a 13 percent discount to net asset value as a wave of selling has swept through European financial markets.
The fund was down 2 percent at 1255 pence in afternoon trading. Earlier Tuesday, BH Macro reported in a regulatory filing that its NAV at the close of business on Oct 3 was 1411 pence per share.
"The whole sector has moved to quite considerable discounts," said Mark James, executive director at RBS. "BH Macro is trading on its widest ever discount."
BH Macro has about $1.6 billion in capital. It came to market in early 2006 to provide access to Brevan Howard’s global macro hedge fund, which was and has continued to be closed to new investors.
