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HedgeCo.net (West Palm Beach) – Hedge fund consultant, Hennessee Group LLC, reported that managers benefited as international equities rallied in July, while the unpredictability of government intervention continues to be one of the greatest concerns for hedge funds.
“We have expected greater scrutiny and new regulation for the financial industry, and specifically for hedge funds, in 2009,” commented Charles Gradante, Co-Founder of Hennessee Group. “In the energy markets, regulators are calling for hard position limits on financially settled energy contracts set by NYMEX, starting as soon as September. While the goal is to reduce speculation and volatility in the energy markets, this could potentially reduce transparency by shifting trading to over-the-counter markets and decrease liquidity. The unpredictability of government intervention continues to be one of the greatest concerns for hedge funds.”
"The deterioration of the economy has clearly slowed, however we continue to see positive signs that we are on the road to recovery, including increases in new home sales, new orders, and production." Gradante said, "I am still cautious and see emerging signs of ‘protectionism’ in the form of dramatic reductions in external lending by G-7 institutions, which could stifle a global economic recovery."
“Hedge funds underperformed in July, as we would expect, but were able to capture a good portion of the market rally in July,” said Lee Hennessee, Managing Principal of Hennessee Group. “Managers opened up their net exposures to participate, but also benefited from a better than expected earnings season. However, managers remain vigilant, knowing that the markets could crack and crack quickly. The VIX is at pre-crisis August 2008 levels and that worries many.”
The Hennessee Hedge Fund Index advanced +3.37% in July (+15.50% YTD), while the S&P 500 increased +7.41%.
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Forbes – Following a brutal 2008 of losses, plunging assets and the Madoff scandal, the activities of the Obama administration were a primary worry among the nearly 500 hedge fund managers and other industry executives gathering at a Las Vegas conference this week.
‘When you have government intervention at the scale we have, you do something the markets abhor: you create uncertainty,’ said Sean Mathis founding partner of New Centurion Capital Partners. ‘We have uncertainty where markets are going and what the rules of the road will be.’
The Obama administration, even as it courts private investors to help buy up toxic bank assets, has targeted Wall Street bonuses and called for tougher market regulation.
West Palm Beach (HedgeCo.net) – James Chanos, Chairman of the Coalition of Private Investment Companies (CPIC), said in response to the SEC’s five proposed rules put forward to curb short-selling, "Rebuilding investor confidence should be the primary objective of any new regulatory effort and it is not clear that today’s proposals will meet that simple goal."
The SEC voted unanimously to seek public comments on all of the proposed rules intended to limit short-sales.
"Skeptics, independent research and critical analysis must continue to play a vibrant role for our markets to grow sustainably and with integrity." Chanos continued, "Short selling is integral to improving the efficiency of markets and enhancing market quality through narrower spreads, deeper liquidity, less volatility, and greater price discovery.
"In recent years, short-sellers have publicly warned the marketplace about the dangers at AIG, Lehman Brothers, and Enron, as well as sounding the alarm over the credit ratings agencies, non-bank subprime lenders, and credit insurers. Proposals to inhibit short-selling have the effect of limiting this vital market-based antidote to corporate fraud and speculative bubbles, and must be carefully weighed against the clear harm that comes from ill-conceived government intervention in basic market functions,” Chanos concluded.
CPIC is a coalition of private investment companies whose members and associates are diverse in both size and investment strategies.
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Bloomberg – Billionaire investor George Soros said the current economic upheaval has its roots in the financial deregulation of the 1980s and signals the end of a free-market model that has since dominated capitalist countries.
Liberalization of the financial industry begun by the Reagan administration has led to a series of crises forcing government intervention, Soros told economists and bankers at a Feb. 20 private dinner at Columbia University in New York. The global recession, triggered by the collapse of the U.S. housing market, has “damaged the financial system itself,” he said.
New York (HedgeCo.Net) – Anheuser-Busch has agreed to a $50 billion takeover bid by Brazilian-Belgium brewer InBev, in which will result in the largest beer company in the world.
The final $70 a share offer was $5 higher than the original bid in which Anheuser-Busch rejected. The company will now be called Anheuser-Busch InBev according to an unnamed source and will post annual sales of around $36 billion.
"This combination will create a stronger, more competitive global company with an unrivaled worldwide brand portfolio and distribution network, with great potential for growth all over the world," said the 48 year old Carlos Brito of InBev, who will serve as the head of the new company.
InBev, who produces Labatt Blue and Stella Artois, has been stuck in a nasty month-long battle with Anheuser-Busch after they proposed their own slate of board nominees and both companies filed suits against the other. Anheuser-Busch claimed that their original offer was not only illegal but wasn’t even probable thanks to insufficient funding. They also were clear to point out InBev’s Cuban brewery.
Brito will make St. Louis the North American headquarters and promised not to close any of Anheuser’s U.S. breweries.
Shares of both companies surged on Friday amidst negotiation rumors. Anheuser shares rose 8.6 percent while InBev shares climbed more than 7 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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