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.
Taping a "Bernanke on the Record" special that will air on PBS this week, the top U.S. monetary policy-maker defended the aggressive, even unorthodox actions taken by the Fed during the long recession and deep financial crisis.
"I was not going to be the Federal Reserve Chairman who presided over the second Great Depression," Bernanke said.
"When you’re in a situation like this, a perfect storm, sometimes you have to do things that are a little unorthodox, out of the box,"
Detroit News – President Barack Obama is ready to roll out an overhaul of the intricate rules and systems that govern America’s troubled financial institutions, proposing the most ambitious revision since the Great Depression.
The goal is to prevent a recurrence of the economic crisis that erupted in the United States and exploded last fall with devastating consequences still reverberating around the world.
Unlike the government’s temporary ownership stake in automakers and major financial companies, the regulatory changes set to be announced Wednesday are designed to be permanent. They could result in a major realignment of power and authority among government agencies that set the rules for banking, lending and investing and touch American lives through daily transactions, from credit cards to mortgages and mutual funds.
Reuters – Prominent hedge fund investor Mark Yusko on Monday warned endowments against putting the bulk of their money into stocks, arguing that these assets perform only when economies are growing.
For years most investors ranging from big institutions to average Americans saving for college and retirement have bet mostly on the U.S. stock market.
But in the wake of the worst financial crisis since the Great Depression, Yusko, who worked with two large college endowments before founding his own firm, Morgan Creek Capital, said investors need to change their thinking.
Bloomberg – Goldman Sachs Group Inc., unbowed by the securities industry’s worst year since the Great Depression, increased its trading bets at the fastest rate on Wall Street.
Goldman Sachs’s so-called value-at-risk, the amount the New York-based bank estimates it could lose from trading in a day, jumped 22 percent to $240 million in the first quarter, twice what Morgan Stanley stands to lose, company reports show. VaR climbed 2.8 percent in the same period at JPMorgan Chase & Co. and dropped 14 percent at Credit Suisse Group AG.
West Palm Beach (HedgeCo.net) – "Alpha" released the results of the 2009 Hedge Fund 100, the magazine’s eighth annual ranking of the world’s biggest single-manager hedge fund firms. Although most hedge fund managers in 2008 couldn’t escape the carnage from what many have called the worst financial crisis since the Great Depression, their industry overall lost less money than did other investors. For their part, the firms in the Hedge Fund 100 managed a combined $1.03 trillion in assets at the beginning of this year, down from the record $1.35 trillion that the world’s 100 largest firms managed at the end of 2007.
Bridgewater Associates leads the Hedge Fund 100 with $38.6 billion in assets under management. The Westport, Connecticut-based firm, which was founded by Raymond Dalio more than 30 years ago, grew by more than $2 billion in assets last year, based on the strength of its Pure Alpha Strategy hedge fund, which was up 8.7 percent in 2008. New York-based JPMorgan — the world’s biggest hedge fund firm a year ago — saw its assets fall 26.4 percent, to $32.9 billion, in large part because of redemptions and poor investment performance at its Highbridge Capital Management group.
Redemptions have been a challenge for most hedge fund firms, even those that managed to deliver positive returns in 2008, as investors have looked to raise cash where they can. In the fourth quarter of last year, hedge funds saw a net outflow of $152 billion, with most of the assets coming out of bigger firms. In recognition of this new reality, "Alpha" changed the methodology for the Hedge Fund 100, using firm and fund asset totals as of January 1, 2009 (in the past the magazine collected December 31 data). To qualify for "Alpha’s" 2009 Hedge Fund 100, a firm needed at least $4 billion in assets under management, compared with the $6.25 billion minimum a year ago.
The ten biggest hedge funds managed a combined $264 billion at the start of 2009, down nearly 12 percent from year-end 2007.
"Alpha’s" Hedge Fund 100 Top 10
Rank Firm Total Capital ($ millions) 1 Bridgewater Associates 38,600 2 JPMorgan Asset Management 32,893 3 Paulson & Co. 29,000 4 D.E. Shaw & Co. 28,600 5 Brevan Howard Asset Management 26,840 6 Man Investments 24,400 7 Och-Ziff Capital Management Group 22,100 8 Soros Fund Management 21,000 9 Goldman Sachs Asset Management 20,585 10 Farallon Capital Management 20,000 10 Renaissance Technologies Corp. 20,000 To view the complete rankings for the Hedge Fund 100, visit www.alphamagazine.com
The Ledger – Anxiously assembled at the most perilous moment for the global economy since the Great Depression, the world’s financial powers pledged more than $1 trillion Thursday for emergency loans to combat spreading chaos. But they rebuffed President Barack Obama’s bid for new stimulus spending and made no guarantees of success.
"This was the day the world came together to fight back against global recession," declared British Prime Minister Gordon Brown, the summit host, as he led a choreographed show of unity designed to boost confidence in homes and boardrooms everywhere. "This is just the beginning," added Obama.
No one promised an immediate impact, and all agreed much remained to be done.
Bloomberg – BlackRock Inc.’s global macro fund, the world’s second-best performer over two years among hedge funds that invest based on economic trends, is betting against this month’s equities rally and buying bonds as a recovery from the worst credit crisis since the Great Depression falters.
BlackRock’s A$216 million ($152 million) Asset Allocation Alpha Fund returned 41 percent in 2008, when hedge funds around the world lost a record 19 percent on average. The fund is short U.S. and Australian equities, expecting them to decline, and long U.S., German, Australian, Canadian, and U.K. bonds, said its manager David Hudson.
“The risk is that the economic recovery disappoints in the second half and that equity markets need to revisit their lows in the next few months and maybe go through them,” Sydney-based Hudson said in an interview March 20.
The MSCI World Index, which tumbled 42 percent last year, has rallied 21 percent since March 9, boosted in part by the U.S. Federal Reserve’s decision to pump money into the economy to get credit flowing. Hudson profited from the declines last year by betting against equities.
BlackRock, which oversees $1.3 trillion, is the biggest publicly traded asset manager in the U.S. Over a third of total assets are managed on behalf of non-U.S. investors, and nearly one-third of its employees are outside the U.S.
Fortune Magazine - Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That’s the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world’s biggest hedge fund, has been preparing to answer it for eight years.
In 2001 he had his investment team build a "depression gauge" into the firm’s computer system, line by line in the code, to adjust the portfolio’s strategy and risk profile if the economy ever entered a massive deleveraging period – the kind of multiyear process that ricocheted through the world economy in the 1930s and that has eviscerated markets periodically through the ages.
Reuters – It would be hard for many to imagine hedge funds buying stock in a U.S. company with the word "home" in its name in the worst housing downturn since the Great Depression — let alone speak admiringly of its solid cash flow and growth prospects.
But to a number of hedge funds, Brink’s Home Security Holdings Inc is just such a company, benefiting from long-term solid cash flow and more security-conscious consumers who fear rising crime as the nation’s economic slump drags on.
"With its very predictable cash flow, this stock is the Rock of Gibraltar," said a principal at a hedge fund that has owned Brink’s shares for years. He said he could not be quoted on the record, in part because the fund was considering raising its stake in the home-security system provider.
Ginga Service Sector Fund, the third-best performing Japan-focused hedge fund in 2008, held its ranking in January by investing only in the telecommunications and services companies.
The 3.4 billion yen ($36 million) fund, advised by Tokyo- based Stats Investment Management Co., returned 0.7 percent last month, extending its 13 percent advance in 2008, according to a letter to investors.
Average losses in the $1.4 trillion hedge-fund industry reached 19 percent in 2008, the worst on record, as the biggest market declines since the Great Depression slashed asset values and caused investors to withdraw their money, according to Chicago-based Hedge Fund Research Inc.
Bloomberg - Sparx Group Co., Asia’s biggest hedge-fund manager, will likely miss its asset management target of 5 trillion yen ($57 billion) by March 2011 because of redemptions and losses amid the global market rout.
The firm has cut costs to counter the biggest market losses since the Great Depression, an effort that hasn’t prevented its total assets under management shrinking to 753 billion yen as of Dec. 31 on a preliminary basis, or about a third of the peak of 2 trillion yen in August 2006.
“Realistically, it’s going to be extremely tough” to meet the target, Shuhei Abe, the chief executive officer of the Tokyo- based firm, said in an interview on Jan. 23. “There is still room to cut more costs, while we also have to prepare for other unexpected events going forward.”
