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.
Times Online – Guardian Media Group, the owner of The Guardian and The Observer newspapers, lost £24m last year on botched currency trading as it tried to protect hedge-fund investments.
The newspaper publisher, which is considering closingThe Observer, the world’s oldest Sunday newspaper, was caught out by the dollar’s rapid rise against sterling which led to a £24m loss.
The investments were made out of a £200m investment fund designed to spread GMG’s risk away from volatile advertising markets.
Sources said the fund was never intended to make a profit in its first year and the losses were the result of a ”mark to market” valuation at the end of March. However, the scale of losses from derivatives investments, which contributed to a £90m annual group loss, will alarm its left-leaning readership.
Hedge fund Fortelus and other investors are preparing to oust the management of a publicly listed investment trust because they disagree with its investment decisions, the Guardian has learned. The growing row provides a rare insight into the way hedge funds operate.
Fortelus owns 14% of the shares of Strategic Equity Capital (SEC), a trust managed by London-based asset manager SVG Investment Managers. Along with shareholders representing another 20% of the company’s capital, the rebel group will request management to step down at an extraordinary general meeting to be held in London on 14 August. "We’re launching an EGM to remove the board of this underperforming fund," said one of the investors.
The Guardian – Value of assets held by the world’s sovereign wealth funds fell to $3 trillion this year from $3.6 trillion at end-2007 as the credit crisis nearly halved their equity portfolio, according to Deutsche Bank.
The German bank’s report on state-owned investment funds also highlighted their positive long-term prospects, with their total assets under management likely to more than double to $7 trillion in the next 10 years.
Sovereign wealth funds (SWFs), which have replaced hedge funds and private equity as major movers of corporate mergers and acquisitions, have taken a dent in their wealth after pouring $80 billion into major banks just before the credit crisis escalated into major market turmoil.
The Guardian – Hedge fund LNG Capital is eyeing the debt of companies at risk of running short of cash, seeing the potential for high returns at an early stage of the credit crisis when companies are still able to tap rescue capital.
When a corporate borrower raises money or sells assets to get over a liquidity hump, its discounted short-term bonds — those maturing in up to 18 months — can become a buy, said the fund’s chief investment officer and founder, Louis Gargour.
Guardian.co.uk – The secretive hedge fund manager and philanthropist Chris Hohn last year donated almost half a billion pounds to the children’s charity run by his wife, it emerged yesterday.
The £486m gift follows hefty profits at Hohn’s hedge fund TCI in 2007, and beat the previous year’s donation of £276m. The financier has now donated more than £1bn in total, more than the gross domestic product of countries including Greenland and Antigua.
The funds will be given to the Children’s Investment Fund Foundation (CIFF), the charity that Hohn co-founded with his wife Jamie to help children in poor and developing countries, mostly in Africa, Asia and Central America.
guardian.co.uk – A minister for Sweden, which took over the EU presidency on Wednesday, said hedge funds and private equity firms needed regulation but should not be viewed as a primary cause of the global financial crisis.
Speaking after a visit by the European Commission to Stockholm to mark the Nordic country’s start in the six-month presidency, Financial Markets Minister Mats Odell cautioned against "overzealous" regulation.
What was needed, he told Reuters, was well-considered, balanced regulation that helped avoid systemic risk.
"I believe there is an exaggerated view in some countries that private equity and hedge funds helped pull us into the crisis," Odell told Reuters.
The Guardian – The BIS said the retreat from riskier investments such as stocks in favour of safer bonds could pressure stock markets, delaying their recovery. "Similarly, the decline in the pension wealth of households participating in defined contribution plans and of employers sponsoring defined benefit plans has implications for aggregate spending," the BIS said.
Hedge funds did not play a central role in shaping the crisis but they will feel its impact, the BIS said.
After many wealthy individual investors withdrew, the funds are targeting institutions.
"Such a shift engenders demands for greater transparency about the investment strategy and greater scrutiny of risk management processes," the BIS said.
Guardian.co.uk – Big gains on derivative bets linked to Volkswagen shares offset a decline in nine-month earnings at Porsche SE’s core sports car business, the heavily indebted holding company said on Friday.
Porsche, scrambling to shore up its tattered balance sheet, blamed lower volumes and revenue as well as investments on its upcoming fourth model line and hybrid powertrain technology but insisted that its returns remained relatively healthy.
"A high earnings margin was still achieved," the company said in a statement, while a company spokesman added that it was "nearly in the double-digits".
That is still a drop from Porsche’s traditional margins of near 20 percent when markets were strong.
The Guardian – Hedge fund manager Man has moved to the top of the FTSE 100 risers, as traders heard talk it may dispose of its remaining stake in broker MF Global.
Man spun off the brokerage in July 2007 by means of a flotation in the US, but retained an 18.5% stake, worth around $130m. The suggestion it might now be looking to sell this has helped send Man shares 17.5p higher to 283.25p. In its latest annual report it classifies the residual MF shareholding as "available-for-sale financial assets."
guardian.co.uk – Investment companies and private equity firms suspect that they have been caught up in a directive whose real aim was hedge funds largely because it is so difficult to define hedge funds.
The Group of 20 leading world economies agreed in April that hedge funds above a certain size should be subject to authorisation and required to report data to supervisors as part of a broader extension of financial regulation in response to the global financial crisis.
But hedge fund managers believe the EU directive is so unclear and badly drafted that it would be dangerous to stick around to find out exactly what it means. The most worrying aspect of the directive is that it would allow regulators to limit the amount of leverage assumed by hedge funds.
guardian.co.uk – Sterling fell against the dollar to near a two-week low on Monday after a collapse of support for the UK’s ruling Labour Party in the European election raised the chances of further challenges to Prime Minister Gordon Brown.
Despite its losses against the dollar, the pound rose against the euro, as the single European currency came under broad selling pressure after Standard & Poor’s cut its sovereign rating on Ireland for the second time in three months.
Analysts said Labour’s drubbing in weekend European elections added to the uncertainty surrounding the political future of Britain’s embattled prime minister, who reshuffled his Cabinet on Friday after six of the party’s ministers quit.
Guardian.co.uk – No single hedge fund today poses a systemic risk to the global financial system, said a former partner at Long Term Capital Management (LTCM), as lawmakers continue to hammer out rules to control the industry.
Even though many funds are now much larger than LTCM, which collapsed in 1998 and received a $3.5 billion bailout to avert widespread financial chaos, Hans Hufschmid, currently chief executive at fund servicing firm GlobeOp, said prime brokers now act as an effective brake on hedge fund risk. "I find it hard to believe — I don’t think a hedge fund today is big enough to pose a systemic risk," he said.
