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.
Guardian Unlimited – Tumbling markets and redemption waves have been murder on hedge funds, but the turmoil will free up top-tier talent for a quiet but well-heeled corner of the market: family offices.
The world’s wealthiest, not content to hand their fortunes to brokers and banks, can afford to build their own money management businesses. These offices, which would never be considered by top fund managers during the go-go years, suddenly look attractive thanks to their stable capital and long-term investment horizon.
"You follow the money. Right now that is leading people to family offices," said Greg Coules, a former hedge fund manager who is building a family office recruiting practice at New York-based Hunter Advisors.
Guardian Unlimited – Aspects of a planned European Commission directive to regulate hedge funds do not go far enough and must change to protect investors, French Economy Minister Christine Lagarde said in remarks published on Monday.
The commission is due to publish its draft directive on governing hedge funds on Wednesday, against a backdrop of growing political pressure for increased regulation of institutions seen as posing systemic risks.
"The good side of the directive being prepared by the commission is that it establishes (a) surveillance (system) on hedge funds," Lagarde told French daily Le Figaro.
Guardian Unlimited – Japanese government bond futures fell on Monday, edging back towards six-month lows hit earlier this month, with traders citing selling by hedge funds on the back of concerns about rising debt issuance.
The Ministry of Finance said it would issue an additional 16.9 trillion yen ($175 billion) in JGBs in the fiscal year that ends next March to pay for an economic stimulus package.
The extra supply, which will start coming to the market in July, will increase calendar base JGB issuance in fiscal 2009/10 by roughly 15 percent to a total of 130.2 trillion yen.
Guardian.co.uk – Investors are highly concerned about potential debt problems in unlisted European real estate funds, causing them to drastically cut back equity commitments to the sector, an industry body said on Thursday.
In a survey of investors, 88 percent said they were either "very concerned" or "concerned" about property funds breaching covenants, INREV (the European Association for Investors in Non-listed Real Estate Vehicles) said in an industry conference held in Greece.
Guardian.co.uk – Lloyd’s of London, the specialist insurance market, has offered to buy back up to 100 million pounds ($145 million) worth of bonds at a hefty discount.
The offer applies to fixed/floating rate subordinated notes due 2024 and subordinated notes due 2025 as well as perpetual subordinated capital securities. The bonds are all rated A-.
Lloyd’s said the transaction would allow it to benefit from a significant discount on the securities without materially affecting its capital position.
Guardian Unlimited – European hedge funds believe capping the amount banks can lend them will be more effective in preventing systemic risks than direct regulation, but this is unlikely to satisfy politicians eager for tougher rules.
The funds are often based in far-away and loosely regulated off-shore centres, so a U.S.-style system to limit lending by prime brokers may be more effective to hem in any systemic risk from the opaque industry.
"Instead of targeting hedge funds themselves it would be more effective to target the providers of leverage," said John Donohoe, chief executive of hedge fund consultant Carne Consulting.
guardian.co.uk – The shadow business secretary, Kenneth Clarke, has become the latest victim of the credit crunch after losing his job on the board of a hedge fund, the Guardian has learned.
Clarke, who was parachuted back on to the Tory frontbench to beef up the party’s handling of the financial crisis, has been axed from the board of Centaurus Capital as the sector faces its worst crisis in decades.
The hedge fund, which like other investment companies faces huge withdrawals of cash from clients anxious about plunging stock markets, has scrapped its advisory board, which also included José María Aznar, the former Spanish prime minister.
Guardian Unlimited – Billionaire hedge fund manager John Paulson has made a £100m profit by betting that the Royal Bank of Scotland’s share price would fall dramatically, according to calculations by the Guardian, adding fuel to the debate about the impact of short-selling on bank stocks.
New York-based Paulson, who made more than $3bn by betting against the US housing market, now appears to be profiting from positions placed on the assumption that bank shares would tumble in the aftermath of the market chaos caused by the demise of the sub-prime mortgage industry.
His hedge fund, Paulson & Co, was one of the few to trade through the ban imposed on short-selling by the Financial Services Authority in September to protect the rescue takeover of HBOS by Lloyds TSB.
guardian.co.uk – A hedge fund admitted yesterday it had been speculating that shares in Barclays would fall. The admission by Lansdowne Partners that it had been shorting Barclays shares on Friday – a day when the bank lost a quarter of its value – came amid concern that hedge funds could be blamed for the dramatic slide in bank shares yesterday.
Hedge funds have to disclose any short positions – where they sell shares they do not own in the hope of buying them back at a lower price to make a profit – but are no longer banned from the practice after a change to the Financial Services Authority’s rules at the end of last week.
Guardian.co.uk – "Parts of the current complexity arises from the existence of distressed debt investors who sometimes see commercial advantage from using an insolvency process to organise the sale of the viable part of a business to a solvent buyer leaving behind the least profitable parts," Tony Lomas, chairman of PwC Business Restructuring, said.
Vulture funds buy debt in struggling firms at a significant discount – sometimes at 20p in the pound – expecting that when the company breaches its loan covenants and falls into administration, a sale of assets may repay debt at a higher price.
