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.
Bloomberg – There are signs of life returning to the hedge-fund industry. Assets under management are rising. New funds are being launched. Some are even making money.
Reports of hedge funds’ demise are exaggerated even if it isn’t quite time to raise prices in Mayfair’s fancy restaurants, or get into the interior-decoration business in the Hamptons. The industry is going to stick around as an important part of the financial universe.
Crain – For years, Dan Loeb was the hedge fund world’s hanging judge, firing off blistering letters to hapless chief executives that condemned them for their shortcomings.
“Do what you do best,” he hissed in a 2005 letter to a soon-to-be-gone CEO. “Retreat to your waterfront mansion in the Hamptons. … The matter of repairing the mess you have created should be left to professional management.”
How times change. After years of posting average gains of 27%, Mr. Loeb’s Third Point hedge fund crashed to earth last year with a shattering 33% loss. In response, many investors grabbed their money and ran, driving assets under management to less than $2 billion from more than $5 billion previously. Now it’s Mr. Loeb who’s left to clean things up—or face oceanfront exile.
Motley Fool – What does the turmoil in the hedge fund world mean to most investors? Losses and more losses. Over the past few weeks, the forced deleveraging of the industry, combined with redemptions by frantic clients, has led to hundreds of billions in stock sales (redemptions in the third quarter amounted to $117.3 billion, according to a new report out by HedgeFund.Net), creating horrific declines in many stocks — but interestingly, not in all stocks.
According to an equity strategist for one of the most successful fund-of-funds outfits in the country, stock holdings among equity hedge fund managers are and have been highly concentrated. Described as "crowded longs," these most-favored stocks tanked in September and October as funds scrambled for cash. Overall, equity long-short funds are down 25% year to date, according to Hedge Fund Research, compared with a near-40% slide in the S&P 500. While hedge funds have outperformed, the showing certainly is disappointing for an industry that is supposedly hedged. The shortfall is because so many managers own the same stocks, and all rushed to sell at the same time. (There were more than 8,000 hedge funds operating at the start of 2008.)
New York Post – Back-to-back bruising months in September and October have shaved more than 10 percent of hedge funds’ value, translating into hundreds of billions in losses, according to research and advisory firm Hedge Fund Research.
After weathering a brutal September that saw fund managers lose nearly 6 percent, hedge funds suffered further erosion last month, shedding 5.4 percent, according to HFR.
This year, hedge funds are down through Oct. 31 by about 15.5 percent.
Times Online – Hedge funds were heading for a full-blown row with the German Government last night as it emerged that funds sitting on tens of billions of euro losses after short-selling Volkswagen could go bankrupt.
Porsche, VW’s biggest shareholder, stands to pocket a quick €6billion (£4.7billion) profit from the short-selling.
The London-based Alternative Investment Management Association (Aima), the hedge fund trade body, said yesterday that it planned to ask the European Union to clamp down on a controversial German legal loophole that allowed Porsche secretly to take its VW stake to almost 75 per cent.
Andrew Baker, Aima deputy chief executive, said: “This sounds somewhat irregular. If you tried that in this country, there would be a number of questions to be answered.”
New York Post – The next issue for concern in the battered economy is whether there are going to be buyers for the nation’s billions in debt, Mayor Bloomberg said yesterday.
Speaking to students at Georgetown University, Bloomberg pointed out that Wall Street convulsions are being felt around the globe.
"Who’s buying our debt? It’s these overseas funds, these sovereign-wealth funds, these overseas hedge funds. They are in trouble now. So it’s not clear who is going to be buying" US Treasury bills, he said.
Bloomberg was planning to have breakfast in Washington today with Treasury Secretary Henry Paulson – whom he described as an old friend – and Christopher Cox, chairman of the Securities and Exchange Commission.
Meanwhile, city Comptroller Bill Thompson warned that many high-paying jobs on Wall Street may be gone for good.
Times Online – People who run hedge funds hate the way the press describe them as “secretive”. A quick Google of “hedge funds” shows what a cliche it has become. Hedge funds are “notoriously secretive” and “super-secretive”; they live in a “secretive world”.
But sadly, for an increasing number of them, the secret is finally out.
The promise behind this $2 trillion universe was that its managers would make money whether markets went up or down. But the turmoil in the financial world is proving too much for many of them. All of a sudden the Masters of the Universe are failing fast.
The average hedge fund has lost more than 4% this year, according to Hedge Fund Research, putting the industry on course for its worst year on record. New investments in hedge funds for the first six months of 2008 fell below $30 billion, compared to $118 billion for the same period last year.
The hedge fund manager has become the Gatsby figure of our era. But his fall will be felt by more than Manhattan estate agents, art galleries and Porsche dealers. Over the past decade, the hedge fund industry has grown fivefold, pumped up with billions from corporate and public pension funds and university endowments looking for market-beating returns.
Bloomberg- Mitsubishi Asset Brains Co., an investment advisory firm of the Mitsubishi financial group, plans to start a fund of hedge funds as it seeks to invest in managers that can make money in falling markets.
The company aims to start advising a fund in the next “two- to-three years” with the aim of raising “several tens of billions of yen,” Akihiro Nishi, executive director at the Tokyo-based company’s investment advisory division, said in an interview in Tokyo. The company has hired a hedge fund manager who will start in August, he said.
Mitsubishi Asset Brains aims to tap growing demand for funds of hedge funds since the credit crunch that stemmed from U.S. subprime loan problems prompted investors to seek diversified investments to secure steady returns. The money managed by funds of hedge funds has grown more than 800 percent since 2003, according to Singapore-based research firm Eurekahedge.
Bloomberg- Christian Kunze pays French farmers to install camouflaged, shoebox-sized “power stalkers” in fields near nuclear stations owned by Electricite de France SA, collecting data the world’s biggest utility says is a secret.
His company, Powermonitor, plans to sell information about reactor starts and stops in France less than three years after Kunze fended off spying charges from EDF’s German affiliate. Banks, hedge funds and traders will pay for such data to gain an edge in continental Europe’s $565 billion power market.
EDF is at the center of a battle over the disclosure of data Citigroup Inc. says may save European electricity users billions of euros a year. The state-owned utility refuses to release information on plant operations that its biggest competitors, E.ON AG and RWE AG, began reporting last year. Now the European Union may force the company to be more transparent.
Reuters- Beleaguered Swiss bank UBS is considering the sale of Paine Webber, the heart of its U.S. wealth management business, according to sources with direct knowledge of the matter.
UBS is under pressure from the Swiss financial watchdog and from one of its top shareholders, Olivant, to overhaul its business after more than $37 billion (18 billion pounds) in writedowns during the credit turmoil.
The bank’s management, led by Chief Executive Marcel Rohner, is also grappling with the U.S. trial of a former employee for helping a billionaire client hide $200 million.
Guardian.co.uk- Foreign sovereign wealth investors are targeting London’s hedge fund industry as they seek to boost returns on their vast savings, much of it generated from trade with the west in oil and other commodities.
The hedge funds have seen billions of pounds pour into their investment plans at a time when the industry desperately needs cash to replace debt funding that collapsed during the credit crunch.
According to a survey by the magazine Hedge Fund Manager Week, the rapidly expanding group known as fund of hedge funds are the main beneficiary of investments from sovereign wealth funds. Assets in fund of hedge funds, which spread their investments across a range of individual projects, have grown 10% in the last six months to £700bn.
Fortis Prime Fund Solutions topped the table of funds, with assets under administration of £107bn. Total industry assets have reached £2.2tn, according to the magazine’s annual Hedge Fund Assets Under Administration survey.
