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.
Telegraph.co.uk – The chatter was that Harbinger, a powerful US hedge fund run by Philip Falcone, has built a small stake in African Minerals and has been talking to London brokers in recent days about picking up more stock. Harbinger declined to comment.
If Harbinger has built a stake in the company, it is not clear what the hedge fund’s intentions are for African Minerals. The group runs a variety of strategies. Sometimes the investment fund acts as a passive, long-only investor. However, Harbinger also has a reputation for being activist and occasionally bids for companies. Last year, for example, Harbinger made a takeover approach for blue-chip satellite services group Inmarsat, which slipped 6.3 to 495.2p.
Mr Falcone is well known in City circles. The trader hit the headlines when it emerged that Harbinger was one of the main hedge funds to have shorted HBOS before the Government orchestrated the bank’s emergency merger with Lloyds, now Lloyds Banking Group.
Times Online – A group of banks that financed the £450 million leveraged buy-out (LBO) of car wash group IMO will take control of the struggling business leaving a rival group of hedge fund investors with nothing.
In a High Court decision that lawyers say will damage hedge funds’ interests in dozens of ailing private equity deals, a judge awarded 100 per cent of IMO’s equity to the banks, led by HBOS.
The hedge funds, which also lent money to back the 2006 buy-out, argued that they were entitled to some equity in the business, which is being restructured after defaulting on its debts in March.
Reuters – U.S. hedge fund Harbinger Capital is the first company to declare a short position in HSBC following the bank’s record rights issue, after making millions from a similar tactic with UK bank HBOS last year.
Harbinger said in a regulatory filing it has taken a 0.26 percent short position in HSBC’s London shares, worth about 110 million pounds. By 0910 GMT the shares were up 2.5 percent at 356 pence.
International Herald Tribune – U.S. hedge fund Harbinger Capital is the first company to declare a short position in HSBC following the bank’s record rights issue, after making millions from a similar tactic with UK bank HBOS last year.
Harbinger said in a regulatory filing it has taken a 0.26 percent short position in HSBC’s London shares, worth about 110 million pounds. By 9:10 a.m. the shares were up 2.5 percent at 356 pence.
Harbinger has also unveiled a series of short positions in Spanish banks in recent weeks, including a short position of 1 percent in BBVA and 0.4 percent in Santander.
Times Online – Alex Salmond is under renewed pressure over his links with Sir George Mathewson, the former HBOS chairman, after it emerged that Sir George’s investment group’s hedge fund is running businesses from the Cayman Islands.
John McFall, the Labour chairman of the Treasury Select Committee, questioned Mr Salmond’s continuing use of Sir George as his chief economic adviser yesterday following the revelation.
Mr McFall said: “I am highly surprised that someone who appears to be avoiding paying tax in this country is an adviser to Alex Salmond. It is not in Scotland’s interests and sends very mixed messages to both bankers and the Scottish public.”
Independent – The collapse of Lloyds’ share price on Friday afternoon was deeply upsetting – and not just for shareholders in the bank.
Two weeks ago, those annoying folk at Paulson & Co, the hedge fund that has made a fortune from the credit crunch, took a sizeable short position in the bank. It looked like a duff bet: having sold Lloyds short at about 65p, the fund watched as the bank’s share price climbed to about 125p. And then the HBOS loss was disclosed and Lloyds plunged to 61p on Friday. That calamitous drop will have earned Paulson tens of millions of pounds. Darn it.
Bankers at the Japanese investment bank Nomura are cock-a-hoop at having earned fat fees advising Chinalco on its £200bn investment in the mining giant Rio Tinto. For various cultural and historical reasons, it is pretty unusual for Japanese companies to win work from China, so this was a breakthrough deal for Nomura. It was secured by the mining team that Nomura acquired when it bought bits of Lehman last year. In every cloud there’s a silver lining.
Telegraph.co.uk – When Andy Hornby, the former chief executive of HBOS, was asked by the Treasury Select Committee to detail his banking qualifications he couldn’t. Like his fellow bankers, Sir Fred Goodwin, Sir Tom McKillop and Lord Stevenson, being questioned by the panel, Mr Hornby, had to admit publicly that he held no formal banking qualifications. However unlike his fellow bankers, Mr Hornby’s admission held one important qualification.
"I have an MBA from Harvard," he told the MPs, "where I specialised in all the finance courses including financial services."
With the question about qualifications almost certain to come up, Mr Hornby’s answer was almost certainly prepared. By referring not just to his MBA, but also to where he got it from, Mr Hornby knew he was putting himself firmly at the front of the pedagogical pecking order. Harvard prides itself on consistently being the highest-ranked university; Mr Hornby no doubt prides himself on being the highest-achieving student out of his year, coming top out of 800 peers.
New York (HedgeCo.Net) – Billionaire and hedge fund manager extraordinaire John Paulson has reportedly pocketed $139 million by betting against the Royal Bank of Scotland, further fueling cynicism that shorting aids in driving down share prices.
Paulson is no stranger at predicting trends and shorting companies that he feels fit. Late last year, his New York-based Paulson & Co. disclosed short positions in the British mortgage lender HBOS, Barclays and Lloyds TSB.
Investors turn to Paulson because he seems to have a knack for placing bets that he feels will turn out in his favor. Paulson infamously bet against the U.S. housing market in 2007, which garnered himself a $3 billion paycheck while returns on his hedge funds continued to rise. In 2008, when most hedge funds lost an average of 15 percent on the year, Paulson’s funds kept steady, with his Advantage Plus fund up 20 percent.
While some argue that the practice of shorting is responsible for driving down share prices, many feel that is an unfair assumption. The ban on short selling that was enacted last September in the UK was finally lifted earlier this month, although short positions are still required to be disclosed. The Financial Services authority has said they would reinstate the ban if it proved to be needed.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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.
LONDON (Reuters) – Hedge funds may have missed out on sharp falls in banks’ shares in recent days because few rushed in after the UK’s ban on short selling financial stocks expired on Friday, data shows.
According to figures from research firm Data Explorers, the amount of stock out on loan — a good indication of how much a stock has been sold short — did not increase on Friday in Royal Bank of Scotland and actually fell in HBOS.
Stock out on loan in HSBC, Lloyds TSB and Barclays rose only slightly.
nebusiness.co.uk – LLOYDS Banking Group became the latest casualty of the bank sector sell-off yesterday as its shares plunged as much as 47%.
Royal Bank of Scotland steadied a little after Monday’s mammoth 67% fall, but doubts over the Government’s second bank bail-out and renewed fears for the sector’s health dragged its rivals lower.
Lloyds, created this week from the merger of HBOS and Lloyds TSB, was the worst hit, followed by Barclays down nearly 20%.
The falls extend losses across the sector in light of news that RBS expects to report record annual losses, but also comes in the wake of the recent expiry of the short-selling ban.
Times Online- The Financial Services Authority took the unprecedented step of pressuring Britain’s five biggest banks into supporting the revised rescue capital-raising at Bradford & Bingley last week, The Times has learnt. HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS are understood to have each agreed to sub-underwrite £20 million-worth of the reworked £258 million rights issue.
The banks agreed to step in when Citigroup and UBS, the lead underwriters, could find no one to whom they could lay off some of the risk. Underwriters typically pass on some of the risk to institutions known as sub-underwriters. The FSA, worried that too much Bradford & Bingley stock would be left with UBS and Citigroup, which are already under pressure, decided in the middle of last week to ask the big five to take some of the risk.
