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.
New York (HedgeCo.net) – According to investors, hedge fund manager John Paulson, who through Paulson& Co., has raised over $1 billion for clients, has plans to launch a fund dedicated to buying up shares of bullion-related investments.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
Guardian.co.uk – My coverage of Raj Rajaratnam, the Wall Street hedge fund manager accused of orchestrating a sophisticated insider trading ring with tipsters at firms such as IBM and Intel, has prompted an email from an acquaintance of the accused who says the Sri Lankan-born billionaire is not the “ogre” he is being made out to be.
Vijay Dandapani, chief executive of a budget hospitality company in Manhattan called Apple Core Hotels, writes to say that he was invited by Rajaratnam on a cricket trip a few years back and has since seen him “off and on” in New York.
“I do know Raj, though not well, and find it hard to believe that he is the ogre he is being made out to be,” says Dandapani.
New York (HedgeCo.net) The Galleon scandal is raging full force, with Raj Rajaratnam’s global hedge funds under a microscope. Supervising the case is U.S. District Court Judge Jed S. Rakoff, who’s ruling on the Merrill Lynch/BofA case, earned him the nickname ‘Judge Dread’ on Wall Street, according to The Post.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA’s largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
Boston.com – Federal investigators plan to charge at least 10 securities professionals with insider trading, some linked to the criminal case against billionaire hedge fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said yesterday.
The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren’t public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Friday, one person said.
New York (HedgeCo.net) – Hedge fund manager logi Energy announced today that it has made an offer to CIT Group’s Board of Directors for a small portion of their middle market lenders debt portfolio. The offer increases the options available to the board as it works through restructuring and a possible pre-packaged bankruptcy, which CIT is negotiating with bondholders.
“Our proposal provides CIT increased liquidity, without the complexity of additional debt. This allows them to address short-term challenges and extend the time period with which to deal with bondholders. We think that the core of the CIT franchise is fundamentally sound and simply needs the benefit of increasing consumer economic activity,” said Lorenzo Ortega III, CIO of logi. “It would be damaging to small businesses nationwide, and CIT’s shareholders, if the company was unable to avoid bankruptcy. What we are proposing is to be part of the solution.”
logi Energy has offered in excess of $1B for a portion of CIT’s debt portfolio and anticipates closing a transaction within 30 days of acceptance of the proposal.
“We think we could also provide opportunity for other purchases from CIT” said Ortega.
logi Energy is a group of financial and engineering professionals with substantial experience in finance, oil and gas exploration and production, large projects and Energy. logi Energy has formed The Peak Oil Value Fund, a focused hedge fund to purchase interests in, and provide operating capital to, strategically valued, public and private oil, gas and energy-centric companies.
Reuters – Hedge fund industry veteran Philip Duff is setting his sights on acquiring an asset management firm at a time he says big corporations are ready to leave the management of their pension funds to someone else.
Duff made his name at legendary hedge fund Tiger Management, as a chief financial officer at Morgan Stanley and the co-founder of FrontPoint Partners, a $5.5 billion hedge fund manager that Duff sold to Morgan Stanley in 2006 as part of the bank’s alternative investments push.
New York (HedgeCo.net) – The London Metropolitan police are considering launching an investigation into the whereabouts of Nicholas Levene, who is being accused by investors of disappearing with their money.
The Guardian reports that at least £70 million ($114 million) is owed. Others say the hedge fund manager is not on the run, but in a hospital receiving care. His lawyers would neither confirm nor deny, the Guardian said.
The questions started when Levene failed to appear at crucial court hearings to defend himself, prompting the court to freeze assets and demand he surrender his passport. A spread betting firm also alleges that Levene has racked up gambling debts.
“Levene is known to be a generous family man with an extravagant lifestyle. One leading city broker described him as a man who ‘lived the dream’ and had a private jet on call,” the Guardian reported.
“Last week certain information was passed to the fraud squad.” the police said in a statement, “Detectives are now assessing the matter to determine what action if any is necessary. At this time no decision has yet been reached whether an inquiry should be conducted.”
New York (HedgeCo.net) – Hedge fund manager Paulson will own 9.9% of private health insurance company Conseco’s common stock after a private share sale, buying $77.9 million in stock and warrants.
Paulson & Co. Inc., on behalf of several hedge funds and accounts he manages will also have certain registration rights in connection with its acquisition of the common stock and warrants.
“This is a bold move,” said Andrew Schneider, founder and co-principal of HedgeCo Networks. “With the current healthcare debate in full swing, the timing is everything. But then, this is the kinds of risk we’ve come to expect from Paulson.” Paulson made $2.5 billion last year, hedging against the U.S. housing market.
Paulson’s warrants will also convert to common stock at $6.50 a share. Conseco rose 78 cents, or 16%, to $5.77 at 7:47 p.m. in late New York trading. The shares have dropped about 68% in the past two years.
Conseco, run by Chief Executive Officer James Prieur, will also file for a public offering of $200 million in new common stock and will sell $293 million in convertible notes. The bond proceeds will be used to repurchase existing notes, the company said. The new debt, due in 2016, will pay investors 7%.
Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 %, compared with a loss of 19% for hedge funds on average.
New York (HedgeCo.net) – Hedge fund manager Michael C. Regan was sentenced in a federal court in Brooklyn, N.Y. to seven years in prison for fraud.
Just last June, Regan settled charges with the SEC on another of his hedge funds, Regan and Regan & Co., which the SEC alleged, he fraudulently obtained at least $15.9 million and ultimately caused investors to lose at least $6.69 million through Regan’s misappropriation and trading losses. The settlement was closed without Regan admitting or denying the allegations.
When his hedge fund, River Stream Fund collapsed in April 2008 Regan turned himself in in May 2008 and pleaded guilty to one count of fraud the following month. He began the fund in 1998 with money from friends and acquaintances, according to the prosecution.
While Regan agreed to pay restitution, he filed for bankruptcy protection after turning himself in. The government said it is unlikely his victims will ever be compensated.
The SEC is also filing a civil suite. Regan could face additional criminal charges for failing to file tax returns for 10 years.
Bloomberg – Lucidus Capital Partners LLP, a new joint-venture of hedge fund manager Bruce Kovner’s Caxton Associates LLC, has raised about $500 million for a high-yield debt hedge fund, three people familiar with the situation said.
Darryl Green, chief executive officer of Caxton Europe Asset Management in London, will co-manage the fund with Geoffrey Sherry, a Caxton portfolio manager based in New York, said the people, who declined to be identified because the information is private. The pair will continue to run a $1 billion high-yield bond fund for Caxton, the people said.
Caxton will have a 25 percent stake in the new firm with the balance held by Green, Sherry and other staff members, the people said. The fund will use Caxton’s infrastructure and controls to help attract institutional investors reluctant to put money into a startup fund firm.
Bloomberg – Former Bear Stearns Cos. hedge fund manager Matthew Tannin, accused of misleading investors, said “We could blow up” in a 2006 e-mail, according to documents released by prosecutors.
Tannin, 47, is set to go on trial Oct. 13 for securities fraud with fellow ex-manager Ralph Cioffi, 53. In a message with the subject title ‘Thoughts” that Tannin sent to himself on Nov. 23, 2006, he said was “stressed” about his work at the fund.
“I became very worried very quickly,” Tannin wrote in the e-mail. “Credit is only deteriorating. I was worried that this would all end badly and that I would have to look for work.”
Reuters – Hedge fund manager William Ackman helped send Realty Income Corp (O.N), a real estate investment trust, down 4.5 percent on Wednesday after he identified it as good stock to bet against, analysts said.
Ackman, who manages $4.8 billion and whose investment ideas are closely followed in the markets, spoke at a conference in Texas on Tuesday where people who heard him speak said he identified Realty Income Corp as a possible stock to short.
