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) – The fund which the U.S. House Financial Services Committee is setting up to dismantle large insolvent financial institutions will be limited to $200 billion, MarketWatch reported earlier today.
“The cap we have is $200 billion,” House Financial Services Committee Chairman Barney Frank said, referring to legislation which would collect funds from large financial institutions and hedge funds with $10 billion in capital or more.
The Chairman’s regulatory-overhaul package, in opposition to the Obama administration, which wants to collect fees after a company fails, is up for vote by the House this month. The fund would be used to make payments to creditors and counterparties of a large failing financial institution so that its collapse does not unsettle the financial markets.
The New York Times – The hedge fund industry has incurred a backlash by lobbying aggressively against proposed European Union rules and now faces possible pay curbs that were not envisaged in the original legislation.
Attacks by some London-based hedge funds and British politicians have had the effect of softening European Commission proposals to regulate alternative investment companies. But the lobbyists have misjudged the tide of public opinion. Read Complete Article
New York (HedgeCo.net) – Jean-Philippe Blochet has left Europe’s biggest hedge fund firm, Brevan Howard, Bloomberg reported today. “Following his return from sabbatical last year, Jean-Philippe Blochet has decided to cease to be an active member of Brevan Howard Asset Management LLP,” the firm said in a statement.
Blochet was co-founder of Brevan Howard and was part of the hedge fund firm’s macro team, focusing on currencies and interest rates.
Brevan Howard had $25.7 billion in assets under management as of September 2009, it returned more than 20% last year while the average hedge fund lost around 19%.
Also leaving Brevan Howard is UCITS fund manager Stephane Diederich, who was hired from Credit Suisse in 2007 to set up an alternative CDO (collateralized debt obligation) business, an area of the financial world that was hit hard by the credit crisis, Bloomberg reported.
Bloomberg – Alberto Micalizzi, founder of the hedge fund firm Dynamic Decisions Capital Management Ltd., said allegations that he invested in worthless bonds are unfounded and investors will recover close to 100 percent of their money.
The firm’s main hedge fund, with a net asset value of $550 million as of Dec. 31, is being liquidated in the Cayman Islands after investors raised questions about some of its holdings. The U.K. Serious Fraud Office, which prosecutes white-collar crime, opened a probe into the London-based firm last week after the matter was referred to it by the Financial Services Authority.
Reuters – Wheat has been the poor cousin of commodities this year, losing value as star performers such as copper, lead and sugar have flown, but the humble grain is now beginning to catch the eye of all-important investment funds.
Prices have been weighed down by growing stocks following a record global harvest in 2008 and the second-largest harvest in history this year, but there are signs that the tide may finally be beginning to turn.
New York (HedgeCo.net) – Highlights of a second annual national survey released by Morningstar and Barron’s Magazine examining the perception and usage of alternative investments among institutions and financial advisors showed that hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
“One of the most interesting findings from our survey is that both institutions and advisors continue to view alternative investments optimistically, despite their questionable performance, correlation, and liquidity during last year’s global downturn as well as the high-profile scandals that rocked the hedge fund industry,” said Steve Deutsch, director of the pension, endowment, and foundation database at Morningstar. “Again this year, the majority of participants indicate that they plan to increase allocations to alternatives, but with greater scrutiny and due diligence given to those investments.”
Among the survey findings:
Current and Future Usage of Alternatives
• More than 60% of institutions and advisors believe that alternatives will be as important or more important than traditional investments over the next five years.
• The majority of institutions and advisors expect alternatives to account for more 10% of their portfolios over the next five years; a quarter of institutions expect alternatives to account for more than 25% of their portfolios.
• Hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
Motivation and Hesitation
• For both institutions and advisors, the top three reasons for investing in alternatives remain the same as in last year’s survey: portfolio diversification, absolute returns, and exposure to different investment techniques, like arbitrage or shorting.
• Institutions and advisors are much more concerned, however, about lack of liquidity and transparency than they were last year.
Definitions of “alternative”
• Compared to the 2008 survey, fewer institutions and advisors view real estate investment trusts and commodities as alternative asset classes.
• Both institutions and advisors tend to classify investments as “alternative” based on the investment’s strategy, i.e. absolute return, rather than the investment’s designation, i.e. mutual fund versus hedge fund.
“Perhaps most important for investment consultants, advisors, and money management firms to note is the survey once again found that overall both institutions and advisors want the benefits of alternative strategies with the positive characteristics of traditional investments—low correlation with liquidity, absolute returns with transparency, and redemptions without restrictions,” Deutsch added.
Morningstar and Barron’s conducted the Web-based survey in late September through early October 2009; 89 institutions and 300 financial advisors participated. Survey results appear in the Nov. 9 issue of Barron’s and online at Barrons.com.
Bloomberg – About 60 Muslim fishermen and their families congregated in a community hall on Sri Lanka’s east coast to pray for Raj Rajaratnam after he was arrested for alleged insider trading at his New York hedge fund.
The billionaire co-founder of Galleon Group LLC helped build 240 apartments in Kalmunai with a $5 million donation following the 2004 tsunami that swept away people and houses in his homeland, leaving 30,000 people dead.
New York (HedgeCo.net) – Bloomberg reported this morning that hedge fund manager John Horseman is stepping down from his position as manager of the $2.8 billion fund, Horseman Global Fund Ltd.
“There will be those who might think that a poor year is unduly influencing my decision, and it is probably true that if the fund had had a better year, I might have been tempted to continue,” Horseman wrote in a letter to investors, obtained by Bloomberg. “But with a time frame of three to four years at most, I feel now is the time to make way for others.”
The hedge fund fell in value by almost a quarter this year. Russell Clark and John-Paul Burke are teaming up to take his place. The pair had run Horseman Emerging Markets Funds, which will close, Bloomberg said.
New York (HedgeCo.net) – Russia lead the way in October reporting gains of 4.16% in October. Emerging markets total index grew 1.55% in October and is up 36% this year. Latin America rose 2.18% for the month and Asia, excluding Japan, grew 0.41%. According to Hedge Fund Research the HFRI Fund Weighted Composite dropped 0.05%.
Russian hedge fund manager, The Pharos Russia Fund was ranked #1 in the Equity Long/Short category for September 2009 of Barclay Hedge database.
Pharos Russia Fund is an absolute return hedge fund focused on securities in Russia and the former Soviet Union. The Fund is the top performing Russia Fund over the past 11 years. The Fund has the possibility of using derivatives or going short, and is positioned with a long bias due to the manager’s positive outlook for the Russian market.
New York (HedgeCo.net) – London-based hedge fund, Dynamic Decisions Capital Management, which operated the Cayman Islands-based Growth Premium Master fund is being investigated by the Serious Fraud Office (SFO).
The hedge fund collapsed in April this year when investors applied for it to be put into liquidation, making accusations of “gross mismanagement and misfeasance”.
The Guardian reports that it is alleged that the hedge fund moved a large proportion of its assets out of equities and into asset-backed bonds that could be converted into oil. According to reports, the company then “received legal advice that raised questions relating to the counterparties to the oil sales contracts that lie behind the bonds”.
Dynamic Decisions’ chairman, Dr Alberto Micalizzi, said in an interview with the Times, “The investigations are not founded, first of all. There have been complaints from investors about the delays in payment of redemptions.” He said that it was his “expectation” that investors would receive their money back in full.
Bloomberg – BlueCrest Capital Management Ltd., a London-based hedge fund firm that oversees about $15.4 billion, plans to open an office in Geneva as increased taxes and regulation make London a less attractive location, a person familiar with the situation said.
As many as 50 BlueCrest employees may move, said the person, who declined to be identified because the plans are confidential. The firm has about 300 employees in London.
DealBreaker – Admit it: You’re bummed that the Bear Stearns fraud trial has ended in a flash of prosecutorial incompetence and 12 potential clients for Ralph Cioffi and Matthew Tannin. We are, too. But fear not, friends, there’s an embarrassment of hedge fund fraud riches out there to continue to follow, and we thought we’d offer a Readers’ Digest of the (alleged) scams and scandals still making news.
Last week, Madoff’s storefront accountant pleaded guilty to fraud, obstruction and false filings. But the court battles aren’t over: Swiss authorities have charged the former head of Banco Santander’s fund of hedge funds arm with criminal mismanagement for overseeing its $3.5 billion in Madoff losses.
