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.
Ananova - Royal Bank of Scotland says it is facing a potential loss of £400m after a Wall Street banker was charged with a massive alleged fraud.
US prosecutors say Bernard Madoff has confessed to defrauding investors of $50bn (£33bn) in a giant pyramid scheme that collapsed in the global financial crisis.
RBS, in which the British government now has a majority stake, says it has exposure through investments in hedge funds that invested with Mr Madoff.
It is one of a number of banks that face big losses in the suspected fraud.
Santander, the Spanish bank that owns Abbey and Alliance and Leicester, said it had more than 2.3bn euros (£2.08bn) worth of exposure.
West Palm Beach (HedgeCo.net) - The Russian market continued to sell off in October as the global financial crisis continued to wreak havoc everywhere, according to the Pharos Russia Fund, October was the fifth consecutive month of losses for the RTS Index, and its 36% loss was the third worst month in the history of the Russian market after August 1998 (-56%) and May 1998 (-39%).
During the month of October, the Pharos Russia Fund was down 12.9%, the Pharos Gas Investment Fund was down 12.8% and the Pharos Small Cap Fund was down 27.4%. Meanwhile the MSCI Russia Index was down 35.3% over the same period. The Russian government has been extremely pro-active during the crisis with its financing and stimulus packages. Thus far, more than $200 billion has been made available to the banking sector.
The Ruble dropped against the dollar causing the sector to suffer as it was one of the most popular investment themes of the year, with both Long Only funds and Hedge Funds heavily invested into the sector. As Hedge Fund (Emerging Market, Commodities and Global Macro) deleveraging accelerated rapidly during the month, these stocks were aggressively liquidated, causing very sharp price falls.
The last week of October also saw aggressive action from many of the main government actors on the global stage – the US Fed, ECB, IMF, Central Bank of China, Central Bank of Japan and many others all took steps to inject liquidity into their respective financial systems.
In the face of all of this aggressive government action, economic statistics and corporate results continue to paint a very gloomy picture. Again, the bottom line is that while governments and central banks are stepping in with a huge amount of stimulus, the private sector is slowing rapidly and that slowdown may overrun the extensive government efforts to keep the world economy from contracting.
It will take some time before the outcome of this battle to forestall deflation is known, so the next months look certain to continue to be extremely volatile. During this time of heightened volatility, Pharos looks to a few leading indicators to inform their next moves. The oil market needs to stabilize in order to remove pressure on the ruble. Should the oil price remain around $50/barrel or below, then a 10-15% devaluation of the ruble would be useful for stabilizing the Russian economy and its markets. From these levels, both the ruble and equity markets have become extremely sensitive to the oil price.
"We are well aware that these outcomes will take time to resolve, and remain cautious as a result," Pharos says, "Our approach to risk management here is driven by the increase in realized volatility; we size our positions with an understanding that smaller capital usage generates similar market exposures to that seen prior to the crisis. Although today’s global economy is facing some enhanced probability of a calamity, the most likely outcome is that global demand ultimately is restored. Russia will be a major beneficiary of the world being saved."
Alex Akesson
Editor for HedgeCo.Net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Bloomberg – Satellite Asset Management LP, founded by former employees of billionaire George Soros, stopped client withdrawals from its three largest hedge funds and eliminated more than 30 jobs after losses reduced the firm’s assets to about $4 billion this year.
Satellite Overseas Fund Ltd., Satellite Fund II LP and Satellite Credit Opportunities Ltd. have declined as much as 35 percent in 2008, said a person with knowledge of the funds’ performance. Simon Rayler, Satellite’s general counsel, declined to comment and wouldn’t disclose how many people remain at the firm’s New York headquarters or London offices. Satellite oversaw about $7 billion for clients at the end of last year.
More than 75 hedge funds have liquidated or restricted investor redemptions since the start of the year as they cope with fallout from the global financial crisis. Investors pulled $40 billion from hedge funds last month, while market losses cut industry assets by $115 billion to $1.56 trillion, according to data compiled by Hedge Fund Research Inc. in Chicago.
Reuters – Blackstone Group LP has cut the size of its planned Asia-focused hedge fund because the global financial crisis has led to redemptions, the Wall Street Journal said citing people familiar with the situation.
Blackstone, which manages private equity, real estate and hedge funds, would cut the fund size to about $200 million from a range of $500 million to $1 billion, the paper said.
New York-based Blackstone, about one-10th owned by China’s sovereign wealth fund, has scaled back its plans for the fund at a time when hedge funds around the world are facing redemption pressure, with some forced to shut down, the Journal said.
Idaho State Journal – Several prominent hedge fund managers told Congress Thursday they support a new central exchange to open the murky world of some complex investments partly blamed for the global financial crisis, but stopped short of endorsing stricter regulation of hedge funds themselves.
The managers testified at a House hearing examining the role of hedge funds in the crisis, and the risks that critics say they pose to the financial system. Hedge funds, vast pools of capital holding an estimated $2.5 trillion in assets, operate mostly outside of government supervision.
Billionaire investor and liberal activist George Soros, who runs a hedge fund, said new regulations were needed to gauge the underlying financial strength of banks. But he warned against "going overboard" with regulations that could do more damage than good to the financial system.
Bloomberg – Office rents in Mayfair and St. James’s, the London districts with Europe’s biggest concentration of hedge funds, are falling for the first time since 2005 as the alternative investment industry has its worst year in two decades.
The cost of renting new or refurbished offices in those neighborhoods, the most expensive in the world, fell 6.5 percent to 107.50 pounds ($168) a square foot in the six months ended Sept. 30, data compiled by Jones Lang LaSalle Inc. show. Incentives such as rent-free periods lowered the net figure to 95.96 pounds, the commercial property broker estimates.
Demand for space is falling as at least 350 funds in the $1.7 trillion hedge fund industry have closed this year amid the global financial crisis, including Peloton Partners’ ABS Fund and MKM Longboat Capital Advisors’ Multi-Strategy Fund. Client redemptions and forced asset sales have given investors losses for five straight months through October, the longest streak since 1990, and the slump may push rents down to as low as 90 pounds a foot, Jones Lang of Chicago estimates.
Reuters UK – Fund manager Aberdeen Asset Management is eyeing opportunities to snap up funds of hedge funds and funds of private equity funds at bargain-basement prices, its chief executive said on Thursday.
Martin Gilbert said that with opportunities in these areas "now pretty strong" as the global financial crisis causes upheaval in the industry, the fund manager could look at making small acquisitions.
"Funds of hedge funds (FOHFs) and funds of private equity are a lot cheaper than they were six months ago, and they are significantly cheaper than they were two years ago.
"FOHFs, for example, were selling for 15 percent of assets under management two years ago. They are now down to very, very manageable levels, very attractive levels, and a lot of them are subscale, so I think there is an opportunity to consolidate in that area," Gilbert told Reuters in an interview.
New York Times – Several leading hedge fund managers told Congress on Thursday they support some new regulation of hedge funds and the complex derivative securities that are partly blamed for the global financial crisis.
But they advocated only the lightest supervision of their industry, and said they would be willing to disclose their secretive trading activities to regulators only with a guarantee the information would not be released to the public. One executive claimed that requiring hedge funds to publicly disclose their proprietary trading strategies would be like requiring Coca-Cola Co. to reveal to competitors its proprietary recipe for Coke.
"Proper regulation is critical, but the best regulation is created with an eye toward unleashing opportunities, not limiting possibilities," said Citadel Investment Group Chief Executive Officer Kenneth C. Griffin. "We must solve the serious issues we face but in a way that does not stifle the best innovative qualities of our financial markets."
MSN UK News – Business leaders around the world back greater regulation in response to the global financial crisis, a survey showed on Wednesday, with support strongest for curbs on credit rating firms, hedge funds and structured finance.
Responses from more than 700 chief executives, chairmen, partners and directors across Asia, Europe and the United States were received between November 4th and 6th.
The survey, conducted by international law firm Allen & Overy, was timed ahead of this weekend’s Washington DC summit on the deepening crisis between the leaders of the Group of 20 leading world economies.
More than three-quarters of those polled agreed that more regulation of credit rating agencies was necessary, while two thirds supported greater regulation of hedge funds.
Times of India – Can the wealthy trust their wealth managers any more after losing 30 to 60% of their wealth during the current global financial crisis?
The world’s top banks including brands like Morgan Stanley, UBS, Barclays and Standard Chartered operating in Asia are desperately struggling to find a suitable answer to this question.
It is interesting to see the usually suave and self-confident community of private bankers looking dazed and fearful of survival. There is already a run on deposits with some of Asia’s wealthy pulling out money from accounts of private banks. The future looks dismal. Some of the world’s top banks have either gone bust or merged with others to stave off closure.
"Professional advisers have failed to prove their worth," Peter Flavel, senior managing director of The Standard Chartered Private Bank told a conference of wealth managers in Singapore on Friday. "The players have changed in a way that was unimaginable a few months back. They will continue to change," he said.
Boston Globe – On Day 2 of the fall auction season, a Russian masterpiece expected to sell for up to $3 million at auction did not find a buyer yesterday, further underscoring the impact of the global financial crisis on the art market.
Not one hand went up when "View of St. Petersburg" by Alexei Petrovich Bogoliubov was offered at Sotheby’s morning sale of important Russian works from the impressionist and modern periods.
Many other works sold at or below their presale estimates; others did not sell at all.
It was the second day of lackluster bidding at the annual fall art season. On Monday, Sotheby’s kicked off the season with masterpieces by Edgar Degas, Kazimir Malevich, and Edvard Munch that fetched impressive prices. But a high percentage also went unsold – 25 works did not sell while 45 did.
Reuters – Hedge fund manager PMA said on Wednesday its flagship macro vehicle focusing on foreign exchange and interest rate markets returned 4.83 percent in October, even as the global financial crisis ravaged many of its peers.
The unit of SPARX Group Co Ltd, Japan’s largest listed hedge fund manager, said the PMA Harvester Fund managed by macro-strategy chief investment officer Shun Hong Liu had now returned 21.33 percent year-to-date.
"Given that we anticipate that market conditions will remain difficult in the near-term, our strategy will be to remain light and nimble in our positions," the CIO said in a statement.
