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.
Oregon Live – Oregon won the first round in a $36 million court battle against the former investment manager of its college fund by keeping the lawsuit out of federal court.
U.S. District Judge Michael Hogan ruled that the case be remanded to the Marion County Circuit Court, rejecting an attempt by OppenheimerFunds to avoid the jurisdiction of an Oregon court.
Attorney General John Kroger and Treasurer Ben Westlund have sued OppenheimerFunds for $36 million, saying it falsely promoted a high-risk college investment plan as "conservative." OppenheimerFunds’ Core Bond Fund, valued at $89 million in the state’s College Savings Plan last September, caused big losses in eight of 15 Oregon college investment portfolios, including those labeled conservative or ultraconservative.
Bloomberg – Greenlight Capital Inc., the hedge- fund firm run by David Einhorn, added to its holdings of Ford Motor Co. debt in the first quarter and invested in EMC Corp., Harman International Industries Inc. and Pfizer Inc.
The hedge fund bought Ford’s high-yield, high-risk bank loans at an average price of 37 cents on the dollar starting in the fourth quarter of 2008, according to a May 1 letter the New York-based Greenlight sent to investors. The debt rose to 45 cents on the dollar when the first quarter ended, said the letter, a copy of which was obtained by Bloomberg News.
Bloomberg – Global Tactical Trust, a hedge fund run out of Australia by Boston-based Grantham Mayo Van Otterloo & Co., is betting the recent rally in stocks will end, and is avoiding high-risk investments.
The hedge fund that invests based on global economic trends returned 13 percent last year, when the industry posted average declines of 19 percent, by wagering against equities and backing bonds. Managed by Jason Halliwell, the fund is long the U.S. dollar, yen, U.S. Treasuries and gold, expecting them to rise, while remaining neutral on equities.
Business Standard – Hedge funds and foreign currency convertible bonds (FCCBs) are replacing real estate as popular offshore investment destinations for India’s richest.
Hedge funds are investment funds which employ various strategies to produce absolute returns. These strategies could be long- short, event driven, arbitrage or of various other types. A long-short strategy involves buying stocks which are assumed to perform high and selling stocks which are assumed to perform low.
As hedge funds are considered to be a high risk asset class, they are recommended to only a few “ultra high net worth and sophisticated” clients only. "Currently we are recommending 10-15 per cent allocation in strategies such as long -short and arbitrage to well-informed HNIs", said the head of a private bank. The returns range from 12-15 per cent annually in dollar terms.
West Palm Beach (HedgeCo.net) – In a letter to investors, Hedge Fund manager Pentwater Capital announced that due to a number of unexpected redemption notices for year-end they have suspended redemptions and withdrawals, effective immediately.
"The entire hedge fund industry is bracing for large redemptions at year-end so as not to become forced sellers in the midst of a severe market crisis," says the Pentwater letter, "In turn, this has put additional pressure on hedge fund investors to find liquidity wherever they can, because they have to fund their own potential redemptions."
"If the Fund were to meet the year-end redemption requests we have received, the Fund would be forced to sell more of its investments into one of the worst markets since the great depression."
The fund has instead opted to create two new classes that have modified liquidity, fee and expense provisions as compared with the current classes. Investors will have the choice to transfer all or part of their investment into one or both of the new classes or remain in the existing classes.
"We will allow investors that wish to invest new capital to do so in one of these new classes and until further notice allow them to retain the benefit of their existing high water mark on any new investment. Further, investors that have already submitted a redemption notice will have a one-time option to rescind that notice, reduce the size of their redemption request, and/or choose to participate in one of our new classes."
Pentwater was not immediately available for comment.
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New York Times – Kenneth C. Griffin was one of those Wall Street whiz kids. As a teenager, he traded out of his dorm room at Harvard. In his 20s, he opened his own hedge fund. In his 30s, he boasted that his company might one day rival Goldman Sachs.
But it can be tough for a boy wonder to grow up — particularly in the midst of the gravest financial crisis since the Depression. A week before his 40th birthday, Mr. Griffin finds himself in an unaccustomed position: on the defensive.
The Citadel Group of Chicago, the giant hedge fund that Mr. Griffin has run so successfully for nearly 20 years, is leaking money. As of Sept. 30, its two main investment funds were down 20 percent this year, according to Citadel investors. Most of the losses came in the last few weeks, when the markets swooned. Two other smaller Citadel funds are still well in the black.
Chicago Tribune – The leader of an activist hedge fund with a significant stake in Sara Lee Corp. has been added to the foodmaker’s board of directors.
Downers Grove-based Sara Lee said Thursday that it is expanding its 10-member board by one, naming Jeffrey Ubben, founder and chief executive of ValueAct Capital, to the new spot. Last winter, San Francisco-based ValueAct bought a 5 percent stake in Sara Lee, maker of bread, hot dogs and meat products sold under such brands as Hillshire Farms and Jimmy Dean.
Activist investors often buy into what they perceive as undervalued companies and then urge significant changes. But ValueAct is considered less strident than some other activist funds, saying at the time of its purchase that it had no plans to push for strategic change at Sara Lee and was comfortable with the firm’s direction.
Neither Sara Lee, which is in the midst of a multiyear turnaround effort, nor ValueAct could be reached.
