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.
SF Gate – There probably won’t be many tears for Larkspur’s Copper River Management LLC. The $1 billion hedge fund’s partiality to short selling earned it obloquy, lawsuits and, ultimately, death.
No trace of company personnel could be found for comment Wednesday, after the Wall Street Journal reported that the fund is "liquidating and returning funds to investors." The only sign of life was a forlorn logo on the company’s Web site. The cause of demise? Some observers predicted it after the company, formerly known as Rocker Partners, got caught on the wrong side of derivative trades with the going-bankrupt Lehman Bros. Others pronounced the patient terminal when the feds banned short selling of financial stocks in September.
RK Capital Management LLP, the metals hedge-fund firm co-founded by Michael Farmer, lost as much as 30 percent last month amid falling copper and aluminum prices, according to an investor with the firm.
The declines cut the combined returns of the firm’s five funds to about 2 percent this year, said the investor, who asked not to be identified because the information is private. Red Kite Metals, the company’s biggest fund, dropped about 40 percent, bringing this year’s loss to as much as 7 percent.
The London Metal Exchange Index of six industrial metals fell 6.6 percent last month and is down 3.6 percent in 2008 as the slowing global economy cut demand for materials such as lead and zinc. Ospraie Management LLC, the New York-based commodity hedge-fund firm run by Dwight Anderson, said last week it will shut down its biggest fund after it lost 39 percent this year.
Bloomberg – Hedge funds that profit from turbulence in the financial markets are beating stock, bond and commodity investments for the first time in five years.
Volatility hedge funds climbed 7.3 percent this year through August, according to the Newedge Volatility Trading Index. The average equity fund fell 8.38 percent, corporate fixed-income funds declined 4 percent, and energy and basic- materials stock funds dropped 6.36 percent in the same period, data compiled by Chicago-based Hedge Fund Research Inc. show.
“Nobody knows the direction of the markets or economy at the moment, and we’re profiting from that uncertainty,” said Trevor Taylor, 35, co-chief investment officer at Miami-based Innovative Options Management LLC. The firm’s $90 million hedge fund rose 12.3 percent this year through August, after returning 25 percent in 2007.
Price swings that helped Taylor started with the collapse of subprime mortgages that have left the world’s biggest banks with $506 billion of writedowns and credit losses in the past year, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index fell 19 percent since October as credit dried up and the U.S. economy edged to the brink of recession.
Miami Herald – The deflating commodities bubble is claiming its first casualties as large investment funds absorb staggering losses from bad bets that prices for oil, precious metals and grains would keep going up.
Hedge fund operator Ospraie Management LLC notified investors Tuesday that it’s closing its flagship fund after it suffered losses in August on positions in energy, mining and other natural resource-related stocks that left the fund down nearly 40 percent year-to-date. It’s believed to be the first hedge fund to go bust in this latest commodities boom as prices come crashing down after a historic bull-run earlier this year.
And the bloodletting may have only begun. Wall Street analysts say similar trouble looms for other funds that got caught up in the exuberance of the boom but were too late in getting out.
Globe and Mail – A year ago, Dwight Anderson was being hailed as the "king of commodities," a precocious 40-year-old hedge fund manager who made a prescient – and highly profitable – bet that global food prices would spike in unprecedented fashion.
Now he is merely another in a long line of hard-luck speculators, his crown handed to him by a fickle commodities market that has proven itself capable of ruining fortunes as quickly as it created them.
In a letter to investors yesterday, Mr. Anderson announced he was shutting down the largest fund of Ospraie Management LLC, the firm he built into one of the largest commodities-themed hedge funds in the world. The Ospraie Fund, which focuses on natural gas, oil, metals and other resources, boasted assets of almost $4-billion (U.S.) at its peak last year, but so far in 2008 it is down 39 per cent – including a gut-wrenching 27-per-cent slide in August.
"I am extremely disappointed with this result and the fund’s sudden reversal in performance," Mr. Anderson wrote. "The losses were primarily caused by a substantial selloff in a number of our energy, mining and resource equity holdings during a six-week period characterized by some of the sharpest declines in these sectors in the past 10 to 20 years."
Myrtle Beach Online – The deflating commodities bubble is claiming its first casualties as large investment funds absorb staggering losses from bad bets that prices for oil, precious metals and grains would keep going up.
Hedge fund operator Ospraie Management LLC notified investors Tuesday that it’s closing its flagship fund after it suffered losses in August on positions in energy, mining and other natural resource-related stocks that left the fund down nearly 40 percent year-to-date. It’s believed to be the first hedge fund to go bust in this latest commodities boom as prices come crashing down after a historic bull-run earlier this year.
And the bloodletting may have only begun. Wall Street analysts say similar trouble looms for other funds that got caught up in the exuberance of the boom but were too late in getting out.
They say Ospraie’s misfortunes illustrate one of the hard lessons emerging from the commodities bubble: Many money managers have never been through a commodities boom and so were ill-prepared for the hyper-volatility associated with hard assets.
"You’re always going to have victims when a market comes down this fast. People stayed at the party for too long," said Phil Flynn, energy analyst at Alaron Trading Corp. in Chicago.
West Palm Beach (HedgeCo.net) – Lee Hetfield has joined ARE Asset Management LLC, a distressed credit and distressed real estate asset management company in Florida, as Portfolio Manager.
Hetfield reports that as of May 30, 2008, ARE Asset Management launched ARE Opportunity Fund, Ltd. (British Virgin Islands). The fund works in purchasing mortgage loans, the strategy is generating returns using both loan modifications negotiated with borrowers to create loan re-performance, as well as loss mitigation techniques. Re-performing loans are held for income or sold to securitizers or other investors for a gain.
Loans that cannot re-perform, resulting in “REO” or real estate owned property, are resolved via a property sale or entered into a rental income program. The fund also opportunistically invests in senior commercial loans backed by improved real estate at low LTV’s (50-65% of 90 day liquidated value, 35%-45% of BPO), through high-yielding originations made by an affiliated commercial loan originator, SeaBreeze Financial.
The investment manager currently has $110 million under management under the strategy as that of the fund, and the results since launch have been encouraging: For the month of June the BVI fund was up 1.59%, net of expenses, and July looks to be up ~1.5% (early est.). Prior to the BVI fund launch The Manager has historically managed funds for offshore investors in fixed-term, LLC structures (in the same distressed/credit opportunities strategy).
The team is spearheaded by Jeffrey Kirsch with over 30 years of experience in commercial and residential real estate. He has managed the ARE group of companies, based in Miami, FL, since their founding in 1996. At ARE, Mr. Kirsch has overseen more than $1 billion in performing and non-performing mortgage transactions and has long-standing relationships with private and public-sector sellers.
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TheChronicleHerald.ca- Two U.S. private equity firms are offering about $7.8 billion — or $39 a share in cash — for Alberta-based utility TransAlta Corp., which had been under pressure by a major investor to boost its stock price.
LS Power Equity Partners and Global Infrastructure Partners presented TransAlta with a "non-binding approach" on Monday.
TransAlta said its board will "carefully consider the letter and will respond in due course."
LS Power Equity Partners is linked to Luminus Management LLC, the New York-based hedge fund that fought earlier this year to persuade TransAlta to shed assets and to load up on debt as a means to buy back shares.
LS Power president James Bartlett said in a telephone interview that the suitors are seeking a "consensual, negotiated transaction."
Bloomberg- A year after Andrew Rabinowitz yanked his hedge fund’s cash from Bear Stearns Cos. because of concern the Wall Street firm wouldn’t make good on its trades, he’s ready to return.
For Rabinowitz’s New York-based Marathon Asset Management LLC, the lure is a prime brokerage that’s now part of JPMorgan Chase & Co., whose $1.6 trillion balance sheet is more than four times the size of Bear Stearns’s. JPMorgan Chief Executive Officer Jamie Dimon is counting on customers like Rabinowitz, some of whom helped bring Bear Stearns to its knees in March, to make his $1.36 billion takeover worthwhile.
After a run on Bear Stearns prompted a bailout by the Federal Reserve and the sale to New York-based JPMorgan, Dimon said one of Bear Stearns’s biggest attractions was its prime brokerage, which provides loans and processes trades for hedge funds. Bear Stearns lost as much as 40 percent of its so-called prime brokerage volume in the month after the March 16 acquisition.
New York (HedgeCo.Net) – The legal battles that ensued between Ritchie and investors who once tried to force an involuntary bankruptcy upon them are slowing simmering down.
Chicago based Ritchie Capital has dismissed a complaint it brought against Benchmark Plus Management, LLC, an investor in their Multi-Strategy Fund. Benchmark, along with the Sterling Low-Volatility Fund, had originally sought to expose balance sheets and other secretive information when the fund started experiencing declines.
Ritchie Capital filed a suit against the investors following those actions, seeking $5 million in damages and citing a breach of the confidentiality and non-disparagement provisions of the governing documents of the fund.
In April, the involuntary suit was dismissed by a Chicago court, prompting Ritchie to drop their charges and focus on the Multi-Strategy fund, which is not closing according to the company.
“We are pleased that the communication channels between Ritchie and Benchmark Plus have been re-established. Benchmark is supportive of Ritchie Capital’s continued management of the Multi-Strategy Fund and applauds its recent actions of having an independent expert verify the relevant books and records of the Fund,” said Robert Ferguson, Principal of Benchmark Plus. He went on to say that Benchmark has terminated their relationship with their legal counsel, Winston & Strawn, though reasons weren’t stated as to why.
It is estimated that Ritchie is managing approximately $1 billion in assets. Ritchie has not yet dropped their case against Sterling.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Hartford Courant- An investor has sued a Greenwich hedge fund management firm, accusing its operators of siphoning off money and enriching themselves at the expense of investors.
Westerly Capital sued Windmill Management LLC, manager of SageCrest hedge fund, and operators Alan and Philip Milton and Richard Weyand in Stamford Superior Court earlier this month.
It is demanding an accounting of money that has been lost and accuses the operators of Windmill of overvaluing fund assets "in furtherance of a scheme and/or course of conduct designed to personally enrich themselves even if this proved detrimental to the fund and its investors."
Bloomberg- BlackRock Inc., the largest publicly traded U.S. money manager, and Ospraie Management LLC, are among five companies that will start Shariah-compliant hedge funds based in Dubai.
The funds will get $50 million each in so-called seed capital from the Dubai Multi Commodities Centre Authority, a government-backed agency. Barclays Capital, securities unit of Britain’s fourth-largest bank, will also back the funds which will start in the next two weeks, said Frank Gerhard, the bank’s head of fund-linked derivatives strategy in an interview.
Shariah forbids investment in companies judged by scholars to be highly indebted, and those involved in alcohol, gambling and weaponry. Financial information companies including Standard & Poor’s and Dow Jones & Co. have started Islamic indexes that show only Shariah-compliant companies. The world’s Muslim community has about $3.6 trillion of combined wealth, Standard & Poor’s estimated in 2006.
