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New York (HedgeCo.Net) – Spanish bank Santander is seeking to freeze redemptions after stating on Monday that they currently lack the liquidity to meet the rising demands for withdrawals. Investors in the bank’s flagsihip real-estate fund, the Santander Banif Inmobiliario FII, moved to withdraw 80 percent, or $3.3 billion, of the fund’s capital at the end of January according to a regulatory filing yesterday.
Santander stated that investors would receive 10 percent up front of their redemption claims, to be followed by 10 percent increments whenever they could meet those demands. If they are still short on cash, they would inject capital themselves, they added.
The bank is hoping to put a halt on full capital withdrawals for the next two years so they may start an “orderly program of disposals.” They added that if they could not fulfill requests at the end of that period, they would wind down the fund.
The fund suffered losses last year after dropping 15 percent at the start of the fourth quarter after market conditions in residential real estate rentals took a turn for the worse. 67 percent of the fund’s assets were invested in real estate.
Some experts worry that the influx of demands at Santander may spark a domino effect with other Spanish funds invested in real estate, which considering their illiquidity, could pose a major a problem.
Santander has had their share of obstacles recently, including a massive 2.33 billion euro exposure to Bernard Madoff through their Optimal Investment Fund. Shares closed down 4 percent yesterday to 5.49 euros.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.
These gaps, which caused the Dow Jones Industrial Average to swing as much as 104 points this month in the final minute of trading, suggest investment firms faced with client redemptions and plunging markets may be gaming the closing-auction system. The discrepancies spurred the Financial Industry Regulatory Authority, which oversees 5,000 brokerages, to look for evidence that investors are improperly swaying prices.
General Electric Co., McDonald’s Corp. and the 28 other Dow companies swung 0.6 percent on average at the close the last two weeks, according to data compiled by Bloomberg. That’s almost eight times greater than the average three months ago. Because of the swings, the New York Stock Exchange plans to distribute information on the closing auction more often to help mitigate volatility.
New York (HedgeCo.Net) – Credit rating agency Moody’s said on Tuesday that it would probe deeper into why its staff incorrectly rated approximately $1 billion of complex debt securities.
While it was thought to be a computer error that caused the discrepancies in ratings, an external investigation by Sullivan & Cromwell revealed that some members of a key ratings committee violated certain codes of conduct while dealing with constant proportion debt obligations, or CPDOs. An expose produced by the Financial Times originally shed light on the errors.
“I am deeply disappointed by the conduct that occurred in this incident,” said Moody’s CEO and Chairman Raymond McDaniel. “The integrity of our rating process is core to Moody’s values and is essential to the market.”
CPDOs were awarded the highest "Triple A rating" when they first appeared in 2006. It then came to be known that they were actually associated with risky instruments. Moody’s insists that the error was not intentional. Some investors who snatched up CPDOs lost over half of their capital.
Following the subprime fallout last summer, Moody’s, Fitch and Standard & Poor’s have downgraded hundreds of billions worth of debt, creating substantial losses for investors and causing the implosion of several hedge funds.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Bear Stearns has triumphed in a case involving disgruntled investors seeking $141 million for the losses they incurred following the collapse of the Manhattan Investment Fund Ltd., a hedge fund where Bear served as the prime broker.
The fund, which filed for Bankruptcy in 2000, started experiencing losses almost immediately after its launch in 1995. After shorting technology stocks to no avail, fund manager Michael Berger issued false documentation showing profits and gains and ultimately collected $575 million from investors. Berger pleaded guilty in 2000 to securities fraud.
The suit against Bear Stearns was an attempt to hold hedge funds’ prime brokers responsible for investigating fraudulent clients. However, it was ruled that Bear Stearns had acted in good faith. The eight person jury in Manhattan concluded on June 27th that Bear was not liable for failing to see the discrepancies in the hedge fund’s books.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
