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.
Reuters – A wave of hedge funds are being launched this year by traders as the financial crisis fuels a shakeout of talent from Wall Street banks and big investment firms, an industry executive said.
Record redemptions last year prompted hundreds of hedge funds to shut down, and swooning markets have made it difficult to raise new capital. Still, one leading financial services technology firm said a growing number of managers are braving the tough environment to strike out on their own.
"There’s a huge resurgence of new start-ups," said Jayesh Punater, chief executive of Gravitas Technology, whose company builds and manages technology systems for investment firms.
Post Chronicle – U.S. securities regulators charged a prominent hedge fund industry executive on Wednesday with failing to properly review collapsed hedge fund Bayou Group before recommending that their clients invest.
Hennessee Group and its principal Charles Gradante, who runs the New York-based group with his wife, failed to research the hedge fund group as vigorously as promised, the Securities and Exchange Commission charged.
The news is a big blow to Gradante and the Hennessee Group, which established their reputation in the $1.3 trillion hedge fund industry by tracking funds’ returns, industry flows and creating portfolios for clients.
Reuters – Millionaires who long put money with hedge funds are now skittish about adding fresh cash after these loosely regulated portfolios posted record losses last year, a top industry executive said on Thursday.
"We have probably seen the worst of the (hedge fund industry redemptions), but I think it will be a slow go to build up that asset base again," Don Heberle, executive director at Bank of New York Mellon Corp’s Wealth Management unit where he oversees the Family Office and Charitable Gift Services groups, said in an interview.
The potential of hedge funds to deliver strong returns in all markets because they can sell stocks short and use borrowed money has appealed to wealthy investors for years. With the help of people like Heberle’s clients — families that are worth more than $100 million — hedge fund industry assets doubled to $2 trillion between 2005 and 2008.
Bloomberg – Bernard Madoff’s alleged Ponzi scheme may cost insurers who cover financial institutions more than $1 billion as they pay legal costs for investment managers who gave client money to Madoff, an industry executive said.
Insurers who sell such coverage never expected, or charged their clients, for the possibility of investor losses in such a massive fraud, said Greg Flood, the president of the management liability practice at Ironshore Inc., the Bermuda-based insurer.
“This isn’t supposed to happen in America,” Flood said. “There will be extraordinary losses paid for this year.” About $1 billion in claims costs industrywide “wouldn’t be too difficult to imagine.”
New York Sun- A majority of the City Council is backing a tax-the-rich plan that would require hedge fund and private equity fund partners to pay a city tax on income generated by investments, making it more likely to gain traction in Albany.
Assemblyman Micah Kellner, who represents the Upper East Side, recently introduced a bill that would change the city’s tax law so it would apply to hedge fund and private equity managers.
Twenty-six of the council’s 51 members signed a letter in support of the tax proposal, which is being touted as a way to raise more than $200 million a year. As the council and Mayor Bloomberg near a July 1 budget deadline, members are searching for new ways to generate revenue for the city to protect favored programs and classrooms from anticipated budget cuts.
The New York Sun – Suspicions that illegal insider trading may have preceded the year’s biggest and most publicized corporate takeover attempt — Microsoft’s hostile $44.6 billion bid for Yahoo — have prompted the Securities & Exchange Commission to commence a trading probe, knowledgable regulatory sources say.
The investigation is just one of nearly a dozen stock trading probes that were recently initiated by the SEC, The New York Sun has learned, and they include trading in some of the best-known names in Corporate America, regulatory sources tell me.
"It looks like some of Wall Street’s bad guys may be at it again; these guys never learn," one source said.
Confirmations of these investigations — which are not of the companies themselves, but rather focus solely on the trading in their stocks — are clearly documented in a series of information-seeking letters (known as Bluesheets) that the commission recently sent to the brokerage community. The Sun has obtained copies of those SEC letters, which detail 11 such probes, including the one into Yahoo’s securities.
