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 – Even hedge-fund managers with portfolio gains are in trouble this year.
Dozens of managers who are outperforming the market and their troubled rivals with gains of as little as a few percent or as much as nearly 100 percent are facing a surge of withdrawals as investors try to exit during the worst bear market since the Great Depression.
Connective Capital, a Palo Alto, California-based hedge fund, treated investors in its short strategy to an eye-popping 85 percent gain this year as its benchmark Nasdaq Index slumped 42 percent. Still, clients asked manager Robert Romero to return roughly 20 percent of their capital.
Reuters – Two activist hedge funds of Dillard’s Inc are demanding access to inspect the retailer’s books and records, seeking greater transparency from the department store chain’s executives and family members.
Dillard’s shares jumped 18 percent in Monday morning trading.
Barington Capital has been calling on the Little Rock, Arkansas retailer to take steps to improve financial results and governance practices since at least June 2007.
The hedge funds own around 5 percent of Dillard’s class A stock. The Dillard family own most of the company’s class B stock, which allows them to nominate eight of the company’s 12 directors.
Reuters – In the world of stock exchanges, bigger is better. And although Deutsche Boerse AG said on Sunday that merger talks with NYSE Euronext had ended with no result, exchanges will still have to make cross-border mergers to contain costs.
A merger between the German bourse and the operator of the New York Stock Exchange would have generated huge synergies — around $300 million on a combined $3 billion cost base — and challenged derivatives market CME Group Inc CME.N.
"The more volume they can get on one platform, the better for exchanges, so all the mergers make sense," said Octavio Marenze, head of consultancy firm Celent.
Reuters – Hedge funds around the world extended their losses last month when the average portfolio declined 1.41 percent amid fresh stock market turmoil, data released on Friday shows.
The average hedge fund lost 17.70 percent in the first 11 months of 2008, figures from Hedge Fund Research show.
These numbers mark the worst-ever returns in an industry that once wooed investors with promises of strong returns in all market conditions and whose only unprofitable year was 2002, when the HFRI index lost 1.45 percent and the S&P 500 dropped 23 percent.
Reuters – Hedge Fund Firm Centaurus is considering selling its remaining 6.66 percent stake in French IT services group Atos Origin due to the financial crisis, French daily La Tribune reported on Monday.
Centaurus and Atos could not be immediately reached for comment.
According to La Tribune, Centaurus could sell its stake to PAI Partners, which is the group’s main shareholder with a 22.61 percent stake, and thereby relinquish its supervisory board seat.
Reuters – Merrill Lynch & Co Chief ExecutiveJohn Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered company’s compensation committee is resisting his request, the Wall Street Journal said, citing people familiar with the situation.
The compensation committee has not reached a decision, but is leaning toward denying Thain and other senior executives bonuses for this year, the people told the paper.
Merrill could not be immediately reached for comment.
Shareholders on Friday approved Bank of America Corp’s takeover of Merrill, a deal fraught with risk but one that would create a banking giant with a leading position in almost every major area of the financial system.
Reuters – Private equity investor Thomas H. Lee may shrink or shut down two funds that had $1.5 billion in assets after suffering losses of about 40 percent this year, the Wall Street Journal reported on Thursday, citing people familiar with the situation.
Hard-hit hedge funds run by Lee farmed out investor money to about 110 other funds, including SAC Capital Advisors and D.E. Shaw Group, according to the paper.
While Lee designed the so-called funds-of-funds to have low volatility with steady, consistent returns, he borrowed heavily to multiply the size of his bets, piling up debt of as much as $3.2 billion, the sources told the paper.
Reuters – Hedge funds should be wary of being pressured into cutting fees because of poor performance numbers during the financial crisis, a director at fund research company Lipper FMI said on Thursday.
Speaking at a briefing on trends for the fund management industry, director of fiduciary operations Ed Moisson said the industry was seeing much discussion around a potential overhaul of the standard ’2 and 20′ structure.
Hedge funds have traditionally charged a 2 percent management fee and a 20 percent performance fee on investments in their funds.
Reuters – Hedge fund manager John Paulson told investors that he made money again in November, leaving his biggest funds with double-digit gains for the year at a time many prominent rivals are nursing heavy losses.
Paulson’s roughly $5 billion Advantage Ltd fund gained 2.04 percent in November and is now up roughly 21 percent since January, according to an investor.
His roughly $10 billion Advantage Plus Ltd fund rose 3.19 percent in November and is now up 33.52 percent year-to-date.
Reuters UK - Hedge funds are suffering "tremendous" reputational damage because promises to make money whichever way markets move have not been fulfilled, although in the long run the industry will benefit from the shake-out, Veritas Asset Asset Management manager Ezra Sun said.
Hedge fund "cowboys" boosting returns with lots of borrowing rather than smart strategies were the main culprits for the reputational damage, with investors blaming them for charging high fees and blocking them from withdrawing their money, he said.
"The market in the past few years has been rewarding people who’ve been running basically leveraged long-only funds," Sun told Reuters in an interview.
Reuters – Hedge funds in the European Union will be regulated following a public consultation that is currently underway, a senior EU official said on Wednesday.
"On hedge funds, we have used as our basis that they must be regulated," EU Economic and Monetary Affairs Commissioner, Joaquin Almunia told the European Parliament.
On Monday the bloc’s internal market commissioner, Charlie McCreevy, launched a public consultation on whether hedge funds needed more oversight but stopped short of saying if there will be regulation or a softer approach, such as an industry code.
Reuters – General Motors Corp and Chrysler LLC are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi billion dollar government bailout, Bloomberg reported, citing a person familiar with internal discussions.
In response to automakers’ bailout plea, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy — negotiated with workers, creditors and lenders — could be used to reorganize the sector without liquidation, Bloomberg said.
General Motors and Chrysler could not be immediately reached for comment by Reuters.
Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors Corp, Ford Motor Co or Chrysler would spread throughout an industry that is bleeding cash in a global slowdown.
