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.
Times Online – John Ho, the head of The Children’s Investment Fund’s (TCI) operations in Asia, is poised to resign over what sources describe as a “clash of minds” with Chris Hohn, its notoriously abrasive founder.
The same sources said that the two had fallen out over investment strategy and changes in the way the £6.5 billion fund is run. The hedge fund invests on behalf of a charitable foundation run by Mr Hohn’s wife.
The alleged disagreement follows a year of terrible investment losses during which Mr Hohn’s master fund is understood to have shed more than 40 per cent of its value. The fund has also lost several key figures in quick succession and its appetite for shareholder activism appears to be dwindling with the recent sale of most of its stake in Deutsche Börse.
Reuters – Not only are Hedge funds losing clients and money, they are losing clout, too, as large investors turn the table on them and demand better terms.
Stung by investment losses and vexed by so-called gates that limit redemptions, some of the largest pension funds and other large investors are demanding that fund managers trim fees, provide more information and increase access to cash.
Bloomberg – Compensation for U.S. hedge-fund employees may drop as much as 25 percent this year as the firms try to recoup last year’s investment losses.
The decline will cut hedge-fund paychecks to about half the record levels of 2007, according to estimates by Alan Johnson, founder of Johnson Associates Inc., a New York-based compensation-consulting firm whose clients include financial- services companies.
About 70 percent of the industry’s 6,800 so-called single- manager funds lost money in 2008 with the average fund dropping 19 percent, according to data compiled by Chicago-based Hedge Fund Research Inc. That means most clients don’t have to pay performance fees — generally 20 percent of profits — until the losses are made up. Many owners of the private partnerships will cover salaries out of their own pockets, or from pools set aside in previous years, to keep their best employees, Johnson said.
Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees.
The dismissals will come on top of the 10,000 jobs that disappeared last year at the investment partnerships, according to estimates by New York-based Options Group, an executive-search firm. Employment peaked at 155,000 in 2007, and has since dropped to about 145,000, the firm said.
San Diego Union Tribune – The county pension board’s chief investment officer has resigned a week after a second hedge fund collapse in which employee retirement investments could lose as much as $78 million.
David Deutsch, who held the job for five years, oversaw a $2.5 billion loss in pension assets since June 30.
He had pushed the San Diego County Employees Retirement Association – which manages retirement benefits for 35,000 county retirees and current employees – to invest heavily in hedge funds.
The association’s board accepted his resignation in closed session yesterday. His last day will be March 19.
Brian White, the association’s chief executive, said Deutsch didn’t give a reason for his departure and wasn’t given a severance package.
Asked if Deutsch was under any pressure because of investment losses or hedge fund problems, White said, “I think we’re all under a lot of pressure because of the market.”
Interactive Investor – British fund firm Ashmore Group said it expected the fund-raising environment to remain tough in 2009 as clients continue to cash in investments, after it reported first half profits in line with forecasts.
The group, which specialises in managing emerging market funds, said on Tuesday it sees significant opportunities arising from the turmoil that has hit financial markets, though so far this year it has lost money on its investments. The group said pretax profit for the six months to end-December fell to 80.3 million pounds ($116.9 million) from 100.9 million a year before.
Assets under management fell 34 percent to $24.6 billion during the period as the group suffered net outflows of $5.8 billion and investment losses of $7.1 billion.
Bloomberg – Mohammed Syed has spent the past seven years scouting out the best hedge-fund investments for clients of his Axiom Fund Manager Ltd. Now, he’s seeking to expand the $100 million he oversees by acquiring rivals.
“I am looking for two or even three firms that can complement my business,” said Syed, 45, who founded London-based Axiom in 2002. “A year ago most people wanted huge premiums for their businesses, but now it’s a different story.”
Hedge funds are consolidating after record investment losses and customer withdrawals cut assets by 37 percent in the second half of 2008, squeezing their main source of fees. As many as 40 percent of the 9,000 hedge funds and funds of funds may disappear in the next two years, according to Karamvir Gosal, a New York- based investment banker at Jefferies Putnam Lovell. While some will return money to investors and shut their doors, mergers and acquisitions will be more prevalent than in the past.
West Palm Beach (HedgeCo.net) – Independent forensic professionals, Chris McConnell and Eric Steinwald are finding themselves in increasing demand as hedge funds and other investors turn to experts for help in recovering from losses caused by fraud, Ponzi schemes, stock market or real estate market losses.
"Any asset, at any time, may bercome subject to fiduciary duty standards, "McConnell said, "Fiduciary duty is not simply a good idea or a best practice; rather, it’s the highest standard known under the law."
McConnell, AIFA of Fiduciary Forensics, has over 25 years of experience in the field and is an acknowledged fiduciary expert in the securities, compensation and valuation fields based upon actual, inside hands-on Wall Street securities industry experience. Steinwald is a principal of Steinwald and Kaufmann, a Brentwood/Los Angeles, California tax and forensics accounting CPA firm, and also has 25 years of experience of serving financial clients. Together, the two bring over 50 years of unmatched expertise to plaintiffs who experience suspicious investment losses of any kind.
"Courts often hold trustees and/or third party investment fiduciaries (banks, brokers, trust companies, investment advisers, hedge funds, and even custodians) may be liable, measured against the expert investment standard regarding personal liability. "McConnell said, "The amount of potential fraud, loss of income, and/or insurance claims looks to increase dramatically as investors face staggering losses. We are ready to help as many people as we can to avoid potential financial catastrophe."
The difference between proving liability and recovering damages and loss is in the actual details, which often provide the edge for success.
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Reuters – Steel Partners this week asked a Delaware court to dismiss a lawsuit filed against the hedge fund firm by billionaire investor Carl Icahn, saying he is "looking for a scapegoat" for investment losses that happened as the financial crisis deepened.
Steel Partners said the suit, which claims it committed fraud, has no merit.
The court papers were made public on Tuesday.
Two weeks ago ACF Industries, a railcar component maker closely associated with Icahn, sued Steel Partners in Delaware Chancery Court, saying the fund firm failed to properly inform investors about plans to turn one of its funds into a public company.
