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.
StarTribune – The money trail in a suspect currency investment program promoted by several Twin Cities companies runs through an industrial building in this gritty southern California community that calls itself Horsetown USA.
Trevor Cook, a 37-year-old Minneapolis money manager at the center of a sweeping federal investigation, wired millions of dollars over the past year to a lawyer here, Gary Saunders, to buy land for a Panama casino and condominiums, according to sources familiar with the transfers.
HedgeCo.net (West Palm Beach) – A survey by RSM McGladrey, a financial services consultancy, found that hedge fund managers are surprisingly ready to work with SEC regulators to cooperate with authority, despite wide-spread wariness about over-excessive regulation from the Obama administration.
However, the Obama financial regulatory plan was a top concern with 75%, fearing that further regulation will go too far and stifle the market’s recovery.
The survey polled more than 100 hedge fund managers during the last month and focused on hedge fund industry sentiment toward the Obama administration regulation.
Fund managers are also optimistic about the industry’s prospects, according to the survey. 60% believe the current environment provides more investment opportunities than challenges. An overwhelming majority (69%) see the U.S. economy returning to positive growth by Q2 2010.
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West Palm Beach (HedgeCo.net) – The Treasury Department said that they have recieved 100 applications from potential fund managers interested in participating in the Legacy Securities portion of the Public Private Investment Program (PPIP).
A variety of institutions applied, including traditional fixed income, real estate, and alternative asset managers, such as hedge funds.
Successful applicants must demonstrate a capacity to raise private capital and manage funds in a manner consistent with Treasury’s goals, they must have experience investing in eligible assets and headquartered in the United States.
Applicants can expect to be informed of their preliminary qualification around May 15, 2009, when they can begin raising a minimum of $500 million in private capital that will serve as the investment that, pending further approval, will be matched with taxpayer funds.
Since announcing the program details on March 23, the Treasury has encouraged small, veteran, minority and women owned private asset managers to partner with other private asset managers. On April 6, Treasury extended the deadline for fund manager applications to provide more time to facilitate these types of partnerships.
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Reuters – Bridgewater Associates Inc, one of the world’s biggest hedge-fund managers, said on Tuesday it might be interested in participating in the U.S. Treasury’s public-private investment program, calling it a "big transfer of money from the government to the banks and to the buyers."
Bridgewater manages roughly $80 billion in global investments for a wide array of institutional clients, including foreign governments and central banks.
In a letter to clients, Bridgewater said its interest in buying the distressed assets under the terms being offered would depend on the pricing and on "whether we can get over our fears of partnering with the government."
West Palm Beach (HedgeCo.net) – Todd Groome, Chairman of the Alternative Investment Management Association (AIMA) said in a statement regarding the Public-Private Investment Program announced by Tim Geithner, "It shows that there is recognition among policy makers at the highest level that the hedge fund industry is part of the solution."
The Treasury’s Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.
"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.
"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.
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New York (HedgeCo.Net) – The Obama administration has unveiled its much anticipated program aimed at clearing toxic assets from the books of U.S. banks and finding a middle ground between inaction and nationalization. By financing the purchase of up to $1 trillion in illiquid real estate assets, the government is hoping that its Public-Private Investment Program will revive the lending process while helping to jumpstart the economy.
“This will allow banks to clean up their balance sheets,” Treasury Secretary Timothy Geithner said. “There is no doubt the government is taking risk. You cannot solve a financial crisis without the government assuming risk.”
The plan entails using up to $100 billion in the Troubled Asset Relief Program funds along with additional capital from private investors to “generate $500 billion in purchasing power to buy legacy assets with the potential to expand to $1 trillion over time,” according to a statement released by the Treasury.
Under the plan, the “Legacy Securities Program” would be instilled to protect private investors’ or hedge funds’ purchase of the assets by using money from half of the original funds. The Treasury would match any private capital that is raised for the purchases dollar for dollar.
The Federal Deposit Insurance Corporation would oversee a facet of the plan called the “Legacy Loans Program,” which is expected to garner interest among many private investors. With this program, the treasury would pony up half of the capital to purchase a bundle of loans while the rest of the cash would come from private investors or hedge funds. The FDIC would then guarantee financing of up to six times the original price, then auction off the loans.
In addition, private-sector purchasers would determine the value of these assets so as to quell any fears that the government might be overpaying for the loans.
Some critics are weary that the program’s success relies exclusively on the action of private investors to step up to the plate. The Fed’s new program to revive consumer credit, called the Term Asset-Backed Securities Loan Facility, or TALF, was a disappointment as far as popularity was concerned, with just 19 large hedge funds and other firms showing interest. Out of the $200 billion offered, only $4.7 billion in requests for loans came in.
Another reason cited for the lack of big-money interest in the programs is the mess that unfolded after AIG handed out $165 billion in employee bonuses. A near unanimous vote in the House to tax those bonuses 90 percent may have stifled public outcry, but it did little to put to rest investor’s uncertainty regarding the government’s conflicting actions.
Former President Bush declined to buy the toxic securities in November. No banks have agreed as of yet to sell their illiquid assets.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – The Obama administration will announce details of a plan today to expand the $700 billion rescue of the financial system that will rely on enticing private investors to buy the troubled assets clogging banks’ balance sheets.
Treasury Secretary Timothy Geithner, who will unveil the Public Private Investment Program today, has crafted an approach using up to $100 billion of bailout money to spur investment funds to purchase — and banks to unload — the illiquid securities and loans that have caused credit to dry up. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. will all play a role alongside private investors in aiming to buy between $500 billion and $1 trillion of troubled assets.
“By providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,” Geithner said in an op-ed piece published in today’s Wall Street Journal. “The ability to sell assets to this fund will make it easier for banks to raise private capital.”
