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 – Massachusetts will remove $1.6 billion from hedge fund managers Blackstone, Crestline, EIM Management, and Strategic Investment Group as it shifts its investment strategy after suffering recent heavy losses.
Trustees for the roughly $40 billion fund voted on Tuesday to pull out of four firms that used portable alpha, a once popular technique employed by pension funds to beat markets that underperformed during the financial crisis.
“This is a strategic shift and not a dissatisfaction with the individual managers,” said the pension fund’s chief investment officer, Stanley Mavromates.
Forbes – Southridge Capital Management, a Ridgefield, Conn., hedge fund firm run by Stephen Hicks that primarily employs an investment strategy known as PIPEs, is under investigation by the Securities and Exchange Commission and Manhattan District Attorney Robert Morgenthau.
The SEC has opened an investigation into Southridge, according to two subpoenas the SEC sent in late July to companies that had received financing from the firm’s hedge funds.
Tuscaloosa News – A committee of University of Alabama trustees voted to pull some investments from stocks, instead buying more stable U.S. and international bonds in an effort to avoid potential drops in the stock market.
International bonds will be bought as well as domestic to hedge against the deflating dollar, said Thomas Gale, investment officer for the system.
“In light of the fact that the stock market is no longer cheap, we are reducing our stock exposure slightly, thus reducing the volatility of the endowment fund,” Gale said after the meeting.
HedgeCo.net (West Palm Beach) – Bandon Capital Management has reached it’s 5th year for its hedge fund flagship investment strategy, ‘Directional Interest Rate Strategy’, (DIRS) producing annualized returns of +7.09% net of all fees, comparatively over the same time period the S&P 500 has lost -2.15%.
The strategy provides investors with absolute returns, uncorrelated with the equity and fixed income markets, by investing in the US Treasury Market using ETF’s or mutual funds and is available to non-accredited investors.
“We’re incredibly proud of this milestone. This is an investment area where there is a tremendous amount of product development activity and innovation." Bill Woodruff, Founder and Managing Principal said, "As advisors and their clients increasingly seek non-correlated, absolute return strategies we stand out for both the length and strength of our track record.”
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HedgeCo.net (West Palm Beach) – Rosemawr Management LLC, two months ago launched the Rosemawr Municipal Partner Fund LP,. The fund has seen returns of 0.82% in May and 0.86% in June, since inception on May 1st 2009.
With former Managing Director at Lehman Brothers, Greg Shlionsky, as portfolio manager, the new fund’s investment approach is fundamentals-driven. The investment team believes it possesses a unique understanding of municipal investments’ fundamentals. The investment strategy is based on thorough analysis of securities’ structure and credit, rather than on short-term momentum or technicals.
The fund limits its capital allocation (before leverage) to any one investment to 15% of the Fund (with exceptions made for short-term very liquid securities). Leverage is only applied to securities that the Investment Team considers liquid.
Rosemawr Management LLC, the Fund Manager, is an SEC-registered Investment Adviser focused exclusively on the U.S. Municipal market. The Fund’s Investment Team is comprised of professionals who draw on decades of senior-level experience overseeing municipal portfolios and major trading desks to manage credit, interest rate and event risk. Average Principal’s tenure in the municipal market is 20 years.
In addition to the fund, Rosemawr oversees value-added municipal strategies for family offices (including those of Forbes 100 and Forbes 400 families), ultra high net-worth individuals, and select institutional clients.
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The Guardian – The BIS said the retreat from riskier investments such as stocks in favour of safer bonds could pressure stock markets, delaying their recovery. "Similarly, the decline in the pension wealth of households participating in defined contribution plans and of employers sponsoring defined benefit plans has implications for aggregate spending," the BIS said.
Hedge funds did not play a central role in shaping the crisis but they will feel its impact, the BIS said.
After many wealthy individual investors withdrew, the funds are targeting institutions.
"Such a shift engenders demands for greater transparency about the investment strategy and greater scrutiny of risk management processes," the BIS said.
West Palm Beach (HedgeCo.net) – Viathon Capital, LP has announced the launch of a new credit focused opportunity fund, the Whitewater Master Fund, LP, as of May 1, 2009. The launch has affiliated with Citigroup Alternative Investments LLC (CAI) as seed investor in this new fund.
The fund employs a fundamental, credit-intensive research process in order to identify long and short investment opportunities in both US and European markets.
"We have a multi-million dollar, best-in-class trading and risk management system that allows us to manage portfolio risk on a real time basis and seamlessly integrate with our prime brokers and independent administrator." Bob Becker and Rob Comizio, managing partners said, "In addition, we have the relationships, infrastructure and investment process in place to effectively execute our investment strategy."
"As managers of the Whitewater Master Fund, we are keenly aware of the current changes and challenges in our industry. As a result, we have instituted a number of key policies and initiatives specifically designed to service the needs of sophisticated investors in this new environment." they said.
The performance estimate for Whitewater Master Fund for the month of May 2009 was approximately +1%. Viathon Capital, LP has 60 years of combined market experience including four investment professionals and two trade support/back office personnel to manage the new fund.
Alex Akesson
Editor for HedgeCo.Net Email: alex@hedgeco.net
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London Stock Exchange – Hedge funds that short stocks as part of their investment strategy should be forced to pay a levy to support research into the impact of the tactic on the markets, according to a new manifesto for the "fundamental reform" of corporate governance.
The document, published by corporate oversight and social responsibility consultancy PIRC, calls for the charge to be introduced alongside enhanced disclosure of listed companies’ pay and benefits, as well as binding shareholder votes on audit committee reports and remuneration policies.
AltAssets – Abbott Capital Management, a US-based independent investment manager, announced today that it has met its target for the Abbott Capital Private Equity Fund VI, having raised over $1bn.
Like Abbott’s previous funds, the investment strategy for ACE VI is to invest in a range of venture capital and growth equity, buy-out and special situations funds within the US and other developed markets.
Reuters – Hedge funds basing their investment strategy on sharia, or Islamic legal principles would face significant disadvantages compared with non-sharia hedge funds, some exponents of Islamic finance say.
Many strategies would be difficult to achieve because they would be too expensive to perform in a Sharia-compliant way, or because the tools themselves would be inappropriate under Sharia law. "You cannot have long-short hedge funds, because the idea of short selling, or selling something that you don’t own, runs contrary to the principles of Islamic finance," Fares Mourad, Head of Islamic finance at Swiss private bank Sarasin told Reuters. "I have not seen a credible structure that resolves this," Mourad said.
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.
New York (HedgeCo.Net) – Connecticut has long been a haven for the hedge fund industry; where light regulation and a dense population of ultra wealthy investors lure the most talented of hedge fund managers. But if some state lawmakers have their way, hedge funds will have to jump through a lot more hoops than they are used to, according to the Hartford Business Journal.
Under current law, hedge funds only allow accredited investors who have a net worth of $1 million or higher to participate. The proposed legislation would bump that minimum requirement up to $2.5 million, with institutions needing at least $5 million in assets.
The new legislation would also require hedge funds to provide greater transparency by disclosing their fees and other information about management or investment strategy. Hedge funds would also be required to obtain a state license as well as have an independent annual financial audit performed.
Many fear that by imposing these guidelines, Connecticut would have less of a draw, and many hedge fund managers could simply pack up and move to nearby metropolises like New York or Boston.
The pull for stricter oversight on hedge funds is by no means limited to the state level. Many members of Congress have been pushing for greater transparency after hedge funds got blasted for having a hand in the financial crisis thanks to controversial practices like short selling.
Others push for heightened regulation due to the recent outbreak of Ponzi schemes from so-called “trustworthy” individuals, like Arthur Nadel of Sarasota or the obvious case of Bernard Madoff where hundreds of investors were swindled out of their retirement. However, many who oppose the oversight based on increased fraud argue that investors are ultimately responsible for where their money goes and should perform greater due diligence themselves before trusting anyone with large sums of capital.
Republican State Representative John Stripp told the Hartford Business Journal that it’s not about a “vendetta against hedge funds,” just that “there is a need to have some kind of regulation in place.”
Even European finance ministers agreed this past weekend to the direct regulation of hedge funds overseas, leading most to believe that the era where hedge funds could get away with anything, is coming to an abrupt end.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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