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.
Bloomberg – Hedge-fund assets increased by about $34 billion in September, a fifth straight monthly gain, helped by improved investor confidence and global stock market gains, Eurekahedge Pte said.
Net inflows into hedge funds totaled $15.1 billion in September, while performance-based gains made up $18.7 billion, bringing total assets under management to $1.43 trillion, the Singapore-based research firm said in a report posted on its Web site today. The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds globally, gained 2.6 percent in September, bringing its year-to-date advance to 16 percent.
Bloomberg – The Galleon Group insider-trading investigation may sap investor confidence in the hedge-fund industry, already under scrutiny after Bernard Madoff’s Ponzi scheme, said Michael Coleman, chairman of the Singapore chapter of the Alternative Investment Management Association.
“It’s obviously not good news for the hedge-fund industry from the top level, but it seems to be a very specific case,” Coleman said in an interview on Bloomberg Television today.
Galleon founder Raj Rajaratnam was arrested in New York on Oct. 16 for alleged insider trading, charges which he denies. The U.S. government is reviewing regulation of the financial industry, including a plan that would create an agency for monitoring consumer financial products and bring hedge and private-equity funds under federal scrutiny.
New York (HedgeCo.net) – At a seminar held yesterday, Starting A Hedge Fund In The Post-Madoff Era, organized by Andrew Schneider and Hedgeco Networks, 220 managers, investors and service providers came together at the U.S. Trust Building to hear Joe Goldstein, Ron Geffner, Ron Suber, Merlin Securities and others discuss the future of startups in the hedge fund industry.
“As a presenter I was very happy to see many start up funds in the audience as well as investors and service providers.” Joe Goldstein from G&S Fund Services said, “I think it was a good environment for someone looking for the right information to plan and succeed in establishing a a start up hedge fund. It is typical that in post-Madoff period fund managers embrace the importance of a good infrastructure in gaining investor confidence and building a good fund.”
After the speeches were drinks and networking, where the guest speakers mingled with investors. The general feeling among attendees was the the importance of knowing top of the line service providers, ones that stand out and have a prominent reputation.
“After the collapse of Bernie Madoff’s ponzi scheme, hedge fund infrastructure has come to the forefront in the industry.” Andrew Schneider, founder and co-principal of HedgeCo Networks said, “Investors are performing in-depth due diligence and looking for robust infrastructure before committing their capital. This is especially true for new hedge funds. Potential investors are relying heavily on the reputations of a hedge fund service providers including third-party administrators, auditing firms, prime brokerage houses, and legal counsel to prevent fraud and massive failures like never before.”
Yahoo News – Madoff dismissed an SEC investigation as a “fishing expedition” and highlighted how investigators develop cozy relationships with firms they are supposed to regulate.
“The guys … ask a zillion different questions and we look at them sometimes and we laugh, and we say are you guys writing a book?” Madoff said. “These guys they work for five years at the commission then they become a compliance manager at a hedge fund now.”
The SEC’s failure to uncover Madoff’s massive scheme has led the agency to beef up enforcement efforts as it moves to restore investor confidence.
Reuters – The value of Japanese retail-targeted mutual funds rose to a 10-month high of 58.8 trillion yen ($613 billion) in July, lifted by inflows into international equities funds and strength in share prices, an industry body said on Thursday.
It was the sixth straight month of increases in the value of publicly placed investment trust funds, or "toshins", as signs of a global economic recovery boost investor confidence. The value was also helped by rises in share prices, with the benchmark Nikkei share average .N225 gaining 4 percent in July.
The overall value of publicly placed investment trust funds rose by 1.7 trillion yen or 3 percent from the previous month to 58.8 trillion yen in July, the highest since September, Japan’s Investment Trusts Association said.
Reuters – A global regulatory body backed compulsory registration of hedge fund managers on Monday to restore investor confidence, saying the $1.3 trillion sector did not cause the credit crunch but may have amplified its effects.
The International Organization of Securities Commissions (IOSCO) represents regulators from over 100 countries, including the United States, Japan and the 27-nation EU.
Its final principles flesh out a statement made in March and a pledge from the G20 group of industrialized and emerging market countries in April that all hedge fund managers should be registered and directly supervised.
New York Times Blogs – The compulsory registration of hedge fund managers was backed by a global regulatory body on Monday in an effort to restore investor confidence.
The International Organization of Securities Commissions, representing regulators from more than 100 countries, said the $1.3 trillion hedge fund sector did not cause the credit crunch but may have amplified its effects.
IOSCO’s final six principles flesh out a statement made in March, and a pledge from the G20 group of industrialized and emerging market countries in April, that all hedge fund managers should be registered and directly supervised, Reuters reported. Those principles include mandatory registration of hedge fund managers while prime brokers who provide funding to hedge funds should also be subject to mandatory registration and supervision.
The European Union has also put forward a draft law that goes further than IOSCO, while the U.S. is also planning mandatory registration of hedge funds but so far in a less extensive way than the EU.
ZURICH, June 9 (Reuters) – Hedge fund outflows of $116 billion in the first quarter of 2009 were the second highest since 1994, Lipper data show, yet hedgies may yet receive a boost from some pension funds before the end of the year. Aureliano Gentilini, Lipper’s global head of hedge fund research, said on Tuesday he expected hedge fund outflows to taper off in the second quarter and that inflows could return in the third as investor confidence returns.
"Although down 21 percent from the fourth quarter of 2008, outflows were high, but partly because withdrawal restrictions imposed in the fourth quarter were lifted in Q1 of 2009," said Gentilini.
Gentilini also said that, in spite of having their worst ever year in 2008, hedge funds were seeing renewed interest from larger institutions as the dust from the financial crisis settles. Lipper is a Thomson Reuters research firm.
Reuters Tokyo – Hedge funds are dipping their toes back into the dollar/yen options market after months of absence, betting that eventual interest rate tightening by the U.S. Federal Reserve will help the greenback gain against the yen.
Dollar/yen’s implied volatility, a gauge of how much a currency pair is expected to move over a given period, has come down to levels not seen since before Lehman Brothers collapsed in mid-September, sending global markets into a tailspin.
The decline suggests market stress has eased substantially and investor confidence has risen after the battering dealt by the global financial crisis, but it also implies lessening demand for options to hedge against a further surge in the yen.
West Palm Beach (HedgeCo.net) – In testimony before the House Financial Services Subcommittee; “Perspectives on Hedge Fund Registration”, the Managed Funds Association (MFA) announced its support for the new push for mandatory registration of managers with the SEC.
"Though hedge funds were not the cause of the ongoing problems in our financial markets and our economy, MFA and our members share the commitment of policy makers to enact measures that will help restore stability to our markets, strengthen financial institutions and restore investor confidence." Richard H. Baker, MFA President and CEO, said, "We believe supporting mandatory registration for investment advisers is just one of the many important steps that can be taken towards these mutually shared goals."
Baker’s testimony stressed that while hedge funds are important to the capital markets and the financial system, the relatively small size and scope of the industry, with approximately $1.5 trillion in assets under management, did not pose significant systemic risk. He also stressed that hedge funds are substantially less leveraged than banks, have outperformed the overall market and have not sought any federal assistance.
“A registration framework that overwhelms the resources, technology and capabilities of regulators will not achieve the intended objective, and will greatly impair the ability of the regulator to fulfill their existing responsibilities, as well as their new responsibilities.
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West Palm Beach (HedgeCo.net) – James Chanos, Chairman of the Coalition of Private Investment Companies (CPIC), said in response to the SEC’s five proposed rules put forward to curb short-selling, "Rebuilding investor confidence should be the primary objective of any new regulatory effort and it is not clear that today’s proposals will meet that simple goal."
The SEC voted unanimously to seek public comments on all of the proposed rules intended to limit short-sales.
"Skeptics, independent research and critical analysis must continue to play a vibrant role for our markets to grow sustainably and with integrity." Chanos continued, "Short selling is integral to improving the efficiency of markets and enhancing market quality through narrower spreads, deeper liquidity, less volatility, and greater price discovery.
"In recent years, short-sellers have publicly warned the marketplace about the dangers at AIG, Lehman Brothers, and Enron, as well as sounding the alarm over the credit ratings agencies, non-bank subprime lenders, and credit insurers. Proposals to inhibit short-selling have the effect of limiting this vital market-based antidote to corporate fraud and speculative bubbles, and must be carefully weighed against the clear harm that comes from ill-conceived government intervention in basic market functions,” Chanos concluded.
CPIC is a coalition of private investment companies whose members and associates are diverse in both size and investment strategies.
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Reuters - Bernard Madoff is behind bars, but the effects of his fraud are still reverberating in the hedge fund industry, with more redemptions expected and investor confidence decimated.
Traumatized investors are now more likely to closely monitor where their money is and who is managing it, hedge fund professionals said at the Reuters Private Equity and Hedge Funds Summit this week.
"You know, it is just absolutely devastating," said Anthony Scaramucci, managing partner at SkyBridge Capital, referring to the Madoff scandal.
