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 - The investment banks and global hedge funds that are the usual buyers of debt and equity in struggling Asian companies have largely fled the market, leaving the distressed asset space to home-grown investors.
Local players with the cash — and the stomach — to remain in the hunt for cheap assets find themselves with the luxuries of time, choice and pricing power.
"We’re just taking our time and doing our homework, because a lot of the traditional buyers are not in the market," said Chris Gradel, managing partner at Hong Kong-based Pacific Alliance Group, which runs $1.6 billion (1 billion pounds) in hedge funds.
New York (HedgeCo.Net) – Gabriel Capital and founder Ezra Merkin have been sued for their exposure to Ponzi-schemer Bernard Madoff by a disdained investor.
Scott Berrie, who has $500,000 tied up in one of Gabriel’s funds, claims that Gabriel lied to investors when they marketed that they hold a “diverse portfolio of securities,” which “falsely implied that the general partner was actively pursuing the partnership’s strategy in a prudent manner by using numerous and diverse investments.”
Berrie also alleges that Merkin, who heads up GMC financing arm GMAC LLC, neglected at least 27 percent of its investments, the chunk of which was invested with Madoff.
Berrie filed a class-action lawsuit yesterday in a federal court in Manhattan.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Ananova - Royal Bank of Scotland says it is facing a potential loss of £400m after a Wall Street banker was charged with a massive alleged fraud.
US prosecutors say Bernard Madoff has confessed to defrauding investors of $50bn (£33bn) in a giant pyramid scheme that collapsed in the global financial crisis.
RBS, in which the British government now has a majority stake, says it has exposure through investments in hedge funds that invested with Mr Madoff.
It is one of a number of banks that face big losses in the suspected fraud.
Santander, the Spanish bank that owns Abbey and Alliance and Leicester, said it had more than 2.3bn euros (£2.08bn) worth of exposure.
New York Daily News – Is Park Ave. lawyer Marc Dreier a Blood? Or maybe a Crip?
Federal prison officials are refusing to remove the accused hedge fund swindler from 24-hour lockdown until they determine whether he’s a gang member, attorney Gerald Shargel told a judge Thursday.
"How ludicrous is that?" Shargel told Magistrate Judge Douglas Eaton during a failed attempt to get the Yale grad and Harvard Law School alum released on $10 million bail.
Eaton agreed to look into Dreier’s conditions after Shargel said prison officials told him it will be another three weeks before they can remove Dreier from lockdown at theManhattan Correctional Center.
Washington Post – New evidence has emerged in an insider-trading investigation that the Securities and Exchange Commission closed two years ago without filing charges, raising questions on Capitol Hill about the government’s oversight of what was once one of the nation’s most prominent hedge funds.
According to documents, the hedge fund — Pequot Capital Management — secretly began to pay $2.1 million to a key witness in the case last spring, just three months after several senators called on the SEC to reopen its investigation.
Top Republicans on the Senate Finance and Judiciary committees asked Pequot’s chairman this week to provide records related to the payments. The FBI is also looking into the matter, according to people familiar with the case.
Bloomberg - The global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.
“It’s very clear that there is going to be significant consolidation in the hedge-fund industry,” said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies. “Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”
Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion, Singapore-based Eurekahedge said, based on preliminary figures taken from 41 percent of the funds it surveys. It said hedge-fund assets shrank by $110 billion to $1.65 trillion in October.
West Palm Beach (HedgeCo.net) - US-based Stream Asset Management announced the launch of a credit dislocation fund and a multi-strategy credit hedge fund, the company said in a press statement.
The move is part of Gulf Stream’s aggressive expansion strategy to capitalise on current market opportunities. To further support the firm’s growth, Gulf Stream has also opened a New York City office, the statement added.
Earlier this year, Istithmar World Capital, the private equity and alternative investment arm of Istithmar World, acquired a majority stake in Gulf Stream. Gulf Stream Asset Management is majority owned by Istithmar World Capital.
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Law.com – As Marc S. Dreier was being arrested for attempting to defraud hedge funds of more than $100 million, some of the 10 affiliates of Dreier LLP were peeling off and others were trying to hold the firm together even as money for insurance and some operating expenses is frozen.
Declarations filed Monday by the Securities and Exchange Commission in connection with a civil case it brought against Dreier also indicated that some firm attorneys were concerned that escrow accounts, which Dreier controlled, had been depleted.
One named partner of an affiliated firm, Vincent Pitta of Pitta & Dreier, stated in a declaration that the firm could not meet its expenses. The reason, Pitta said, was that he and Dreier were the sole signatories to the firm’s operating account, and Pitta had only limited authority to approve spending.
Seekingalpha.com - Moore, named after Bacon’s middle name, is a $10 billion global macro set of hedge funds. The next few funds we will be covering are global macro oriented funds, which is a switch from some of the more value oriented funds we’ve been covering, like the ‘Tiger Cub’ funds including Stephen Mandel’s Lone Pine Capital, Lee Ainslie’s Maverick Capital, John Griffin’s Blue Ridge Capital, and Andreas Halvorsen’s Viking Global.
Global macro funds seek to find investments in whatever market they can gain an edge, whether it be equities, bonds, currencies, debt, commodities, and more. So, keep in mind that these equity positions only represent a portion of the fund’s overall holdings. They are not required to disclose holdings outside of equities, notes, and stock options.
Forbes – A group of Dillard’s Inc. investors is asking the family that controls most shares in the department store chain for corporate records containing information on family and business relationships and perks given to directors or executives of the department store chain.
The request was detailed in a filing with the Securities and Exchange Commission and comes as softening consumer spending has many retailers, including Dillard’s, posting weak sales ahead of the crucial holiday season.
Reuters – Even some strong hedge fund managers may not survive the ongoing credit crisis due to a lack of funding or credit, the president of hedge fund John W. Henry & Co. said on Tuesday.
"There are going to be some firms that have good strategies that were strong in terms of discipline and their strategy itself, but may not survive this because they don’t have the assets or the funding to be able to survive," Ken Webster, president of the firm, said at the Reuters Investment Summit in New York.
The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades.
West Palm Beach (HedgeCo.net) – Hedge fund Trian Partners said that they will buy about 49.4 million shares of fast-food operator Wendy’s/Arby’s Group for $4.15 per share, or about $205 million.
The hedge fund and their affiliates now own about 21.6% of Wendy’s/Arby’s, or 52.1 million shares, up from its previous 11.1% stake. In November, Trian Fund Management L.P., led by billionaire investor Nelson Peltz, Peter W. May and Edward P. Garden, said it would buy shares of the fast-food restaurant business for about $4.15 per share.
The deal was subject to certain conditions, including that there would not be a decline of more than 10% in the Dow Jones Industrial average or the S&P 500 index after Nov. 5. Another condition was that Wendy’s/Arby’s shares would not lose 10% of their value.
Triarc Cos. Inc., which operates Arby’s and was run by billionaire investor Nelson Peltz, bought Wendy’s in a deal that closed in September.
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