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 – Stanley Ku, former head of Fortress Investment Group LLC’s Hong Kong office, plans to start an Asia- focused hedge fund to profit from macroeconomic developments, according to a marketing document given to potential investors.
Minerva Macro Fund, to be managed by Hong Kong-based Ku, will start investing in early August, two people with knowledge of the plan said. It seeks to generate annual returns of 12 percent to 22 percent trading stocks, interest rate, currency and commodity instruments in large and liquid markets, according to the document, obtained by Bloomberg.
New York Times – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again. Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors for longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
Fees will face greater scrutiny. The archetypal hedge fund charges 2 percent of assets and skims off 20 percent of investment gains, the longstanding “2-and-20” structure. But some funds have had to offer breaks on fees lately to persuade investors not to take their money out. Investors will be more selective and are likely to put downward pressure on fees. All the same, it is probably too soon to sound a Last Post bugle call for 2 and 20.
Reuters Dubai – The outlook for investments in the oil and gas industry remains healthy as demand growth from emerging economies is expected to recover, a co-manager of a shariah compliant oil and gas hedge fund said.
"There is constant demand for these finite resources from emerging economies like China and India, even though there is some downturn in the short term," said Russell J. Lucas of U.S.-based Lucas Capital Management, co-portfolio manager of Al Safi’s Lucas Energy Fund.
"You have to eat, you have to drive, you need heat to keep your family warm, I believe those are the things that should be the core of a portfolio, especially in uncertain times."
The Dubai oil and gas hedge fund could grow to $500 million (332.7 million pounds), from its initial investment of $50 million in the next 18 months, he said.
New York (HedgeCo.Net) – One month after RAB was forced to revamp their flagship fund, the British hedge fund is halting redemptions on their Energy Fund. After losing more than 50% of its value this year, RAB has informed investors that they will not be able to make withdraws in the near future.
Investors who wish to stay in the fund will be offered the same deal as those locked up in the $1.4 billion Special Situations Fund. The deal entails paying smaller management fees in exchange for keeping their money in the fund for the next three years.
Investors have until this Friday to let RAB know whether or not they want to accept the offer. The alternative would be receiving “redemption shares,” which are basically an IOU promised by RAB to pay back the investors when they start posting profits.
The Special Situations Fund, one of the largest shareholders of Northern Rock, got burned with the British Government nationalized the faltering bank. Losing almost $55 million in the first half of the year, former RAB head Phillip Richards wrote it off as “very regrettable” while outlining some new strategies for the company that involved investing in under-developed regions throughout India and the Middle East. Richards stepped down shortly after as CEO to concentrate exclusively on the Special Situations Fund.
The RAB Energy Fund is run by Gavin Wilson and Mark Redway and once managed over $1.5 billion at its peak.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Bloomberg – Energy Capital Management and Nordic Commodity Funds AB’s hedge funds are outperforming the competition in European energy markets, where power prices fell as much as 17 percent last month from a record.
Energy Capital’s MMT fund returned 19.2 percent through July, according to a letter to investors, the best result in a Bloomberg survey of 11 funds in Europe’s electricity, coal, natural-gas and emissions markets. Alfakraft AB’s Alfa Energy Fund posted the biggest drop, at 17.9 percent, according to its Web site.
The plunge in power prices and related commodities since early July ended a four-year surge in electricity costs that enabled funds to provide better returns than stocks and bonds. Coal costs, which affect European power markets, more than doubled in the first half, before sliding 13 percent in July.
