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.
New York (HedgeCo.net) The Galleon scandal is raging full force, with Raj Rajaratnam’s global hedge funds under a microscope. Supervising the case is U.S. District Court Judge Jed S. Rakoff, who’s ruling on the Merrill Lynch/BofA case, earned him the nickname ‘Judge Dread’ on Wall Street, according to The Post.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA’s largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
New York (HedgeCo.net) – Despite rich equity market multiples and uncertainty surrounding the upcoming 3rd quarter earnings reports, Hennessee Group said that hedge fund investors continued to pile into stocks due to an uptick in merger activity during September.
The Hennessee Long/Short Equity Index gained +3.13% in September (+18.75% YTD), while the S&P 500 index finished September up +3.6%, faring much better than the average loss of -1.2% the S&P has historically posted during the month of September dating back to 1929.
Hedge funds have also taken on additional directional risk in order to participate in the ongoing equity market rally and Hennessee believes they remain cautious and aware that the market could turn sharply to the downside.
“Little of the bail out money given to banks seems to have been passed on to businesses or consumers. It must have gone somewhere, and it is possible that is has gone to the proprietary desks of the banks, which are putting it to work in the markets,” Charles Gradante Co-Founder of Hennessee Group, said. “That could lead to a potential problem if the public and institutions do not join the rally, and the banks eventually have to sell equities into a vacuum.”
“The current debate among hedge fund managers is ‘Deflation versus Inflation’,” Gradante said, “The weak dollar and deficits are inflationary, but the 30 year treasury below 4% (80 bps over the 10 year) points to deflation expectations. Hennessee research is noticing a growing propensity of hedge funds to short 20 and 30 year treasuries as yields break 4%. The U.S. Treasury is currently funding its long term debt with 3 to 10 year Treasuries. The need to finance America ’s debt on the long end of the curve with attractive yields is increasingly obvious.”
New York (HedgeCo.net) – Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) will finish up +2.67% in September (based on 65% of assets reporting).
Long/Short Equity and Emerging Markets managers experienced another positive month driven by equity market gains in September. At the end of the best quarter since 1998 for the Dow Jones Index, which had a gain of nearly 15%, market sentiment was bolstered by several positive macro indicators, such as an increase in the Global Purchasing Managers’ Index (PMI) that signaled expanding manufacturing output and pointed to a continuing stabilization of global economic activity. Inflation continued its moderate downward trend in the U.S. and in the Organization for Economic Co-operation and Development (OECD) countries, while central banks overall maintained low interest rates in the face of a weak recovery. Many equity indices finished in positive territory, although there were some late market corrections following reports of worse-than-expected U.S. home sales.
A number of Global Macro quantitative managers had a positive month, driven by long currency trades in the Yen and Euro and decreased FX volatility. Yield curves did not move significantly and therefore front end positions had relatively little impact on performance.
Credit-oriented managers in the Fixed Income Arbitrage and Event Driven sectors had a positive month, with performance coming from mortgage-related bonds, corporate bonds (especially financials), swap spread trades (which have been normalization trades focusing on the narrowing in the spread between LIBOR rates vs. Treasuries) and opportunities in government bond auctions.
Managed Futures also had another positive month, giving the strategy its third positive month for the year, as many trend followers’ models gained traction. Equity Market Neutral managers were also up in September. The value factor contributed positively to performance while factors such as momentum detracted from performance.
Chris Shumway runs a $5 billion hedge fund and is best known for intensive fundamental research to create long/short equity portfolios. He is a ‘Tiger Cub’ because he formerly served as Julian Robertson’s right-hand man while at Tiger Management. Taken from our post on ‘Tiger Cub’ biographies:
Chris Shumway is the Founding Partner of Shumway Capital Partners (“SCP”), an investment management firm founded in 2001. SCP, which manages a multibillion dollar group of private investment funds, uses a private equity-like research model for public market investment on a global basis. Prior to forming SCP, Mr. Shumway was a Senior Managing Director at Tiger Management (1992-1999), an Analyst at Brentwood Associates (1990-1991), and an Analyst at Morgan Stanley & Co. (1988-1990). He received an M.B.A. from Harvard Business School (1993) and a B.S. from the McIntire School of Commerce at the University of Virginia (1988).
Reuters – Read Complete Article – Majedie hedge fund manager Matthew Smith has rotated his portfolio out of cyclical stocks and into value stocks with high yields, in another sign hedge funds think equities are susceptible to a pullback.
Smith, who runs the 50 million pound Tortoise long-short equity fund at Majedie Asset Management, has recently sold banks as well as shares in other companies sensitive to economic growth because he believes their valuations are now stretched.
West Palm Beach (HedgeCo.net) – Long/Short Equity hedge funds returned positive performance in August mainly as a result of the continued uptrend in equity markets, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
“Following a strong rally in July, equity markets continued their upward trend in August, reaching highs not achieved since October 2008.” Dr. Drachman noted, “Long/Short Equity hedge fund managers continued to increase their overall net exposures in order to benefit from market gains. Despite brief corrections due to a mid-month weak consumer sentiment report, managers were able to finish up for the month. The Credit Suisse Long/Short Equity Replication Index (“AIR Long/Short Equity Index”) was up 1.55% (net) for the month, while the Credit Suisse Global Macro Replication Index (“AIR Global Macro Index”) finished up 0.08% (net) over the same period.”
AIR Indices seek to replicate the performance of major hedge fund strategies and enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index. The AIR platform also offers inverse indices that seek to approximate short exposure to the aggregate returns of the universe of Long/Short Equity and Global Macro hedge fund managers.
Performances for the AIR Global Macro and Long/Short Equity Indices are calculated daily and shown net of a 1.15% per annum calculation fee.
Alex Akesson
Editor for HedgeCo.net alex@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Bloomberg – OGI Capital Partners Ltd., a Japanese hedge fund with 3.5 billion yen ($40 million) in assets, plans to almost double in size by starting a global macro hedge fund to be run by Allan Bedwick, a former proprietary trader at Lehman Brothers Holdings Inc.
The OGI Global Macro Fund will start this month with seed money from an overseas institutional investor of 3 billion yen and wager on stocks, bonds and currencies globally with a focus in Asia, said Naoya Takahashi, OGI’s head of fund management.
The global macro fund will be the third fund offered by OGI this year, after the firm started a Japan-focused long-short equity fund and a Japanese long-only stock fund in July. OGI joins Sparx Group Co., Asia’s biggest hedge fund, in offering a global macro fund as demand for the strategy rises in a market short of similar offerings after global hedge funds had their worst year on record in 2008.
Financial Standard – Long/short hedge fund managers increased their net exposure to equity markets, allowing them to post positive returns last month, according to a replication index.
The Credit Suisse Long/Short Equity Replication Index, which replicates the performance of major hedge fund strategies, was up almost 2 per cent (net) in July.
At the same time, the Credit Suisse Global Macro Replication Index crept into positive territory by 3 basis points.
Reuters – The UK Railways Pension Schemes, one of the UK’s largest plans, has invested 65 million pounds in London-based asset manager Goodhart Partners’ global long-short equity fund of hedge funds.
Railpen Investments, the fund manager of the industry-wide scheme with assets of over 15 billion pounds, has some 8 percent of its assets in hedge fund strategies.
”Goodhart’s Long-Short fund offers large institutions exposure to small and specialist hedge fund managers, with the degree of governance and due diligence these allocations require,” said Paul Jeffries, an investment analyst at Railpen.
HedgeCo.net (West Palm Beach) – Long/Short Equity hedge funds continued to increase overall net exposures in July, enabling managers to capitalize on market upswings early in the month, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
Dr. Drachman noted, ”As risk appetite returns to the market, many Long/Short Equity hedge fund managers have increased their overall net exposures, which enabled them to generate positive returns as equity markets bounced back early in July. Despite mid-month volatility, managers were able to preserve gains to finish up for the month. The Credit Suisse Long/Short Equity Replication Index was up 1.96% (net) for the month, while the Credit Suisse Global Macro Replication Index finished up 0.03% over the same period.”
AIR Indices seek to replicate the performance of major hedge fund strategies and enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index. The AIR platform also offers inverse indices that seek to approximate short exposure to the aggregate returns of the universe of Long/Short Equity and Global Macro hedge fund managers.
Performances for the AIR Global Macro and Long/Short Equity Indices are calculated daily and shown net of a 1.15% per annum calculation fee.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
HedgeCo.net (West Palm Beach) – BTIG LLC. announced that it has expanded its Prime Brokerage group to offer fixed income services, including trading and portfolio financing. The expansion into fixed income is in conjunction with the launch of BTIG’s Global Fixed Income Group in February of this year, which focuses on sales and trading of credit products across the full credit spectrum from investment grade to distressed debt.
BTIG Prime Brokerage previously covered equity and equity options and made the move to fixed income to better meet the needs of its hedge fund clients in today’s market.
“As our clients became more interested in fixed income products, we saw a huge need and opportunity to expand our services,” Justin Press, Managing Director and Co-Head of Prime Brokerage, said. “We have created a one-of-a-kind fixed income offering that will bridge the gap for hedge fund managers who have traditionally been operating in equities only.”
BTIG’s Prime Brokerage clients also benefit from the firm’s full range of expertise and services, including Outsource Trading, Market Intelligence, International Trading, and access to the Equity Derivatives team, Capital Introduction team and Commission Management services. The Prime Brokerage group was launched in January 2004 and caters to start-up and existing long/short equity hedge funds. Prime Brokerage and middle office operations have a combined 40+ professionals.
The Global Fixed Income Group has added 50+ professionals since its launch earlier this year.
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CNBC – The Commodities Futures Trading Commission will seriously consider imposing strict position limits on traders placing bets on energy contracts, and that’s just fine with hedge fund manager Mike Masters.
The head of Masters Capital Management blew the whistle on oil speculators last year when he testified before Congress regarding the rapid run-up in oil prices as it reached its record high of $145 a barrel. He is scheduled to testify at the CFTC hearings Aug. 5.
Masters, whose long/short equity fund manages approximately $1.06 billion according to data provider IPREO, believes stringent limits on commodities trading would work.
