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 China – Abu Dhabi Investment House, a Gulf Arab bank, is planning a $1.5 billion (824 million pounds) private equity fund to invest in real estate and manufacturing in China with a local partner, a senior executive said on Sunday.
An agreement to launch the fund will be signed within two months, said Rashad Janahi, ADIH’s managing director.
The Gulf firm is eyeing China at a time when a raft of tightening measures have chilled its real estate market, with sluggish transactions and falling prices in major cities. For a related story, double-click on.
Reuters – Blackstone Group LP has cut the size of its planned Asia-focused hedge fund because the global financial crisis has led to redemptions, the Wall Street Journal said citing people familiar with the situation.
Blackstone, which manages private equity, real estate and hedge funds, would cut the fund size to about $200 million from a range of $500 million to $1 billion, the paper said.
New York-based Blackstone, about one-10th owned by China’s sovereign wealth fund, has scaled back its plans for the fund at a time when hedge funds around the world are facing redemption pressure, with some forced to shut down, the Journal said.
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.
Interactive Investor - Man Group aims to win more business from big Asian investors such as pension funds and insurers even as global financial turmoil spurs some existing clients to redeem holdings and seek safety in cash.
The world’s largest listed hedge fund group recently hired an institutional salesperson in South Korea because of the potential it saw there and was studying the long-term opportunity in China, said Tim Rainsford, managing director, Asia Pacific for Man Investments.
"It’s certainly a challenging time. At the same time, the brakes are not on in the business. We will launch products when they’re appropriate," he told the Reuters Finance Summit on Monday.
The Street – Forced selling by hedge funds is behind the late-day market volatility these days, Jim Cramer told the viewers of his "Mad Money" TV show Thursday.
He fears we may never see a bottom until the selling comes to an end.
Cramer said many hedge fund strategies have just been dead wrong, such as the betting on a Chinese recovery after the Olympics that failed to materialize. As evidence, he used the Baltic Dry Shipping Index and the Shanghai Composite Index to graphically show how much China’s economy has slowed.
The result of hedge funds gone bad is forced selling, he said. At around 2:45 p.m. each day, hedge funds begin preparing for the next day’s round of redemptions by liquidating their ill-conceived positions.
KEZI – Most Asian stock markets recovered Monday after last week’s historic sell-off as governments around the world intensified efforts to boost the ailing financial system.
Hong Kong’s Hang Seng Index, which tumbled more than 7 percent Friday, opened over 2 percent but shed its gains to trade about 360.50 points higher, or 2.44 percent, at 15,157.37.
In Australia, the S&P/ASX200 index was up 4 percent in response to a government plan to guarantee bank and other lender deposits for three years. The benchmark plunged over 8 percent on Friday, its biggest single-day fall ever.
South Korea’s benchmark gained more than 2 percent and Singapore’s key stock measure was up about 1 percent. But China’s key Shanghai index traded 2 percent lower, while Taiwan’s benchmark lost more than 3 percent.
The Australian – CMC Markets senior dealer Matthew Lewis said base metals were hammered in New York and London overnight on Wednesday as hedge funds liquidated their holdings.
"There is growing concern about the slowing of global growth and the impact that will have on base metals demand," he said.
"Junior iron ore explorers have been really hurt, which has been directly linked to concerns that China’s steel mills may reduce intake by up to 20 per cent.
"Plus, the short-term strength in the US dollar will hamper any bounce in metals."
Business Day – Private equity firm Actis says equity funds have embraced investing in Africa because many governments have instituted market reforms which are creating opportunities for brave investors willing to take a long-term view on Africa.
“There is increased private equity interest in the continent, illustrated by numerous new (private equity) funds being raised for Africa," Peter Schmid, head of Actis Africa, said yesterday.
His firm recently led a consortium to acquire Alstom South Africa, a big electrical engineering, manufacturing, distribution and contracting business, for R5,16 bn.
Analysts say the lure of emerging markets in countries such as Russia, China and India, and now Africa, has grown stronger after the bruising credit crunch in the US and Europe.
Seeking Alpha – If you happen to be in need of Vaseline and find that your local pharmacy is sold out, never fear. Chances are, the entire stock has been purchased by your friendly neighbourhood hedge fund manager. If you ask nicely, perhaps he’ll let you borrow a tub or two.
One of the signal trends of the past month or so has been the sharp decline in the oil price. Part of this is likely attributable to the China/global growth slowdown theme that Macro Man has highlighted recently, and part of it is likely a result of some sort of dollar strength feedback loop, which itself is at least partially attributable to a softening of the ECB’s rhetoric.
On the face of it, it would appear that the hedge fund world has dodged a bullet in oil. After all, the CFTC data has shown net speculative positioning to be fairly light over the past month or two, and even slightly negative for the last few weeks.
CNBC – As losses mount, hedge funds no longer have the ability to drive speculation in the markets, Hugh Hendry, chief investment officer and partner at Eclectica hedge fund told "Squawk Box Europe" on Tuesday.
"There is no role for speculation or speculators today. This is kaput," Hendry said. "If we were Second World War generals, we’ve exposed our flanks. We’ve been wiped out. This is about fundamentals … this is about losing money."
As the crisis unfolds, the policymakers’ focus should shift from the threat of inflation to that of the world economic downturn, which could be more severe than economists anticipate, he said.
China, which many believe will balance out slowdowns elsewhere, will struggle if difficulties in the U.S. continue, while the current spike in producer prices is just a hangover from rising oil prices earlier this year, Hendry said.
"I fear that the central bankers of the world are fighting yesterday’s battle," he said.
Reuters – Shanghai has decided to let foreign investors, including private equity and venture capital funds, register legally as local equities investment firms as China’s financial hub moves to lure more overseas investment.
Foreign investors with a focus on Chinese equities can set up a Shanghai-registered entity with initial capital of 100 million yuan ($14.56 million) or more with the legal status of a local investment company and receive special tax treatment, according to a city government document dated Aug. 11 and obtained by Reuters on Friday.
Qualified foreign investors would include private equity funds, venture capital funds, buyout funds and hedge funds, it said.
Reuters Singapore – U.S.-based Russell Investments, which manages over $211 billion (110 billion pounds) in assets, wants to boost its exposure to Asian real estate as it sees growing markets in China and India withstanding a global downturn.
The company, which raises money from institutions such as pension funds and invests it with other fund managers, said it expects to more than double its investments in Asia properties over the next three years, from about $300 million currently.
"Our clients tell us they want to be in Asia property, and we go where our clients want to go," said Martin Lamb, newly appointed Asia Pacific head of property for Russell, the funds and indices unit of Northwestern Mutual Life Insurance.
