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.
The major broker-dealers have been decimated, with only Morgan Stanley and Goldman Sachs remaining independent and solvent.
There are daily fears of hedge funds facing the equivalent of a bank run, as investors scramble to withdraw their cash. Those private-equity firms, such as Blackstone and Fortress, which had entered the public markets to take their positions alongside the investment banks are now trading at massive discounts to their IPO values.
New York (HedgeCo.Net) – At a time when many hedge funds are experiencing their worst year to date, private equity firm The Carlyle Group is launching a new fund with around $14 billion in capital.
According to a report by Reuters, the Washington D.C. – based company launched the U.S. buyout fund in the spring of 2007, and has a target goal of $15 billion.
The current economic conditions make it extremely difficult to raise capital, as fear and unfavorable market conditions prompt investors to rush for withdraws from many large hedge funds. According to the Chicago-based Hedge Fund Research, hedge funds are down about 15.5 percent on the year.
The Carlyle Group is one of the country’s largest private equity firms, with almost $90 billion under management. They recently decided to shut down its Asia leveraged finance group “in light of the current global turmoil and the serious dislocation of the credit capital markets.”
The new fund will be added to Carlyle’s already vast portfolio of investment vehicles. According to the company website, Carlyle manages 55 different funds specializing in buyout, growth capital, real estate and leveraged finance.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters HK – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital TPG.UL, wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
Reuters – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital , wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
"Since a lot of hedge funds have a side pocket with a two- to three- to four-year lock-up period, that means that liquid assets are under great pressure," Bonderman said. "And guys like us who have the capital should be buying them."
Asia would emerge from the global downturn earlier than elsewhere and was well-positioned for recovery, said Bonderman, TPG’s founding partner.
NEW YORK – Deals involving asset managers rose in the July to September 2008 period, with the global credit crunch as the backdrop for a jump in divestitures to almost 40% of total sales, up from 23% a year earlier, according to Jefferies Putnam Lovell, the investment banking group of Jefferies & Company, Inc. focused on the asset management and financial technology industries.
Sixty-nine asset manager transactions worldwide were announced in the third quarter of 2008, 33% above the total of 52 in the July to September 2007 period, according to preliminary data from New York-based Jefferies Putnam Lovell. Total assets under management changing hands amounted to $1.0 trillion, more than three times the $300 billion total in the third quarter of 2007. Total disclosed deal value in the third quarter of 2008 increased to $6.4 billion from $6.1 billion a year earlier.
‘’As we anticipated, tremors transforming the global financial landscape have served as a catalyst to asset management deal flow,’’ said Aaron Dorr, a New York-based Managing Director at Jefferies Putnam Lovell. ‘’In the short-term, we expect more banks and other cash strapped financial institutions to retreat from owning money managers, private equity firms to step up their growing involvement in the sector, and consolidation among hedge fund companies and other alternative asset managers as firms grapple with investor redemptions and lack of liquidity. Consistent with the broader financial services industry, the asset management sector is quickly reshaping.’’ Highlights from asset management M&A activity in the third quarter of 2008 include:
• The announced sale of Lehman Brothers fund units, including Neuberger Berman, to Bain Capital and Hellman & Friedman.
• Allianz’s takeover of Cominvest as part of a swap of its Dresdner Bank unit to Commerzbank.
• Fortis’ purchase of the minority stake it didn’t already own in Artemis Asset Management.
• Lazard’s acquisition of the remaining interest in Lazard Asset Management held by the unit’s executives.
• Nippon Life’s purchase of 5% of Russell Investments.
About Jefferies Putnam Lovell
Jefferies Putnam Lovell, the division of Jefferies & Company, Inc. focused on the financial institutions industry, offers a wide range of corporate advisory services, including mergers and acquisitions advice and capital raising. Jefferies Putnam Lovell’s global client base is comprised of diversified financial services firms, institutional and mutual fund managers, alternative investment managers, banks, broker-dealers, insurers, and financial technology firms. Putnam Lovell was founded in 1987 and today operates from offices in New York, San Francisco, and London. Since July 2007, Putnam Lovell has been a division of Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF). For more information please visit www.jefferies.com/jpl
About Jefferies
Jefferies, a global investment bank and institutional securities firm, has served growing and mid-sized companies and their investors for 45 years. Headquartered in New York, with more than 25 offices around the world, Jefferies provides clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management. The firm is a leading provider of trade execution in equity, high yield, convertible and international securities for institutional investors and high net worth individuals. Jefferies & Company, Inc. is the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF; www.jefferies.com)
Reuters – Nigeria’s buoyant real economy and strong domestic liquidity will limit the damage caused by hedge funds and portfolio investors pulling money out of the country as the global financial crisis bites, analysts say.
The sheer size of Nigeria’s economy means it has been the main beneficiary outside South Africa of a rush to invest in Africa in recent years. Hedge funds and private equity firms from Asia, the United States and Europe have all put money into its equities and bond markets.
That means that, on paper, sub-Saharan Africa’s second biggest economy is one of the most vulnerable on the continent as institutional investors around the world struggle with tightening credit lines and become more risk-averse.
"We have certainly moved away from the situation where everyone was scrambling to get something in Nigeria, where everyone needed exposure to Nigeria," said Razia Khan, head of Africa research at Standard Chartered in London.
Forbes – In an op-ed in the Financial Times on Monday , I described the unraveling and demise of the shadow banking system that started with non-bank mortgage lenders, structured investment vehicles (SIVs) and conduits, major independent monoline broker dealers and money market funds. I then argued that the next leg of this unraveling would be hedge funds and private equity firms and their reckless leveraged buyouts (LBOs).
Let me now discuss in more detail this unraveling of parts of the hedge fund industry.
First, note that too much of the shadow banking system was about "Schmalpha" rather than "Alpha" (i.e. the returns that fund managers and asset managers–with their ridiculously high management fees of 2% or more–were getting by parting investors from a good chunk of their assets, rather than by superior absolute returns). In fact, the hedge-fund math of "2/20" was, most of the time, 2% for the fund managers and not 20% (sometimes single digit returns and, this year, actual negative ones) for investors. This scam is now unraveling.
Reuters Tokyo – Global buyout firm Advent International said it has raised 60 billion yen (317 million pounds) for its first private equity fund in Japan.
The fund, which opened its office in Tokyo in 2001, will target companies with enterprise values from 5 to 50 billion yen, but could be involved in larger deals through co-investment with other Advent funds, it said in a release.
Advent, with nine professional staff in Tokyo, said it will target four main sectors — health and life sciences, industrial, retail and consumer, and support services.
Private equity firms have spent $8.7 billion in buying Japanese companies since the beginning of this year, down 19 percent from the same period last year, Thomson Reuters data shows.
Daily Telegraph – Ruth Keattch, the star fund manager nicknamed "Rock Hard Ruth", is to make a come-back with a move to Artemis, the activist fund manager with £14bn under management.
Mrs Keattch, who earned a fearsome reputation at Deutsche Asset Management, where she fought against private equity firms trying to snap up publicly listed companies on the cheap, has been hired by Artemis to again spot the value in companies that have been hit hard by the credit crunch.
She has been appointed to co-manage Artemis’s flagship fund, the £800m Special Situations fund with Derek Stuart.
Mr Stuart, a founder member of Artemis, said: "We want to focus on the stocks that have been hardest hit in the recent sell-off. Ruth has a formidable reputation in the area and we’re very excited that she’s joining."
Reuters – Nigeria’s buoyant real economy and strong domestic liquidity will limit the damage caused by hedge funds and portfolio investors pulling money out of the country as the global financial crisis bites, analysts say.
The sheer size of Nigeria’s economy means it has been the main beneficiary outside South Africa of a rush to invest in Africa in recent years. Hedge funds and private equity firms from Asia, the United States and Europe have all put money into its equities and bond markets.
That means that, on paper, sub-Saharan Africa’s second biggest economy is one of the most vulnerable on the continent as institutional investors around the world struggle with tightening credit lines and become more risk-averse.
"We have certainly moved away from the situation where everyone was scrambling to get something in Nigeria, where everyone needed exposure to Nigeria," said Razia Khan, head of Africa research at Standard Chartered in London.
New York (HedgeCo.Net) – Harbinger Capital has taken an 8 percent stake in Cablevision Systems Corp., according to a regulatory filing done yesterday with the Securities and Exchange Commission.
The activist hedge fund now owns nearly 19 million shares of the cable operator. The filing communicated Harbinger’s views that the stock is undervalued and also touched on the possibility of a strategic restructuring, saying they may “seek to influence or change the control” of the company.
It is not uncommon for hedge funds and other private equity firms to try to replace or enhance a company’s board of directors in order to give them more control or decision making privileges. Hedge funds generally seek high returns in a short time frame, and are more than prepared to try and replace management should the current slate fail to share their views.
Harbinger is no stranger to this practice. Already, the hedge fund has sought seats on two of the boards of companies in which they invest: The New York Times and Media General. Harbinger was awarded three seats on Media General’s board and two seats on the board of the Times after a much publicized near proxy battle.
Shares of Cablevision closed at $32.46 on Thursday, down 10 cents.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Reuters UK – Vulture funds are finally saying debt from Spanish retailer Cortefiel is now cheap enough to buy, after waiting for months to see prices of the struggling company’s debt fall further.
The funds, which have raised billions of dollars to invest on the hopes that a worsening global economy will depress debt prices, are closely monitoring the Spanish group whose debt trades at about 42 percent of its face value.
"At these levels, you have to start thinking," said a hedge fund manager, under the condition of anonymity.
Cortefiel, owned by private equity firms Permira, CVC and PAI Partners is struggling as the Spanish economy slows in the wake of the credit crunch after a real estate bubble in the country burst.
