New York (HedgeCo.Net) – Halbis Capital Management of HSBC is upping the exposure in their European Alpha hedge fund thanks to cheap stock prices. Bill Maldonado, head of alternative investments, believes it is finally the right time to buy.

"Lots of stocks are trading on increditbly low multiples of 4 to 5 times 2009 earnings," Maldonado said in an interview with Reuters. "They’re pricing in quite a bad recession.”

The $300 million market neutral hedge fund takes both long and short positions. After cutting the gross exposure in recent months, the fund is now buying back into stocks after recent market turmoil made the prices even more attractive.

“We’re rebuilding now because we think the opportunities are definitely there, but we’re being very cautious,” he explained. Even if we see opportunities that are very, very appetizing, they can easily go against you another 10, 20, 30 percent.”

This move comes at a time when hedge funds are trying to recover from one of their worst years ever and when hedge funds across the board are freezing redemptions in hopes of staying afloat. Just last week, Deephaven Capital Management halted withdraws on two of their funds. Other reputable names that have imposed recent restrictions include Drake Capital Management, Citadel and Pardus Capital.

Maldonado explained that while returns on his European Alpha are already admirable at 3 percent, they are likely to improve because there is less hedge fund money competing for profitable trades thanks to reduced leverage and redemptions.

Julie Scuderi
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Reuters – A largely unnoticed ratings downgrade on a slate of Paramount Pictures movies backed by hedge-fund money offers rare proof that such innovative packages have proved to be wobbly investments.

The Melrose I fund, established in 2004, was cut six grades by Moody’s Investor Service from an investment grade "Baa2" to the speculative "B3" rating. The downgrade, announced October 21, could trigger higher interest payments to lenders, and will surely lower the value of debtholders’ bonds.

The fund is backed by a partial ownership stake in 26 Paramount films released during 2004-05. So, lead underwriter Merrill Lynch and other senior debtholders will maintain a minority hold on those assets until they can secure full repayment on their loans or Paramount buys out their equity positions.

Melrose I was crafted during the regime of Paramount chief Sherry Lansing, whose reign atop the Viacom Inc-owned studio ended in 2004 amid a lengthy commercial dry spell. That year, the studio released such iffy features as "The Stepford Wives," "Sky Captain and the World of Tomorrow" and "Alfie," though Paramount has never acknowledged publicly which of its pictures were funded by Melrose I.

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