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 – The G30, a group of high-profile economists and policy-makers, on Thursday called for changes in international financial regulation to help avoid future meltdowns, but its recommendations were vague and non-binding.
In findings that made no reference to the issue of executive compensation, the group of bankers and policy-makers indicated that big firms that pose a risk to the entire system should be subject to particularly close scrutiny.
The global economy has been reeling from a financial crisis that began with a popping U.S. housing bubble and has since infected the entire financial system, shaking confidence and breeding mistrust.
Bloomberg – Hedge-fund managers including George Soros and Philip Falcone, in an unprecedented appearance before Congress, defended their practices and profits while splitting over whether the U.S. should impose stricter regulations.
"This is not a case where management takes huge bonuses or stock options while the company is failing,” said Falcone, one of five billionaire investors who testified today before the House Committee on Oversight and Government Reform in Washington.
Falcone, senior managing director of New York-based Harbinger Capital Partners, urged Congress to require more disclosure by hedge funds, which oversee $1.7 trillion of investments. Soros, founder of Soros Fund Management LLC, cautioned against “ill-considered” rules because this industry is reeling from market losses and client defections.
Daily Telegraph – Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia.
The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system.
Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.
Investors pulled at least $43bn (£25bn) from US hedge funds in September, according to TrimTabs Investment Research. This is nearly five per cent of the global sector’s estimated $2 trillion in total assets.
New York (HedgeCo.Net) – Activist hedge fund Harbinger Capital might be looking to make some strategic changes to another management team. They are expected to hold talks with Leap Wireless International, in which they hold a substantial 14.8 percent stake or just over 10 million shares. The hedge fund is looking to discuss both short-term and long-term management solutions while figuring out the best way to maximize shareholder returns.
“We respect and welcome the views and opinions of all Leap stockholders, said Leap spokesman Greg Lund while avoiding any specifics. “We look forward to continuing the open and productive dialogue we’ve had and expect to have with all of our stockholders.”
Harbinger is no stranger for pushing for internal change within companies in which they invest. By acquiring board seats, the hedge fund gets a say in major decisions while giving them more control over the company. Harbinger won three seats on the board of Media General and two seats on the board of the New York Times after a nasty near proxy battle.
Shares of Leap closed at $27.90 yesterday and have fallen over 60 percent in the course of a year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Telegraph.co.uk – EU data shows that Philip Falcone, the US hedge fund baron who led the assault on HBOS, has sold short €138m (£108m) of Banco Popular’s shares, or 1.65pc of the total float, through his fund Harbinger Capital.
He has short bets of €208m on Santander and €185m on BBVA. Blue Ridge Capital has targeted Bankinter and Popular. Calypso Capital Management, High Side Capital, Landsdowne, and Belgium’s Fortelus have all joined the hunt.
The Madrid positions are a way for funds to continue shorting banks in Britain, where Santander is now a key player after taking over Abbey National, Alliance & Leicester and Bradford & Bingley.
Britain’s Financial Services Authority has suspended short selling of bank stocks, but Spain has not done so.
New York Times – For some hedge funds, Lehman Brothers has become the Roach Motel of Wall Street: They checked in, but they can’t check out.
Two weeks after Lehman spiraled into bankruptcy, hedge funds that did business with the Wall Street bank are still fighting to get their money out of the firm. For some, it has become a life-or-death struggle.
Big funds like GLG, Harbinger, Amber Capital and Elliott Associates have varying degrees of exposure to Lehman Brothers.
But even a $6.2 million fund run by students at the Darden School of Business at the University of Virginia has been caught up in the bankruptcy. The fund, like its larger counterparts, used Lehman as a prime broker, and no longer has access to its money.
Bloomberg – Lehman Brothers Holdings Inc., the U.S. investment bank holding company that filed the largest bankruptcy in history, faces objections to a proposed $1.75 billion sale of its broker-dealer unit to Barclays Plc.
Hedge fund Harbinger Capital Partners asked a U.S. bankruptcy judge to block the sale unless Lehman immediately discloses cash transfers it made just prior to its bankruptcy, including an alleged $5 billion transfer of cash from Lehman’s London office. Another two hedge funds, Bay Harbour Management LC and Amber Capital, filed papers alleging $8 billion was moved.
The objections continued to roll in as a hearing to approve the sale, scheduled for 4 p.m., was delayed as hundreds of participants and onlookers overcrowded a courtroom in U.S. Bankruptcy Court in Manhattan.
Lehman “must provide adequate information, and certify its accuracy, as to what cash has moved in and out of Lehman Brothers Inc. and debtor Lehman Brothers Holdings Inc.,” Harbinger said in court documents filed today with U.S. Bankruptcy Judge James Peck.
JP Morgan Chase & Co and Citadel Investment Group resumed trading with each other on Friday, one day after the bank had cut off the hedge fund over a hiring dispute, a person familiar with the matter said.
"The dispute has been resolved," a person familiar with the hedge fund said on Friday.
Citadel’s officials could not be reached for comment at the office.
Citadel, one of the world’s largest hedge fund firms with roughly $20 billion in assets, clashed with JP Morgan because it had hired a string of executives from America’s second largest bank this year, people familiar with the matter said.
They said JP Morgan told employees to stop trading stocks, bonds and currencies with Citadel on Thursday morning, essentially prohibiting anyone from buying or selling with the hedge fund.
By Friday, the differences had been resolved and business was back to normal, the person said.
AP – Chinese steelmaker Sinosteel Corp. has taken control of 98 percent of Midwest Corp. and will proceed with compulsory acquisition of the Australian miner, Midwest said.
In a brief statement Wednesday, Midwest said Sinosteel would recommend de-listing the company from the Australian Securities Exchange. The conclusion of the deal marks the first successful hostile takeover of an Australian firm by a Chinese entity.
The exchange released a notice from Sinosteel to Midwest that said the Chinese company had gained a 98.52 interest on Monday, after U.S. hedge fund Harbinger Capital agreed to the Chinese firm’s offer for its 15.2 percent stake.
Also Monday, major shareholders Murchison Metals Ltd. and Armadale Offshore Inc. accepted Sinosteel’s takeover bid, giving up their 9 percent and 12 percent stakes in Midwest.
Sinosteel launched a $1.36 billion bid for Midwest in December last year, and gained a controlling stake in July.
Reuters – Hedge fund Harbinger Capital Partners said it is not pulling out of high-profile investments like The New York Times Co. and Media General Inc., seeking to quell market rumors after their share prices dropped sharply on Monday.
Philip Falcone, who runs the hedge fund, told Reuters that investors would be mistaken if they thought selling by Harbinger was behind the double-digit percentage declines in stocks it holds, including the Times, Media General Inc., Cablevision Systems Corp, Cleveland-Cliffs Inc. and Calpine Corp.
"People are speculating as to what we’re doing and why we’re doing it, but the reality is different from what they think," Falcone, Harbinger’s senior managing director, said in a phone interview.
He said that while their main fund’s composition has changed since its most recent 13 F regulatory filing with the U.S. Securities and Exchange Commission on August 13, Harbinger remained bullish on its investments.
Business Week – A hedge fund known for shaking up underperforming companies has increased its stake in Cablevision Systems Corp. to 9.1 percent, according to a regulatory filing Thursday.
Harbinger Capital Partners now owns more than 21 million shares of the diversified cable operator, up from nearly 19 million shares, or 8.1 percent of Class A shares, its stake as of a regulatory filing made last month. In an earlier August filing, Harbinger disclosed that it held a 4.9 percent stake. The Dolan family owns the Class B shares.
"As we stated previously, we welcome all investors and their focus on enhancing value for all shareholders," said Charlie Schueler, spokesman for Bethpage, N.Y.-based Cablevision.
New York (HedgeCo.Net) – As if trying to secure $6.1 billion in financing to exit bankruptcy isn’t enough of a headache, now Delphi has to deal with counterclaims by hedge fund Appaloosa Management who is demanding that the U.S. auto parts supplier pay them $82.5 million in fees plus expenses.
Appaloosa claims they are entitled to that money because Delphi violated the terms of their agreement. The original agreement entailed Appaloosa heading the rescue of Delphi, offering them $2.55 billion if they secured the rest of the capital needed to exit Chapter 11. On the last day of the deadline, Appaloosa walked away from their commitment, leaving Delphi high and dry with little alternatives.
Delphi then proceeded to sue Appaloosa, hoping to make them deliver on their promise of the much needed capital. The hedge fund however, expressed concern on the company’s overreliance to once parent company GM, who guaranteed Delphi a $2 billion piece of their financial puzzle.
Delphi spokesperson Lindsay Williams said, “"We continue to believe that the plan investors failed to honor their commitment at the April 4 closing, causing unnecessary harm in delaying our emergence from Chapter 11. We’ll continue to pursue legal remedies in court.”
In its counterclaim, Appaloosa sates that the agreement with General Motors “violates the express terms."
Appaloosa is just one of the would-be investors who is seeking a piece of the $82.5 million. Others include Harbinger Capital Partners, Merrill Lynch, UBS and Pardus Capital Management, who all commited to Delphi’s rescue.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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