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.
West Palm Beach (HedgeCo.net) – The SEC has frozen the assets of a Connecticut-based hedge fund manager, alleging that he forged documents, promised false returns, and misrepresented assets managed by the funds to illicitly raise more than $30 million from investors.
According to the SEC’s complaint, Francesco Rusciano solicited investments for two hedge funds he controls, Ponta Negra Fund I, LLC and Ponta Negra Offshore Fund I, LTD, which is the principal of Ponta Negra Group, LLC, located at his residence in Stamford, Conn.
The hedge fund manager also sent out an e-mail to investors saying that his Ponta Negra hedge funds had $59 million in assets under management as of February 2009. According to the SEC’s complaint, the hedge funds had less than $10 million.
The SEC says that Rusciano forged brokerage account statements to make it appear that another hedge fund account had more than $43 million in assets, when it had less than $3 million.
"Rusciano went to great lengths to deceive investors, and the SEC is committed to ensuring that money managers who provide inaccurate information to investors and fail to uphold their fiduciary duties are held responsible for their misconduct," said Rose Romero, Director of the SEC’s Fort Worth Regional Office.
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Boston Globe – The Massachusetts state pension fund fired two money managers yesterday for poor performance, including one that had lost $12 million investing with accused swindler Bernard L. Madoff.
Austin Capital Management, which had managed $170 million in state retirement funds, was fired after it lost $40 million, including the money invested with Madoff and $28 million from market declines. The state withdrew its remaining $130 million from Austin, which runs a "fund of funds," a middleman that takes investors’ capital and spreads it among other money managers, including hedge funds.
Economic Times - Gold, the traditional safe haven in times of economic turmoil, proved to be more a commodity that everyone loved to hate last year even amid the turbulence that engulfed world markets.
But as 2009 gets under way the yellow metal has found huge traction with money managers. In the last eight sessions, gold has rallied as much as $100 an ounce to hit a near four-month high of $915.30 on Monday — in spite of a rising dollar.
Grand Forks Herald – From worrying about banks and a financial meltdown, investors are now wondering if they can trust the person investing their money.
In this year of shocks, investors were dealt another a little over a week ago. Someone considered one of the nation’s elite money managers, Bernard Madoff, reportedly confessed that he misled investors for years about the money they were making.
The $50 billion firm collapsed, allegedly wiping out funds of supposedly savvy investors – multimillionaires, colleges, foundations, brokerage firms and hedge funds. The clients, many of whom had done social gymnastics to get into his fund, may have nothing.
The situation serves as a reminder that investors need: Don’t take on a broker, adviser, money manager or hedge fund without thorough checking.
CNNMoney.com - Railroad CSX Corp. said Wednesday it has settled a case of alleged securities law violations with two activist shareholder hedge funds.
If the settlement is approved by a federal court, CSX will receive $10 million from TCI, which manages The Children’s Master Investment Fund, and $1 million from 3G Capital Management.
The case, brought by a CSX shareholder, accused the hedge funds of collecting "short-swing" profits, or using insider information to nab a short-term gain. But under the settlement, the hedge funds deny any wrongdoing.
New York (HedgeCo.Net) – Just days after what could prove to be the largest Wall Street sham in history, investors that were burned by Bernard Madoff are coming forward in droves.
Spanish bank Santander, along with French bank BNP Paribas both detailed their exposure to the alleged ponzi scheme on Sunday. Santander estimated it had just over $3 billion tied up in the firm, while BNP Paribas has about $470 million at stake.
"While BNP Paribas has no investment of its own in the hedge funds managed by Bernard Madoff Investment Services, it does have risk exposure to these funds through its trading business and collateralized lending to funds of hedge funds," BNP said in a statement.
Santander’s exposure came from a sub fund of their Optimal Fund, called Optimal Strategic US Equity, which used Madoff Securities for their investments.
A handful of hedge funds have also come forward in the wake of the scandal. Fairfield Greenwich Group released a statement on Friday saying they were still trying to assess their losses, but estimated they had about $7.5 billion, or half of its total assets, tied up in Madoff’s firm as of November. Founding Partner Jeffrey Tucker said they were “shocked and appalled by this news.”
Tremont Capital Management also had a hefty amount invested with Madoff through their fund of funds. “Needless to say, our level of anger and dismay over the apparent betrayal by Mr. Madoff and his organization of his 14-year relationship with Tremont is immeasurable,” Tremont stated in a letter to investors on Friday.
Also coming forward on Friday was Maxam Capital Management, who reported losing $280 million through Madoff-linked investments.
Bernard Madoff, owner of Bernard L. Madoff Investment Securities and part founder the Nasdaq stock market, was arrested and charged on Thursday with orchestrating a $50 billion scam that targeted some of the most reputable hedge funds and affluent individuals in the business. The 70-year-old allegedly ran a large ponzi-scheme where new money coming in is used to pay off existing investors, creating the false notion of peak performance and admirable returns.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Washington Post – New evidence has emerged in an insider-trading investigation that the Securities and Exchange Commission closed two years ago without filing charges, raising questions on Capitol Hill about the government’s oversight of what was once one of the nation’s most prominent hedge funds.
According to documents, the hedge fund — Pequot Capital Management — secretly began to pay $2.1 million to a key witness in the case last spring, just three months after several senators called on the SEC to reopen its investigation.
Top Republicans on the Senate Finance and Judiciary committees asked Pequot’s chairman this week to provide records related to the payments. The FBI is also looking into the matter, according to people familiar with the case.
West Palm Beach (HedgeCo.net) Canadian hedge fund manager, Rival Capital Management launched the Rival North American Growth Fund and since 2007 it has gained more than 80 accredited investors and $15 million in assets under management (AUM).
Headquartered in Winnipeg, Manitoba, the hedge fund is focused on small/midcap Canadian as well as US growth companies, with up to $2 billion Canadian market cap and $10 billion US. Also under development by Rival Capital Management is the Rival North American RRSP Growth Fund, which will buy units in the underlying Rival.
The fund uses a combination of a technical and a fundamental approach, using a proprietary filtering routine that accesses a database of 8,000 US companies and 2,000 CDN companies tracking approximately 2,000 variables, focusing on leading industries and stocks within those industries. The fund also focuses on protecting downside risk through strategies to limit leverage and limit losses.
While the S&P/TSX SmallCap index is down 43.23% year-to-date (to Oct 31, 2008 ) the Rival North American Growth Fund has used its proprietary risk management strategies to keep its loses to a minimum (-9.82 %) during this unprecedented period of volatility and downward pressured markets.
When asked about conditions that may cause the hedge fund to sell, CIO Tony Warzel said, "We normally look for a change or reversal in the underlying attributes that caused us to originally take a position in a stock. For example, if the momentum is slowing we can usually directly attribute the change in sentiment in one or more of our predefined triggers such as sales or earnings. The sell message can be very clear and come very quickly which is why we monitor our portfolio continuously and very closely."
"Because we keep our portfolio small we know each company well and we pay close attention to their chart action," Warzel said when asked about risk management, "We also have proprietary risk mitigation techniques and tools available to us. If warranted, we will use limits on the way up and the way down. In addition, we limit the size of each holding and will use shorts to counteract what we see as an overweight in a particular area. Once we generate alpha, we like to protect it. Therefore if we make a bad trade we work to exit quickly and minimize the downside. We have a 10% rule where if we are down 10% on an initial trade we sell out the position. Yes you can occasionally get whipsawed but that one rule alone has saved us an immense amount of pain this year. In addition, we do not add to losing positions, based on our style averaging down is something we avoid; given the market action this year that too has worked well for us." Warzel concluded.
Warzel has experience as a Small and MidCap Equity Manager, managing AUM in excess of $1.3 billion for a variety of funds.
Alex Akesson
Editor for 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 – Parkcentral Capital Management LP, an investment firm that manages money for the family of former U.S. presidential candidate H. Ross Perot, is liquidating a fixed-income hedge fund because it’s “no longer viable.”
Parkcentral Global Hub Ltd.’s assets fell as much as 40 percent to $1.5 billion this year through October. The fund is selling remaining holdings to pay creditors, Eddie Reeves, a spokesman for the Plano, Texas-based firm, said in an e-mailed statement today. Perot, 78, who ran unsuccessfully for U.S. president in 1992, and members of his family are the fund’s biggest investors.
Minneapolis Star Tribune – The local hedge fund industry has canceled its Winter Ball, scheduled for the Minneapolis Club in December, "due to volatility within the hedge fund industry."
The big shooters at Deephaven Capital Management, Whitebox Advisors, Pali Capital, plus other firms and their lawyers and accountants are a little stressed lately. And not all their clients are happy about their performance.
"In its place, we plan to host a ‘happy hour,’ as much of the feedback included the desire to get together, albeit on a smaller scale," according to a note last week from the Twin Cities Hedge Funds Care Committee. "We are in the process of confirming a venue and anticipate the location to remain downtown."
New York (HedgeCo.Net) – SEC officials did not botch an investigation into alleged insider trading by hedge fund Pequot Capital Management, at least according to the SEC.
Brenda P. Murray, an administrative law judge for the Securities and Exchange Commission, concluded that no disciplinary action should be taken against two of the officials originally accused.
The 15-page report compiled by Murray goes against the original findings of both the SEC’s Inspector General H. David Kotz and Senate investigators who were put on the case.
Last month, Kotz compiled his own report and recommended the agency take disciplinary action against Director of Enforcement Linda Thomsen, Assistant Director of Enforcement Mark Kreitman and Robert Hanson, Supervisor of SEC lawyer Gary Aguirre.
Kotz said he found evidence that “raised serious questions about the impartiality and fairness” of the SEC investigation. He went on to say how the SEC treated the hedge fund differently than other investigations and perhaps gave them special treatment.
Murray’s findings were in stark opposition with Kotz’s, clearing both Thomsen and Hanson from any wrongdoing.
“We were surprised and disappointed by the administrative judge’s decisions,” said Kotz. “We also have serious concerns about the process utilized in arriving at these decisions.”
Other concerns that have come to the table draw on the fact that Murray was acting outside of her jurisdiction, along with the fact that there might be a conflict of interest considering she is in fact employed by the SEC.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) – Brotman Capital Partners LP, based in Boca Raton, Florida, has turned in the best performance Year to Date of a Market/Trend Timing Hedge Fund according to Barclays Hedge Fund Database.
Through October, 2008 the Fund is up over 14% net of fees. The fund has a $100,000 minimum investment and charges a 2% management fee and a 20% incentive fee.
According to Dr. Randy Brotman, Chairman and CEO, the fund has remained in cash since the middle of August. He states that “in our Trend Timing Fund, cash is an option, therefore a position.”
The Proprietary Trend Timing Model that Brotman Capital Management LLC employs dictates when the Fund should be long, short or in cash. “Be are comfortable to sit on the sidelines and wait for the trend-timing model to tell us when we will reenter the market, Brottman concluded.
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