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.
Director of Finance online – Lyxor says their Hedge Fund Index was up 1.53% in January. Lyxor is an asset management group wholly-owned by Socieìteì Geìneìrale.
According to a report released today the top performing strategies over the month of January were Fixed Income Arbitrage (+4.19%), Special Situations (+4.08%) and CTAs Short Term (+3.30%).
Bloomberg – JO Hambro Capital Management Ltd., which oversees about $3.5 billion of assets, will close one of its two hedge funds partly because a bet against Volkswagen AG shares backfired, people familiar with the situation said.
The $240 million Trident European Fund dropped 25 percent in October, its worst month since starting a decade ago, mainly after a bet on a drop in Volkswagen shares went awry, said the people, who declined to be identified because the firm doesn’t disclose returns. The fund has slumped 39 percent this year after posting average returns of 8.4 percent annually since its inception.
Poor performance, dollar gains sapping European investment returns and investors moving assets from medium-sized companies all contributed to the fund’s closure, Suzy Neubert, a spokeswoman for JO Hambro in London, said in an e-mailed statement.
West Palm Beach (HedgeCo.net) – The Ernst and Young New Zealand Absolute Return index surged to its second highest level since inception in October, gaining 2.83% for the month, putting year to date performance at +15.8%, and year on year performance at +18.07%.
Profitable performance from those managers with a positive exposure to the serial correlation of market returns (what some call “trend following”), and implied volatility contributed to a substantial proportion of the month’s gain. A long-short commodities component also surprised with a positive performance, even in the face of weaker commodity markets.
New Zealand Absolute Return Association (NZARA) Chairman Anthony Limbrick, who is also Chief Investment Officer of Pure Capital, one of the contributing managers, said, “The Ernst & Young New Zealand Absolute Return Index was developed to do two things. The first was to raise both offshore and domestic awareness of the small but innovative New Zealand industry. This is an ongoing process but we are confident we are making progress. The second, to highlight the competence of New Zealand managers, continues to be reinforced by the strong performance of the index, both in outright terms, and in relative terms against our global peers”.
The Ernst and Young New Zealand Absolute Return Index is based on a concept of simple averages i.e. each of the seven constituent managers presents an “NZARA Average”, an average of the performance of all their funds or programs that are available for new money. In some cases a manager is presenting an average of several products. This collection of averages is then compiled again as a simple average to create the index. Ernst and Young compiles the index but is not a verification agent and does not guarantee the veracity of the performance numbers presented by the individual managers.
The index documentation was compiled by law firm Minter Ellison Rudd Watts.
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West Palm Beach (HedgeCo.net) – Because of investors’ demand Salus Alpha decided to make the Salus Alpha Directional Market accessible as a fund. This way Salus Alpha continues to launch tracker funds for all hedge fund indices launched by Alternative-Index Ltd.
The Directional Markets Index (DMX) convinced investors this year with outstanding +53% YTD performance and above-average performance in the last years, the DMX contrasts clearly with other Hedge Fund Indices.
Investors are able to achieve profits even in falling markets because of the widening of the product range Salus Alpha. It responds to investors’ needs in the current volatile market environment and offers a lager selection of funds with no correlation to bonds or equities.
The Salus Alpha Directional Markets employs directional trend following strategies in multiple time frames and markets. The funds objective is to achieve low to negative correlation to traditional longonly investments such as bonds or equities. The fund also tracks the Vienna Stock Exchange listed DMX.
Since inception of the calculation the DMX displays a performance of approximately 28.40% p.a. with a volatility of 17.88% p.a.
The subscription period for the Salus Alpha Directional Markets is from 5th November 2008 to 30th November 2008. During subscription period no sales fee will be charged.
New York (HedgeCo.Net) – Following in the footsteps of other large hedge funds trying to weather the credit crunch, Blue Mountain Capital Management has suspended withdraws on its $3.1 billion fund.
The Blue Mountain Credit Alternatives Fund lost a little over 2 percent in October, while posting admirable returns the rest of the year. The firm decided to halt redemptions hoping they won’t have to sell assets in the current falling credit markets.
“We are not comfortable with this state of affairs,” Feldstein wrote in a letter to investors obtained by Bloomberg News. “If we were to unwind or sell positions to meet current redemptions, the severe liquidation costs would be borne inequitably by the remaining investors.”
The move comes as a shock to some, since the Credit Alternatives Fund has posted an average return of over 45 percent since its inception in 2003. The firm’s other funds aren’t faring too bad either, with its $1.1 billion equity alternatives fund losing only 0.9 percent and its $400 million BlueCorr Fund boasting returns of 21.3 percent, according to the letter. Hedge funds as a whole have had their worst year ever, losing 20 percent according to the Chicago-based HFRX Global Index.
Investors were given until November 10 to decide whether they wanted to redeem their current investment or exchange it for any one or more of three share classes. If they choose to stay, the lock up provisions of the fund will be waived.
For an industry that was once thought to manage close to $3 trillion in the beginning of 2008, assets are falling off sharply according to an estimate by Morgan Stanley, who says that number might drop to $1.3 trillion.
Fears of liquidity crunches have forced investors to rush to redeem their cash, causing several notable funds to freeze up capital this year. Last week, Deephaven Capital Management froze their $1.6 billion fund after investors rushed to withdraw 30 percent of their capital. Meanwhile, RAB took a more drastic route, opting for a three year lock-up in their Special Situations Fund after losing half of its value this year.
“This level of redemptions in the current market environment forces the question of whether such redemptions can be processed in the ordinary course without disadvantaging both continuing and later redeeming investors,” explained Deephaven CEO Colin Smith in his letter to investors.
It is unclear how long Blue Mountain Capital plans on restricting access to redemptions. The company manages an estimated $5.5 billion from locations in New York and London.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Globe and Mail – Black clouds have been building over the hedge fund industry for much of the year, and a storm could break in coming weeks as investors receive their second set of lousy monthly results from funds that are meant to do well in good markets and bad.
A series of challenges, some unrelated to the hedge funds’ investment strategies, have combined to create lower returns and investor redemptions.
Industry experts expect some funds will be forced to close down as clients walk away.
The single biggest problem is performance. The most recent update of Scotia Capital Inc.’s hedge fund index shows the average fund was down 8.6 per cent in July, compared to a 1.74-per-cent decline in the S&P/TSX equity benchmark. Since its inception in 2005, the Scotia Capital hedge fund index averaged a 13.9-per-cent annual gain.
Al-Bawaba – The Global Islamic Funds of Funds has demonstrated excellent performance in terms of returns and stability and has consistently outperformed other funds in the same category.
Global Investment House “Global” announced today that its Global Islamic Fund of Funds was ranked number one in July 2008 by Zawya. The Fund recorded a +5.72% YTD return and was posted on the homepage of the Zawya platform, where only leading funds make it there.
Global launched the fund in July 2007 in order to actively evaluate and invest in the growing number of Shari’a compliant products. With a dynamically evolving Hedge Funds team and an established track record of erudite investments across 80 different hedge fund managers, this fund has greatly benefited from the experience of the Hedge Fund team.
Mr. Omar El-Quqa, Executive Vice President at Global said, ”It is worth mentioning that, in the first 12 months since inception the fund has recorded a creditable performance of 11.00%, of which nearly 6% has been achieved in the first half of 2008”. Mr. El-Quqa further added, ”It must also be noted that on a panoramic landscape, clouded by credit crisis in the global markets, where the shallow waters of uncertainty threatened to return, this fund has done tremendously well. One of the key element to this performance is that the fund adopts aggressive strategies accompanied by low volatility of only 4.5% as compared to the other Islamic funds that portray high volatility”.
New York Post- Hedge fund BlueGold Capital might have struck black gold, with oil bets driving returns up a whopping 160 percent through the end of June.
BlueGold just opened for business in February, but its eye-popping returns have already attracted attention – and money – from investors. Indeed, assets have grown by more than six times since inception to $925 million, according to a BlueGold official and the company’s most recent letter to investors.
"The hedge fund market has not had a lot of oil traders with physical oil experience. I think that gives us an edge," said Dennis Crema, who helped launch the London-based fund with Pierre Andurand. Both men are former traders from Vitol, a Swiss energy trading firm.
New York (HedgeCo.Net) – Disdained investors of the former Bayou hedge fund, run by one-time fugitive Sam Israel, are going after Goldman Sachs for $20 million to try and recover some of their losses.
Goldman Sachs served as the prime broker while clearing trades and taking custody of the securities. They also provided reports on the hedge fund’s investments. Reports that some say should hold them partly accountable for the $450 million that was duped out of trusting investors.
The suit, which was filed as a private arbitration case in Federal Court, claims that Goldman Sachs Execution and Clearing provided monthly statements to Bayou highlighting its losses. The reports showed more than $88 million between August 1999 and August 2005. But while the reports may have been right on, creditors claim that Goldman knew that Bayou was turning around and reporting substantial gains to investors and did nothing about it.
“Through either gross negligence or a willful choice to ignore the signs of fraud, G.S.E.C. failed to diligently investigate the red flags it was made aware of it, to contact Bayou’s auditors to request additional information, or to alert the appropriate authorities of what it had learned,” the suit alleges.
In 2004, Bayou provided Goldman with reports that claimed it had earned returns of almost 18 percent since its inception, which the suit says was “completely inconsistent with the actual returns the Bayou Funds had been realizing in their trading accounts at G.S.E.C., in which they had done nothing but lose money.”
Goldman has declined to comment.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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