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HedgeCo.net (West Palm Beach) – A survey by RSM McGladrey, a financial services consultancy, found that hedge fund managers are surprisingly ready to work with SEC regulators to cooperate with authority, despite wide-spread wariness about over-excessive regulation from the Obama administration.
However, the Obama financial regulatory plan was a top concern with 75%, fearing that further regulation will go too far and stifle the market’s recovery.
The survey polled more than 100 hedge fund managers during the last month and focused on hedge fund industry sentiment toward the Obama administration regulation.
Fund managers are also optimistic about the industry’s prospects, according to the survey. 60% believe the current environment provides more investment opportunities than challenges. An overwhelming majority (69%) see the U.S. economy returning to positive growth by Q2 2010.
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NEW YORK, N.Y. – SecondMarket, the largest marketplace for illiquid assets, announced today that it has launched markets for mortgage-backed securities (MBS), whole loans, and collateralized debt obligations (CDO). Through SecondMarket, buyers and sellers are able to trade these assets in a robust, centralized marketplace that provides transparency, price discovery and an extensive network of market participants.
“Today, the multi-trillion-dollar MBS, whole loans and CDO secondary markets are nearly frozen. For the global economy to recover, it is critical to unfreeze these assets from the balance sheets of financial institutions around the world and restart the securitization markets,” said SecondMarket CEO Barry Silbert. “The most effective solution lies in a time-tested model – an organized, independent secondary marketplace that provides transparency and price discovery.”
Through its online trading and auction platform, proprietary matching algorithm and deep network of relationships, SecondMarket has successfully established itself as a trusted marketplace for a variety of illiquid asset classes since its founding in 2004, including auction-rate securities, bankruptcy claims, limited partnership interests, and restricted securities and blocks in small capitalization companies.
SecondMarket’s trading network includes 2,500 buyers and sellers, hundreds of whom have already expressed an interest in purchasing residential and commercial MBS, CDOs, and portfolios of various whole loans, including residential, commercial, construction, consumer and industrial loans. To date, more than $1 billion in illiquid assets have already been traded over SecondMarket.
Due to the esoteric and opaque nature of many of these assets, pricing is extremely difficult. In an effort to improve investors’ abilities to determine the value of these assets, SecondMarket is providing unparalleled transparency by aggregating data on MBS, whole loans and CDOs and offering it for free to SecondMarket participants. SecondMarket also has established a network of third-party service providers – the SecondMarket Ecosystem – to offer valuation, research, data, analytics, legal and transaction advisory services.
Bill Seidman, former chairman of the FDIC and Resolution Trust Corporation (RTC) and advisor to SecondMarket, endorsed the SecondMarket model. “When we were working with troubled bank assets during the S&L crisis, we were forced to do a lot of work to create a market for these assets,” said Seidman. “Had there been a SecondMarket when I was at the RTC, I would have jumped at using their platform.”
The SecondMarket online marketplace and auction platform is expected to serve as a complementary market to assist the efforts being undertaken to address the legacy asset problem by governments in the U.S. and abroad. “We applaud the federal government’s initial efforts to address the legacy assets and restart the securitization markets,” Silbert said, “and an independent, active secondary marketplace is essential to bolster those efforts.”
SecondMarket is also pleased to announce that it has hired two former Credit Suisse directors to lead its efforts in these asset classes. Elton Wells, previously a Director with Credit Suisse in their Structured Products Group, will head SecondMarket’s MBS and whole loans markets and Adrian Radulescu, formerly a Director with Credit Suisse and Head of the European Leveraged Finance CDO Structuring Desk in London, will head SecondMarket’s CDO market.
“Over the past six months, SecondMarket has been diligently and expeditiously preparing for the launch of these markets by hiring dozens of employees, expanding our technology capabilities and developing key industry relationships,” said Silbert. “We are confident that our efforts will result in transparency, liquidity, a functioning secondary market for the so-called ‘legacy’ assets and, consequently, the restart of the securitization market.”
About SecondMarket
Founded in 2004, New York-based SecondMarket (member FINRA | MSRB | SIPC) is the world’s largest marketplace for illiquid assets, such as auction-rate securities, bankruptcy claims, collateralized debt obligations, residential and commercial mortgage-backed securities, limited partnership interests, restricted securities and blocks in small capitalization companies, and whole loans. SecondMarket has 2,500 participants, including global financial institutions, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors that collectively manage over $500 billion in assets available for investment. For more information, visit www.SecondMarket.com.
Bloomberg – Blackstone Group LP, the world’s largest private-equity firm, fell to a record low in New York trading this week on concern that a rebound in leveraged buyouts will lag behind any economic recovery.
“Given the economic outlook and pressure on asset values, even on existing investments, it’s going to be a while before they have a chance to come back,” said Robert Lee, an analyst with Keefe, Bruyette & Woods Inc. in New York. “It’s hard for investors to see through that valley.”
After announcing about $169 billion of buyouts in 2006 and 2007, New York-based Blackstone has since completed $9.2 billion of deals. An absence of financing for new acquisitions and an inability to sell current holdings have idled the firm and competitors such as KKR & Co. and Carlyle Group LP. Investors say deal won’t resume until after the economy starts to grow and banks can rebuild capital depleted by losses on mortgage-backed securities and previous LBO loans.
Blackstone, run by Chairman Stephen Schwarzman, probably will report a loss tomorrow of 31 cents a share, its third in the past four quarters, according to the average estimate of seven analysts in a Bloomberg survey. The company had a profit, excluding some costs, of 8 cents a share in the same quarter a year earlier.
Of the nine analysts who rate Blackstone shares, six have ratings equivalent to hold, including Lee. One analyst, Barclays Capital’s Roger Freeman, suggests selling the stock. Two recommend clients buy the shares.
Blackstone dropped below $4 a share for the first time on Feb. 23, closing at $3.89, almost 90 percent less than its $31 initial public offering price in June 2007. The stock declined 17 cents to $4.12 yesterday in New York Stock Exchange composite trading.
Bloomberg – Paolo Pellegrini, the hedge-fund manager who helped Paulson & Co. make more than $3 billion in 2007 on bets the U.S. housing bubble would burst, resigned to start his own fund, a person familiar with the matter said.
Pellegrini, 52, a manager of Paulson’s credit opportunities funds, left on Dec. 31 in an “amicable” departure, said Armel Leslie, a spokesman for New York-based Paulson & Co. John Paulson, founder of the firm, which oversees $36 billion, couldn’t be reached for comment.
Paulson and Pellegrini became convinced in 2006 that investors were overvaluing mortgage-backed securities whose risk for losses they or credit rating firms had misjudged, according to client letters obtained by Bloomberg News. The firm’s credit opportunities funds soared about sixfold in 2007 as mortgage defaults rose and the value of the securities declined.
FierceFinance – The government is committed to keeping the wheels of consumer credit greased. To that end, it has launched a $200 billion effort to support the market for consumer receivables.
The Fed announced it will "offer low-cost three-year funding to any U.S. company investing in securitized consumer loans under the Term Asset-backed Securities Loan Facility (TALF)," reports the Financial Times.
"This includes hedge funds, which have never been able to borrow from the U.S. central bank before." The TALF will likely be expanded to cover mortgage-backed securities next year. We’ll have to see if this really adds liquidity to the secondary markets.
