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.
Bloomberg – HSBC Holdings Plc, Europe’s largest bank, is facing lawsuits in Ireland by investors faulting the lender for how it performed as custodian for money lost in Bernard Madoff’s $65 billion Ponzi scheme.
A Dublin court may rule tomorrow on whether investors must wait to pursue claims against HSBC until suits by mutual funds that used the bank as a custodian are resolved. Two Irish funds suspended redemptions due to exposure to Madoff.
Custodian banks, especially those serving European Union- regulated funds that are typically low risk, face scrutiny as the European Commission seeks to increase their responsibilities after the Madoff scandal. Investors in Luxembourg and Ireland, Europe’s biggest and third-largest mutual fund markets, have sued custodians, asking courts to break legal ground by ordering them to repay billions of dollars lost in Madoff’s fraud.
Stamford Advocate – With a new regulatory regime hanging over the industry’s head and a field of shellshocked investors looking for safety, it may seem that hedge fund managers are poised to make a rush into the mutual fund arena.
But there’s a disagreement over how many hedge fund managers will follow AQR Capital Management LLC of Greenwich and others into mutual funds.
Ben Alpert, a hedge fund analyst at Morningstar Inc., said he expects the move will be significant. But David Kabiller, founding principal and head of client strategies for AQR Capital Management, said he wouldn’t bet it will be very big.
Greenwich Time – With a new regulatory regime hanging over the industry’s head and a field of shellshocked investors looking for safety, it may seem that hedge fund managers are poised to make a rush into the mutual fund arena.
But there’s a disagreement over how many hedge fund managers will follow AQR Capital Management LLC of Greenwich and others into mutual funds.
Ben Alpert, a hedge fund analyst at Morningstar Inc., said he expects the move will be significant. But David Kabiller, founding principal and head of client strategies for AQR Capital Management, said he wouldn’t bet it will be very big.
West Palm Beach (HedgeCo.net) – Bull Path Capital Management recently announced the conversion of one of its long-short hedge funds into a long-short equity mutual fund the ‘Bull Path Long Short Fund’ (BPFCX).
The newly launched mutual fund ranks #1 of 811 funds on total annualized returns in the Lipper Mid-Cap Universe for the 5 years ending March 31, 2009, may be a “perfect consideration as a core investment for many investors.” He believes the long-short category will increasingly capture investors’ attention because of its typically lower risk levels than long-only funds. BPFCX has also received a top Lipper Leader rating of 5 for capital preservation against all equity mutual funds (9,360 funds).
“Investors have been traumatized by the events of the past 18 months, including the sobering performance of many long-only, ‘buy and hold’ strategies, and wondering how and when they can reenter the market,” said Rob Kaimowitz, portfolio manager of the Fund and founder of Bull Path Capital Management. “We believe investors will be attracted to the performance characteristics of long-short funds which aim to capture the market’s upside while mitigating risk in a market sell-off.”
“Until recently, there have been few mutual funds focused on long-short, and we are one of the few tested strategies in the market today,” noted Kaimowitz. “We believe this strategy makes sense for both individual and institutional investors with a medium- to long-term view of the market.”
In addition, Kaimowitz says investors who may have previously considered long-short hedge funds should consider investing in this strategy through a mutual fund structure owing to such benefits as lower minimum investments, lower fees, full transparency and the assets being held in a trust bank.
“There has been increasing pressure on hedge funds to provide lower fees, greater liquidity and increased portfolio transparency,” noted Kaimowitz. “A mutual fund structure addresses these issues quite well.”
The Bull Path Long Short Fund adopts a strategy developed and run by Bull Path Capital Management since 2002. “One of the hallmarks of our strategy is our ability to reinvest our knowledge through our rigorous, concentrated fundamental analysis in establishing both long and short positions,” said Kaimowitz. “This ability serves us well as we seek to provide investors with consistent returns and high levels of alpha.”
The Bull Path Long Short Fund is available in A and C Class shares with a $1,000 minimum investment or a $500 minimum with participation in the automatic investment plan. The I share requires a minimum of $100,000 or a $50,000 minimum with participation in the automatic investment plan.
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Dallas Morning News – There are 200 hedge funds in this area, putting the Dallas area third behind only New York and San Francisco in the number of hedgies. Most have offices in the Crescent, Preston Center and in Plano.
Hedge funds – a kind of mutant mutual fund for the wealthy – have been blamed for much of what ails Western Civilization, but make no mistake, they remain one of Dallas’ most thriving industries that no one ever heard of.
Ed Easterling, senior fellow of the alternative investments center at SMU’s Cox School of Business and a hedge fund manager himself, said the average hedge fund dropped just over 20 percent last year. The total assets in the Dallas funds dropped from a high of about $30 billion to about $20 billion today.
Bloomberg – Yale University and Harvard University may have to cut investments in hedge funds and private equity because the risks of holding the hard-to-sell assets outweigh the returns, said Bill Gross, co-chief investment officer of Pacific Investment Management Co.
“The Yale and Harvard portfolios, which have succeeded enormously over the past 10 or 20 years in terms of the emphasis on illiquidity and private investments and risk-taking — you have to question that model,” Gross said yesterday at an industry conference in Chicago.
The two Ivy League schools had more than half of their endowments in hedge funds, private equity, real estate and hard assets such as commodities at June 30. Gross, who manages the $150 billion Pimco Total Return Fund, the world’s biggest bond mutual fund, recommended in March buying securities that provide stable income this year rather than more speculative and illiquid investments, as slowing economic growth and higher unemployment depress returns.
West Palm Beach (HedgeCo.net) – U.S. hedge fund manager MTM Global Financial Services is looking for an offshore hedge fund partner. In order to raise approximately $50 million in capital for a REIT fund focused on newer US residential real estate in state income tax free Florida, Texas, Nevada and Washington.
The fund manager says, "By creating a joint venture with an offshore mutual fund, hedge fund, or high net worth individual, MTM Global Financial Services will provide the acquisition services, along with the day to day operation of the real estate rental portfolios."
"This is a straight up deal, with huge upside, that will offer transparency and integrity for the investors." the President of MTM Global Financial Services said, "we seek a joint venture partner, that is results driven, that values their reputation, and knows a good thing when they see one. We think this could become a lucrative long term enterprise for all involved."
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CNNMoney.com – In what looks like a sign of the hard times in the hedge fund world, AQR Capital Management – one of the industry’s biggest names – is opening its doors to the retail market.
In January, the investment management firm launched its Diversified Arbitrage Fund, its first mutual fund. Its Class I shares are up just 0.15% through the end of February, but that doesn’t look so bad compared with the S&P 500, which dropped 12.5% during the same period.
AQR says it wants to give average investors access to strategies that were once only available to hedge fund clients. While the fund may not be designed as a main holding, David Kabiller, co-founder of AQR with Cliff Asness, John Liew and Robert Krail says it can help individual investors balance out their portfolios.
West Palm Beach (HedgeCo.net) – India hedge fund manager, Taurus Mutual Fund, launched India’s first actively managed Equity Oriented Shariah compliant fund, the ‘Taurus Ethical Fund’.
With a minimum investment of INR 5000 ($100K), the open-ended actively managed mutual fund opens on February 19, 2009 and closes on March 20, 2009.
Launching in Mumbai, the fund has been certified by an independent Shariah Board named TASIS (Taqwaa Advisory and Shariah Investment Solutions).
“It’s all about investing in the right businesses and Shariah compliance ensures that," Waqar Naqvi, CEO, Taurus Mutual Fund said, "The need to pick businesses that foster wealth creation over the long term and distribute it equitably forms the basis of Shariah investing. It also provides an effective filter to identify and avoid speculative businesses. No wonder, Shariah compliant businesses have weathered the sub prime crisis”.
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Reuters – The Madoff scandal could be a boon for mutual funds as investors shift into regulated asset management vehicles in Luxembourg or Ireland away from hedge funds in the Caymans, a German mutual funds executive said.
"There’ll be a drive clearly toward more transparency and stricter supervision. That could be good for mutual funds," Stephan Kunze, head of Europe at Deutsche Bank’s mutual funds arm DWS, told Reuters in an interview.
"A lot of strategies that have been set up in the Caymans will migrate to Luxembourg or Ireland-domiciled replicas (with) hedge fund strategies migrating onto mutual fund platforms," he said, speaking on the sidelines of DWS’s annual news conference.
Seattle Times – The big stories in the mutual-fund world are always taking shape, but the new year gives us a chance to gaze into the crystal ball to try to read future headlines.
Performance stories always rule the day — and I don’t make market forecasts, leaving that task to people willing to volunteer for the job of village idiot — so maybe it will be a good year if the economic crisis winds up serving as the backdrop for the developing stories, rather than continuing to dominate the news itself.
Here are the fund-world stories that could capture the headlines in the year ahead:
Bloomberg – The global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.
“It’s very clear that there is going to be significant consolidation in the hedge-fund industry,” said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies. “Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”
Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion, Singapore-based Eurekahedge said, based on preliminary figures taken from 41 percent of the funds it surveys. It said hedge-fund assets shrank by $110 billion to $1.65 trillion in October.
