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.
NASDAQ – Hedge funds’ traditional "2 and 20" fee structure is being eroded by demanding investors who want a better deal.
According to a survey by research firm Preqin released Wednesday, the average hedge fund collects 1.63% for management fees and 17.21% on any performance gains. The industry has long been know for the 2% management fees and 20% performance fees it charges.
"Fees which for years have conformed to the industry standard of "2 and 20" are now being driven down as investors become more powerful in the manager/ client relationship," Preqin said in the report.
NASDAQ – The pace of new European hedge fund launches has stalled this year after the industry’s dismal 2008 performance made investors unwilling to back new ventures.
Data provider EuroHedge Monday said just 47 funds started trading in the first six months of the year, the least in a decade and less than half the number in the same period of 2008. The new funds collectively raised $2.09 billion – a figure that in "normal" times might have been raised by one fund alone.
However, EuroHedge said there are signs the second half could be more fruitful, with several high-profile funds already started or in the pipeline. Those include Theleme, a global equities strategy being set up by Patrick Degorce, a co-founder of The Children’s Investment Fund who left to strike out on his own, and Gyldmark Liquid Macro Fund, a fund started by former BlueCrest Capital portfolio managers.
NASDAQ – Tribridge Investment Partners Ltd., a Hong Kong-based hedge fund manager, said Monday it will launch a new fund in August and hired John Liptak, former head of Bank of America Corp.’s Asia special situations group, to run it.
The new fund will have a pan-Asia focus and seek to identify mispriced or undervalued securities due to financial stress, some corporate event or other special situation. It will be biased toward large-cap companies in more developed markets in the region such as Hong Kong, Australia, Korea, Singapore, or Japan.
"I believe that the opportunities from the upcoming default cycle have not been seen since shortly after the Asian currency crisis back in 1997-1998," Liptak said in prepared remarks.
West Palm Beach (HedgeCo.net) – Real estate services company, CB Richard Ellis Group, Inc. has reached an agreement to sell in a direct placement 13,440,860 shares of its Class A common stock for gross proceeds of approximately $100.0 million, to hedge fund manager Paulson & Co. Inc. on behalf of several of its investment funds and accounts it manages.
In addition, Ellis plans to sell Class A common stock, having an aggregate offering price of up to $50.0 million through J.P. Morgan.
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Nasdaq.com – Jeffrey Gendell of Tontine Partners LP, who is closing two of his hedge funds after steep losses, has raised money for his new Tontine Total Return Fund, according to regulatory filings.
The Tontine Total Return fund, which Gendell said would be launched in February, has received $11 million from investors, according to a May 21 filing with the Securities and Exchange Commission. A separate filing shows the overseas version of the fund has raised $1.6 million. A Tontine spokesman declined to comment.
Gendell last year began to shut down his Tontine Capital Partners LP Fund and flagship Tontine Partners Fund, after heavy losses. That was after his flagship fund had averaged annual returns of about 39% from 1997 to 2007.
New York (HedgeCo.Net) – Hedge funds gained 1.37 percent in March, according to data compiled by the Hennessee Group LLC. It was a successful month for the equity markets at well, with the S&P advancing 8.54 percent, the NASDAQ climbing 10.94 percent, and the Dow Jones advancing 7.73 percent.
"Hedge funds with a focus on the financial sector may potentially outperform in 2009," said Co-Founder of Hennessee Group Charles Gradante. "Not only did Citigroup and Bank of America announce a profitable January and February, but the borrowings at the Fed discount window have been steadily declining. It is possible that the banking crisis of confidence can unwind as quickly as it unfolded."
According to the data, the long/short equity index advanced 1.6 percent, thanks to programs launched by the U.S. government aimed at helping the banking sector. The arbitrage/event driven index gained 1.34 percent, with credit opportunities aplenty and many managers increasing stakes in bank debt, high yield and convertible bonds.
The global macro index saw a steady increase of .74 percent. The Hennessee Group pointed to the fact that many macro managers posted losses on their short-term Treasuries trade after the Fed announced they would buy $300 billion in U.S. Treasuries, which prompted buying and drove down yields.
This puts the YTD gain for hedge funds at just over 1 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bizjournals.com – After watching Sonesta International Hotels Corp. lose roughly 70 percent of its stock market value over the past 18 months, a Connecticut hedge fund has shed roughly a third of its holdings in the Massachusetts-based hotel operator.
In a recent regulatory filing, Mercury Real Estate Advisors, based in Greenwich, Conn., said it sold around 23,400 shares of Sonesta stock (Nasdaq: SNSTA) between Jan. 20 and Feb. 10, bringing its total ownership in the company to 206,048 shares. Those holdings equate to around 5.6 percent of Sonesta’s common stock outstanding.
Mercury’s ownership stake was more than 9 percent in mid 2007, when Sonesta’s stock traded above $30 a share. Sonesta’s stock opened Monday at $9.50 a share.
Xconomy – Vertex Pharmaceuticals has been around the block with biotech hedge funds. These are the people who aim to get rich trading volatile stocks second-to-second, and make big bets, long or short, on whether an experimental drug will work. Now that Vertex has passed some of the riskiest stages of drug development, the company figured it was time for steady, buy-and-hold investors to support the next phase, as it morphs into a commercial player.
That was one of the insights that I gathered yesterday in a conversation with Vertex chief financial officer Ian Smith. He was in a pretty good mood—as you might be too, if you’d just helped your company raise $320 million in a secondary stock offering. The financing is important because it gives Vertex (NASDAQ: VRTX) enough cash to operate until it introduces its lead drug to the market and starts generating positive cash flow, according to analyst Thomas Russo of Robert W. Baird & Co. Especially in the midst of a recession, that’s good news for Vertex’s 1,300 employees in Cambridge, MA, and 200 in San Diego.
Seekingalpha.com – Since inception, its funds have returned on average 40% annually, which explains how they can charge a 50% performance fee to investors, compared to the normal 20% that most hedge funds charge. They are very active traders and at any given time can account for up to 3% of the volume on the New York Stock Exchange and up to 1% on the Nasdaq. And, if you’re curious, you can see a picture of Cohen’s house here.
Before beginning, we do want to stress that since SAC actively trades positions quite frequently, tracking it via its13F is not necessarily beneficial and we advise that those reading take this with a grain of salt. We are simply covering the fund since it’s a prominent fund and many of our readers were curious about what it was up to these days.
New York (HedgeCo.Net) – American auto parts maker Delphi has been given the green light to proceed with their suit against hedge fund Appaloosa Management.
U.S. Bankruptcy Judge Robert Drain denied a request by Appaloosa yesterday to dismiss the fraud and breach of contract lawsuit that Delphi had waged against them. Delphi is attempting to collect the $2.55 billion that was originally promised to them by Appaloosa as part of their plan to exit Chapter 11.
While Judge Drain did disregard some of Delphi’s complaints, sources say he rejected the arguments of Appaloosa, including the one that stated the agreement with Delphi only allows for damages of up to $250 million.
The money was part of a bigger, $6.1 billion refinancing strategy that was promised to Delphi through various investors. After $2 billion was granted by former parent company General Motors, Appaloosa got weary of the deal and cited an overdependence on GM. One day before the deadline to walk away, Appaloosa did just that, even though Delphi had attained the rest of the financing needed to solidify the deal.
The lawsuit is scheduled to go to trial next year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Appaloosa Management is getting hit from all angles in their attempt to walk away from the deal they struck with Delphi. The hedge fund is not only being sued by the auto parts maker, but now creditors of Delphi Corp. are seeking to intervene on the case.
The lawsuit stems from an original agreement, led by Appaloosa, to provide Delphi with $2.55 billion in aid to help them exit Chapter 11. Though $6.1 billion was needed to make that happen, it looked as if Delphi was going to pull it together, thanks largely to a $2 billion influx of cash from former parent company, General Motors.
Appaloosa walked away from the deal at the deadline, claiming that Delphi had violated several agreements and had an over reliance on GM. Now, creditors are siding with Delphi, saying that Appaloosa walked away simply because they lost interest in the deal.
“Because of the failure to provide the agreed-upon investment financing, distributions that should have been made to creditors pursuant to the plan have not been made,” the Creditors Committee said in the court papers.
The committee said it "should have the right" to join in the lawsuit because they would have "directly benefitted" from Appaloosa’s investment.
Delphi is seeking a ruling that would force Appaloosa to deliver on their original promise.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
