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.
Citywire.co.uk – Fund selector Christian Lundström, from Independent Investment Group in Sweden, is welcoming the evolution of the Ucits III space which is seeing more and more hedge fund groups entering the area.
Last week, HSBC Asset Management’s Farley Thomas warned on the trend of hedge fund groups launching Ucits-compliant funds, saying ‘Ucits is about trust, so retail fund firms in Europe should be protective of Ucits. Will the hedge fund firms be there to hold retail investors’ hands when things go wrong?’
While there may be fears for retail investors accessing such funds, many selectors are greeting the changes with open arms. Lundström is excited by the opportunity to access strategies which can ‘generate portfolio returns with low or even negative correlation to equities and commodities.’
Citywire.co.uk – The Serious Fraud Office (SFO) is to probe UK banks for evidence that complex financial products were mis-sold to consumers before the recession hit.
SFO director Richard Alderman plans to investigate the sale of complicated financial instruments like credit default swaps and collateralised debt obligations. The SFO has changed its tactics and will take a more active tack with investigations and will intervene to prevent future frauds, according to a report in The Times.
SFO staff are already investigating Madoff’s UK operations, hedge funds accused of over valuing securities, AIG UK and the collapse of Weavering Capital, according to The Times. The government has also asked its fraud taskforce to examine the collapse of MG Rover in 2005. And the workload is set to grow with the decision to look into the Keydata saga, as reported by Citywire this week.
CityWire.co.uk – Bernard Madoff’s wife Ruth is being sued for $44.8 million (€31.9 million) by the trustee for the victims of his $50 billion Ponzi scheme.
Court-appointed trustee Irving Picard is the first person to take action against Madoff’s family members, all of whom have denied knowledge of the scam.
Picard’s lawsuit states: ‘Regardless of whether or not Mrs Madoff knew of the fraud her husband perpetrated…she received tens of millions of dollars…to which Mrs Madoff had no good faith basis to believe she was entitled.’
Courthouse News Service – The founder and general partner of a $5 billion hedge fund used the company’s CFO as a scapegoat when investors found out he used their money to buy a private Gulfstream jet, the former CFO claims in Federal Court. Perry Gruss claims that Daniel Zwirn, of D.B. Zwirn and Co., told him he had to leave the company so Zwirn could remain ”pearly white” and ”bullet proof.”
Zwirn and Co. once managed more than $5 billion in assets. Gruss claims its founder began to live the life of an ”investment magnate,” including the private jet, ”scores of professional and personal assistants,” and a vacation home on the East End of Long Island.
HedgeCo.net (West Palm Beach) – ”One of the focal points of the Obama Administration’s Financial System Regulatory Reform Plan is to seek the passage of legislation that would require hedge fund managers (as well as other private fund managers) to become registered as investment advisors with the SEC and be in compliance with the applicable requirements under the Investment Advisers Act,” HedgeOp Compliance said, announcing the launch of a new service to help managers deal with current registration issues.
There are presently three bills pending in Congress and a recent proposal from the Treasury that would achieve that goal if passed. ”We are seeing a lot of activity as hedge fund managers look to get ahead of the curve on these requirements and starting the process sooner rather than later,” Bill Mulligan, the CEO of HedgeOp said, ”In addition to allowing for key thoughtful planning, addressing the registration issue early will provide a great deal of comfort to investors and prospective investors.”
The newly launched ADVassist is designed to provide focused registration and compliance guidance, the hedge fund consulting firm said, to not only complete the registration process, but also to create a foundation for development of a compliance culture and infrastructure.
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The Business Insider – Nassim Taleb and his hedge-fund partner Mark Spitznagel weigh in in the FT with an analysis of the world’s problem (too much debt) and a reasonable solution (convert some of the debt to equity).
As usual, Taleb lards up his argument with guru-speak and smug swipes at every other economist on the planet, which undermine the point. But in this case, the point is a good one.
Converting debt to equity is what corporations do when they go bankrupt. GM and Chrysler just did it, and the airlines will do it next time they go bust. Same for the hundreds of other companies that go broke every year.
New York Daily News – Park Avenue lawyer Marc Dreier was sentenced to 20 years in prison Monday by a judge who scolded prosecutors for wanting to jail him for as long as Ponzi swindler Bernard Madoff.
"Is the government serious about asking for 145 years?" Manhattan Federal Judge Jed Rakoff asked.
"To me, for the government to ask for 145 years is to demean the sentence Judge [Denny] Chin imposed on Mr. Madoff.
ABC News – Irish-American author J.P. Donleavy, in his wonderful book The Unexpurgated Code, details the difficulties of social climbing in England if you are not to the manor born. People who try to invest in hedge funds will find themselves having conversations similar to those in the book:
You:Hey, what a great hedge fund! Can I invest?
Hedge fund:No.
You:Gee, what a bunch of snobs. I’ve got money, and that’s good enough for me
MENAFN - U.K. hedge fund manager Man Group reported a further decline in its assets under management Thursday, but said institutional customers have significantly slowed their withdrawals and private investor sales have been strong.
The group said funds under management at the end of its fiscal first quarter were $43.3 billion, down 7.5% from $46.8 billion at the end of March.
EurActiv.com – European Commission proposals to regulate alternative investment funds discriminate against private equity and favour direct competitors like sovereign wealth funds or maverick businessmen, Javier Echarri, secretary-general of the European Private Equity and Venture Capital Association (EVCA), told EurActiv in an interview.
"We are not against regulation, but it has to be fair," Echarri said, complaining that an EU draft directive on alternative investment funds will hit private equity firms in a disproportionate manner in comparison with other financial actors, further damaging the credit market "when most European companies are in desperate need for capital".
istockAnalyst.com – I’ve always been a fan of what are now called "alternative investments" and never really cared as much for "generic index style equities", although I have owned them of course. Property, commodities, gold and higher yield instruments were always more interesting to me once I began to understand how imbedded inflation really was in the modern world.
Now that I am retired and living on my money, my "business" is to generate income as a goal more important than capital gains. Increasingly I am working on the great divide between tax-deferred and taxable accounts in the US, now and for the future. Perhaps we should call them "totally taxable" and "partly taxable" accounts since every penny one takes out of the IRA or 401K is taxable while only gains and dividends and interest are taxable from the taxable accounts.
FierceFinance – Not too long ago we were lamenting the trend by top investment banks to move into hedge funds and alternative investments in general. Buying hedge fund firms and launching them internally didn’t work out so well for Citigroup. It also wasn’t a home run for other firms, notably Bear Stearns.
Has JPMorgan Chase found a way to buck the trend? It has announced it will buy the portion of Highbridge that it doesn’t already own, and has shut down its proprietary hedge fund and private equity businesses. As of now, it looks like the Highbridge gambit has paid off-and then some. It remains among the biggest of the hedge fund firms, and has tripled its assets under management since JPMorgan invested in December of 2004, reports TheStreet.com. My sense is that Highbridge is one of the mega fund firms that is really well positioned to steal market share.
