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.
Forbes – The spread between Malaysia’s 5-yr IRS and 5-yr government bond yields hit a negative 9.5 bps on Thursday, as hedge funds and other speculators aggressively received 5-year swaps.
The spread was a positive 9.5 bps on Aug 5. The five-year ringgit swaps is quoted at 3.67 percent. Onshore and offshore players have generated huge demand for 5-yr swaps and bonds to avoid shorter-dated debt on a view that the central bank rate would remain on hold for the rest of the year. They are also looking to avoid 10-yr debt on concerns of more supply due to an expected bigger fiscal deficit.
West Palm Beach (HedgeCo.net) – HedgeCo Networks announced the creation of a new Hedge Fund Calculator Professional Services team. The team consists of experienced graphic designers, hedge fund marketers and consultants, CAIAs and CFAs.
The HedgeCo Hedge Fund Calculator has been in use by HedgeCo.Net for over 7 years, creating tens of thousands of hedge fund performance reports. In the first ninety days after its inception, the HedgeCo Hedge Fund Calculator gained widespread recognition and attracted hundreds of hedge funds who generated thousands of analytical reports.
"The addition of our Professional Services team will make our offering incredibly compelling, especially for managers aiming to save time, cut costs and produce high quality performance reports for their investors and prospective investors," stated Aaron Wormus, Managing Director of HedgeCo Networks. "The combination of ground-breaking technology and relevant expertise enables us to create reports with a lead time of as little as 24 hours. Managers no longer need to spend countless hours and thousands of dollars on complicated software. We consult with each client individually to produce personalized reports at a fraction of the price of other solutions in the marketplace."
HedgeCo Networks LLC manages HedgeCo.Net along with a portfolio of nine other websites devoted to alternative investments. With over 25,000 active members, HedgeCo.Net offers a vast array of hedge fund services, including website design, consultation, and third-party marketing and seeding. The Company has consulted or helped to launch over 500 new hedge funds, both onshore and offshore. HedgeCo Networks was founded in 2001 by Evan Rapoport and Andrew Schneider.
CNN Money – In another sign the financial crisis is hitting Asia’s once booming hedge-fund industry, Alexis Fosler, the head of Citigroup Inc.’s ( C) prime brokerage team in Singapore has left the company, two people familiar with the situation said Tuesday.
Fosler was leading a three-person team that was set up more than a year ago to serve hedge funds clients in the island. She had previously worked in the offshore banking industry based in the British Virgin Islands.
One person said Citigroup remains committed to the Singapore prime broking business despite Fosler’s departure.
Forbes – Major Wall Street firms placed large bets against Morgan Stanley using credit-default swaps, two days after Lehman Brothers Holdings Inc sought bankruptcy protection, the Wall Street Journal said, citing trading records.
The firms included Merrill Lynch & Co, Citigroup Inc, Deutsche Bank AG and UBS AG, according to the paper.
The paper said that a close examination of the trading revealed that the swaps played a critical role in magnifying bearish sentiment about Morgan Stanley.
Reuters – Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual investor.
The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 percent this week, a person familiar with the matter said on Thursday.
Discussions so far have been internal, and some options –such as entering into a merger where other executives end up running the company — are unpalatable to managers at Citigroup, the person said. The bank’s board of directors is set to meet on Friday, and Morgan Stanley is not
New York (HedgeCo.Net) – Citigroup Inc. will be liquidating its Corporate Special Opportunities fund after losing over half its value last month, according to a report by the Financial Times.
The hedge fund had frozen redemptions for almost a year before deciding to shut it down. Many funds freeze redemptions in hopes that market conditions will improve and to prevent a liquidity crunch that may just be fueled by fear.
According to the report, Citigroup infused the hedge fund with $450 million in credit and about $320 million in equity. In its heyday, the fund managed about $4.2 billion.
October was a rough month for hedge funds as a whole, with the average fund down almost 5.5 percent according to data from Hedge Fund Research. With only two months to go, 2008 looks to be the worst year ever recorded by hedge funds, with the average fund down almost 15.5 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) – Companiesandmarkets.com has released a report presenting views on the market for hedge fund investment based on a survey of 100 leading asset managers across Europe.
The report, which covers mass market, high net worth and institutional customer groups, forms part of a series looking at the market for alternative investments in Europe. Looking at the onshore hedge fund market in France, Germany, Italy, Spain and the UK, the report provides forecasts to 2012, analysing legislative developments and their implications for growth in the European hedge fund market. The report also identifies the primary client segments and appropriate marketing and distribution strategies for individual countries.
There will be strong growth in funds of hedge funds over the next year, the report states, with less demand for single hedge funds according to 65% of asset managers in Europe. Asset managers in Spain and Italy believe most strongly that the demand for funds of hedge funds will outstrip that for single hedge funds, followed by France, Germany and finally the UK.
Across the five core economies in Western Europe – France, Germany, Italy, Spain and the UK – institutional investors now dominate the market for hedge funds. On average, slightly more than two-thirds of asset managers confirmed that this group represents their biggest customer segment for hedge funds today. In Italy, mass market investors may also be put off by the price of hedge fund investment, according to 40% of asset managers there. In Spain, on the other hand, demand from mass market clients is being limited by competition from capital-protected and structured products and inadequate promotion of hedge fund products by banks and advisors.
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Bloomberg – Hedge-fund assets may fall to about $1 trillion by the middle of next year, a decline of almost 50 percent from their peak in June, because of market losses and client withdrawals, Citigroup Inc. said in a report.
Managers are likely to see investors, led by funds of funds, pull 20 percent of their money, Tobias Levkovich, an analyst at the New York-based bank, wrote yesterday. Funds of funds are middlemen who select hedge funds for their clients.
“The so-called `Swiss hot money’ wants out and funds are responding,” Levkovich wrote, referring to Swiss investors who have a shorter investing period than pension funds. “Citi’s credit analysts estimate that hedge funds have raised cash to roughly 40% of assets already in anticipation of known redemptions and possibly unanticipated demands from investors.”
Hedge funds lost an average of 16 percent this year through October, according to data compiled by Hedge Fund Research Inc., as stock and commodity markets tumbled and lending tightened. The industry has lost money in only one year — a 1.45 percent decline in 2002 — since the Chicago-based firm began tracking returns in 1990.
Bloomberg – The Bush administration will invest about $125 billion in nine of the biggest U.S. banks, including Citigroup Inc. and Goldman Sachs Group Inc., in the government’s latest attempt to shore up confidence in the financial system.
The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.
New York (HedgeCo.Net) – Citigroup Inc. has purchased Wachovia’s banking operations at a price tag of $2.16 billion, or roughly $1 a share, after losses stemming from bad mortgages rendered a resurfacing nearly impossible. Citigroup will now have around 4,300 branches and offices and will surpass JPMorgan Chase as the largest U.S. bank by deposits.
Treasury Secretary Henry Paulson was pleased with the purchase, and said that a failure of Wachovia “would have posed a systemic risk" to our country’s financial system.
Wachovia is yet another casualty of the credit crisis and has suffered over $42 billion in losses from the subprime fallout. As the largest lender of adjustable-rate mortgages, Wachovia saw its shares plunge amidst a record number of defaults on home loans, particularly in Florida and California. The ARM’s offered low “teaser” introductory rates, luring subprime candidates. Many borrowers ended up owing more than what their home was actually worth.
Citigroup will absorb the bank’s losses, while trying to raise an additional $10 billion to pay off Wachovia’s senior and subordinated debt. Charlotte-based Wachovia will retain its Evergreen Asset Management unit, along with its retail brokerage unit, which oversees over $1 trillion in capital.
The purchase will help change the once gloomy outlook for Citigroup, who at one point this year, thought they might collapse themselves after writing down over $46 billion and being one of the hardest hit banks of the housing crisis. Citigroup posted losses in three consecutive quarters, but now says it plans on reducing expenses b more than $3 billion annually.
Citigroup CEO Vikram Pandit has assured investors that he is working closely with Wachovia CEO Bob Steel in an effort to make the transition with “precision” and “speed.”
The deal will no doubt help shed a more positive light on Pandit, after a period of bad press involving the now collapsed hedge fund he founded and eventually sold to Citigroup. The bank, after paying $800 his Old Lane Hedge Fund, $165 million of which went directly into Pandit’s pocket, decided to close up shop this summer after suffering unsustainable losses.
The merger will give Citigroup an almost 10 percent share of the U.S. banking market, with deposits globally exceeding $1.3 trillion.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.net) – Lehman Brothers, Wall Street’s fourth biggest investment bank has filed for bankruptcy, making it the largest and highest-profile casualty of the global credit crisis, with approximately $639 billion in assets.
The bank said the Chapter 11 filing will not include its broker-dealer operations and other units, including Neuberger Berman. Lehman is looking at selling its broker-dealer operations, and is still in advanced discussions with a number of potential buyers of its investment management division.
Investors in recent weeks had grown increasingly jittery about Lehman’s $46 billion of mortgages and asset-backed securities, as well as its credit rating and its ability to raise capital.
Bankruptcy also represents a bad end to Chief Executive Dick Fuld’s four-decade career at Lehman. Fuld, who piloted the investment bank through prior crises with aplomb, was widely seen as too slow to recognize Lehman’s need to raise capital and shed bad assets.
Lehman listed its biggest unsecured creditors as Citigroup Inc, Bank of New York Mellon Corp, Aozora Bank, and Mizuho Financial Group Inc. Citi and Bank of New York Mellon are trustees for Lehman bonds.
The firm said that as of May 31, it owed about $110.5 billion on account of senior unsecured notes, about $12.6 billion on account of subordinated unsecured notes and about $5 billion on account of junior subordinated notes.
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The DIFC has clarified its position on news reports that have recently appeared regarding ‘Rashed Investment Bank’ an Islamic investment bank which has been proposed to be set up in Dubai. The DIFC said that while it welcomes initiatives within the Islamic finance industry, the “DIFC clarifies that it is not a member of the founding consortium of ‘Rashed Investment Bank’ and does not have a financial stake in the venture.”
Word had appeared in some media outlets that a new Islamic investment bank was going to be set up in Dubai, would have authorised capital of around $1 billion. The report which initially broke in the UAE’s Al Bayan newspaper claimed that the new bank would deal in hedge funds, structured products and equity capital markets.
It claimed that a number of investors from the UAE, Kuwait and Saudi Arabia were behind the new entity, although their identities were not made public, adding that it would be headquartered in the DIFC.
