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.
Seeking Alpha – With the news getting worse and worse for the hedgies (e.g. Fortress, Thomas Lee, D. E. Shaw), it’s time for a rethink on hedge funds.
For hedge fund investors: You probably went into them believing that they were uncorrelated absolute return vehicles, or pure alpha. Isn’t it funny how correlations all go to 1 in times of crisis? Maybe it’s time to return to your roots and understand the role of alternative investments in your portfolio.
For hedge fund managers: The really successful ones began fifteen or twenty years ago as small, nimble, guerilla investors. Somewhere along the way the guerillas came down from the hills, got big and became the government. Maybe it’s time to return to the hills again.
Investors thought hedge funds were the panacea when the hedgies showed positive returns in the post-Tech bubble crash. Ultimi Barbarorum writes:
Last time we had a bear market, hedge fund fortunes were made. Andor Capital, William von Meuffling, Crispin Odey, Chris Hohn, even Jim Cramer when he was trading, all made out like bandits producing 20-50% returns on the short side in 2000-2002, many after having doubled their money by being long in 1999.
New York (HedgeCo.Net) – Hedge fund investor Thomas H. Lee may downsize or shut the door to two of his funds after posting losses of about 40 percent this year, according to the Wall Street Journal.
The funds, which together manage about $1.5 billion, suffered losses that were multiplied by Lee’s heavy use of leverage, according to the sources who estimated he sustained losses of as much as $3.2 billion.
The funds were actually set up as funds-of funds, meaning Lee distributed investor’s money to approximately 110 other funds. When investors moved to withdraw cash from the hedge fund, it sparked a wave of redemption requests from the original funds, creating a domino effect of losses.
Funds that Lee invested in include SAC Capital Advisors and D.E. Shaw Group, according to the report.
Lee’s private equity firm was launched in 1974 and has grown to be one of the largest in the country. Lee now heads up his hedge fund business, Thomas H. Lee Capital Management LLC and his new private equity firm, Lee Equity Partners. Lee currently manages about $2.7 billion in capital.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters – Private equity investor Thomas H. Lee may shrink or shut down two funds that had $1.5 billion in assets after suffering losses of about 40 percent this year, the Wall Street Journal reported on Thursday, citing people familiar with the situation.
Hard-hit hedge funds run by Lee farmed out investor money to about 110 other funds, including SAC Capital Advisors and D.E. Shaw Group, according to the paper.
While Lee designed the so-called funds-of-funds to have low volatility with steady, consistent returns, he borrowed heavily to multiply the size of his bets, piling up debt of as much as $3.2 billion, the sources told the paper.
Bloomberg – D.E. Shaw & Co. LP, the investment firm run by David Shaw, and Farallon Capital Management LLC limited withdrawals by clients, joining more than 80 hedge-fund managers to impose restrictions in the past two months.
D.E. Shaw, which oversees $36 billion, capped redemptions from its Composite and Oculus funds, said two people familiar with the New York-based company. Farallon, a $30 billion firm based in San Francisco, did the same with its biggest fund after investors asked to get back more than 25 percent of their money.
The firms are two of the biggest to block withdrawals, known as putting up gates, so they aren’t forced to liquidate investments at distressed prices to raise cash. New York-based Fortress Investment Group LLC said yesterday it froze an $8 billion fund after getting redemption requests for 40 percent of its assets. Tudor Investment Corp., the Greenwich, Connecticut, firm run by Paul Tudor Jones, locked the $10 billion BVI Global fund last week ahead of plans to split the fund into two.
Politico – On the same day Lawrence Summers was announced as President-elect Barack Obama’s top White House economics adviser, the veteran economist said he would resign as the part-time managing director of one of the nation’s largest and most successful hedge funds, D.E. Shaw & Co.
But even as Summers takes the lead of economic policy thinking for the Obama White House, which has promised to be one of the most open and transparent in history, neither the Obama transition team nor D.E. Shaw would say exactly what Summers had done in his two years of work for the $36 billion hedge fund, or how much he has been paid.
In a press release issued Monday, D.E. Shaw said only that Summers had been working on “various strategic initiatives, high-level research and advising the executive committee on the overall business.”
Wall Street Journal – In 2006, Lawrence Summers resigned as president of Harvard University and took a position as a part-time managing director with D.E. Shaw Group, a New York hedge fund with a reputation as one of the most secretive trading outfits in the world.
D.E. Shaw is known for using sophisticated computer-based quantitative strategies to make money on fleeting movements in the stock and bond markets. The fund has been a top performer, returning 15% to 20% a year over the long term, and in two decades has grown into a global powerhouse. But like many funds, it has taken hits in the credit crisis.
West Palm Beach (HedgeCo.net) – The Greenwich Hyatt will be the scene of the 2008 Global Alpha Forum, the hedge fund event is for both fund managers operating in Connecticut and investors wishing to get to know those managers.
The Forum will be held on September 16 and 17, 2008, and will be followed on September 18 by the Green Hedge Trail, an opportunity for institutional investors to visit the offices of some of the world-class funds operating in the Greenwich area, to both meet the funds’ managers and to have some of their questions answered concerning strategies of the various funds included in the Trail.
The Forum is jointly sponsored by the Connecticut Hedge Fund Association, the association of hedge fund professionals representing over 150 member firms based in the “hedge fund capital of the world” of Fairfield County, Connecticut, and Opalesque, the world’s largest subscription-based publisher covering the alternative investment industry.
Rudolph W. Giuliani, Partner, Bracewell & Giuliani, will kick off the Forum at 9 am on Tuesday, September 16th. His address will be followed by panels discussing first Green Trading and Carbon Finance and then the 10 Days that Changed Capitalism.
Lawrence H. Summers, Managing Director, D.E. Shaw and former U.S. Secretary of the Treasury, will be interviewed as part of the luncheon on Day One. After lunch, a panel discussion will explore the Rise of the Sovereign Wealth Funds.
Once the main agenda is concluded, a Hedge Fund Manager Workshop is available that will present the secrets to Creating Reinsurance Firms and Banks: New Permanent Capital Vehicles for Hedge Funds and Funds of Funds. Following the first day’s sessions will be a Networking Event that begins at 5:30pm designed to allow plenty of time for attendees to become acquainted with one another or strengthen existing relationships.
Day Two sessions again begin at 9 am and will include panels on Hedge Fund Regulation, Institutional Investing and the Economic Outlook, all from a global perspective. The luncheon keynote on this day will be Eugene Ludwig, Chairman and CEO, Promontory Interfinancial Network and Former U.S. Controller of the Currency.
Another Hedge Fund Manager Workshop will be offered after the close of the main conference sessions. This workshop will address Islamic Finance: Tapping Middle Eastern Wealth through Islam-Compliant Vehicles.
The GAF was inaugurated in 2007 and that event attracted several hundred delegates and live coverage by both CNBC and Bloomberg Television. Along with the notables highlighted above, numerous financial media personalities will participate as panel moderators and interviewers and panelists consist of world-renowned experts in their subject areas. The GAF is poised to become “Davos on the Sound”—the center of thought leadership for issues impacting the alternative investment industry.
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New York (HedgeCo.Net) – Baer Capital has announced the launch of their new fund that invests in Indian equities, distressed debt and derivatives, further propelling Dubai’s prominence in the hedge fund industry. The Beacon India Alpha Equity Fund is the latest fund aimed at capitalizing on India’s emerging markets.
‘We are extremely excited about the launch of the Beacon India Alpha Equity Fund which is a long short equity fund focused on listed Indian equities and managed by Baer Capital Partners International Ltd,” said Brij Singh, Founder and Chief Executive Officer of Baer Capital Partners. “The Beacon India Alpha Equity Fund is an integral part of our mission to create a ‘Best in Class’ alternative asset management platform focused on India.”
This is the second hedge fund for Baer, who also manages a $220 million private equity fund centering on opportunities in India. Norton Rose (Middle East) LLP has advised Baer on both the structure of the private equity fund and the hedge fund. Baer isn’t the only company captivated by the potential of India. Donald Trump Jr. just recently launched a fund focused on acquiring luxury properties in the subcontinent.
In addition, big players in the hedge fund arena like D.E. Shaw, Renaissance Technologies and Och-Ziff Capital Management have already established their presence in the Indian market.
Baer Capital Partners was established in 2006 and focuses on investment management, corporate finance and wealth advisory.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.Net)- The Managed Funds Association MFA and CME Group (CME), a Strategic Partner member, recently arrived back from a jointly arranged trip to meet with Chinese government officials, policy makers and financial services representatives.
The MFA and CME co-sponsored a conference, "Global Markets and the Role of Alternative Investments" was held in June with the Tianjin Municipal People’s Government and China Foreign Exchange Administration Magazine.
"The conference agenda helped us to continue a dialogue about the important role of alternative investments in the capital markets and to strengthen relationships in China as its economy and financial markets grow." Richard H. Baker, MFA President and CEO, said.
Members who participated in the conference included; Citadel Investment Group, L.L.C.; Fairfield Greenwich Group (FGG); Harbinger Capital Partners Funds; Moore Capital Management, LLC; Tudor Investment Corporation; the D.E. Shaw Group; Paulson & Co., Inc.; and S.A.C. Capital Advisors, LLC.
"MFA’s visit to China is part of its ongoing international outreach with policy makers and its mission to provide information about the global alternative investment industry." MFA said.
MFA is the voice of the global alternative investment industry. Its members include professionals in hedge funds, funds of funds and managed futures funds. MFA Members represent the majority of the largest hedge fund groups in the world who manage a substantial portion of the approximately $2 trillion invested in absolute return strategies.
