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.
Reuters – The Federal Reserve sought to hide its involvement in Bank of America Corp‘s (BAC.N) acquisition of Merrill Lynch as Merrill’s financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday.
The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters.
World Radio Switzerland – Several major hedge funds in London say they’re considering moving abroad, notably to Switzerland. They are angered by a proposition from the European Union that would require more accountability and limit the amount of money they can borrow. Switzerland is an attractive destination because it is easier to register and launch a hedge fund, and subsequent regulation is less constraining. Does that mean this is the wild west for shady financial institutions? No, say the experts. It just means Switzerland has struck a better balance between flexibility and oversight. Lucas Chambers reports for WRS.
BusinessWeek – For years pension funds, university endowments, and other big investors essentially wrote blank checks to hedge funds and private equity firms. They readily paid stiff fees and agreed to onerous restrictions. Investors had no choice if they wanted access to the money managers and outsize gains.
All that is changing. With returns dismal and cash scarce, investors are demanding—and winning—concessions on everything from cost to oversight. "The balance of power has shifted," says a private equity executive.
In recent months some of the biggest institutional investors, including the $175 billion California Public Employees’ Retirement System, have gathered at closed-door meetings in New York and Toronto to talk about ways they might flex their newfound muscle. A number of public pensions, such as the $16 billion Utah Retirement System, have pushed firms publicly to ease terms.
St. George Daily Spectrum – According to the Center for Responsive Politics, hedge funds and private equity firms donated $2,992,456 to the Obama campaign in the 2008 cycle. Obama, vocal critic of the campaign finance practice known as "bundling," accepted more than $200,000 in bundled contributions from billionaire hedge-fund manager James Torrey, more than $100,000 in bundled contributions from billionaire hedge-fund manager Paul Tudor Jones and more than $50,000 in bundled contributions from billionaire hedge-fund manager Kenneth C. Griffin, chief executive officer of Citadel Investment Group in Chicago.
In an extraordinarily candid open letter to Obama, hedge-fund manager Cliff Asness defended his industry from the president’s "backwards and libelous" charges. "Managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the president, nor to oppose him, nor otherwise advance their political views," Asness wrote. He has oversight of some $20 billion at AQR Capital Management, LLC, which is not involved in the Chrysler case.
Bloomberg – Regulating hedge funds is one thing. Shackling them is another.
It’s difficult to tell which one is the ultimate objective of authorities in the U.S. and Europe as they push for greater oversight of these alternative investment managers.
There are reasons to worry officials will opt for whips and chains.
President Barack Obama last week showed why. Speaking of Chrysler LLC’s bankruptcy filing, he heaped blame on “a group of investment firms and hedge funds.” The funds, the president said, had refused to put wider government and auto-industry interests ahead of their own.
London Stock Exchange – Hedge funds that short stocks as part of their investment strategy should be forced to pay a levy to support research into the impact of the tactic on the markets, according to a new manifesto for the "fundamental reform" of corporate governance.
The document, published by corporate oversight and social responsibility consultancy PIRC, calls for the charge to be introduced alongside enhanced disclosure of listed companies’ pay and benefits, as well as binding shareholder votes on audit committee reports and remuneration policies.
Forbes – You’d be hard pressed to find anyone but limousine drivers and beaten-down investors shedding tears for the end of the hedge funds’ golden age.
The average hedge fund lost 18% last year, and one in seven shut its doors, according to Chicago’s Hedge Fund Research. The people who run these funds have, deservedly or not, come to symbolize an unsavory version of Wall Street greed that focused on accumulating vast wealth with little accountability or oversight.
Bloomberg – Hedge fund managers who run the largest 15 percent of portfolios in the European Union would have to report risks, debts and trading activities to regulators under a draft proposal to tighten oversight after the financial crisis.
The EU’s executive agency in Brussels is weighing plans to regulate “alternative investment fund managers” who oversee at least 250 million euros ($333 million). The measure also covers private-equity buyout firms.
The proposal answers calls from EU lawmakers for rules on all market actors, and from the Group of 20 nations for oversight of hedge funds large enough to put financial systems at risk. While the proposal, which may still be changed, excludes 85 percent of hedge fund managers, it would leave out 24 percent of their assets in the region, according to the commission.
MSNBC – Hedge funds are being offered a sweet deal to help the Obama administration rescue the U.S. banking system: A low-risk opportunity to scoop up soured bank assets that could one day make them a killing.
But the deal could make for an uneasy partnership.
The government also wants to closely police hedge funds, some of which have been accused of placing irresponsible bets that helped trigger the financial crisis. Such regulatory overhaul could reshape an industry known for secrecy and little oversight.
Denver Post – Hedge funds are being offered a deal to help the feds rescue the banking system: A low-risk opportunity to buy bad bank assets that could one day make them a killing.
But the deal could make for an uneasy partnership. The government also wants to closely police hedge funds — large investment pools that cater mainly to the rich — some of which have been accused of placing irresponsible bets that helped trigger the financial crisis. Such regulatory overhaul could reshape an industry known for secrecy and little oversight.
EatrhTimes – In response to investor demand for greater transparency as well as pending new legislation, Grant Thornton LLP’s Financial Services practice is launching Hedge Fund Internal Control, Governance and Regulatory Compliance Services. These services will help funds attract new investors who might be wary of alternative investments in light of recent news. It will also assist funds in attracting and retaining investors and assets and help them prepare for pending legislation.
By the fourth quarter, Congress is expected to pass The Hedge Fund Transparency Bill of 2009, which would require investment companies or advisers that are exempt from normal registration, but have at least $50 million in assets under management (AUM), to register with the SEC. “Those funds that have already registered must be prepared for additional oversight and a more aggressive examination and enforcement agenda; those funds that have not yet registered may be required to create a complete internal control and compliance infrastructure in order to be prepared for the regulatory examination process,” said Jack Katz, national managing partner of Grant Thornton’s Financial Services practice. In addition to developing the internal control, compliance and governance facilities to comply with the new rules, firms may also be required to establish an anti-money laundering program and report suspicious activities.
West Palm Beach (HedgeCo.net) – In an effort to makes major changes to the EU financial regulation services, the European Commission (EC) has launched ‘Driving European Recovery’, a consultation on major structural changes to European financial services and markets regulation.
The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.
The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.
The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.
The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.
The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.
Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."
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