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.
New York (HedgeCo.Net) – Those who push for greater transparency of the hedge fund industry had a victory this week, when an EU official all but declared that funds in the European Union will be regulated.
Charlie McCreevy, the bloc’s internal market commissioner, launched a public discussion on whether or not hedge funds need stricter oversight. Though McCreevy has said in the past that no greater oversight is needed for hedge funds, the majority of those present disagreed.
“We don’t need more consultation. We need regulation. We know exactly what are the problems,” said ex-Prime Minister of Denmark Poul Nyrup Rasmussen, who shares the view that short-selling by hedge funds have had a hand in prompting turmoil in the market.
The results of the consultation, which is still underway, are expected to be known in early 2009. Though most hedge funds fall outside the EU, London is home to several large hedge funds and many portfolio managers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Pittsburgh Tribune Review – On Oct. 5, philanthropist and hedge fund billionaire Stanley Druckenmiller sat in his New York den, watching the Steelers play in Jacksonville.
Two weeks before, he yanked an offer worth more than $800 million to buy the fabled Pittsburgh franchise, and now the quarterback of his beloved Black and Gold was scrambling to escape the clutches of the Jaguars, en route to a narrow 26-21 victory in Florida.
But during every commercial, Druckenmiller scrambled to a nearby room, where computer screens tracked the daytime tumult of Asia’s financial markets — Tokyo’s Nikkei 225 average crashing more than 11 percent, Hong Kong’s Hang Seng index tanking, the Bombay Sensex plummeting.
Seeking Alpha – I’m lucky to count among my friends Charlie Michaels, owner of hedge fund company Sierra Global and portfolio manager of the Sierra Europe Fund. Charlie is among the few hedge fund managers sitting on a gain so far this year.
According to the HFRI Fund Weighted Composite Index managed by Hedge Fund Research, Inc. in Chicago, the average hedge fund dropped 5.4% last month and is down 15.5% so far this year. The industry has been losing for five months in a row, which is the longest down streak since the index began in 1990.
Charlie and his team at Sierra Global, meanwhile, gained 0.2% in September, 3.0% last month, and are up 8.6% so far this year. The only year the Sierra Europe Fund ended down was 2002, when it lost 12.3%. The FTSE 100 lost 25% that year and the DAX 42%, so even Sierra’s loss that year can be chalked up as a relative victory. All of which is to say that it’s worth paying attention to Charlie when it comes to stocks.
Arlington Heights Daily Herald – In a typical recession, stocks start recovering about six months before the economy does. The crisis the United States is in right now, however, is anything but typical: Lending is frozen, hedge-fund selling is happening on a massive scale, and economic troubles have spread all over the globe.
As a result, it’s possible the U.S. economy will need to show signs of strength before the stock market stabilizes and regains steam. So with readings getting darker by the day, expect more of the same this week: extreme volatility.
"Volatility’s here, and it’s here to stay," said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. Last Friday, the Dow Jones industrial average finished down 312 points, "and it seemed like a victory."
Globe and Mail – Fairfax Financial Holdings Ltd. is claiming a victory in a long-running legal battle with U.S. hedge funds after brokerage firm Morgan Keegan & Co. Inc. revealed on Wednesday it has fired an analyst embroiled in a dispute with Fairfax.
Morgan Keegan confirmed it fired analyst John Gwynn last month for giving a report on Fairfax to some clients before it was published.
Fairfax has sued Morgan Keegan, based in Memphis, Tenn., and a group of U.S. hedge funds, alleging they worked together to damage Fairfax’s reputation and drive down its share price. Fairfax called it a “massive, illegal and continuing scheme that has targeted and severely harmed Fairfax.”
One of Fairfax’s claims in the suit is an allegation that Mr. Gwynn told hedge funds about negative reports before he issued them publicly, allowing hedge funds to short-sell Fairfax’s stock and profit after the news was released.
Toronto-based Fairfax has particularly pointed to Mr. Gwynn’s first report on the company, published Jan. 16, 2003, which said the company had a shortfall in its reserves. The company’s share price fell 28 per cent in the three days after the report was published.
