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.
West Palm Beach (HedgeCo.net) – Hedge fund prime broker, Newedge, has started using a Dubai Point of Presence (POP) connection to facilitate their access to the Dubai Gold and Commodity Exchange (DGCX). The new connection has high bandwidth and is more secure than an internet-based connection, the company said.
Amaury de Villemandy, CEO of Newedge Europe and Middle East, commented on its fixed line capacity, saying, “Our investment in establishing direct connectivity to DGCX was based on the increased interest among our clients in capitalizing on the commodity and currency trading opportunities offered by the Exchange.”
Newedge is a 50/50 joint venture between Societe Generale and Calyon. With a presence in 25 locations in 17 countries, Newedge primarily serves institutional clients, providing access to more than 85 exchanges.
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West Palm Beach (HedgeCo.net) – The Securities and Exchange Commission yesterday recieved permission to freeze the assets of Mohit A. Khanna, who alledgedly raised as much as $70 million from 300 investors though his fund, MAK 1 Enterprises Group, LLC.
The SEC says he solicited investors in Southern California and several other states, as well as a charitable foundation, through word-of-mouth referrals and a website. The defendant claimed to pool investor funds to invest in commercial paper, foreign currency trading products, and other investments, which the SEC believes to be non-existent. Instead, Khanna misused investor funds to pay for several luxury cars and residential properties, including those now owned by his wife, Sharanjit Khanna of San Diego, Calif., who was also named as a relief defendant.
The complaint alleges Khanna fabricated and gave to an accountant a “screen shot” of MAK 1’s online banking activity purporting to show a balance of over $50 million in its bank account, in reality, the average daily balance in that account never exceeded $197,000.
The SEC seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against Khanna and MAK 1. Court will hold a hearing on August 31, 2009.
The SEC had help from the FBI, the U.S. Attorney’s Office for the Southern District of California, U.S. Postal Inspection Service, National Futures Association, and the Better Business Bureau – San Diego.
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West Palm Beach (HedgeCo.net) – RBC Capital Markets today reported that for the month of July 2009 the RBC Hedge 250 Index(R) had a net return of 2.10 percent. This brings the year-to-date return of the Index to 13.04 percent. These returns are estimated and will be finalized by the middle of next month. The return for June 2009 has been finalized at 0.33 percent.
Comprised of approximately 250 actual hedge funds, the RBC Hedge 250 Index is positioned as a diversified and representative investable index. The Universe on which the Index is based currently consists of 5,242 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $952 billion.
Since its inception on July 1, 2005 through the end of June 2009, the RBC Hedge 250 Index has had an annualized net return of 2.56 percent. In comparison, over the same period, other investable indices have averaged -1.44 percent while non-investable indices have averaged 4.25 percent, according to information reported by the sponsors of those indices.
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West Palm Beach (HedgeCo.net) – Salus Alpha (SA) announced that their fund, ‘The Salus Alpha Directional Markets’ stood out from its peers in the Managed Futures space due to its unique approach.
The majority of the managed futures funds, SA said, invests systematically according to computer based trading models. A computer model typically uses different indicators to identify trends on the global financial markets. These models can be characterized as long-term and short-term operating models.
Most managed futures funds use long-term trend following models; this is the reason why most of the famous managed futures funds have had significantly negative performance since the beginning of the year 2009: they didn’t recognize the trend reversal in time.
The Approach of the Salus Alpha Directional Markets Fund differs significantly from competitors – Model Risk is minimized.
"Unlike other firms we do not trust in technical analysis but we forecast futures prices with precision to identify trends. In contrast to other managed futures models the Salus Alpha Directional Markets controls risk on position, sector and portfolio level. Daily risk balancing positions the fund right in stormy weather or trend less markets." SA said.
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West Palm Beach (HedgeCo.net) - Research and Markets has announced the addition of the "High Net Worth Alternative Investments" report to their offering.
The report identifies demand for hedge funds, capital protected funds, private equity funds and real estate funds from high net worths, The scope of the report covers France, Germany, Italy, Spain, UK, Nordic region, Belgium/Netherlands, Switzerland, Australia, China, India, Hong Kong, Singapore and Taiwan.
Includings hedge funds, capital protected funds, private equity funds and real estate funds (open ended and closed ended) thr peport shows the results of the Wealth Management Market Leaders survey of 280 wealth management companies worldwide, and on high net worths (those with more than $1m in onshore liquid assets)
HNW alternative investment asset allocations are expected to decline slightly in both Australia and France in the next two years, as high net worths reposition their portfolios. Real estate allocations and commodities allocations will decline among Australian HNWs while both hedge fund and derivative allocations will increase.
While British HNWs plan to increase their exposure to capital protected products and private equity funds, and their wealth managers will devote significant resources to the development of these product areas, they are failing to anticipate their clients demand for closed-ended real estate funds.
At the same time German wealth managers are focusing strongly on capital protected products which, while certainly in demand by most HNWs, will not see a significant increase in terms of portfolio allocations.
HedgeCo.net (West Palm Beach) – Off-shore hedge fund law firm, Sadis & Goldberg LLP, sent out a letter to their clients announcing that the Securities and Exchange Commission (SEC) appears determined to issue more subpoenas and give people more incentives to cooperate with investigations as it works to enhance its oversight of the financial markets.
The letter, obtained by HedgeCo, explains, ”Don’t be surprised if you receive a subpoena or are contacted by the SEC.” Daniel G. Viola, spokesperson for Sadis & Goldberg, said, ”The SEC has significantly increased its enforcement efforts since the recent discovery of certain high profile Ponzi schemes.”
Effective August 11, 2009, the SEC has also made it easier for its staff attorneys to issue subpoenas. Thus, the SEC staff attorneys will no longer have to obtain formal approvals to issue subpoenas; instead, they will simply need approval from their senior supervisor.
”If you receive an inquiry letter or subpoena from the SEC, remain calm, ”Viola said, ”This is not uncommon given the current regulatory climate. Above all, do not respond without first contacting legal counsel.”
The The SEC generally has broad powers to conduct investigations of potential violations of the federal securities laws and often works with the Department of Justice in connection with joint proceedings, often known as ”parallel proceedings.”
The law firms Regulatory Practice Group consists of former SEC personnel and litigators with experience regarding civil and criminal proceedings.
Contact info: Daniel G. Viola at 212.573.8038 (or dviola@sglawyers.com) Christiaan Johnson-Green at 212.573.8169 (or cjohnson-green@sglawyers.com)
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HedgeCo.net (West Palm Beach) – The Organisation for Economic Cooperation and Development (OECD) added the Cayman Islands to its ‘white list’ of jurisdictions that substantially implement international tax standards.
The Cayman Islands recognition came about after the country signed its twelfth Tax Information Exchange Agreement (TIEA) with New Zealand, on 13 August 2009.
“For over four decades the Cayman Islands has steadily earned its place as a world-class international financial services centre." Leader of Government Business/Premier Designate, the Honourable McKeeva Bush said, "The Cayman Islands Government sees the OECD’s recognition as a natural outcome of the country’s substantial commitment to uphold an equally world-class international cooperation regime in the exchange of tax information.”
Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, welcomed the signing which puts Cayman Islands “alongside other countries that have substantially implemented the internationally agreed tax standard.”
The Cayman Islands’ maintains 12 bilateral tax information arrangements with the following countries: Denmark, Faroe Islands, Finland, Greenland, Iceland, Ireland, Netherlands, New Zealand, Norway, Sweden, United Kingdom and the United States.
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HedgeCo.net (West Palm Beach) – A new research paper by Deloitte LLC: "How Hedge Funds Are Becoming the Ultimate Networked Enterprise," focuses on how hedge fund methods of interacting with prime brokers and third-party administrators needs to be rethought in order to remain profitable as the roles of prime brokers and third-party administrators evolve.
"As investors demand increased transparency and operational risk management, hedge funds are faced with redefining their relationships with prime brokers and third-party administrators," Cary Stier, Deloitte’s U.S. Asset Management Services leader explained.
"While attraction and retention of capital remains a top priority for fund managers, in today’s market performance isn’t the only bull’s-eye a fund has to hit to accomplish these goals. Investors want assurance that the fund’s operating model has taken into consideration the events of the last year and has adjusted accordingly. At the same time, prime brokers, administrators and custodians are looking for new ways to serve managers," said Adam Broun, Deloitte’s Asset Management Services Consulting leader.
The report outlines five areas of focus for both prime brokers and third-party administrators:
Build the Middle-Office that Fits your Operating Strategy
Hedge funds need to determine their optimal operating strategy and factor in roles various service providers will play in providing necessary capabilities. Although most large firms will build their own middle-office, service offerings from fund administrators and custody players will prove to be compelling from both a cost and capability standpoint. Managing the network of service providers will require additional capabilities that the hedge funds will need to build and staff in-house.
Add Horsepower to Your Collateral Management
The multiprime model will only increase the need for improved collateral management. Some hedge funds will benefit by outsourcing to enterprise collateral management service providers or implementing vendor solutions to efficiently manage their collateral across various parties. In addition to spreading collateral across parties, independent valuation of illiquid assets, zero over-collateralization and optimal collateral composition will be the key focus areas.
Plan Risk Management
Risk management will see a balance of focus between market risk for investment strategies and counterparty risk. In a multiprime model, a single broker’s risk report will show only a partial picture of the risk profile. Risk management will need to be a central function that aggregates positions across all providers. Take this opportunity to separate risk management from investment management.
Choose the Right Mix of Prime Brokers
The choice of prime brokers should be guided by aligning the fund manager’s needs to the prime
Third-party administrators can help hedge funds outsource several middle- and back-office functions. With the increased complexity of the middle- and back-office, hedge funds should at least understand the range of services available from their administrators.
Implications for Prime Brokers
Prime brokers are experiencing a major shift in their business model. Their focus on developing deep relationships with a few hedge fund clients is no longer working in a multiprime environment, where risk diversification and access to capital is taking center stage. As lending stays constrained, prime brokers will be required to improve capabilities to deal with new clients and existing capabilities may lose favor among the hedge funds adopting the multiprime model.
Implications for Third-Party Administrators
Third-party administrators are being challenged by handling increased product complexities, technology scalability and international growth. While hedge funds outsource middle-offices and evaluate ways to reduce costs, third-party administrators will need to cut costs and potentially look into moving their back offices to cost-effective locations. Some may offer prime broker-like services to improve profitability and further increase competition in the market or go global; others will more closely align with custodians or consolidate for scale.
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HedgeCo.net (West Palm Beach) – Bandon Capital Management has reached it’s 5th year for its hedge fund flagship investment strategy, ‘Directional Interest Rate Strategy’, (DIRS) producing annualized returns of +7.09% net of all fees, comparatively over the same time period the S&P 500 has lost -2.15%.
The strategy provides investors with absolute returns, uncorrelated with the equity and fixed income markets, by investing in the US Treasury Market using ETF’s or mutual funds and is available to non-accredited investors.
“We’re incredibly proud of this milestone. This is an investment area where there is a tremendous amount of product development activity and innovation." Bill Woodruff, Founder and Managing Principal said, "As advisors and their clients increasingly seek non-correlated, absolute return strategies we stand out for both the length and strength of our track record.”
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HedgeCo.net (West Palm Beach) – Ms. Mina Gerowin, Managing Director of Paulson Europe, is this year’s recipient of the 100 Women in Hedge Funds 2009 European Industry Leadership Award. In recognition of outstanding professional talent and business ethics, Ms. Gerowin will be presented with the award at a 100 Women in Hedge Funds fundraiser in London on October 7th, 2009, to benefit the UK education charity, SHINE.
"We are thrilled that Mina Gerowin will accept the 100 Women in Hedge Funds’ European Industry Leadership Award," said Effie K. Datson, Chair of 100 Women in Hedge Funds’ London Board. "Mina has demonstrated the type of leadership and entrepreneurial acumen that has become synonymous with the industry; moreover, she is committed to contributing to the non profit activities that she is equally passionate about."
Mina Gerowin is Managing Director of Paulson Europe and a partner of Paulson & Co., specialising in European merger and event-driven investment, including distressed and restructuring investment and the risk arbitrage of both debt and equity. At Paulson she has led investments, including Stork and Ahold, and runs their large European positions.
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HedgeCo.net (West Palm Beach) – Atlanta based hedge fund prime brokerage firm, NorthPoint Trading Partners, LLC, has opened an office in Dallas, Texas, led by industry veteran Chip Miller.
Miller joins NorthPoint from Stadium Capital where he was head trader for 4 years. He will head up both the prime brokerage and the sales trading operations in the region. Miller will report directly to Michael DeJarnette, President of NorthPoint.
“As we continue to expand our presence nationwide, we are very fortunate to have someone join our team who is as talented and experienced as Chip,” says Douglas Nelson, Chief Executive Officer of NorthPoint.
An industry veteran since 1993, Chip has held positions at Jefferies and Co., Clover Partners and Stadium Capital Management. He is experienced in the trading, operational and regulatory aspects of the buy and sell side.
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HedgeCo.net (West Palm Beach) – Long/Short Equity hedge funds continued to increase overall net exposures in July, enabling managers to capitalize on market upswings early in the month, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
Dr. Drachman noted, ”As risk appetite returns to the market, many Long/Short Equity hedge fund managers have increased their overall net exposures, which enabled them to generate positive returns as equity markets bounced back early in July. Despite mid-month volatility, managers were able to preserve gains to finish up for the month. The Credit Suisse Long/Short Equity Replication Index was up 1.96% (net) for the month, while the Credit Suisse Global Macro Replication Index finished up 0.03% over the same period.”
AIR Indices seek to replicate the performance of major hedge fund strategies and enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index. The AIR platform also offers inverse indices that seek to approximate short exposure to the aggregate returns of the universe of Long/Short Equity and Global Macro hedge fund managers.
Performances for the AIR Global Macro and Long/Short Equity Indices are calculated daily and shown net of a 1.15% per annum calculation fee.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
