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 – Merrill Lynch & Co Chief ExecutiveJohn Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered company’s compensation committee is resisting his request, the Wall Street Journal said, citing people familiar with the situation.
The compensation committee has not reached a decision, but is leaning toward denying Thain and other senior executives bonuses for this year, the people told the paper.
Merrill could not be immediately reached for comment.
Shareholders on Friday approved Bank of America Corp’s takeover of Merrill, a deal fraught with risk but one that would create a banking giant with a leading position in almost every major area of the financial system.
Reuters UK – Fund manager Aberdeen Asset Management is eyeing opportunities to snap up funds of hedge funds and funds of private equity funds at bargain-basement prices, its chief executive said on Thursday.
Martin Gilbert said that with opportunities in these areas "now pretty strong" as the global financial crisis causes upheaval in the industry, the fund manager could look at making small acquisitions.
"Funds of hedge funds (FOHFs) and funds of private equity are a lot cheaper than they were six months ago, and they are significantly cheaper than they were two years ago.
"FOHFs, for example, were selling for 15 percent of assets under management two years ago. They are now down to very, very manageable levels, very attractive levels, and a lot of them are subscale, so I think there is an opportunity to consolidate in that area," Gilbert told Reuters in an interview.
Chicago Tribune – The credit crunch and global economic recession have squeezed many independent filmmakers, who were already struggling from a glut of films and a shortage of funds even before the global economy went into a tailspin last month.
While the major studios have long-term deals in place to co-finance their movies, independent producers aren’t nearly as fortunate. Most of them do not have easy access to capital and instead must cobble together a patchwork of financing to make one film at a time. That patchwork has become frayed as lenders cool on making loans to filmmakers and foreign buyers grapple with access to credit and depressed currencies.
"The entire ability of independent filmmakers to finance their films has been shaken dramatically," said Mark Damon, chief executive of Foresight Unlimited, a Los Angeles film production company, who produced the 2003 drama "Monster."
Reuters – Man Group plans to be a consolidator in the hedge fund industry in the long-term, said Chief Executive Peter Clarke, who thinks the industry could see redemptions of between a third and a quarter at the year-end. "Consolidation is undoubtedly going to happen … Longer-term we’d expect to be a consolidator in these markets," he told Reuters in an interview on Thursday.
However, he said the firm was "doing nothing in these markets, there’s too much uncertainty."
Clarke also said redemptions in the $1.7 trillion hedge fund industry of between a quarter and a third at the end of the year would be "the right sort of figure."
"The year-end is seeing significant levels of redemptions," he said.
Reuters Shanghai – The investment banking arm of China Construction Bank plans to launch a 5 billion yuan ($731.3 million) fund to focus on investments in the country’s rapidly growing heathcare sector, state media reported on Tuesday.
Hong Kong-based CCB International is leading the fundraising but has not yet reached the initial target of 5 billion yuan, the online edition of the official Xinhua News Agency (www.xinhuanet.com) said.
Once launched, the fund would focus on investments in healthcare-related sectors including pharmacy, medical equipment manufacturing, medical institutions and services, Xinhua quoted CCB International’s chief executive, Hu Zhanghong, as saying.
Reuters UK – Recent sharp moves in global currencies are the start of longer trends set to produce strong money-making opportunities for trend-following hedge strategies, according to Insch Capital Chief Executive Chris Cruden.
Cruden, whose Insch Interbank Currency Program is up 7.96 percent over the year to end-September before fees compared with a 27.6 percent fall in the MSCI World index, points to the rise of the Australian dollar versus the U.S. dollar between 2001 and 2008 as an example of previous long-term currency moves.
"I imagine the nature of the shakeout will produce sustained moves lasting many months if not years," said Cruden, a former director of Adam, Harding and Lueck Asset Management AHL.L, now the flagship hedge strategy of Man Group.
Seeking Alpha – Investors pulled at least $43bn from U.S. hedge funds in September as market turmoil led to unprecedented withdrawals, an analysis by a leading research house shows.
The data from TrimTabs Investment Research – which was to be sent to clients late on Wednesday – come as hedge funds are working to prevent far bigger redemptions by the end of the year, when many funds give investors a chance to take out money.
Withdrawals can lead to a vicious circle in the markets, as funds sell holdings to return money to clients, depressing prices and prompting further redemptions.
The chief executive of a leading alternative investment manager said he expected the hedge fund industry to shrink by 50 per cent in coming months – with half the decline coming from withdrawals and half coming from investment losses.
Conrad Gunn, chief operating officer of TrimTabs, said the $43bn in September withdrawals would mark “the beginning of what we expect to be a series of outflows for the remainder of the year. We expect October outflows to be larger.”
The industry, which manages close to $2,000bn, has experienced outflows during only a handful of months previously, including a small outflow in April of this year.
Reuters - An unprecedented cash crunch is choking the ability of banks to lend and creating an opportunity for hedge funds to launch, or ramp up corporate lending facilities.
Companies that have relied on bank borrowing to grow, or even maintain their business, are turning to hedge funds in a move that some say may signal a broad shift of lending from banks to asset managers.
"I have a very strong belief that the new investment banks will be the absolute return hedge funds and the managers of private equity," said Thomas Priore, Chief Executive at ICP Capital, an investment firm that manages $13 billion in fixed income assets, in New York.
Forbes – Business software company Epicor Software Corp. said Monday it will not pursue a $566 million buyout offer from shareholder Elliott Associates LP.
Hedge funds Elliott Associates and Elliott International LP offered to buy Epicor Oct. 1 for $9.50 per share, representing a 20.4 percent premium to the stock’s closing price of $7.89 on Sept. 30. Based on Epicor’s 59.6 million outstanding shares as of Aug. 1, the deal would be worth roughly $566 million.
At the time, the offer was still well below the stock’s 52-week high of $14.04 reached last October.
The hedge funds own 10.2 percent of Epicor.
In a letter to Elliott, Epicor President and Chief Executive Thomas F. Kelly said the company has a roadmap of products planned over the next 18 to 24 months and has the opportunity to establish itself further in the market and grow.
Reuters – GAM, the hedge fund firm owned by Julius Baer AG, is preparing to launch a distressed debt fund of funds after watching asset prices reach "extreme levels", a company letter seen by Reuters said.
In a letter to investors seen by Reuters on Monday, GAM chief executive David M. Solo said: "We are completing a thorough review of a range of the best managers in the U.S. and Europe so as to create a diversified vehicle to benefit from this unique opportunity."
In the letter dated Oct. 2, Solo said GAM clients had been requesting a distressed fund for more than a year. That the firm is now preparing to dip its toe in the water could encourage other players in the field to feel asset prices are nearing bottom.
A source familiar with the plans indicated that a launch for the fund has been mooted for the end of this year or early in 2009, although that was subject to change. The source could give no figure for target assets under management.
Times Online – Every week at least one British hedge fund is considering winding up its funds as catastrophic investment performance puts the sector under unprecedented pressure, an industry expert said yesterday.
Andrew Shrimpton, the former head of hedge fund regulation at the Financial Services Authority who now runs Kinetic, a consultancy, said: “The credit crisis is definitely kicking in for the hedge fund industry now. We are being approached by hedge funds considering voluntary fund liquidations on a weekly basis.”
His remarks came as CQS, one of London’s best-known hedge funds, wrote to its investors to say that its flagship $4.25billion CQS Fund had fallen 9.42 per cent for the year to date. Michael Hintze, its chief executive and senior investment officer, told investors that senior management at CQS were meeting as often as three times a day to monitor the fund and take action over its exposures where necessary. The fund, which specialises in convertible arbitrage – or small price differentials between bonds and underlying equities – is down more than 11 per cent for the year.
