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.
Bloomberg – Commodities markets are heading for the biggest annual decline since 2001 as investors exit leveraged bets and slowing economic growth erodes demand for raw materials.
The value of the 19 commodities in the Reuters-Jefferies CRB Index fell $280.6 billion, or 43 percent, from its July 3 peak, a loss larger than their total worth two years ago, data compiled by Bloomberg show. UBS AG, the Zurich-based bank that bought Enron Corp.’s energy unit in 2002, plans to exit most commodity trading. About 15 percent of investors in Boone Pickens’s BP Capital LLC hedge fund may want their money back.
The same credit-market seizure that led to last month’s bankruptcy of New York-based Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch & Co. is squeezing speculators who drove commodities to record highs. Slower expansion in the U.S., China and India is also undermining prices of crude oil, which fell 36 percent, and corn, down 43 percent.
Bloomberg – Tantallon Capital, founded by Merrill Lynch & Co. former head of sales Nicholas Harbinson, closed one of its hedge funds after bad bets on Asian stocks, three people familiar with the matter said.
The Singapore-based firm shut its Tantallon Smaller Companies Fund, managed by Steve Sun, after it lost 25.6 percent this year, according to data compiled by Bloomberg, more than twice a benchmark that tracks similar funds. Assets shrank to $18 million as of end July, from as much as $29 million in February, the people said, asking not to be identified because details are private.
The market turmoil has wiped $19 trillion off global stock markets in the first nine months of this year. That has hurt even the most experienced managers, said Jennifer Carver, who runs the Asian business of 3A SA, the alternative investment unit of Geneva-based Banque Syz & Co.
“There are a lot of funds out there that are effectively net long that are getting killed this year,” said Hong Kong- based Carver, adding that 3A doesn’t invest in Tantallon’s funds. “The bigger funds have lost a lot of assets too, their performance has been bad; smaller funds have to close quicker because they don’t have the depth of the larger funds to keep going.”
West Palm Beach (HedgeCo.net) – Hedge fund third party marketing firm, Agecroft Partners has hired its 5th Managing Director, Jarratt Ramsey. Jarratt spent the last 11 years at multi-billion hedge fund Chesapeake Capital Management.
"Jarratt is a wonderful addition to our firm. Our business model is to introduce large well established hedge funds in a consultative manner to institutional investors," Agecroft Partners’ Managing Partner Don Steinbrugge said, "It is imperative that the members of our firm are highly technically competent. Jarratt’s educational and professional experiences are very impressive. Furthermore, his knowledge of the hedge fund industry, and security markets should give him a lot of credibility with large institutional investors."
Jarratt’s responsibilities will include assisting with due diligence on potential hedge funds the firm may represent and introducing the firm’s hedge fund clients to large institutional investors located within the Northern region of the United States.
Agecroft Partners recently received the 2008 Third Party Marketer of the Year award. It was founded by Donald A Steinbrugge, CFA, a Founding Principal of Andor Capital Management when it was the 2nd largest hedge fund firm in the world. Don was also Head of Institutional Sales for Merrill Lynch Investment Managers. Agecroft Partners, LLC is a Member FINRA and SIPC.
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Reuters – John Thain, the Merrill Lynch & Co Inc chief executive who engineered the firm’s sale to Bank of America Corp, will head investment banking, securities and wealth management at the new company — at least for now.
But analysts don’t expect Thain, who has now led two major Wall Street companies, to remain in his new job for long. They expect him to aim to succeed Bank of America (BAC.N) Chief Executive Ken Lewis, 61, or seek a CEO job elsewhere.
"The fact is that he’s a CEO — he’s not going to stay long," said Greg Donaldson, director of portfolio strategy at Donaldson Capital Management in Evansville, Indiana.
Thain, 53, was previously CEO at NYSE Euronext Inc (NYX.N) and before that was president and chief operating officer at Goldman Sachs Group Inc (GS.N).
Here Is The City – Bloomberg reports that CEOs at Wall Street’s top five securities house earned a staggering $3bn between them from 2003 and 2007, during the time when the subprime and toxic securities timebomb was ticking away in the background. Goldman Sachs CEOs were paid the most in this period ($859m), followed by Bear Stearns ($609m).
And talking of Wall Street finest, former Merrill Lynch CEO Stan O’Neal (who bagged $172m in pay between 2003 – 2007), is said to be thinking of making a comeback. According to The Financial Times, O’Neal is considering joining Vision Capital Advisors, a small hedge fund and private equity firm.
Bloomberg also reports that JPMorgan Chase has acquired Washington Mutual’s branch network for $1.9bn, as the thrift was seized in what has been described as the largest bank failure in US history. JPMorgan will not acquire any of WaMu’s liabilities. CEO Jamie Dimon said: ‘This is a fabulous franchise. We think we got this at a price that protects us’.
Politico.com – Even as the storied financial names vanish — Lehman Brothers, Merrill Lynch and Bear Stearns — they’re being quietly replaced by less familiar ones: Cerberus Capital Management, Citadel Investment Group, SAC Capital Partners and the other biggest hedge funds and private equity shops in the world.
The consensus in Washington is that the Wall Street meltdown means an inevitable resurgence of regulatory authority over the financial sector. But what it may actually portend is just the opposite: the emergence of an almost entirely unregulated financial sector that replaces investment banks that were more rigorously regulated.
It has now become very clear to market insiders that the $2.1 trillion hedge fund industry is larger in terms of capital than the remnants of the investment banking sector.
Reuters – Hedge funds are keeping borrowings and risk low and seeking sanctuary in safe-haven assets during the current market turbulence, but some are beginning to see opportunities to make attractive investments.
The events of the past few days — the collapse of Lehman Brothers, the $50 billion sale of Merrill Lynch to Bank of America and the $85 billion rescue of AIG — have hit funds’ returns and caused many to cut back their bets.
"Managers have been reining in leverage given the extreme volatility in the market. Sentiment is so bad, people are loath to make big bets," said Jack McDonald, chief executive of hedge fund service provider Conifer Securities.
Eclectica Asset Management, co-founded by high-profile hedge fund manager Hugh Hendry, told Reuters its hedge fund had 140 percent of net asset value invested in mid- and long-dated German bunds.
CFO.com – At 12:01 a.m. this morning, the Securities and Exchange Commission pushed out a new "emergency" disclosure rule that requires hedge funds and other large investors to disclose their short positions. The mandate is one of three new SEC investor protection rules that went into effect early this morning in response to widespread drops in stock prices in the wake of a liquidity crisis exacerbated by this week’s Lehman Brothers bankruptcy and sale of Merrill Lynch.
In a joint statement, SEC chairman Christopher Cox and SEC Enforcement Division director Linda Chatman Thomsen said that the rule, which is designed "to ensure transparency in short selling," will affect funds with more than $100 million invested in securities. Those fund managers, who are currently reporting their long positions, will now be required to "promptly begin public reporting of their daily short positions."
Reuters – Hedge funds are keeping borrowings and risk low and seeking sanctuary in safe-haven assets during the current market turbulence, but some are beginning to see opportunities to make attractive investments.
The events of the past few days — the collapse of Lehman Brothers, the $50 billion (28 billion pounds) sale of Merrill Lynch to Bank of America and the $85 billion rescue of AIG — have hit funds’ returns and caused many to cut back their bets.
"Managers have been reining in leverage given the extreme volatility in the market. Sentiment is so bad, people are loath to make big bets," said Jack McDonald, chief executive of hedge fund service provider Conifer Securities.
Eclectica Asset Management, co-founded by high-profile hedge fund manager Hugh Hendry, told Reuters its hedge fund had 140 percent of net asset value invested in mid- and long-dated German bunds.
The remainder of its exposure is to bond yield swaps and soft commodities.
The Independent – Stanley Fink, the so-called godfather of UK hedge funds, has made a dramatic return to the industry after retiring from Man Group, the largest alternatives manager in the world, only two months ago.
Mr Fink confirmed yesterday that he had been appointed chief executive of International Standard Asset Management, an alternative asset manager with about £200m under management. The fund also announced the appointment of the former Labour Party fundraiser Lord Levy as chairman.
The London-based trading group said Mr Fink will assume responsibility for the operational management of the business to build a significant hedge fund presence, while both will use their extensive network of wealthy contacts to boost the fund’s assets under management.
International Standard Fund was set up by the former Merrill Lynch gold trader Roy Sher, a friend of Mr Fink, in 2003, and is mainly backed by private investors. Mr Sher said the big-name appointments should help the firm to win market mandates ahead of its hedge fund rivals.
New York (HedgeCo.Net) – Just one day after reaffirming their stance they would not rescue America International Group Inc., the Fed has agreed to lend the collapsing insurer $85 billion in exchange for a 79.9 percent majority stake.
The Fed justified the move, stating “a disorderly failure of AIG could add to already significant levels of market fragility.” The two-year loan will assist AIG in “meeting its obligations,” although the government has the right to halt dividends to common and preferred stockholders. Parts of the company may also be broken off and sold to pay off the debt.
The move came after a whirlwind week of plunging share pricing and other Wall Street firms trying to stay afloat. With the recent bankruptcy of Lehman Brothers and Bank of America’s purchase of Merrill Lynch hanging in the background, AIG looked to be another casualty of the credit crunch.
The federal government had urged AIG to seek a private investor, not wanting to use taxpayer funds to support a bailout. However, fears of larger worldwide market implications forced the Fed to retract on that belief while denying any aid to Lehman Brothers, who collapsed this week.
Fears of systematic risk and greater market turmoil have been the catalyst for many actions taken by the federal government as of late. Just weeks ago, the Fed stepped in and took over Fannie Mae and Freddie Mac after it was clear the companies could not weather the mortgage crisis. Earlier this year, the Fed helped to facilitate the purchase of Bear Stearns by JPMorgan by providing the needed financing.
AIG has agreed to an interest rate that is 8.5 percentage points above the three-month London Interbank Offered Rate, putting it at about 11.4 percent.
After helping AIG avoid surpassing Lehman as the largest bankruptcy ever filed, the U.S. government has now spent over $700 billion in efforts to stabilize the markets and reverse the damage caused by the housing crisis.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Reuters UK – "Does anyone know what is happening with the markets?" former U.S. Treasury Secretary Lawrence Summers asked after stepping out of his car and into a hedge fund industry conference in Connecticut on Tuesday.
And he wasn’t the only one wondering.
As Summers, now a managing director at hedge fund DE Shaw, and hundreds of managers and investors scanned Blackberries for prices and dialled cell phones for updates, the words Morgan Stanley American International Group tripped off dozens of tongues and faces went pale.
Only one day after watching financial markets tumble as Lehman Brothers Holdings hurtled toward liquidation and Merrill Lynch stunned investors with a surprise sale to Bank of America Morgan Stanley’s share price tumbled but its CFO declared that things were getting out of hand.
AIG’s shares sank 48 percent after the market closed as the insurance group struggled to get the funding it needed to survive.
"I would describe the mood here as a little bit wary," said Raj Mohamad, who travelled to the two-day conference from Singapore where he helps U.S. hedge funds find Middle Eastern investors as Managing Director at Five Pillars Pte Ltd.
