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Reuters Tokyo – Japan’s Nomura Holdings is to buy the Asian operations of Lehman Brothers, a source with direct knowledge of the deal said on Monday, outbidding other banks seeking to scoop up the bankrupt U.S. bank’s Asian assets.
The source did not say how much the deal was worth, nor did he say if certain Lehman units were excluded from the agreement.
Nomura and Britain’s Barclays Plc have also bid for parts of Lehman’s business in Europe, as administrators seek to save as many jobs and salvage as much business as possible from the wreckage of what was Wall Street’s fourth biggest investment bank.
Barclays is interested in Lehman’s European equities businesses, a person familiar with the matter said. That could include 1,000-1,500 bankers and support staff, mostly in London, out of Lehman’s European workforce of 6,000.
Reuters – John Paulson, a U.S. hedge fund manager who gained a superstar reputation with a big bet against the U.S. housing market, was shown holding a 1 billion pound ($1.9 billion) bet against UK banks as short sellers were forced to disclose their positions.
Paulson & Co., run by John Paulson and based in New York, said it had a 1.2 percent short position in Barclays, worth over 350 million pounds, a 1.8 percent short position in Lloyds TSB, and short positions of just under 1 percent in Royal Bank of Scotland and HBOS.
The stakes were unveiled on Wednesday after Britain’s regulator imposed a ban on short-selling financial stocks last Friday, which was followed by similar moves in the United States and elsewhere.
Times Online – Who would be in hedge funds right now? Man Group, which has long traded on its name as the world’s largest hedge fund manager, yesterday found the tag something of a liability.
The shares lost 35½p to 398p before a trading update next Monday, making a 46 per cent fall in six weeks, with analysts saying that it is heavily exposed to the whole hedge fund industry through its fund of funds portfolio. Barclays’ index of hedge fund performance shows a 5.6 per cent fall in the year so far to the end of August. Hedgies relied on high borrowing to generate high returns. Most are now being forced to sell positions to cut debt.
Meanwhile, there are growing question marks over Man’s flagship AHL managed futures fund, as its performance has slipped in the past quarter and the short-selling ban may have an impact on its strategy. Man itself is still available to be shorted.
Investec, which cut its target price from 650p to 460p, said: “The hedge fund industry looks set for further negative press, possibly impacting on short-term fund flows at Man, as well as its near-term share price performance.” Kaupthing cut its earnings forecast but held its 630p target pointing out that the AHL fund was still up 3 to 4 per cent in the year so far.
Reuters – A hedge fund that specializes in distressed investments has filed a notice of appeal in the Lehman Brothers Holdings Inc bankruptcy case, indicating it intends to challenge the court order approving the sale of Lehman’s core U.S. business to Barclays Plc.
The fund, Bay Harbour Management, did not disclose in the filing what it plans to argue in the appeal, but in court last week it filed an objection to the sale based on concerns about an $8 billion transfer from the investment bank’s European unit to its U.S. unit just before Lehman filed for bankruptcy protection.
Forbes - U.S. activist hedge fund Atticus Capital has lost more than $5 billion this year, a source familiar with the matter told Reuters, after its funds were hit by heavy falls in financial stocks. Atticus, a high-profile player in deals such as Barclays‘ unsuccessful bid for ABN Amro last year, saw total assets under management fall to around $14 billion at end-July from more than $20 billion last year, the source said.
The losses were mainly due to a 32.9 percent loss in the $7 billion Atticus European fund from the start of the year to the end of August and a 25 percent fall in the Atticus Global fund.
The firm, which employs a variety of investor lock-ups, saw few investor redemptions. Atticus declined to comment. The firm, which views itself as a long-term investor, has nevertheless delivered strong performance in recent years.
In 2006 founder Tim Barakett earned $675 million, according to hedge fund industry publication Alpha Magazine.
Times Online – The fashionable investment tactic of the past month – buying bank stocks while selling energy companies – could already have gone too far, Merrill Lynch, the financial management group, warned clients yesterday.
In mid-July, hedge funds, pension funds and other institutional investors dramatically reversed their enthusiasm for energy stocks and loathing for financials in an abrupt about-turn that sent bank shares soaring and oil and gas companies sinking.
But Merrill said yesterday that the unwinding of the classic bet of the credit crunch may already have been overdone, giving warning that banks across Europe could still be forced to raise between $70 billion (£37 billion) and $120 billion in new equity on top of the $120 billion already raised. Barclays and HBOS looked most vulnerable among UK banks to having to go back to their shareholders for more equity on top of the £4.5 billion and £4 billion, respectively, already raised.
West Palm Beach (HedgeCo.net)- Barclays Global Investors (BGI) has opened an office in the United Arab Emirates’ Dubai International Finance Centre. BGI has been active in the region since 1998 and currently has assets under management of US$ 28 billion in area.
The office, which is co-located with Barclays Wealth and Barclays Capital, will principally address the growing needs of the region’s institutions – including Government sponsored pension and social security funds, Sovereign Wealth Funds (SWFs), Central Banks and High Net Worth individuals and families.
"The new office is a strategic development for BGI’s Middle Eastern business relationships." David Semaya, Chief Executive, Barclays Global Investors Europe & Asia, said, "We are seeing investors in the region becoming more demanding in their investment strategies."
BGI’s iShares, including its three recently launched Sharia’ah compliant funds, will primarily address the retail market. Islamic finance is a $400bn industry, growing at a rate of over 15% per annum.
BGI is the world’s largest asset manager with over $2.0 trillion in assets under management. BGI’s funds include hedge funds and fund of funds as well as index and active equities and bonds funds.
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Times Online- Philip Falcone is used to demanding change from underperforming company executives, but yesterday he took Harbinger Capital, his activist hedge fund, into new territory.
Complete with financial advisers and a big stake, Harbinger broke cover as a traditional prospective buyer of strategic assets, with a tentative approach to Inmarsat, the London-listed satellite operator.
Harbinger has a 29.9 per cent holding in Inmarsat, as well as stakes in several other satellite companies, including America’s SkyTerra and Terrestar.
Mr Falcone, a former Barclays Capital trader, appears to be intent on acting as an industry consolidator, a role more commonly played by trade buyers or private equity funds.
Financial Times- Even as politicians and regulators accuse hedge fund short-sellers of trying to bring down banks in Britain, the US and Australia, top hedge managers are providing rescue capital to prop up the ailing corporate world.
The latest bail-out backed by hedge funds is the £4.5bn cash raising by Britain’s Barclays, where five big managers are ready to provide just under 10 per cent of the new money – with sovereign wealth funds providing the majority of the rest.
Hedge funds are important backers of the current wave of rights issues, too, according to investment bankers close to the deals. In spite of publicly-declared short positions – where hedge funds hope to profit from falling prices – several big hedge funds are sub-underwriting the rescue rights issue by HBOS, the biggest mortgage lender, guaranteeing to buy the shares if the rights are not taken up.
"Although equity underwriting currently looks difficult, hedge fund participation in this market has increased as their asset base has grown," says Jim Renwick, vice-chairman at UBS. "This has been the case for more than five years now."
Financial Times- Several of London’s largest hedge funds are backing Barclays’ £4.5bn ($8.9bn) capital increase, underscoring the complex roles they are playing in the recapitalisation of the UK banking sector.
GLG Partners, Lansdowne, CQS and Och-Ziff have all agreed to take up a large chunk of Barclays shares as part of its £1.7bn placing with institutional shareholders, according to the prospectus issued by the bank on Thursday.
The news comes after hedge funds have been under intense scrutiny for their actions in selling short the shares of banks attempting to raise capital through rights issues. The Financial Services Authority unexpectedly tightened its rules on the disclosure of short-selling in an attempt to stamp out what the regulator believes were attempts by hedge funds to force down banks’ share prices artificially.
Bloomberg- BlackRock Inc., the largest publicly traded U.S. money manager, and Ospraie Management LLC, are among five companies that will start Shariah-compliant hedge funds based in Dubai.
The funds will get $50 million each in so-called seed capital from the Dubai Multi Commodities Centre Authority, a government-backed agency. Barclays Capital, securities unit of Britain’s fourth-largest bank, will also back the funds which will start in the next two weeks, said Frank Gerhard, the bank’s head of fund-linked derivatives strategy in an interview.
Shariah forbids investment in companies judged by scholars to be highly indebted, and those involved in alcohol, gambling and weaponry. Financial information companies including Standard & Poor’s and Dow Jones & Co. have started Islamic indexes that show only Shariah-compliant companies. The world’s Muslim community has about $3.6 trillion of combined wealth, Standard & Poor’s estimated in 2006.
Reuters India- CQS has hired former Barclays Capital managing director David Kilgore as its head of trading in Hong Kong, part of a broader push by the $9.6 billion (4.9 billion pound) UK hedge fund manager to expand its presence in high-growth Asia.
CQS, a specialist in convertible bond arbitrage, is looking at further expanding its 20-person Hong Kong office and the launch of additional Asia-focused hedge funds is possible, CQS director Brian Pohli said on Tuesday.
"There are a number of different businesses we can bolt on here. But it depends on the skill set of the folks available and the complementary nature of the fit into our existing platform," he told Reuters in an interview at the firm’s Hong Kong office.
