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 – Hedge funds will soon play a bigger role in portfolios, but investors still worry about getting their money back and understanding what a manager is doing, according to a new survey released on Monday.
Nearly 60 percent of all financial advisers who help wealthy people invest their money and institutional investors said they expect hedge funds to be as important to much more important as traditional investments over the next five years.
Reuters – Credit ratings agency Moody’s has maintained its top ratings on four portfolios run by Europe’s biggest hedge fund, firm Brevan Howard, which it initially awarded before the industry crisis last year.
The “OQ1″ ratings, which denote an excellent grade in various areas of the fund’s operations such as its trading and valuation process, were backed up by Brevan Howard’s “excellent risk and liquidity management”, Moody’s said in a statement on Friday.
The agency also highlighted “the strength of the manager’s overall approach towards governance of the fund”.
New York Times – Russell Herman, the chief executive of the hedge fund firm Dawson-Herman Capital Management, is the latest manager to shutter his fund after heavy losses last year and differences with the firm’s founder, Jonathan Dawson.
Mr. Herman told clients in a letter last week that he was shutting the Southport Millennium Funds and returning capital to investors. The move was first reported by Dealbreaker.com on Friday. The firm currently has about $902 million of capital under management after reaching a height of $3.2 billion at the beginning of 2008.
Like many in the hedge fund industry, Dawson-Herman suffered big losses last year. The main Southport fund was down more than 35 percent and has failed to make up for the losses this year. “We have not been able to build the portfolios with high conviction ideas and themes to the degree that is satisfactory to me and in line with our historical standards,” Mr. Herman said in the letter.
Reuters – Fortress Investment Group LLC, one of the few publicly traded U.S. hedge fund groups, reported a narrower quarterly loss on surprisingly strong revenue Wednesday, and forecast improved demand for its portfolios in coming quarters.
Fortress executives said several funds delivered respectable returns in the first half the year, and they expect demand to pick up as financial markets recover.
Seeking Alpha – Hedge Funds: An Analytic Perspective by Andrew W. Lo is a highly technical and intellectual analysis of hedge funds. Mr. Lo has filled his book with many advanced, detailed concepts and statistics about the hedge fund industry. The book is so technical that it reminded me of one of my old college statistics textbooks, filled with complex formulas and mathematical terms.
Warning: This book is not for the average investor (including me). This was the book that I chose to bring with me on vacation. Phrases such as: "Filtered and constrained Sharpe ratio trajectories of tangency portfolios for filtered and constrained mean-variance-liquidity efficient frontiers for 13 CSFB/Tremont hedge fund indexes" is not what I had in mind to read while I sat on the beaches of Long Beach Island, NJ with waves crashing in the background.Seeking Alpha
CNN Money – Money managers must offer new portfolios and keep cutting costs to survive in an era where frightened investors prefer safer fixed-income funds to stock and hedge funds, a report released Monday showed.
Badly bruised by last year’s financial crisis when tumbling markets and investor redemptions shrank global assets 18 percent to $48.6 trillion, asset managers face more tough times in 2009 and the years ahead, The Boston Consulting Group wrote in its seventh annual asset management industry survey.
Profits will shrivel again, likely falling to 30 percent or less this year from 34 percent at the end of 2008 and 38 percent at the end of 2007, the consultants forecast.
Reuters – Hedge funds are crawling back to life after a turbulent 2008 that has almost halved their assets, and fewer but stronger survivors are set to regain their leverage to chase bargains in a less competitive environment.
Hedge funds, which manage their portfolios aggressively with various advanced strategies including derivatives to gain higher returns, suffered double-digit losses last year after global stocks and commodities tumbled because of the credit crisis.
As a result of client redemptions, the amount of investor capital managed by single-manager hedge funds might have halved to close to $1 trillion by mid-2009 from the 2008 peak of $2 trillion (1.2 trillion pounds), according to the European Central Bank.
Alibaba News Channel – Hedge fund firm 36 South said on Monday it had launched a "high risk/high return" fund designed to protect investors’ portfolios against a surge in global inflation. The Excelsior fund will target returns of five times the rate of inflation in the G5 group of economies, if that inflation rate exceeds 5 percent, by buying long-dated out-of-the-money options across assets such as equities, commodities, currencies and interest rates, the firm said in a statement.
However, if the rate of inflation stays below 5 percent then investors could lose all their money, a spokesman said.
"Inflation is the single greatest risk facing the world economy at present," said 36 South director and founder Jerry Haworth.
"Whilst the prevailing view is that a sustained period of significant global inflation is unlikely, investors need to be attuned to this risk and the devastating effect it will have on their portfolio should this scenario come to pass."
Bloomberg – Yale University and Harvard University may have to cut investments in hedge funds and private equity because the risks of holding the hard-to-sell assets outweigh the returns, said Bill Gross, co-chief investment officer of Pacific Investment Management Co.
“The Yale and Harvard portfolios, which have succeeded enormously over the past 10 or 20 years in terms of the emphasis on illiquidity and private investments and risk-taking — you have to question that model,” Gross said yesterday at an industry conference in Chicago.
The two Ivy League schools had more than half of their endowments in hedge funds, private equity, real estate and hard assets such as commodities at June 30. Gross, who manages the $150 billion Pimco Total Return Fund, the world’s biggest bond mutual fund, recommended in March buying securities that provide stable income this year rather than more speculative and illiquid investments, as slowing economic growth and higher unemployment depress returns.
Reuters – Hedge fund manager Steven Persky plans to start betting on companies’ bad fortunes again.
Persky, who runs $1 billion hedge fund firm Dalton Investments, said on Wednesday he will re-launch his distressed debt strategy three years after liquidating two similar portfolios when the strong economy made such investing difficult.
Now that times have changed dramatically, Persky is among a handful of fund managers who expect to make money for their wealthy clients in the distressed area.
West Palm Beach (HedgeCo.net) – U.S. hedge fund manager MTM Global Financial Services is looking for an offshore hedge fund partner. In order to raise approximately $50 million in capital for a REIT fund focused on newer US residential real estate in state income tax free Florida, Texas, Nevada and Washington.
The fund manager says, "By creating a joint venture with an offshore mutual fund, hedge fund, or high net worth individual, MTM Global Financial Services will provide the acquisition services, along with the day to day operation of the real estate rental portfolios."
"This is a straight up deal, with huge upside, that will offer transparency and integrity for the investors." the President of MTM Global Financial Services said, "we seek a joint venture partner, that is results driven, that values their reputation, and knows a good thing when they see one. We think this could become a lucrative long term enterprise for all involved."
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Post Chronicle – U.S. securities regulators charged a prominent hedge fund industry executive on Wednesday with failing to properly review collapsed hedge fund Bayou Group before recommending that their clients invest.
Hennessee Group and its principal Charles Gradante, who runs the New York-based group with his wife, failed to research the hedge fund group as vigorously as promised, the Securities and Exchange Commission charged.
The news is a big blow to Gradante and the Hennessee Group, which established their reputation in the $1.3 trillion hedge fund industry by tracking funds’ returns, industry flows and creating portfolios for clients.
