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.
The London Free Press – A hedge-fund swindler who faked his own death in an effort to skip out on a 20-year prison term was sentenced yesterday to two extra years.
Federal Judge Kenneth Karas said Samuel Israel III was "thumbing his nose at the system" when he staged a suicide and jumped bail last year rather than do time for taking hundreds of millions from investors in his Stamford, Conn.-based Bayou hedge funds.
Denver Post – Bernard Madoff asked a federal judge this week to sentence him to as little as 12 years in prison after he pleaded guilty earlier this year to operating a massive, decades- long Ponzi scheme.
In a letter filed late Monday and made public Tuesday, Ira Sorkin, a lawyer for Madoff, asked U.S. District Judge Denny Chin to sentence his client to less than a life sentence.
"Mr. Madoff is currently 71 years old and has an approximate life expectancy of 13 years," Sorkin said. "A prison term of 12 years — just short of an effective life sentence — will sufficiently address the goals of deterrence, protecting the public and promoting respect for the law without being greater than necessary to achieve them."
Minneapolis Star Tribune – A Prominent Manhattan lawyer has pleaded guilty to defrauding hedge funds of more than $400 million.
Fifty-eight-year-old Marc Dreier on Monday pleaded guilty to conspiracy to commit securities and wire fraud, securities fraud, wire fraud and money laundering. The charges carry a potential prison term of 30 years to life in prison.
HedgeFund.Net – Samuel Israel III, the Bayou Group founder who led the FBI on a merry chase after failing to show up to serve his prison term, has recovered sufficiently to plead guilty to escape, a federal judge said last week.
But Israel still hasn’t pleaded guilty as the proceeding was delayed until March 16, to give the convicted ex-hedge fund manager more time to talk to his lawyers, according to news reports.
West Palm Beach (HedgeCo.net) - Bernstein Liebhard is investigating whether, among other things, these investment funds conducted proper due diligence before investing heavily in Madoff Securities, and whether these funds ignored the warning signs that Madoff was conducting a large-scale fraud.
Bernstein Liebhard is also investigating whether these funds misrepresented to investors the concentration of the funds’ investments in Madoff Securities. On December 11, 2008, Madoff was arrested by federal authorities who say Madoff admitted to operating a $50 billion Ponzi scheme in which Madoff used the principal investments of new clients to pay fictitious "returns" to other clients.
The criminal action against Madoff is pending in the Southern District of New York, 08-Mag-2735. Although Madoff had only a few individual clients that invested directly with him, individuals and institutions across the world invested indirectly and sometimes unknowingly in Madoff’s scheme through "feeder funds" – such as Fairfield Sentry Ltd. (run by the Fairfield Greenwich Group), Rye Select Fund (run by Tremont Group Holdings), and Kingate Global Fund (run by FIM Advisers LLP) – whose sole purpose was to funnel money to Madoff Securities.
Hedge funds and funds of funds invested heavily with Madoff’s feeder funds (including Fairfield) despite many warning signs that the consistent returns Madoff delivered were too good to be true. "
Hedge fund, fund of funds managers, or other collective investment fund that lost money as a result of its investment in Madoff Securities, may have a right of action to recoup losses," Bernstein Liebhard says "We has assembled a team of former government prosecutors, former SEC trial attorneys, and investigators to analyze the various legal claims available to investors injured by the Madoff scheme."
Bernstein Liebhard is one of the preeminent plaintiffs’ class action law firms in the country, having pursued hundreds of securities and consumer cases and recovering approximately $2 billion for its clients. It has been named to The National Law Journal’s "Plaintiffs’ Hot List" in each of the last six years.
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West Palm Beach (HedgeCo.net) - Morningstar presented their monthly analysis of hedge fund performance for November and asset flows through October.
"Hedge funds have a long path to recovery ahead of them," said Hedge Fund Analyst Nadia Papagiannis. "November was a better month than the last two, mostly because hedge funds hoarded cash, but they are still losing money on their investments and facing the ongoing challenge of funding investor redemptions."
Hedge funds slid again in November, as the Morningstar 1000 Hedge Fund Index lost 2.5% for the month and 23.7% year to date. Hedged against the appreciating U.S. dollar, the asset-weighted Morningstar Composite Hedge Fund with MSCI Index fared better dropping only 0.8%. Hedge funds charge performance fees on any new profits earned, but those have been scarce since November 2007.
Compounding the funds’ pain, investors have responded to the lackluster performance by pulling more than $20 billion in October, which accounts for the bulk of the $29 billion withdrawn over the last 12 months from hedge funds.
Hedge funds of funds performed better than multi-strategy hedge funds this month, as the Morningstar Hedge Fund of Funds and the Morningstar Multi-Strategy Hedge Fund Indexes dropped 2.3% and 3.0% respectively.
November returns and October asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of Dec. 16, 2008. Returns for the Morningstar Hedge Fund Indexes with MSCI are based on funds that reported November performance as of Dec. 14, 2008.
As announced in September 2008, Morningstar is also now calculating hedge fund indexes by applying the MSCI Hedge Fund Index Methodology and Hedge Fund Classification Standard to Morningstar’s hedge fund database. These indexes demonstrate the performance of hedge funds to investors who have hedged their currency exposure back into U.S. dollars. The MSCI Hedge Fund Index Methodology classifies hedge funds by investment process, geography, and asset class.
But the news was not all doom and gloom. Once again, the Morningstar Global Trend and Global Non-trend Hedge Fund Indexes performed well, funds in these categories experienced outflows during October, global trend funds saw overall inflows of $9 billion for the first 10 months of the year, more than every other category. Emerging markets fared poorly, as dwindling demand for commodities depressed the equities in commodity-based economies. The Morningstar Emerging Markets Hedge Fund Index lost 5.1% in November.
The Morningstar Developed Asia Hedge Fund Index’s relatively small loss of 0.3% was bolstered by the Bank of Japan’s interest rate cut and stimulus package announcement. The Morningstar Japan with MSCI Hedge Fund Index gained 0.5%. U.S. equity hedge funds performed among the worst this month, small capitalization equities took a beating in November, but most hedge funds hedged, as the Morningstar US Small Cap Equity Hedge Fund Index ended down only 4.6%, as compared to the Russell 2000 Index’s almost 12% decline.
The Morningstar Security Selection with MSCI Hedge Fund Index, with component funds that also take directional bets on equities, lost 2.7%. For the year to date through October, directional Europe and U.S. equity funds experienced significantly more outflows than other categories. Funds that kept a lid on market exposure fared relatively well this month. U.S. Treasuries across the board showed the largest monthly gain in decades amid poor economic data, fears of deflation, and a government plan to buy U.S. mortgage-backed securities.
The Morningstar 1000 Hedge Fund Index, a global, broadly representative benchmark for hedge fund performance, has return history from January 2003.
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West Palm Beach (HedgeCo.net) - Transport company, CSX Corporation announced that it has joined in a civil action brought by the plaintiff, shareholder Deborah Donoghue, in federal court in New York to recover so-called "short-swing" profits under Section 16(b) of the Securities Exchange Act of 1934.
The Children’s Investment Fund and 3G Capital Partners LP are there in connection with their alleged purchases and sales of CSX securities. CSX is party to the suit in name only, which was brought for the benefit of CSX.
If approved by the court, CSX will receive $10 million from TCI and $1 million from 3G and the defendants will be released from claims of violations of Section 16(b) of the Securities Exchange Act. The settlement provides that counsel for the plaintiff will seek approval by the court for attorney’s fees and costs of up to $550,000, which will be paid from the proceeds of the settlement payable to CSX.
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West Palm Beach, Dec 15, 2008 – Adding to its array of new and interactive features, HedgeCo.Net has unveiled the Hedge Fund blog platform, which provides both accredited investors and the general public the rare opportunity to view the world of hedge funds through the eyes of the industry experts themselves.
The HedgeCo.Net blogs provide a much anticipated compilation of expert analysis and opinion, while giving the user a detailed look into the minds and biases of industry gurus, which are all too often absent in mainstream media.
HedgeCo has already gathered a group of experts who will be contributing their timely knowledge to HedgeCo’s audience through the blogs. Topics will include everything from regulation issues and political influence, to due diligence procedures and tips on investing.
"Over the years HedgeCo.Net has worked towards promoting transparency in the Hedge Fund industry," explains HedgeCo Co-Founder Evan Rapoport. "The HedgeCo.Net database has gone a long way to provide simple communication between accredited investors and hedge funds. The Hedge Fund blogs further promote this idea by providing a way for the general public to get a glimpse into the lives of hedge fund professionals. The traffic and response we have gotten so far has been very positive."
To peruse the blogs or post a response, visit http://www.hedgeco.net/blogs.
West Palm Beach (HedgeCo.net) - Platts 3rd Annual European Carbon Capture and Storage (CCS) conference is assembling the CCS community to discuss and review CCS projects in their various stages and look to uncover opportunities in what will become a changed regulatory environment to ensure CCS lives up to its potential.
Some of the issues to be covered include, delivering EU Regulatory Framework, finance and investment, public perception, international CCS case-studies and storage selection and liability among others. Some leading companies are also planning to highlight their latest CCS projects.
Carbon Capture and Storage has developed in a short space of time from coal-fired power’s much-heralded saving grace, to Europe’s energy policy catchphrase to real, on-the-ground pilot project status.
With these first-stage investments underway, the energy industry is closer than ever to a genuine assessment of CCS’ viability. CSS says they are looking for updates from the major actors – how are the pilot projects progressing? Is there an adequate spread of projects in the pipeline to test all potential technologies?
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West Palm Beach (HedgeCo.net) – FactSet Research Systems Inc. announced the first quarter results ending November 30, 2008, showed revenue increase to $155.6 million, an increase of 16% compared to the prior year.
Operating income for the first quarter advanced to $51.3 million, up 21% from $42.5 million in the same period of fiscal 2008. Net income rose to $35.6 million as compared to $29.4 million a year ago. Diluted earnings per share increased to $0.73, up from $0.58 in the same period of fiscal 2008. Included in the just completed first quarter were income tax benefits of $1.4 million or $0.03 per diluted share related to the reenactment of the U.S. Federal R&D credit in October 2008, retroactive to January 1, 2008. The first quarter of fiscal 2009 marked the first full quarter of operations for FactSet Fundamentals. FactSet Fundamentals increased revenues by $0.8 million and reduced diluted earnings per share by $0.03 per share.
Philip A. Hadley, Chairman and CEO said, "Our earnings results in the first quarter clearly demonstrate the strength of FactSet’s business model. In the most turbulent three moths for our clients in decades, FactSet was able to find productivity solutions for them and grow both our ASV and EPS."
ASV increased $7.0 million when excluding currency effects during the first quarter and rose 14.5% or $78.4 million over the prior year. Including foreign exchange, ASV increased $5.2 million during the quarter.
ASV was $620 million at November 30, 2008. Of this total, 79% of ASV is derived from buy-side institutions and the remainder derives from the sell-side firms who perform M&A advisory work and equity research. Many sources are predicting that the current market turmoil will result in a reduction of the number of hedge funds. The contribution from hedge funds to FactSet’s total ASV is 6%. ASV at any given point in time represents the forward-looking revenues for the next 12 months from all annual subscription services currently being supplied to clients.
The company will host a conference call today, December 16, 2008 at 11:00 a.m. (EST) to review the first quarter fiscal 2009 earnings release. To listen, please visit the investor relations section of the Company’s website at www.factset.com.
About FactSet
FactSet Research Systems Inc. combines integrated financial information, analytical applications, and client service to enhance the workflow and productivity of the global investment community. The Company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations from more than twenty-three locations worldwide.
West Palm Beach (HedgeCo.net) - Alternative money managers and hedge fund restructuring advisers, Grisons Peak and IGS, have formed a joint venture to launch the Alternative Investment Merchant Banking (AIMB). The AIMB is to advise on M&A and restructuring deals for firms in the alternative assets industry, the business will be co-led by Paul Sullivan, Partner of Grisons Peak, and John Godden, CEO of IGS Group..
“With a 30% decline in AUM and an expected 50% decrease in the number of Fund managers and no incentive fees for 2008," John Godden, CEO of IGS Group, said, "we will see a continuing surge in merger and acquisitions activity as the Hedge Fund industry goes into an accelerated Darwinian phase. The alternative assets industry has traditionally been formed of boutiques which make for particular and complex merger issues requiring specialist knowledge of both Hedge Funds and M&A expertise.”
“The reduction in AUM in 2008 and the expected continuation of this trend in 2009 will increase the pressure on the owners and managers of alternative investment firms. Many of these firms will seek partners in order to improve profitability and increase their attractiveness to investors.” Paul Sullivan, Partner of Grisons Peak, concluded.
The 50:50 joint venture AIMB targets UK and European deals deal involving single fund managers with AUM of between $250m to $750m or Fund of Hedge Fund managers with AUM of between $400m and $1bn.
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West Palm Beach (HedgeCo.net) - Hong Kong-based hedge fund manager PMA has chosen to more than triple the number of users of PerTrac CMS in the company’s Hong Kong, Tokyo, New York, London, and Dubai offices.
PerTrac CMS is an alternative investment workflow management solution used for investor relations, capital raising and investment management workflows.
"PMA’s marketing reach has expanded significantly over the last 12 months and we now has marketing teams based in our Dubai and London offices as well as representations in New York," noted PMA Chief Technology Officer Shane McPherson.
PMA was established in July 2002 to provide investment advisory and investment with assets over $2 billion, PMA currently has over 70 professionals employed in Hong Kong, Sydney, London and Dubai, and became a member of the SPARX group in April 200, the largest publicly listed asset manager in Asia.
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!
