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Reuters – It appears nothing — not losses, redemption gates or lofty fees — can deter the rich from stashing their cash in hedge funds.
A year after crumbling markets triggered losses and fund managers drew fire for blocking redemptions, wealthy investors have not abandoned hedge funds, according to private bankers and wealth managers attending the Reuters Global Wealth Management Summit this week.
“We see continued dedication to hedge funds,” said Catherine Keating, chief executive of JP Morgan Chase & Co’s U.S. private bank, which advises families whose combined assets total $350 billion.
Finance Asia – Swiss private bank Julius Baer Group will buy ING Bank (Switzerland) for SFr520 million ($505 million) in cash.
Julius Baer will gain SFr15 billion of assets currently under management with ING in Switzerland, adding 10% to its current AUM. This will take Julius Baer’s AUM to SFr160 billion as of August. The acquisition price translates into about 2.3% of AUM, excluding capital deemed surplus on the books of ING Bank (Switzerland), and about 3% of AUM including the surplus capital, according to Julius Baer.
Julius Baer will also double its presence in Geneva through the addition of 310 ING staff, of which 80 are relationship managers.
Earthtimes – Julius Baer, one of Switzerland’s largest wealth managers, reported Monday a net profit of 324 million Swiss francs (303 million dollars) in the first half of the year, down 37 per cent compared to the same period in 2008.
The private bank said it had 299 billion Swiss francs of assets under management at the end of June, 25 per cent less, year-on-year. Compared however, to the end of last year, when the financial markets were in turmoil, the bank said its position had improved and was experiencing inflows of new capital.
The bank dropped 2 per cent of its workforce, which now stands at 4,255 staff, and personnel expenses fell by 13 per cent to 587 million francs, reflecting a lowering of performance-related bonuses.
Reuters – Hedge funds basing their investment strategy on sharia, or Islamic legal principles would face significant disadvantages compared with non-sharia hedge funds, some exponents of Islamic finance say.
Many strategies would be difficult to achieve because they would be too expensive to perform in a Sharia-compliant way, or because the tools themselves would be inappropriate under Sharia law. "You cannot have long-short hedge funds, because the idea of short selling, or selling something that you don’t own, runs contrary to the principles of Islamic finance," Fares Mourad, Head of Islamic finance at Swiss private bank Sarasin told Reuters. "I have not seen a credible structure that resolves this," Mourad said.
New York Times Blogs – Swiss private bank Union Bancaire Privée, one of the largest European hedge-fund investors, offered Thursday to buy back $700 million of its clients’ Bernard L. Madoff-related investments at half what they originally paid.
The bank, based in Geneva, will offer to pay clients the equivalent of 50 percent of the cost of their investment in five equal annual payments, plus 2 percent interest, Jérôme Koechlin, a UBP spokesman, told Bloomberg News. The first payment would be made on Dec. 31, he added.
‘‘The bank has decided to make a goodwill gesture,’’ the company said in an e-mailed statement. This is ‘‘designed to reinforce its partnership with its clients by offering a comprehensive financial package.’’
Business Standard – Hedge funds and foreign currency convertible bonds (FCCBs) are replacing real estate as popular offshore investment destinations for India’s richest.
Hedge funds are investment funds which employ various strategies to produce absolute returns. These strategies could be long- short, event driven, arbitrage or of various other types. A long-short strategy involves buying stocks which are assumed to perform high and selling stocks which are assumed to perform low.
As hedge funds are considered to be a high risk asset class, they are recommended to only a few “ultra high net worth and sophisticated” clients only. "Currently we are recommending 10-15 per cent allocation in strategies such as long -short and arbitrage to well-informed HNIs", said the head of a private bank. The returns range from 12-15 per cent annually in dollar terms.
Reuters – Swiss private bank Union Bancaire Privee (UBP) may pull client money out of hedge funds unless they set up independent administrators, the Financial Times said on Wednesday.
The Geneva-based bank, one of the world’s largest investors in hedge funds, declined to comment on the report, which cited an internal memo to instruct managers.
Investors have blamed the absence of independent administrators as a key factor in Bernard Madoff’s success in setting up an alleged fraudulent Ponzi or pyramid scheme. Madoff was arrested earlier this month on accusations of a $50 billion fraud.
