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 – Private-equity investors are being offered stakes in Indian companies as hedge funds and banks seek to offload assets, said an executive at 3i Group Plc.
Hedge funds and banks that bought minority stakes in Indian firms in recent years are finding it hard to unwind their investments because the “listed market is dead,” said Anil Ahuja, who heads the Asian business of the London-based private- equity firm. 3i has poured more than $2 billion into Asia since 2006, and last month invested $161 million in Krishnapatnam Port Company Ltd., its third infrastructure investment in the nation.
“There’s a whole new slew of transactions that are starting to be discussed where people who need the capital are offloading stakes which they hold in unlisted companies,” he said, declining to name the companies.
The offers could ease a slowdown in private-equity sales as stakes are offloaded for less than what management of the companies are prepared to accept, Ahuja said. Private-equity investments in India may fall to as low as $5 billion this year, according to estimates by TPG Inc. and Bain Capital executives at an industry conference in Mumbai last month. That would be less than half the $10.7 billion invested in 2008, based on estimates from the Asian Venture Capital Journal.
Initial share sales by Indian companies fell 46 percent to 183 billion rupees ($3.5 billion) in 2008, making it harder for private-equity investors, banks and hedge funds to cash out their investments. The benchmark Sensitive Index tumbled a record 52 percent last year.
Forbes – Private equity investors in Asia are increasingly fearful of fraud within their portfolio companies as the global economic downturn puts mounting pressure on firms in the region.
The global financial crisis has already caused significant damage to private equity-backed companies in Asia, with shares plunging and demand drying up for everything from electronics to manufactured goods.
But corporate fraud, a scourge that can be more prevalent and harder to detect in emerging economies such as China and India, can quickly turn a bad private equity investment into a disaster.
International Herald Tribune – The mergers and acquisitions business is about to take a deep dive.
For most of the financial crisis, it has remained surprisingly buoyant. This was partly because there was a lot of business to be done selling troubled banks like Merrill Lynch, HBOS and Fortis.
There was also the overhang of deals from the bubble era. But in the past week, two such megadeals – the miner BHP Billiton’s hostile bid for a rival, Rio Tinto, and the planned leveraged buyout of Bell Canada – have come apart at the seams.
As the financing squeeze tightens, other deals could follow suit.
Financing Verizon Wireless’s acquisition of Alltel is proving to be a strain. Verizon Wireless has issued bonds and is looking to raise some bank debt. But the company may have to pay a high price.
International Herald Tribune – Hedge fund managers usually shun the spotlight. But five of them, billionaires all, are about to come under the glare on Capitol Hill.
The money managers — Philip Falcone, Kenneth Griffin, John Paulson, James Simons and George Soros — have been called by a House panel to discuss some of their trade secrets at a hearing on Thursday.
The topics are likely to range from the managers’ use of leverage — the borrowed money that fuels investment returns on the way up but can be devastating on the way down; their funds’ bets in the markets; and the managers’ pay.
Also front and center will be the matter of oversight, one of the most contentious issues confronting the loosely regulated hedge fund industry. Regulation, or the lack of it, has been an issue since the 1990s, but it has come to the fore this year as questions have swirled about hedge funds’ role in the financial crisis.
International Herald Tribune – Bernard Drury is a rarity on Wall Street: a hedge fund manager who is making money, rather than losing it.
While most hedge funds are declining this year and unsettling the markets in the process, a handful are posting spectacular gains. Drury’s fund, for instance, is up 60 percent since Jan. 1.
How has he done it? Drury, a former grain trader, is not giving away his secrets. He relies on proprietary computer models to chart tides in the markets and to ride the prevailing currents.
But however smart or lucky the moneymakers have been, a few bad trades can end any hot streak. Despite Wall Street’s reputation as a place of big money and bigger egos, many of the winners are reluctant to boast, particularly given the gaping losses threatening some rivals.
International Herald Tribune – Bernard Drury is a rarity on Wall Street: a hedge fund manager who is making money rather than losing it.
While most hedge funds are sinking into red this year and unsettling the markets in the process, a handful of them are posting spectacular gains. Drury’s fund, for instance, is up 60 percent since Jan. 1.
How did he do it? Drury, a former grain trader, is not giving away his secrets. He relies on proprietary computer models to chart tides in the markets and to ride the prevailing currents.
But however smart or lucky the moneymakers have been, a few bad trades can end any hot streak. Despite Wall Street’s reputation as a place of big money and bigger egos, many of the winners are reluctant to boast, particularly given the gaping losses threatening some rivals.
"There’s going to be, naturally, a lot of forms of disillusionment with hedge funds," said Drury, who opened his fund, Drury Capital, in 1992.
International Herald Tribune – Only 10 months ago, Remy Trafelet was so flush that he treated about 100 employees at his hedge fund to a getaway in Venice. He and his crew spent a long, luxurious weekend at the five-star Hotel Bauer, which has Murano glass chandeliers, private gondoliers and a splendid view of a 17th-century basilica.
But now, a bit like Venice, Trafelet’s hedge fund seems to be sinking. His flagship fund has fallen about 26 percent this year, and Trafelet is struggling to hold on to anxious employees, as well as some investors.
Perhaps the most remarkable thing about Trafelet is that he is not so remarkable at all. Thousands of hedge fund managers like him — mostly young, mostly male and virtually all unknown outside financial circles — confront a sober reality: for now, the days of easy money are over.
International Herald Tribune – Lehman Brothers said Monday that it would sell for $2.15 billion much of its money management business, including its prized Neuberger Berman asset management unit, to Bain Capital and Hellman & Friedman.
The sale of the business, more than a month in the making, has been among the biggest outstanding issues for Lehman, which filed for bankruptcy protection two weeks ago. Barclays of Britain bought Lehman’s United States capital markets division. Nomura Holdings of Japan is buying many of Lehman’s assets in Europe, the Middle East and Asia.
Before Lehman collapsed, it had proposed selling off a major stake in its investment management division, which includes Neuberger, as an integral part of a self-help plan. Then, it expected to fetch bids that would have valued the unit as high as $7 billion.
International Herald Tribune – Making millions – or even a few billion – by managing a hedge fund has been a running dream on Wall Street in recent years. But suddenly even the masters of this $2 trillion universe are falling on hard times, at least by their own gilded standards.
Hedge funds, those secretive investment vehicles for the rich and, increasingly, not-so-rich, are supposed to make money whether markets go up or down. But many of them are being swept up in the turmoil in the financial world.
The funds’ investment returns are sinking, and so are those big paydays for their managers, whose riches have helped redefine our notions of wealth and helped drive up the price of everything from Picassos to New York penthouses.
Several big funds have faltered in recent weeks, some of them spectacularly so. While many funds are still flying high, the average hedge fund has lost more than 4 percent this year, according to Hedge Fund Research, putting the industry on course for its worst year on record.
International Herald Tribune – As world markets shudder, the hedge funds based in London, once the toast of the city’s flashy financial elite and magnets for cosmopolitan capital, have stumbled badly.
The increasingly global sweep of the credit crunch and the collapse of Lehman Brothers have punished all manner of hedge funds – secretive investment pools that rely on generous lenders and a high tolerance for risk to thrive.
But in London, where a number have already shuttered, the hedge fund retreat has a pointed resonance. Along with celebrity chefs, Russian oligarchs and Italian soccer coaches, hedge funds that established operations here in the past decade have been seen as a mark of London’s hip new spirit of decadent cool – a notion reinforced by the pound’s long period of strength and the boom in home prices.
Now, the failure of Lehman Brothers, which had deep financial relationships with some of the largest hedge funds in the world, has unsettled an already jittery market – sparking fears that some hedge fund assets might be frozen there and thus be unavailable for sale if investors choose to redeem them.
International Herald Tribune – In May, David Einhorn, an outspoken hedge fund manager, took the microphone at a large industry gathering and laid out his case against the investment bank Lehman Brothers.
The firm, he told the crowd, had used "accounting ingenuity" to avoid large write-downs and remained tainted by bad commercial real estate investments. Einhorn stood to profit by convincing people of his view: He had been betting against Lehman’s stock, which stood at around $40 when he spoke, since July 2007.
In the four months that followed, the tactic known as short-selling, in which an investor bets on a decline in a stock price, played a role in hastening a fire sale of Lehman’s shares – an erosion that ultimately helped bring the venerable 158-year old firm to its knees.
At emergency meetings led over the weekend by Timothy Geithner, the president of the Federal Reserve Bank of New York, and Treasury Secretary Henry Paulson Jr., the heads of major financial institutions said they feared short-sellers would now capitalize on the climate of fear surrounding Lehman and target other financial firms. They raised the idea of having the Securities and Exchange Commission reinstate a temporary rule to limit short-selling, according to two people who were briefed on, but did not attend, the meetings.
International Herald Tribune – Do you remember a time, only a short while ago, when virtually anybody could start a hedge fund? It seemed so easy: Billions of dollars were being thrown around like confetti, even at first-time managers. Greenwich, Connecticut, the wealthy New York suburb that became an enclave for hedge fund managers, overflowed with multimillionaires and more than a few billionaires.
Anybody could make money with their eyes closed. Or so it seemed.
Ron Insana was one of the people who chased that dream. Insana spent more than a decade as one of the most prominent anchormen at CNBC, the financial news channel on cable television that has become a constant presence in just about every Wall Street office and trading room. He was a mere journalist, to be sure, but he regularly interviewed some of the titans in business, trying to make sense of the daily gyrations of the market.
In March 2006, Insana left the network to try his hand at becoming one of those titans, setting up a fund to help investors get into hedge funds, a so-called fund of funds. Paul Kedrosky, a writer and investor, said at the time that Insana’s move "reminded him a little of Lou Dobbs going to Space.com at the peak of the dot-com bubble."
