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.
Wall Street & Technology – Although talk of the swine flu has largely been out of the media for the past few weeks, a rush of new cases of the H1N1 virus is expected to hit financial centers in the fall and winter " and organizations, and in particular hedge funds, need to be well prepared for a pandemic.
Bob Guilbert, managing director of marketing and products at Eze Castle Integration (booth 1804), which provides outsourced IT technology and services for hedge funds, says his firm has been taking a proactive approach to the pandemic.
Courthouse News Service – President Obama’s plan to overhaul financial regulations, to prevent a repeat of the country’s credit and banking catastrophe, is laid out in a "nearly final" 85-page document the president is expected to reveal today.
Among other things, the president proposes creating a National Bank Supervisor to oversee all federally chartered banks; strengthening capital requirements for banks; requiring hedge funds and other private pools of capital to register with the SEC; and regulating derivatives, including credit default swaps.
The plan would give the Federal Reserve more authority over large financial institutions that could threaten the financial system, and give the Federal Deposit Insurance Corp. greater power to seize and break up such institutions.
The document proposes five "key objectives;" 1. Promote robust supervision and regulation of financial firms; 2. Establish comprehensive supervision and regulation of financial markets 3. Protect consumers and investors from financial abuse; 4. Improve tools for managing financial crises; and 5. Raise international regulatory standards and improve international cooperation.
The first objective of the plan calls for "new authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks."
Reuters – Hedge fund managers, administrators and investors have gathered in Monaco for the annual GAIM industry conference following a tough year marked by poor performance and client outflows.
Below are selected quotes from the first day of the conference:
JONATHAN FEENEY, INVESTCORP INVESTMENT ADVISORS:
"In the last five years or so … everything was flying and no one cared about risk management. It’s only when problems arise that it suddenly becomes a focus, and then it’s too late.
"With a new manager, it’s horrible to say this, but it’s got to the stage now where you want to check the office exists. It’s the paranoia now post-Madoff."
Hedge funds have begun to raise leverage levels again in recent weeks as prime brokers and other lenders become bolder about extending credit in more stable markets, a lawyer specializing in the sector said on Tuesday.
Henry Bregstein, attorney at law at Katten Muchin Rosenman, said that some strategies, such as multi-strategy funds and funds of funds, had tentatively started to increase leverage to as much as 50 percent within the last six weeks.
"We’re starting to see some leverage come back into the hedge fund industry," he told Reuters on the sidelines of the GAIM hedge fund industry conference here.
"With the stronger funds, we’re beginning to see some working on new leverage transactions… Markets appear to have stabilised."
Herald Tribune – Investors are always searching for the "Holy Grail" of investing; that is, investments with high returns, low risk and little correlation to the returns of the broad stock and bond markets.
Some investors believe that they have found it in the category of investments labeled as hedge funds.
A hedge fund is an investment partnership open only to a limited number of "qualified" (meaning wealthy and supposedly sophisticated) investors that engages in a range of non-traditional investment strategies, many of which are not permitted to mutual funds.
Financial Post – Barclays PLC, the U.K.’s third-largest bank, is in talks with BlackRock Inc. and other bidders to sell its asset management division for more than US$10-billion.
BlackRock, the world’s biggest publicly traded asset manager, is the leading contender to buy Barclays Global Investors, people familiar with the situation said June 6. London-based Barclays has also held talks about selling BGI to Bank of New York Mellon Corp, the people added. The bank is seeking more than US$12-billion for the unit, and may keep a 20% stake in the merged company, one of the people said.
Retaining a stake "is an intelligent way to structure the deal," said Danny Clarke, a Liverpool-based analyst at Capital Group PLC, who has a "hold" rating on Barclays. "It strikes a balance between short and long-term goals, boosting capital and retaining some earnings."
Reuters – Many of Switzerland’s smaller fund of hedge funds providers could be forced to consolidate in order to cover increasingly onerous expenses if they are unable to attract significant assets, a Swiss academic said on Monday.
The small average size of Swiss funds of funds produced low income from management fees, making it more difficult for funds to achieve economies of scale, Peter Meier, head of the centre for alternative investments and risk management at the Zurich University of Applied Science, said in a presentation in Zurich. "I’m sure there are many funds around which no longer have the asset base to cover their costs. Some will need to attract more assets to survive," Meier told Reuters after the presentation on Swiss fund of hedge funds.
Reuters Copenhagen – Business leaders met in Denmark to try to unite behind a common call for long-term climate policies, ahead of a U.N. conference in December meant to forge a new climate treaty to replace the Kyoto Protocol.
"For those who are directly or implicitly lobbying against climate action I have a clear message: your ideas are out of date and you are running out of time," U.N. Secretary-General Ban Ki-moon told a meeting of more than 500 business leaders.
"The smart money is on the green economy," he said. "Leaders sometimes are weak because they are short-sighted to get the votes," he added, urging businesses to lobby for carbon cuts.
Reuters – Warren Lichtenstein’s Steel Partners LLC is forging ahead with a controversial plan to convert its flagship hedge fund, Steel Partners II, into a publicly traded holding company in the face of opposition from shareholders calling for liquidation.
The New York-based firm told limited partners, in a shareholder letter dated Tuesday, that they have until June 5 to either approve its plan to convert the fund into shares in a listed company, Steel Partners Holdings, or elect to receive a share of the fund’s assets. Both options will also distribute some cash.
"For myself and many of our investors, the option provided by Steel Partners Holdings is too compelling to ignore," Lichtenstein said in his investor letter, a copy of which was obtained by Reuters.
NineMSN – Ospraie Management is launching two funds focusing on commodities and other liquid securities just eight months after it was forced to close its flagship fund amid huge losses on commodities trades.
The US hedge fund’s move, announced in a letter to investors, is a sign of growing confidence within the hedge fund industry.
"After much reflection and with a number of lessons learned, we see a set of opportunities today that we believe could create significant value for investors in coming years," Dwight Anderson, Ospraie’s founder, wrote in a letter last week obtained by the Financial Times.
American Chronicle – A Los Angeles businessman has pleaded guilty to corruption charges in a pension fund scandal that began in New York and is heading west.
Julio Ramirez Jr.’s guilty plea to securities fraud, revealed Tuesday in New York, tightened the connection between that state’s scandal and the pension fund industry in California. The charges arise from Ramirez’s work as an unlicensed "placement agent" for Wetherly Capital Group of Los Angeles, a politically connected firm that has secured investment business from CalPERS and CalSTRS.
GlobeSt.com – Locally based direct private lender Silo Financial Corp. has formed an alliance with a New York City-based private equity fund to concentrate on non-performing loans, says Silo founder Jonathan Daniel. The fund has earmarked $100 million "for opportunistic real estate lending, acquiring non-performing loans, lending against nonperforming loans and potentially even doing some strategic preferred equity," Daniel tells GlobeSt.com.
The time is ripe for such a venture, in the view of Daniel and the founders of KPO Ventures, two former partners at multi-billion-dollar hedge funds. "Obviously, the current environment is very conducive for private lending, due to the fact that there’s no capital out there," says Daniel.
