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 – The steepest plunge in crude prices on record may be setting up oil investors for a rally this year, if history is any guide.
The so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 30 percent to $60.29 a barrel by December. The curve looks almost the same as 10 years ago, after Russia’s default and the collapse of the Long-Term Capital Management LP hedge fund raised concerns that a global economic slowdown would reduce energy demand. Crude prices fell 25 percent in the final quarter of 1998, the steepest drop in seven years.
Bloomberg – There’s not a lot of light in Paulson & Co.’s 28th-floor headquarters on a drizzly November afternoon. The Alexander Calder sculpture and multicolored prints have been shipped to the firm’s new offices six blocks south. Darkness envelops the New York skyline.
The Dow Industrials have lost a total of 929 points over two days, and the jobless rate is poised to hit 6.5 percent. And John Paulson, who oversees $36 billion in hedge fund assets, isn’t exactly Mr. Sunshine either.
“You have deterioration in almost every asset class,” Paulson says. “You’re looking at declines in housing prices, the health of manufacturers and the earnings of various companies. There are rising delinquencies in auto loans and commercial real estate.”
Independent – The FTSE 100 Index tumbled more than 200 points today after a weekend of financial turmoil in Europe.
Investors took scant comfort from Friday’s backing of a US financial rescue to leave the FTSE 100 Index down almost 5 per cent or 240.5 points at 4739.
Banks were under pressure after German mortgage lender Hypo Real Estate became the latest to receive state aid.
Analysts said the impact of the latest crisis crossed all sectors amid fears of slowing demand.
Halifax Bank of Scotland – soon to merge with Lloyds TSB – plunged 15 per cent in the sell-off, while Royal Bank of Scotland suffered a 10 per cent drop.
The market was also hit hard by hefty falls from heavily-weighted mining stocks after experts warned that the sector’s earnings could almost halve this year.
Times Online – Who would be in hedge funds right now? Man Group, which has long traded on its name as the world’s largest hedge fund manager, yesterday found the tag something of a liability.
The shares lost 35½p to 398p before a trading update next Monday, making a 46 per cent fall in six weeks, with analysts saying that it is heavily exposed to the whole hedge fund industry through its fund of funds portfolio. Barclays’ index of hedge fund performance shows a 5.6 per cent fall in the year so far to the end of August. Hedgies relied on high borrowing to generate high returns. Most are now being forced to sell positions to cut debt.
Meanwhile, there are growing question marks over Man’s flagship AHL managed futures fund, as its performance has slipped in the past quarter and the short-selling ban may have an impact on its strategy. Man itself is still available to be shorted.
Investec, which cut its target price from 650p to 460p, said: “The hedge fund industry looks set for further negative press, possibly impacting on short-term fund flows at Man, as well as its near-term share price performance.” Kaupthing cut its earnings forecast but held its 630p target pointing out that the AHL fund was still up 3 to 4 per cent in the year so far.
News.com.au – Takeover target Ausdrill has blamed a fall in the company’s share price on hedge fund selling after comments from suitor Macmahon that its bid was unlikely to succeed.
Ausdrill said that it believes selling from hedge funds accounted for the "majority" of the "large number" of shares traded in the belief that Macmahon’s offer would fail.
The drilling contractor’s share price sank 20 per cent from a closing price of $2.50 on Tuesday to close at $2.00 yesterday.
Ausdrill chairman Terry O’Connor said the impact of hedge fund selling on the share price was likely to be "short term" and that the price did not reflect the group’s excellent outlook and earnings.
Shares in Ausdrill gained nine cents to $2.09 by 10.41am (AEST), while Macmahon put on 1.5 cents to $1.815.
Macmahon is offering 1.65 of its own shares for every Ausdrill share, valuing the company at $511 million at Macmahon’s previous closing price of $1.80.
Guardian.co.uk – Four large hedge funds, all shareholders of Huntsman Corp, have proposed a plan to salvage a $6.5 billion buyout of the chemical company by a unit of Apollo Global Management.
But Apollo’s Hexion Specialty Chemicals unit late Thursday rejected the plan, saying Huntsman’s increased debt and decreased earnings since the deal was struck in July 2007 would no longer make a combined company solvent.
"We are not seeking to renegotiate this transaction," Hexion responded in a statement. "We are seeking to terminate it, and obtain judicial confirmation that Hexion has no obligation to pursue the acquisition or to pay Huntsman a termination fee."
Apollo’s Hexion has been locked in a legal battle to try to get out of the $28-per-share deal, reached last year at the height of the leveraged-buyout boom. Since then, the credit markets have seized up, making the math behind the deals no longer attractive. In June, Hexion filed suit against Huntsman seeking to limit its liability in the event that the deal falls apart.
Reuters – Some bearish option players are betting that Wells Fargo & Co and SunTrust Banks Inc could both lose as much as 10 to 15 percent of their current stock values by October options expiration.
Nagging worries about the credit markets on Monday have been slamming financial stocks, including banks and brokerage firms.
"We are seeing some limited speculation based on put spreads going up in SunTrust and Wells Fargo showing that investors are still nervous about earnings, potential failures and other industry events," said Scott Fullman, director of derivative investment st
New York Post – Corporate raider turned activist investor Carl Icahn is having a tough year.
The Far Rockaway, Queens native’s hedge funds are suffering their first losses since the 72-year-old opened them in 2004. The losing streak, which started midway through 2007, is expected to continue when Icahn Enterprises, the publicly-traded holding company for his hedge funds and other investments, reports earnings on Tuesday.
Shares of Icahn Enterprises, which include the hedge funds and other businesses, have plummeted nearly 50 percent this year as investors have backed away from their initial enthusiasm for the activist investor. His funds were up about 2 percent last month, but are down roughly 6 percent for the year, according to investors.
Bloomberg – Just when American International Group Inc. shareholders figured things couldn’t get worse at the world’s largest insurer, profit from the company’s private equity and hedge fund investments is evaporating.
Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker.
The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.
Guardian Unlimited- Aberdeen Asset Management said on Friday its assets had grown 6 percent despite turbulent markets and had also earmarked higher cost savings to offset falling earnings, pushing its shares up.
The fund manager said its assets under management grew to 113.7 billion pounds ($227.5 billion) in the three months to end-June, from 107.3 billion the previous quarter.
Aberdeen warned that turbulent market conditions, which took 1.8 billion off its assets, would remain difficult in the coming months but said it remained confident of growing its business despite the tough environment.
Aberdeen CEO Martin Gilbert told journalists that investor confidence remained fragile, which had caused redemptions to run at a rate 50 percent higher than last year.
Bloomberg- William Ackman put more cash into the $2 billion hedge fund he started to invest in Target Corp. as shares of the second-largest U.S. discount retailer declined 38 percent in the past year, according to two people with knowledge of the matter.
Pershing Square Capital Management LP, Ackman’s New York- based firm, added at least $100 million to the fund, while he personally committed $5 million. Ackman also solicited money from current and new investors, said the people, who declined to be identified because the fund is private.
The Target fund’s loss may exceed the drop in the Minneapolis-based company’s stock because it uses derivatives, which can amplify gains and losses. Target peaked at a record $70.14 on July 13, 2007, three days before Ackman disclosed owning a stake. Earnings have fallen for three straight quarters as consumers cut back on purchases of clothing and home goods.
Star Tribune- Minneapolis Star Tribune- A terrible year for financial stocks isn’t keeping Ameriprise Financial Inc. from growing. The Minneapolis-based financial planning and insurance company announced Monday that it will acquire the asset management firm J&W Seligman & Co. Inc. for $440 million.
Seligman, based in New York, manages an $18 billion portfolio of mutual funds, closed-end funds, hedge funds and institutional accounts.
Ameriprise financed the deal with cash on hand; it had $3.8 billion in cash as of December. The transaction is expected to close in the fourth quarter and will add to earnings and return on equity in 2009, Ameriprise said.
