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.
ForexHound – I admit I had not heard of this fellow until I saw this interview on Zerohedge, but apparently this is the key brain behind the massive bet against subprime mortgages that made John Paulson both famous and one of the wealthiest men on the planet.
The man who “made billions of dollars for John Paulson shorting real estate,” Paolo Pellegrini of PSQR LLC, discusses his economic outlook and investment strategies.
Korea Herald – The CEO of Korea Investment Corp. said yesterday the company would invest $1 billion in inflation-hedging assets such as price-linked bonds, commodities and real estate assets as part of its exit strategy, amid rising concerns over possible "hyper inflation." The nation’s sovereign wealth fund received $3 billion from the Finance Ministry in July, of which it will spend $2 billion in investing in traditional overseas bonds and stocks, and the remaining $1 billion in new alternative investments like inflation-hedging assets.
With the $3 billion included, the KIC now manages a $27.8 billion fund, of which $17 billion came from the Bank of Korea and 10.8 billion from the Finance Ministry.
Bloomberg – Billionaire Nelson Peltz and former Countrywide Financial Corp. President Stanford Kurland are among at least six investors turning to the public markets to finance purchases of distressed home loans and corporate debt.
The investors, most of whom previously relied on private partnerships for funding, have proposed since May 1 to raise $2.6 billion through public stock sales. They plan to use the money, along with government financing in some cases, to acquire mortgages and below-investment grade loans to companies that fell in value amid the collapse of the real estate and credit markets starting in mid-2007.
New York Times Blogs – John Paulson, the hedge fund manager who reaped a windfall betting against the U.S. housing market before the credit crunch, is now hoping to ride to riches on the property industry’s recovery, The Telegraph reported.
Mr. Paulson’s firm, Paulson & Company, is in the early stages of raising money for a new private equity fund, Paulson Real Estate Recovery Fund, the newspaper said.
Reuters – General Growth Properties Inc GGP.N, the second largest U.S. mall owner, on Thursday filed for bankruptcy protection on Thursday, making it one of the biggest real estate bankruptcies in U.S. history.
Ending months of speculation, the Chicago-based mall owner which listed total assets of $29.557 billion and total debts of $27.294 billion, sought Chapter 11 bankruptcy protection from creditors along with 158 of its more than 200 U.S. malls, while it seeks to restructure some of its debt.
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.
Bizjournals.com – After watching Sonesta International Hotels Corp. lose roughly 70 percent of its stock market value over the past 18 months, a Connecticut hedge fund has shed roughly a third of its holdings in the Massachusetts-based hotel operator.
In a recent regulatory filing, Mercury Real Estate Advisors, based in Greenwich, Conn., said it sold around 23,400 shares of Sonesta stock (Nasdaq: SNSTA) between Jan. 20 and Feb. 10, bringing its total ownership in the company to 206,048 shares. Those holdings equate to around 5.6 percent of Sonesta’s common stock outstanding.
Mercury’s ownership stake was more than 9 percent in mid 2007, when Sonesta’s stock traded above $30 a share. Sonesta’s stock opened Monday at $9.50 a share.
Birmingham Business Journal – The hedge fund created by activist investor William Ackman to buy up shares of Target Corp. lost 40.1 percent of its value in January, according to a Bloomberg News report.
Since creating the fund, called Pershing Square IV, Ackman has acquired a 9.7 percent stake in Target. He recently attempted to convince Target to spin off its real estate holdings into an investment trust. However, company officials decided not to pursue the strategy. Ackman also urged Minneapolis-based Target to sell off its credit-card receivables. It completed the sale of half of its receivables last year.
Bloomberg – MetLife Inc., the largest U.S. life insurer, said fourth-quarter profit declined 12 percent on losses from hedge funds and real estate ventures. Shares gained in extended trading as the company beat analysts’ estimates.
Net income slipped to $985 million, or $1.20 a share, from $1.12 billion, or $1.44, in the year-earlier period, the New York-based insurer said today in a statement. Excluding some investment results, the company made 19 cents a share, six cents better than the average estimate of 17 analysts surveyed by Bloomberg.
The Independent – Rents for plush offices in Mayfair and St James’s plunged almost 30 per cent last year, hammered by the declining fortunes of many of their hedge funds tenants.
The commercial property agency NB Real Estate has released new research that shows the rent in swanky west London offices tumbled from £120 per square foot at the end of 2007 to £85 at the end of last year, a consequence of a bad year for hedge funds. They have been vilified for short selling bank shares, have suffered mass redemptions and experienced their worst ever full-year losses.
Hindu Business Line – Worried that global financial services provider Morgan Stanley may land into financial troubles like Lehman Brothers, several hedge funds fled the bank resulting in a loss of billions of dollars in its prime brokerage business last week, a media report says.
“Many of the world’s biggest hedge funds moved their assets to commercial banks regarded as safer last week, as they and their investors worried that Morgan Stanley could follow Lehman into trouble,” the Financial Times said.
Quoting people familiar with the business Financial Times said, “Losses will deal a big blow to Morgan Stanley as its prime brokerage is one of its most profitable and successful businesses.”
The withdrawal of client assets is likely to make Morgan Stanley’s business less profitable by restricting its ability to fund loans to hedge funds from balances left by other hedge funds, FT added.
Hedge funds are pooled investment funds, usually a private partnership that seeks to maximise absolute returns using a broad range of strategies, including unconventional and illiquid investments.
