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.
Times Online - Some of Britain’s most powerful fund managers are setting aside billions of pounds to fund cash calls from sound companies hamstrung by a lack of bank lending.
Investment bankers say that they have been inundated with calls from Britain’s biggest institutional investors over the past few weeks offering billions of pounds to fund the right recapitalisation deals. The institutional investors, corporate brokers say, are insisting that they be shown deals before private equity funds that are also waiting to snap up bargains.
Scottish Widows Investment Partnership, owned by Lloyds Banking Group, and M&G, owned by Prudential, the insurer, are among big investors ready to take up equity or debt of UK plc, whose shares have slumped in the past year. The FTSE all-share index is down almost 30 per cent over the period.
West Palm Beach (HedgeCo.net) – Fitch Ratings has taken a positive view of the recent moves by the United Arab Emirates (UAE) government to boost liquidity in the banking system but notes that the operating environment has become more challenging.
"The risks of a UAE bank suffering a capital markets-driven liquidity crisis are limited as none of the banks are reliant on these markets. Their funding bases are predominantly based on retail and corporate deposits, with the balance as inter-bank borrowings and some limited debt capital market issuance," says Robert Thursfield, Director in Fitch’s Banks team.
"However, UAE banks face mounting challenges in the form of slower economic activity, a property market correction and negative valuation adjustments from continuing volatility in regional stock markets."
It is unlikely, Fitch says, to change the banks’ Long-term Issuer Default Ratings as these are driven by expected support from the UAE authorities, although Individual ratings could come under pressure if the banks’ ability to fund themselves deteriorates, leading to declining growth, profitability and the erosion of capital.
Fitch says the series of measures taken by the Central Bank of the UAE (CBUAE) and UAE Ministry of Finance (MOF) are likely to strengthen confidence in the bank sector.
The longer-term challenge faced by the banks is to develop other funding/capital sources so they can continue financing a significant pipeline of infrastructure projects.
A more immediate challenge for the banking sector is the likelihood of a negative impact from major corrections and continuing volatility in regional stock markets. The Dubai Financial Market was down about 44% YTD and the Abu Dhabi Securities Exchange down about 23% YTD as of 21 October 2008.
The Dubai property market has seen spectacular growth in recent years but there is increasing concern that a correction will occur in the short- to medium-term. Stress in the local interbank market is likely to have a negative impact on the availability of residential mortgages and funding for property developers, which would dampen demand as supply is forecast to increase.
The declining oil price will negatively impact business sentiment and domestic economic activity (Brent was priced around $67 a barrel on 21 October 2008). This could result in the postponement or cancellation of some major projects. However, Fitch estimates that Abu Dhabi would continue to run a budget surplus at a price as low as $31/bl.
Bank results for the year to end-September 2008 will be published soon and Fitch expects to see slower growth in loans and deposits, higher funding costs and negative investment portfolio mark to market valuations. Fitch will review the results and may comment further on the sector’s performance.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Forbes – The hedge fund sector has to date weathered market volitality better than the banking sector, since no large bellwether hedge fund has yet gone bankrupt. Nonetheless, hedge funds are expecting a wave of redemptions, as investors move to safer investments and reconsider their commitments to the sector.
Hedge fund sector resilience? Whereas banking sector difficulties have provoked a host of policy responses, including Treasury Secretary Henry Paulson’s now-moribund $700 billion bailout package–no hedge fund problem has yet necessitated a similar systemic response. The apparent resilience of the sector is particularly striking given that recent estimates suggest that the $2 trillion hedge fund industry accounts for approximately 30% of U.S. equity and bond trades (although volatile market conditions have led many managers to shift greater percentages of their holdings into cash-equivalents).
Cay Compass – Turmoil caused by the US financial meltdown will likely effect Cayman’s hedge fund industry.
Leader of Government Business Kurt Tibbetts acknowledged at the Cabinet press briefing Friday that Cayman’s economy “does not operate in isolation and that we are not immune from the global volatility and uncertainty”.
Although Mr. Tibbetts said preliminary consultations with the financial industry indicated the retail banking sector was not experiencing any problems, the story was different for other key aspects of the sector.
“The areas that are expected to suffer most are those connected with hedge funds and structured finance,” he said. “Current global market conditions in the hedge fund arena are characterized by heavy redemptions, suspensions and re–structurings coupled with much–reduced… new fund formations.”
Politico.com – Even as the storied financial names vanish — Lehman Brothers, Merrill Lynch and Bear Stearns — they’re being quietly replaced by less familiar ones: Cerberus Capital Management, Citadel Investment Group, SAC Capital Partners and the other biggest hedge funds and private equity shops in the world.
The consensus in Washington is that the Wall Street meltdown means an inevitable resurgence of regulatory authority over the financial sector. But what it may actually portend is just the opposite: the emergence of an almost entirely unregulated financial sector that replaces investment banks that were more rigorously regulated.
It has now become very clear to market insiders that the $2.1 trillion hedge fund industry is larger in terms of capital than the remnants of the investment banking sector.
Irish Independant – The fund manager who predicted that the credit crunch would rip a hole through the banking sector has been rewarded with £28m (€35m) in pay and bonuses.
Crispin Odey trousered the bulk of the profits made by his Odey Asset Management Group after a hugely successful year with profits soaring from £16m to £55m. Mr Odey, 49, the founder, paid himself £28m. His 11 partners shared the other £27m.
The performance was driven by the flagship hedge fund Odey European Inc, which generated returns of 55 per cent, and is up 15 per cent in the first half of 2008. Launched in 1992, it is one of the longest established hedge funds in Europe, delivering an annual average return of 14.2 per cent.
The fund made millions from the risky practice of going short on bank stocks – selling shares not already owned in the hope they can be bought back at a lower price later. David Stewart, chief executive officer for Odey Asset Management, said: "We went short of banks and financials because we expected them to have a difficult time. We were long of agricultural and other commodity companies which did well and helped to boost overall performance."
