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.
The Money Times – While the group of Indiana pension funds, holding $42 million debt in Chrysler, opposed the treatment meted out to them in the form of reorganization process with Fiat, the court denied hearing to the pension funds and upheld the decision of Chrysler- Fiat alliance.
While refusing the hearing to the pension funds, the Supreme Court issued a statement saying that the aggrieved parties must convince four out of nine judges that the matter is serious to warrants full appeal.
Indiana Treasurer Richard Mourdock, who led the cause of the pension funds, said that he was disappointed. “The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors.”
Daily Territorial – A third offer to take copper miner Asarco out of Chapter 11 was filed last week in U.S. Bankruptcy Court in Corpus Christi, Texas, by New York City-based hedge-fund manager Harbinger Capital Partners.
The $500 million reorganization is competing for control of Asarco with plans offered by Sterlite Industries, based in Mumbai, India, and Asarco’s parent company, Grupo Mexico.
The plan from Harbinger Capital, one of Asarco’s largest bondholders, is less than half the other offers but the investment firm says its offer is better because the other two either lack sufficient support from creditors or won’t meet bankruptcy court standards.
Bloomberg – MBIA’s split of its bond- insurance business was challenged by hedge funds alleging the move hurts owners of about $240 billion of debt while benefiting stock investors, executives and some policyholders.
The reorganization, in which MBIA stripped $5.4 billion of assets and its U.S. municipal business from a unit that now mainly insures only structured-finance bonds, “represents the height of insidious greed,” the Aurelius Capital Management and Fir Tree Partners funds said in a lawsuit filed today.
Reuters – In spite of suffering more than most markets in the global downturn, hedge funds are likely to bounce back faster than other markets.
That is the view of Barclay’s Capital director Frank Gerhard whose company is a major player in the regional hedge fund market and is in the process of launching a Sharia-compliant hedge fund platform along with Sharia Capital.
"We have been running a roadshow around the region and there is still a lot of institutional and high net worth individual interest in the sector.
"What we are likely to see is hedge funds bouncing back in the first quarter of next year even if equity markets remain depressed.
"Each time there is a major market downturn, like the Asia crisis of 1998 or the slump after the dotcom bubble burst, we have seen alternative investments like hedge funds bounce back far quicker than other investments.
A new report released Monday by HedgeFund.net estimates the assets under management by hedge funds have reached nearly $3 trillion.
According to the report, hedge fund assets increased 4.41 percent last quarter, in spite of rough equity markets, to reach $2.973 trillion. The report combined data from a bi-annual survey of hedge fund administrators and information from HedgeFund.net’s database of more than 8,400 funds.
Peter Laurelli, vice president of Channel Capital Group which owns HedgeFund.net, said hedge fund assets will probably top $3 trillion sometime in the next couple of quarters, depending on performance.
Fund performance accounted for $91.28 billion being added to hedge funds last quarter, while investors placed an additional $34.21 billion in new assets with hedge funds. One dark spot for the industry was that liquidations of funds last quarter exceeded assets in newly established funds by $8.52 billion. Second quarter saw the third-highest level of hedge fund closures on record.
"It’s a natural evolution of the industry if you have funds that are not performing well," Laurelli said. "When you go through a period like we’ve had where there have been some large losses in the industry, you’re going to have fund closures. That doesn’t mean that the industry is contracting, it just means that there is some turnover."
Financial Times- Even as politicians and regulators accuse hedge fund short-sellers of trying to bring down banks in Britain, the US and Australia, top hedge managers are providing rescue capital to prop up the ailing corporate world.
The latest bail-out backed by hedge funds is the £4.5bn cash raising by Britain’s Barclays, where five big managers are ready to provide just under 10 per cent of the new money – with sovereign wealth funds providing the majority of the rest.
Hedge funds are important backers of the current wave of rights issues, too, according to investment bankers close to the deals. In spite of publicly-declared short positions – where hedge funds hope to profit from falling prices – several big hedge funds are sub-underwriting the rescue rights issue by HBOS, the biggest mortgage lender, guaranteeing to buy the shares if the rights are not taken up.
"Although equity underwriting currently looks difficult, hedge fund participation in this market has increased as their asset base has grown," says Jim Renwick, vice-chairman at UBS. "This has been the case for more than five years now."
Financial Times – Hedge funds have more than $2,900bn under management, according to a survey of valuers of their assets, sharply up on last year in spite of the credit crunch and a series of high-profile problems in the industry.
The survey of assets under administration by Hedge Fund Manager Week, a trade magazine, showed the total had jumped 20 per cent in the past year and continued to climb over the past six months even as the credit squeeze intensified.
The scale of the growth – up by $230bn in the six months to April – suggests concerns about hedge fund losses and a slowdown in flows of new money into the industry may be overstated.
However, the rate of growth is slowing, with the 9 per cent rise in the most recent six months well below the 17 per cent growth in the magazine’s last survey.
Hedge fund administrators act as independent valuers of hedge fund assets, giving investors updates and providing regulatory, legal and accounting services.
They are used by almost all European hedge funds and an increasing number of US funds, who are under pressure from investors to provide independent valuations.
Valuation practices are being closely scrutinised by regulators, with hedge funds in the UK and US setting up codes of best practice this year, with a focus on how to deal with hard-to-value assets such as private equity or structured credit.
