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.
Reuters – Some of the country’s biggest and best-known hedge fund managers on Wednesday shared their best investment and short-selling ideas with an audience of some 1,200 hedge fund executives.
The annual Ira Sohn Investment Research Conference raises millions of dollars for pediatric cancer research, but its high wattage speaker list also moves stocks. Last year Greenlight Capital’s David Einhorn predicted that Lehman Brothers had more troubles than they had let on, four months before the investment bank filed for bankruptcy
Bloomberg – At last year’s Ira W. Sohn Investment Research Conference, Greenlight Capital Inc.’s David Einhorn told an audience of hedge-fund managers that Lehman Brothers Holdings Inc. wasn’t disclosing the whole truth about its finances.
Four months later, Lehman filed the largest bankruptcy in U.S. history. The conference attendees who followed his advice got a jump on the rest of the industry. They also got a tax write-off since all the registration fees go to cancer research and an art-therapy program for seriously ill children.
New York (HedgeCo.Net) – Gabriel Capital and founder Ezra Merkin have been sued for their exposure to Ponzi-schemer Bernard Madoff by a disdained investor.
Scott Berrie, who has $500,000 tied up in one of Gabriel’s funds, claims that Gabriel lied to investors when they marketed that they hold a “diverse portfolio of securities,” which “falsely implied that the general partner was actively pursuing the partnership’s strategy in a prudent manner by using numerous and diverse investments.”
Berrie also alleges that Merkin, who heads up GMC financing arm GMAC LLC, neglected at least 27 percent of its investments, the chunk of which was invested with Madoff.
Berrie filed a class-action lawsuit yesterday in a federal court in Manhattan.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Clients of Fortress Investment Group LLC have requested to withdraw more than $4.5 billion of their assets over the next few months, according a statement released by the hedge fund yesterday.
The company reported its first annual loss since going public, mostly due to its Drawbridge Global Macro funds losing over 13 percent this year through the end of September. If investors have their way, this would take a 25 percent chunk out of the total assets under Fortress’s management.
Fortress isn’t the only hedge fund dealing with a hit of investor withdraws. The sour economy and recent credit crisis has sent a wave of panic over some investors, prompting them to rush for redemptions. Some hedge funds choose to “freeze” investor withdraws until the market takes a turn for the better, or until they can figure out how to wind down the fund in an orderly manner.
Fortress said it received $2.6 billion in redemption requests for its liquid hedge funds, which include the Drawbridge Global funds and the Fortress Commodities funds. Its hybrid hedge funds, which include the Drawbridge Special Opportunities funds which saw a drop of over 7 percent in the third quarter, and the Fortress Partners funds, will lose $1.9 billion in capital because of the withdraws.
Fortress reported a third-quarter loss of $20 million, equivalent to 4 cents a share. A year earlier, they were posting a profit of around 26 cents a share. The company currently manages $34.3 billion in assets, a 2.1 percent drop from last quarter.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – New York hedge fund Peconic Partners was sued yesterday for firing an employee who reportedly was running his mouth about some shady insider trading activities.
The suit, filed by former Chief Compliance Officer Joseph Sullivan in New York State Supreme Court, accuses CEO William Harnisch of wrongfully firing him.
According to the 30-page complaint, Sullivan said he was let go after voicing reservations regarding Harnisch’s trading activity involving fertilizer company Potash Corp., whose stock plummeted last month.
Sullivan alleged that Harnisch got rid of his 600,000 shares, selling them for $130 a share. He then sold a chunk of his client’s shares for around $90 each. This may have helped to drive the price down of Potash, which is now trading at around $82.
The Securities and Exchange Commission has also been contacted by Sullivan’s legal team to alert them of the possible insider trading activities.
Peconic Partners was founded in 2004 and has approximately $1.5 billion under management.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Hamilton Spectator – North American stock markets chalked up huge rallies late in the afternoon yesterday, resulting in one of the biggest one-day gains ever for the Dow Jones industrial average and a big bounce in Toronto.
Toronto’s S&P/TSX composite index rose 614.29 points or 7.2 per cent to close at 9,151.63. That mended a good chunk of the 757-point hole dug on Monday, when growing worries about the length and depth of a global recession pushed down Canada’s main index by eight per cent.
In New York, the Dow gained 889.35 points yesterday to rise almost 11 per cent to 9,065.12 — the second-biggest percentage gain on record for the world’s most-watched stock-market indicator
AlterNet – Jack Nash, a key pioneer of the global hedge fund industry, passed away this past summer. Much of the rest of the industry may soon join him six feet under. The industry, one insider told the Financial Times last week, has embarked on "a sort of death march."
Hedge funds now appear to be the next chunk of high finance headed for meltdown. They may actually do their melting before most Americans even know what they are.
A quick primer: Hedge funds have been operating in the financial world’s immensely lucrative shadows ever since Jack Nash co-founded Odyssey Partners, the granddaddy of the modern hedge fund, in 1982, just one year after Ronald Reagan slashed tax rates on America’s highest incomes.
The new tax rates — the lowest the rich had seen since the early 1930s — meant that wealthy Americans suddenly had plenty of new cash sloshing in their pockets. Nash promised these affluents high annual returns if they gave him their money to invest — and then delivered. Over the next 14 years, Odyssey delighted investors with a 24 percent average annual return.
Guardian.co.uk – Housebuilder Taylor Wimpey has slipped more than 8% on news that Toscafund, the hedge fund run by former bank analyst Martin Hughes, has sold a chunk of shares in the business.
Tosca, which is said to have lost about £300m in the collapse of US bank Washington Mutual, held a 10.2% stake in Taylor Wimpey. But in an official filing just out, Tosca has now reduced that to below the 3% disclosable threshold.
Taylor Wimpey is down 1.75p at 19p, but rival Redrow, where Tosca had a 27% stake, has climbed 6.75p to 163p. On Friday, Redrow said Bridgemere Securities had bought 14.4m shares to take its stake to 16.24%. Traders wondered whether some of these shares might have come from Tosca.
Bridgemere is a fund set up by the Redrow founder, Stephen Morgan, and the purchase has prompted talk of a possible takeover of Redrow.
CNBC – Given the troubles in the market, we’re all worried about losing a chunk of our savings, whether it’s wrapped up in mutual funds, hedge funds or individual stocks. But how do you know when to bail on your fund (or fund manager) instead of just sticking out the volatility? Carmen offered some guidelines on Wednesday for distressed investors wondering when’s the right time to get out.
If you’re invested in a mutual fund, you’re probably seeing losses across the board. It’s important to look at the fund relative to other benchmarks, though, not just how it is performing against the Dow Industrials. If your fund has lost 10% or more relative to rival funds, Carmen suggested it might be time to pull the plug.
For hedge funds, be aware that it takes more time to redeem your investments. Do a gut check, Carmen said. If you feel uneasy about how your money is performing, that’s a sign. Trust your instincts as well as the overall performance of the fund.
Financial Times- Several of London’s largest hedge funds are backing Barclays’ £4.5bn ($8.9bn) capital increase, underscoring the complex roles they are playing in the recapitalisation of the UK banking sector.
GLG Partners, Lansdowne, CQS and Och-Ziff have all agreed to take up a large chunk of Barclays shares as part of its £1.7bn placing with institutional shareholders, according to the prospectus issued by the bank on Thursday.
The news comes after hedge funds have been under intense scrutiny for their actions in selling short the shares of banks attempting to raise capital through rights issues. The Financial Services Authority unexpectedly tightened its rules on the disclosure of short-selling in an attempt to stamp out what the regulator believes were attempts by hedge funds to force down banks’ share prices artificially.
Times Online- This week, some of the City’s wealthiest people will descend on a lavish party in London intent on giving away a large chunk of their personal fortunes.
More than 1,100 will pile into the Absolute Return for Kids (Ark) annual dinner at the Royal Naval College in Greenwich, including many leading members of the new City establishment from the hedge fund world.
Some will be flush with cash, despite the downturn and the credit crunch. Others will be feeling the pinch. At last year’s event, this group of modern-day philanthropists — with its smattering of Hollywood superstars and A-list celebrities — gave away an average of £26,000 each and raised a combined £26.6 million.
