Reuters – Hedge fund managers could play a key role in jump starting the ailing U.S. economy if Washington offers them appropriate tax breaks, a prominent hedge fund industry lawyer said on Tuesday.

Sitting on billions of dollars in cash, dozens of hedge funds are looking for investments at the same time cash- strapped small and mid-sized companies search for new money to help them stay in business.

Together these unlikely partners could find a way to escape a debilitating liquidity crisis that threatens to push the country further into its deepest financial crisis since the Great Depression, Perrie Weiner, a partner at law firm DLA Piper told Reuters in an interview.

"There is a way out, but the answer lies not with the current government rescue plan, but rather with hedge funds," Weiner, who advises dozens of hedge funds as international co-chair of DLA Piper’s Securities Litigation group said one day before speaking about the topic at an industry conference.

Read Complete Article

Tags: civil-engineer, classified-information, complexity, contagion, housing-market, international-co, international-investment-banks, investment-arm, mayhem, pariah, personal-friend, proceedings, proceeds, sec-investor, trimtabs, u-s-treasury, weiner

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.

Alex Akesson

Editor for HedgeCo.Net
Email: alex@hedgeco.net

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!

Tags: advisory-services, boston, business-assets, currency-policy, debt-markets, financial-investors, global-economy, international-finance-centre, recapitalisation, sec-investor