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Because of the recent market turmoil, many hedge-fund investors have questions regarding what regulations are applicable to hedge funds, and how to withdraw their money from their hedge-fund investments if they want out. Indeed, hedge funds often present many different barriers to withdrawal, and there are essentially no regulatory prohibitions on these barriers.
Perhaps the best way to understand the regulations that apply to hedge funds is to compare them with mutual funds. Mutual funds are investment companies that are required by law to register with the U.S. Securities and Exchange Commission (SEC) and, therefore, are subject to stringent regulatory oversight. Virtually every aspect of a mutual fund’s structure and operation is subject to regulation under four federal laws, including the Securities Act of 1933, the Investment Company Act of 1940, the Securities Exchange Act of 1934 and the Investment Advisers Act. The Investment Company Act regulates the structure and operation of mutual funds and forces funds to safeguard their portfolio securities.
West Palm Beach (HedgeCo.net) - A pioneering collaboration that brings together the best of the academic and finance worlds has been such a success that the venture has outgrown its premises, just a year after its establishment.
Man Group plc, one of the world’s largest alternative investment companies, founded the Man Research Laboratory ("MRL"), in Oxford in September 2007. The role of MRL is to undertake commercial research projects for the various quantitative groups within Man, and in particular, for its wholly owned subsidiary fund manager AHL. Although quantitative techniques are widely used throughout Man, it is within AHL that they have been used extraordinarily successfully for more than twenty years.
The laboratory was established at the same time as the Oxford-Man Institute of Quantitative Finance ("OMI"), which is part of the University of Oxford. Man provides the principal funding (an initial commitment of GBP 13.75 million - $21.9 million) for the institute, which shares common facilities with the laboratory.
"The partnership between Man and the University of Oxford is unique," said Dr Anthony Ledford, a senior executive at AHL and Research Director of MRL. "While other hedge fund managers have opened their own, private research centres, none has done so in partnership with the University of Oxford itself."
"The aim for both the University and Man is to create a stimulating environment of research and innovation, where ideas flourish," Dr Ledford continues. "Practitioners from a wide spectrum of disciplines can bring their skills into collaboration, and learn from each other."
Staff numbers are expected to double over the coming year. OMI, which brings together academics from a wide spectrum of Oxford University departments, already has fourteen faculty members, another fourteen associate members and four permanent academic staff - three research fellows and the institute’s Director - along with twelve higher-degree students.
"The collaboration has been a great success", Dr Ledford added. "It has exceeded the expectations of both the University and Man. Planned staffing levels in both the laboratory and the institute were met ahead of schedule, and the number of applications for positions has necessitated a search for larger premises."
Although the institute and laboratory are independent of each other and follow different research programmes, there is significant interaction between them. This has benefited both parties, and OMI is attracting significant international attention. In its first year, as well as a series of over one hundred seminars and presentations, it has hosted a symposium and two conferences - one of its guest speakers being a Nobel Prize winner.
MRL has already made significant commercial contributions to Man and AHL, which specialises in systematic automated trading. A new trading model - first conceived at the laboratory - which operates on high frequency data is now actively trading the global markets and providing new sources of enhanced investment opportunities. Another benefit is the magnetic effect the laboratory is having in attracting the next generation of top talent into Man from around the world.
Dr Ledford added: "The interaction between our Research Lab and the Institute has put us at the cutting edge in our field. Looking at what we’ve already achieved, we’re really excited about the prospects for the future."
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West Palm Beach (HedgeCo.net) - According to a recent survey conducted by the Association of Investment Companies (AIC), a poll of 1,300 sophisticated private investors showed that 15% believed that hedge funds offer the potential for strong returns in the current environment. However they are also concerned about their perceived lack of transparency (17%) and riskiness (17%).
Investors are also cautious about hedge funds because they believe that they are not regulated (14%), and are concerned about the reputation for high charges (12%). Some investors also find them confusing (11%) and believe they are only accessible to the wealthy (5%).
Although some sophisticated private investors are wary of hedge funds, 6% of those surveyed are already investing in hedge funds, 5% have invested in the past and 3% are planning to invest in the future. Interestingly, nearly half (46%) of investors believe they may possibly invest in hedge funds in the future whilst only 29% of investors surveyed would never invest in hedge funds.
"Many of these investors’ concerns over hedge funds are addressed through the listed hedge fund and fund of hedge funds sectors," Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC) said, "The listed structure of closed ended hedge funds and fund of funds means investors have access to a much higher level of transparency. Shares in listed funds are available on the stock market just like any other share so they are available to those of modest means as well as the super wealthy."
"This is a real growth area of the industry with the hedge fund sector making up 65% of the assets raised this year in the investment company sector. However, it is still a young sector, so long-term performance records are not available for the majority. Investors need to do their homework to make sure they select the right fund for them in this diverse sector and if they are unsure they should take independent financial advice," she concluded.
Ian Plenderleith, Chairman of BH Macro, said, "Hedge funds who can maintain the necessary standards of investment expertise and risk management have demonstrated that they can deliver superior returns on a consistent basis. Listed hedge fund vehicles give a wider range of investors access to alternative investment strategies through an avenue they are familiar with. They get the benefit of the regulatory safeguards and disclosure obligations, and the secondary market liquidity that go with stock exchange listing."
Robin Bowie, Chairman of Dexion Capital, said: "When dislocation in financial markets reaches the present level, it provides an ideal environment for hedge funds, which are well-placed to make opportunistic investments where they recognise value and can hedge out the market risk. Some of those positions will be illiquid, which will be unsuitable for most managers of open-ended funds. Closed-ended funds employ ‘permanent capital’, raised on the stock exchange, which allow managers to blend liquid and illiquid assets and take advantage of the current mismatch in the markets. In essence, closed-ended funds bring liquidity to illiquid situations."
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West Palm Beach (HedgeCo.Net)- Sidley Austin has further expanded its hedge fund practice in London by hiring a new counsel in the Investment Funds, Advisers and Derivatives practice.
Barry Breen has joined the firm’s London office and will focus his practice on hedge funds and further expand Sidley’s fund capabilities in London. "Barry is a talented and experienced hedge fund lawyer and we are pleased to have him join us to enhance our growing fund capabilities in Europe," said Bruce Gardner, head of the hedge fund practice in London.
Breen will advise clients on the organization of offshore and onshore hedge funds, including master/feeder,fund of funds and side by side investment structures, commodity pools, registered fund of funds and mutual funds, ETFs, and the registration, regulation and governance of registered management investment companies.
"I am thrilled to join a firm with such a respected and renowned global investment funds practice," said Breen. "I look forward to working with Bruce, David and the other partners in the practice to continue to build and strengthen the funds team in London, Europe and globally."
Breen previously was with Tannenbaum Helpern Syracuse & Hirschtritt LLP in the Financial Services, Hedge Funds and Capital Markets practice operating out of their New York and London offices.
Sidley has a international practice in structuring and advising investment funds and advisers. In 2006 and 2007, the Alpha Awards(TM) for hedge fund service providers ranked Sidley as the number one onshore hedge fund law firm. Additionally, in 2008, the firm was named "Investment Funds Team of the Year for the U.S." by Chambers and Partners. In 2007, Sidley also was named Investment Funds Law Firm of the Year by Asian Legal Business. The Investment Funds, Advisers and Derivatives practice group consists of more than 100 lawyers in Chicago, Hong Kong, London, Los Angeles, New York, San Francisco, Singapore and Tokyo.
West Palm Beach (HedgeCo.Net)- The SEC has released a new `ComplianceAlert´ letter identifying common deficiencies and weaknesses that SEC examiners have found during recent compliance examinations of registered investment companies and broker-dealers.
The alert finds weakness in several areas including; personal trading by investment advisory employees, incomplete code of ethics, soft dollar practices, "Free lunch" sales seminars, broker-dealers’ issues, supervision, and use of mortgage financing as credit for the purchase of securities among others.
"Our June 2007 ComplianceAlert was very well-received by industry compliance and legal professionals," said Lori Richards, Director of the SEC’s Office of Compliance Inspections and Examinations. "Many industry compliance staff told us that, after reading it, they reviewed their firms’ practices in the areas we noted and took steps to ensure that their firms’ practices were fully compliant. By highlighting our recent examination findings in this way, we expect that this second ComplianceAlert will be similarly helpful to industry firms that are seeking to be proactive in addressing compliance risks."
Management Consultancy- Hermitage Capital Management has claimed that fraudsters have allegedly stolen $230m (£115m) from the Russian tax authorities in a tax scam.
The scheme allegedly involved the forgery, impersonation and the theft of three investment companies, according to Hermitage. The companies fraudulently re-registered ownership of the companies before making false tax rebate claims, the FT reported.
Hermitage is now in the process of filing criminal complaints over the affair.
Sydney Morning Herald- There should be no doubt in anyone’s mind that those aggressive funds we all love to hate were responsible for the massive fall in Babcock & Brown’s share price yesterday - a fall so large it prompted a "review" by the company’s banks of its corporate debt facility.
There is also no doubt B&B provides a fertile environment for the hedge funds to operate. B&B and many of its satellite investment companies are vulnerable because they are over-geared, with flawed business models.