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Reuters – Opportunities abound for equity and credit-focused hedge funds, according to Axa Investment Managers, but the firm is favouring nimble players able to adjust strategies quickly in still uncertain markets.
Chris Manser, global head of funds of hedge funds at Axa IM, part of insurance giant Axa,said he likes managers who can switch quickly between a net long position — where stocks owned outweigh those it is shorting in anticipation of a fall — and a net short position.
He is shunning managers who closely adhere to a net long or net short position and who would perform better during a long term rally or bear market.
Reuters – Quarterly profit at asset manager Sprott Inc was down by half as some hedge funds were hurt by rallying stock prices, while the company said opportunities still exist on the long side of the market.
Eric Sprott, who is president and chief executive of Sprott Inc and a consummate Bay Street bear, said some hedge funds did not fare well during the quarter due to the "massive rally in the market," and as short positions were hurt by the upswing in stock prices.
A short position is the sale of a borrowed security with the expectation that the asset will fall in value.
Bloomberg – Alphex Investments Co., the adviser to Japan’s first short-biased hedge fund, plans to sell exporters’ shares, wagering they’ll fall on a rising yen and weak global economy, boosting the fund that started in March.
“What we’re seeing right now is nothing more than a bear- market rally,” Ichiro Takamatsu, 44, chief executive officer of the Tokyo-based hedge fund advisory firm, said in an interview yesterday. “We’re going to see a really bad yen rally this year, and that will create an opportunity to profit on exporters.”
The firm started its ASB Opportunity Fund on March 3 with $25 million of seed funding from a New York fund-of-funds seeking to diversify its portfolio, said Takamatsu. The ASB fund, with a net short position at all times, is the first of its kind in Japan, he said.
Reuters – U.S. hedge fund Harbinger Capital is the first company to declare a short position in HSBC following the bank’s record rights issue, after making millions from a similar tactic with UK bank HBOS last year.
Harbinger said in a regulatory filing it has taken a 0.26 percent short position in HSBC’s London shares, worth about 110 million pounds. By 0910 GMT the shares were up 2.5 percent at 356 pence.
International Herald Tribune – U.S. hedge fund Harbinger Capital is the first company to declare a short position in HSBC following the bank’s record rights issue, after making millions from a similar tactic with UK bank HBOS last year.
Harbinger said in a regulatory filing it has taken a 0.26 percent short position in HSBC’s London shares, worth about 110 million pounds. By 9:10 a.m. the shares were up 2.5 percent at 356 pence.
Harbinger has also unveiled a series of short positions in Spanish banks in recent weeks, including a short position of 1 percent in BBVA and 0.4 percent in Santander.
Independent – Lansdowne Partners, the hedge fund, has made almost £13m from a short position in Aviva – and stands to make more if the beleaguered insurer announces a rights issue.
The London-based investor has had a net short position on 0.27 per cent of Aviva shares since 13 February. The stock has since tumbled to less than half its value and on Friday a trade could have netted the fund £12.7m.
Hedge funds which made a killing last year short-selling banks ahead of rights issues are turning their attention to the insurance sector.
Lansdowne last month made a possible profit of almost £2.7m from short positions in Old Mutual and Legal & General, and has continued with trades in Aviva and Prudential. Lansdowne is not alone. Rivals including Odey Asset Management, Diamondback Capital and Gilder Gagnon Howe have also been playing the game.
The Australian – Some of the City of London’s shrewdest hedge fund investors, who made millions of pounds betting that UK bank shares would fall, have turned their guns on insurers amid heightened worry about the financial strength of the sector
Lansdowne Partners, which spent three years gambling on the collapse of Northern Rock, and made huge profits when the bet paid off in the fourth year, has gambled tens of millions that the share prices of four household-name insurance companies will fall.
Lansdowne, founded in 1998 by Paul Ruddock and Steven Heinz, has disclosed that it had a short position in Prudential, Britain’s No 2 insurer, worth about £10.5 million ($24 billion); a £26.2 million bet against Aviva, owner of Norwich Union; and further gambles against Legal & General (L&G) and Old Mutual. With the exception of the Pru, insurers’ shares have continued to fall.
Independent – The collapse of Lloyds’ share price on Friday afternoon was deeply upsetting – and not just for shareholders in the bank.
Two weeks ago, those annoying folk at Paulson & Co, the hedge fund that has made a fortune from the credit crunch, took a sizeable short position in the bank. It looked like a duff bet: having sold Lloyds short at about 65p, the fund watched as the bank’s share price climbed to about 125p. And then the HBOS loss was disclosed and Lloyds plunged to 61p on Friday. That calamitous drop will have earned Paulson tens of millions of pounds. Darn it.
Bankers at the Japanese investment bank Nomura are cock-a-hoop at having earned fat fees advising Chinalco on its £200bn investment in the mining giant Rio Tinto. For various cultural and historical reasons, it is pretty unusual for Japanese companies to win work from China, so this was a breakthrough deal for Nomura. It was secured by the mining team that Nomura acquired when it bought bits of Lehman last year. In every cloud there’s a silver lining.
Bloomberg – Paulson & Co., the hedge fund run by billionaire John Paulson, made at least 295 million pounds ($420 million) since September by short selling Royal Bank of Scotland Group Plc.
Paulson held a short position of 0.87 percent in Edinburgh- based RBS on Sept. 19, according to regulatory filings. The shares traded at 213.5 pence at the time, and Paulson’s disclosure indicates he borrowed and sold almost 144 million RBS shares with plans to buy them back at a lower price. He reduced his short position to less than 0.25 percent, or about 98.6 million shares, as of Jan. 23, according to a filing yesterday.
West Palm Beach (HedgeCo.net) – Privately-owned investment management company, SVM Asset Management, is seeking approval from the Financial Services Authority for the launch of the long/short SVM UK Absolute Alpha Fund, which has a similar investment approach to their SVM Saltire fund, which returned +19.7% in 2008.
The fund, if approved, will have the flexibility to move from a net long to a net short position differentiating it from other absolute return funds, the company says. Managed by Colin McLean, returns will be driven by stock selection and the net position of the fund will be determined by whether the manager has more long or short stock ideas at the time.
"In 2008 just 31 of the stocks in the FTSE All Share ended the year higher, and 580 were down. It is therefore not surprising that few long only managers were able to profit," McLean says, "Without question this year will be challenging for the economy. However, at a company level there will be winners and losers and fundamental stock picking skills will be required to identify them."
The focus will be on generating positive returns over the long term rather than positive performance each month, as such SVM believes the appropriate time frame for investing in the new fund is at least three years.
Based in Edinburgh, SVM focuses principally on global fund of funds, UK and European equities.
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