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Bloomberg – Deephaven Capital Management LLC, the hedge-fund unit of stockbroker Knight Capital Group Inc., froze a $1.6 billion fund after investors asked to get back 30 percent of their money.
Withdrawals from the Deephaven Global Multistrategy Fund were suspended so managers wouldn’t be forced to sell assets in falling stock and debt markets, the Minnetonka, Minnesota-based firm said yesterday in a letter to investors. Lenders and trading partners also imposed stricter financing requirements, according to the letter.
Deephaven Global, which trades a variety of securities including bonds and commodities, follows RAB Capital Plc, Ore Hill Partners LLC and Highland Capital Management LP in limiting withdrawals amid the worst financial crisis since the Great Depression. The fund lost 15 percent this year through September, and Deephaven estimated it has fallen an additional 10 percent this month. The fund has returned an average of 16 percent annually since opening in 1994.
“This level of redemptions in the current market environment forces the question of whether such redemptions can be processed in the ordinary course without disadvantaging both continuing and later redeeming investors,” said the letter, signed by Colin Smith, Deephaven’s chief executive officer .
Norwalk Advocate – Some hedge funds are reducing their management and incentive fees to keep investors for longer periods during turbulent times on Wall Street.
Typically, hedge fund managers require investors to lock their money into a hedge fund for a year while charging a 2 percent management fee and keeping 20 percent of hedge-fund profits as an incentive fee – if it reaches a pre-determined point.
Camels Capital LLC, a Greenwich-based hedge fund, and Ore Hill, a New York-based fund, among others, have restructured these terms to keep investors.
"Ourselves, Ore Hill and a few other funds have taken a step to do that in this period of liquidity to lock in investors," said Richard Brendan, chief executive officer for Camels Capital. "We’ve been able to lock in our investors for a period of time to participate in opportunities with them."
Brennan would not comment on the specifics of the agreement between the hedge fund and his investors.
Scott Baker, a principal with Greenwich-based hedge fund investment firm Cookpine Capital, said many hedge funds are coming up with innovative ways to secure investor capital for longer periods.
Financial Times – RAB Capital is planning to restructure its flagship hedge fund, which plunged more than a third this year, and offering investors lower fees in return for agreeing not to withdraw their money for three years.
It is unclear how much of the $1.4bn that RAB Special Situations had at the end of June will be locked up for three years.
But any agreement to limit withdrawals could be good for the London-based fund, much of which is invested in hard-to-sell Aim-listed shares and private equity.
RAB is the latest in a series of hedge funds to offer discounts to investors who agree to stick with a poorly performing manager. Others include Ore Hill, the New York credit fund half-owned by London’s Man Group.
According to people familiar with the requests, RAB could announce the restructuring within a few days.
Wall Street Journal – In another sign of the changing power dynamics between hedge funds and their investors, funds are offering to cut fees if investors agree to stay put.
Camulos Capital LP in a letter last week asked its investors to promise to keep nearly $2 billion in place with the firm for another year as part of a restructuring. Camulos, the letter said, will take a 1.25% management fee, instead of the standard 2% fee, on most assets. If the fund makes money starting Oct. 1 through 2010, the firm will keep 10% of most profits, not the 20% that is typical of hedge funds and that Camulos investors previously agreed to pay, the letter said.
Meanwhile, Ore Hill Partners LLC, a New York money manager with about $2.8 billion in hedge-fund assets, also told clients it is ready to deal. It offered a sliding scale of fees depending on how long investors would commit money to its Ore Hill International Fund Ltd.
With returns lower this year at many hedge funds, there has been much talk of investors demanding better terms. But until now, there have been few reports of hedge funds actually changing their model.
Lowering fees can make it hard for funds to keep top analysts and traders, who often are paid out of profits, and it can undercut a fund’s prestige. Just last year, investors were begging to get into hot funds. But with hedge funds having their worst year in nearly two decades, investors are getting antsy.
Reuters – Hedge fund Ore Hill Partners, which specialises in credit strategies, has barred clients from redeeming their money from its flagship offering, imposing a freeze just as investors clamored for an exit, the company said on Friday.
The firm, half owned by Man Group, the world’s largest publicly traded hedge fund, put up a so-called gate provision on its roughly $1.2 billion (650 million pound) Ore Hill International portfolio this week, limiting the amount of withdrawals after investors sought the return of roughly $300 million, said an investor who asked not to be identified.
Heavy redemptions for September triggered an automatic gate, said Sophie Sophaon, a spokeswoman for the fund. Fund directors are considering what measures to take that will be in the best interest of all investors, she added.
New York (HedgeCo.Net) – New York-based Ore Hill has suspended investor redemptions after hefty withdraws set off an “automatic gate.” The $1.2 billion Ore Hill International Portfolio, which is partially owned by hedge fund giant Man Group Plc, was frozen after investors sought to redeem about $300 million.
The credit strategies fund posted a loss of about 6.5 percent this year, after an unimpressive 2007 in which the fund returned a mere 1.8 percent. A board meeting has been planned to discuss the next course of action. Often, hedge fund will suspend redemptions in an effort to wait out unfavorable market conditions. Other times, it serves as a precursor to the eventual closing of the fund.
This year has proven to be one of the toughest for the hedge fund industry, with hedge funds down as a whole 3.5 percent, according to data from Hedge fund Research. Like many other funds, Ore Hill experienced losses stemming from the credit crisis.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.Net)- Man Group has agreed to pay $50 million for a 25% stake in Nephila Capital, an alternative investment manager specializing in insurance-based instruments such as insurance linked securities, catastrophe bonds, insurance swaps and weather derivatives.
The CEO of Man Group plc, Peter Clarke, said, "This transaction further develops Man’s strategy to expand the range of opportunities for our investors. The natural catastrophe and weather derivative markets offer significant opportunities for uncorrelated alternative investment returns. We are excited at the prospects of this strategic partnership and what it means for our and Nephila’s investors."
The investment, which follows Man’s purchase of 50% of credit specialist Ore Hill in March, comes as the increasingly competitive hedge fund industry hunts for sources of extra return not correlated with traditional markets.
Bermuda-based Nephila, which manages around $2.4 billion in assets and employs 25 staff, specialises in insurance-based instruments such as insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives, Man said in a statement on Friday.
Man is a world-leading alternative investment management business. With a broad range of funds for institutional and private investors globally, it is known for its performance, innovative product design and investor service. Man manages over $78 billion and employs 1,600 people in 13 countries worldwide.
