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.
Globe and Mail – When Salida Capital Corp. beat all other bidders in a charity auction last month to score lunch with Warren Buffett, the $1.68-million (U.S.) win sent a signal to Bay Street: Salida is back.
Salida, the once high-flying, resource-focused hedge fund manager known for its appetite for risk, became one of Canada’s high-profile victims of last year’s market meltdown when its flagship Multi Strategy Fund plunged 67 per cent and three of its hedge funds got locked up in the Lehman Brothers Holdings Inc. bankruptcy.
That was followed by a rapid exodus of key staffers and by dwindling assets under management.
Reuters – Volatility spread across stock and foreign exchange markets on Tuesday as investors eyed a Federal Reserve meeting expected to cut interest rates and hint at future unorthodox monetary policies to lift the U.S. economy.
European stocks reversed early losses to put in solid gains after better-than-expected euro zone manufacturing data. The dollar firmed against the euro after earlier hitting a two-month low.
Oil was trading below $45 but was supported by expectations that OPEC will agree its largest supply cut ever later in the week.
The Fed is widely expected to cut interest rates to just 0.5 percent or lower. Futures markets are setting a two-thirds possibility of a 75 basis points cut to 0.25 percent.
Forbes – In the December issue of Dan Wiener’s newsletter, "The Independent Adviser for Vanguard Investors," Wiener interviews James Barrow, lead manager for $31 billion Vanguard Windsor II, and learns that the venerated value manager believes that hedge fund liquidations should cease by the end of the year, taking a good deal of volatility and downward pressure out of the markets.
Barrow told Wiener that: "All of that money the banks loaned the hedge funds is getting called in. They are selling these guys out. Not only are these guys getting redeemed by their investors, they’re getting redeemed by their lenders. I don’t know how long this has to go on–it’ll obviously be over by the end of the year, but it could be pretty bloody between now and then."
Reuters – Private equity investor Thomas H. Lee may shrink or shut down two funds that had $1.5 billion in assets after suffering losses of about 40 percent this year, the Wall Street Journal reported on Thursday, citing people familiar with the situation.
Hard-hit hedge funds run by Lee farmed out investor money to about 110 other funds, including SAC Capital Advisors and D.E. Shaw Group, according to the paper.
While Lee designed the so-called funds-of-funds to have low volatility with steady, consistent returns, he borrowed heavily to multiply the size of his bets, piling up debt of as much as $3.2 billion, the sources told the paper.
Minneapolis Star Tribune – The local hedge fund industry has canceled its Winter Ball, scheduled for the Minneapolis Club in December, "due to volatility within the hedge fund industry."
The big shooters at Deephaven Capital Management, Whitebox Advisors, Pali Capital, plus other firms and their lawyers and accountants are a little stressed lately. And not all their clients are happy about their performance.
"In its place, we plan to host a ‘happy hour,’ as much of the feedback included the desire to get together, albeit on a smaller scale," according to a note last week from the Twin Cities Hedge Funds Care Committee. "We are in the process of confirming a venue and anticipate the location to remain downtown."
Straits Times – Hedge fund assets fell by US$100 billion (S$151 billion) in October as investors withdrew their money and funds were forced to sell stock, exacerbating the severe volatility that pounded global markets during the month.
About US$60 billion of the US$100 billion in asset losses during the month came from investor redemptions, according to a report on Wednesday released by Eurekahedge, a data and research provider.
Hedge funds’ assets totalled US$2.497 trillion at the end of the third quarter, according to HedgeFund.net, a hedge fund data provider.
Hedge fund selling has widely cited as one of the reasons for the increase in volatility in equity and bond markets during October.
Reuters – The Turtle Fund, an $80 million Swiss-based hedge fund trading volatility, has stopped trading and will let investors exit after sharp losses, following a disagreement between the fund’s managers. In a note to investors, seen by Reuters, the fund said it lost 8.7 percent in September and 14 percent in October — its worst-ever monthly performance.
That took year-to-date returns, which had been in positive territory, to around a 13 percent loss.
On October 10 alone, there was a 14-percent loss, which the note said was caused by a "disagreement within the team concerning the hedging strategy."
"Our third partner … by virtue of his majority stake in the company revoked our trading authority and liquidated all existing positions at the … worst possible moment, arguing to protect his clients from further losses," it said.
West Palm Beach (HedgeCo.net) – Because of investors’ demand Salus Alpha decided to make the Salus Alpha Directional Market accessible as a fund. This way Salus Alpha continues to launch tracker funds for all hedge fund indices launched by Alternative-Index Ltd.
The Directional Markets Index (DMX) convinced investors this year with outstanding +53% YTD performance and above-average performance in the last years, the DMX contrasts clearly with other Hedge Fund Indices.
Investors are able to achieve profits even in falling markets because of the widening of the product range Salus Alpha. It responds to investors’ needs in the current volatile market environment and offers a lager selection of funds with no correlation to bonds or equities.
The Salus Alpha Directional Markets employs directional trend following strategies in multiple time frames and markets. The funds objective is to achieve low to negative correlation to traditional longonly investments such as bonds or equities. The fund also tracks the Vienna Stock Exchange listed DMX.
Since inception of the calculation the DMX displays a performance of approximately 28.40% p.a. with a volatility of 17.88% p.a.
The subscription period for the Salus Alpha Directional Markets is from 5th November 2008 to 30th November 2008. During subscription period no sales fee will be charged.
Reuters – In the past month, traders could have shown up on Wall Street at 3 p.m. and not have missed much.
The last hour, even the last min utes, of trading seemed to be the only ones that mattered in October. But the days of one-hour markets may be waning, at least for now.
Traders say the intensity of these extreme late-day swings — 443 points on average in the "witching hour" for the Dow Jones industrial average .DJI in October — could let up as some of the so-called forced selling abates.
"I don’t think the late-day volatility will be as evident this month," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York.
CNBC – About half of the investors in T. Boone Pickens’ energy-oriented equity hedge fund have asked to withdraw their money on the heels of losses of about 60 percent this year, the Wall Street Journal said, citing people close to the matter.
Pickens and his investment fund have lost $2 billion since peaking in late June, Pickens told the CBS program ’60 Minutes’ on Sunday.
His fund, BP Capital, will have about $400 million to $500 million after expected withdrawals, the Journal said.
A few weeks ago, Pickens moved the fund almost entirely into cash to help ride out the volatility in the energy patch, the paper said, citing people close to the matter.
Daily Telegraph – Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia.
The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system.
Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.
Investors pulled at least $43bn (£25bn) from US hedge funds in September, according to TrimTabs Investment Research. This is nearly five per cent of the global sector’s estimated $2 trillion in total assets.
New York (HedgeCo.Net) – After a disappointing year, Citadel will launch several new hedge funds in hopes of countering the losses of their main hedge fund.
The multi-strat $10 billion Kensington Global Strategies Fund has fallen over 30 percent this year. CEO Ken Griffin attributed some of that loss to the temporary ban on short selling, saying it “created material dislocations across many of our portfolios and disrupted our ability to assume and manage risk.”
After much speculation and some bad press, Griffin warned investors last week that returns on the fund would experience “significant volatility” in the next few weeks.
The new funds will focus more on global macro, convertible arbitrage and fixed income strategies, according to the Wall Street Journal.
Griffin told investors, "The financial crisis dramatically raised the cost of borrowing and reduced the availability of credit to market participants, materially reducing the value of cash assets as compared to the value of derivative instruments.” He went onto explain how he did not foresee the financial crisis that has unfolded this past year.
While the Kensington Fund will still be available to investors, many clients are interested in allocating their assets across numerous strategies.
Citadel was founded in 1990 and manages over $20 billion in capital.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
