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CNN Money - Hedge funds may be struggling and closing up shop in the current market environment, but Goldman Sachs Group Inc. (GS) was able to make more money tending to the funds’ needs this year than last.
The company, which on Tuesday reported its first quarterly loss since it went public a decade ago, was able to post a 19% gain in revenue in its securities services operations for the three months that ended Nov. 28, compared to the same period last year. The business also turned in record net revenues for all of fiscal 2008 at a time when Goldman’s normally high-octane trading and principal investing line was down by 71% for the year.
Goldman’s security services business is dominated by its prime brokerage operations, whose clientele comes primarily from hedge funds. Competitor Morgan Stanley (MS), which runs a similar prime brokerage business that turned in record net revenues last quarter, reports its earnings on Wednesday.
Though hedge funds have been hard-hit by customer redemptions and market losses, Goldman was able to generate more revenue this year because its securities services business mix became more profitable, Chief Financial Officer David Viniar told analysts during a conference call.
CNN Money - In another sign the financial crisis is hitting Asia’s once booming hedge-fund industry, Alexis Fosler, the head of Citigroup Inc.’s ( C) prime brokerage team in Singapore has left the company, two people familiar with the situation said Tuesday.
Fosler was leading a three-person team that was set up more than a year ago to serve hedge funds clients in the island. She had previously worked in the offshore banking industry based in the British Virgin Islands.
One person said Citigroup remains committed to the Singapore prime broking business despite Fosler’s departure.
New York (HedgeCo.Net) - The debate on whether or not to grant the big three Detroit automakers billions in bailout funds continues as Democratic leaders set a timetable for the companies to present a “credible restructuring plan.”
In a letter sent Friday to GM’s Rick Wagoner, Ford’s Alan Mulally and Chrysler’s Robert Nardelli, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid outlined what the auto executives must do to receive the rescue they are desperately seeking.
"The American people - deserve to see a plan that is accountable to taxpayers and that is viable for the long-term," the letter said. The democratic leaders also insisted that the auto executives must be "making significant sacrifices and major changes to their way of doing business."
With the majority of media attention focusing on the fact that each of the three men flew private jets to Washington and proceeded to beg Congress for $25 billion in bailout money, “significant sacrifices” could mean perhaps flying commercial next time.
The letter states that the companies must provide a detailed assessment of their finances, along with a request for an amount that they feel would bring them to “long-term viability.” The December 2nd deadline leaves plenty of time for heated debates on what seems to be the most prevalent issue in the current economic crisis.
Some republicans, like Alabama Senator Richard Shelby, are reluctant to provide aid to what he feels is already a lost cause. In a recent CNN interview, Shelby argued that even $25 billion would not save the automakers. He went on to say that perhaps $50 billion or even $100 billion would not be enough. His take is that unless these companies have “new management, new innovation and new products,” they are going to sink, no matter how much of an infusion of cash they receive.
The Democratic leaders said the companies have failed to convince Congress that they have a coherent strategy to stay afloat once any funding was granted. The letter urges the automakers to bring to the table a long-term plan with reasonable objectives for repayment.
Should the companies receive any taxpayer-funded loans, those would receive “senior status,” meaning they would have to be paid off before any other company debt. The Democrats are hoping that Congress will reconvene the second week in December to decide if and how there will be a rescue package for the three automakers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
CNN Money - Third Point Management, a New York hedge fund run by one of the country’s most outspoken and controversial investors, has come under investigation from the Securities and Exchange Commission.
The $5.6 billion fund, whose founder Daniel Loeb is well known for his pointed regulatory filings targeting chief executives he deems underperforming, informed investors in a letter last month that it has been notified that the SEC has commenced a formal investigation into its communications with other hedge funds.
The SEC’s investigation into Third Point comes at a time when hedge funds are being criticized for playing a key role in the trading of various companies as well as in the continuing financial crisis. The SEC is investigating the actions of up to 50 hedge funds in the collapse of Bear Stearns and in the continuing troubles of Lehman Brothers and mortgage guarantors Fannie Mae and Freddie Mac.
According to reports, the SEC is investigating whether hedge funds knowingly and intentionally spread falsehoods about the financial strength of these - and other - brokers and banks. According to Institutional Investor magazine, which broke the Third Point story Tuesday, Loeb told investors that the communications were uncovered during the course of a routine audit last year after Third Point became a registered investment adviser.
CNN Money - No one would dare go so far as to say that the Wall Street job market is bright.
Through June, financial firms of all stripes have shed an estimated 63,000 jobs over the past year, according to the latest employment figures from the Labor Department. That’s due in large part to the housing slump and credit crisis.
The pain is particularly acute on Wall Street. Investment banks and brokerages have shed an estimated 7,600 jobs, or roughly 4% of their workforce during the past year, according to the latest figures from the New York State Department of Labor.
If previous market downturns are any guide, analysts project that Wall Street could cut anywhere between 20% to 25% of its workers if the economy gets even worse.
But despite this, there are some financial firms hanging out the "Help Wanted" sign.
CNN Money- A listed fund of hedge funds operated by Goldman Sachs Group Inc. (GS) has lifted its assets by about 25% by raising an additional $ 221.3 million on the London Stock Exchange on Tuesday.
Goldman Sachs Dynamic Opportunities Ltd. (GSDO.LN), which invests in 20 hedge funds run by managers including New York’s Och-Ziff Capital Management Group LLC and London’s The Children’s Investment Fund Management (UK) LLP, now manages about $840.2 million, making it the second-largest fund of hedge funds trading in London.
Investors have been scooping up shares in listed funds of hedge funds as a way to diversify from traditional stocks and try to preserve capital in turbulent markets. Funds of hedge funds have historically posted flat returns in years when stock markets suffered sharp declines.
CNN Sports Illustrated- A former hedge fund manager’s suicide has no effect on a lawsuit filed by six former NFL players against the league and its players union over $20 million they say they lost in an investment scheme, an attorney for the plaintiffs said Monday.
The lawsuit claims the union endorsed Kirk Wright’s services even though he had liens against him.
Wright hanged himself in a suburban Atlanta jail on Saturday, three days after he was convicted of leading an investment scheme that caused clients, ranging from the former NFL players to his mother, to lose millions of dollars while he spent the money on jewelry, real estate and a $500,000 wedding.
CNN Money- Two hedge funds urged shareholders of CSX Corp. on Tuesday to elect their minority slate of five board candidates, arguing that their nominees have more industry experience and a greater financial stake in the railroad operator.
The hedge funds are TCI, which manages The Children’s Investment Master Fund, and 3G Capital.
In October, TCI asked CSX’s board to separate the roles of chairman and chief executive, add new directors with railroad experience and present a plan to improve operations. In December, they jointly nominated the minority board slate.