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.
Reuters – European shares closed lower on Tuesday in response to disappointing U.S. economic data, with banking and commodity stocks weighing the most on the main index.
”We have had a couple of macro figures which did not please the market. The U.S. labour costs and productivity figures are worrying … they simply mean that there are enormous constraints on the consumer who are supposed to bail us all out of this,” said Heino Ruland, strategist at Ruland Research.
”Industry is just slashing costs all over the place … it means final demand may not be strong enough,” he said.
Reuters – One of London’s top analysts, James Montier, has resigned from French bank Societe Generale to join a hedge fund, a source with knowledge of the situation said on Thursday.
The source did not say which hedge fund has employed Montier, recently voted best strategist in the Thomson Extel survey, alongside colleague Albert Edwards.
The pair joined Societe Generale from Dresdner Kleinwort in December 2007 as co-heads of global strategy.
Reuters – Mellon Capital Management, which invests money for pension funds and others, plans to launch a new hedge fund in August, a top executive said on Tuesday.
The new portfolio, which is slated to become the group’s flagship hedge fund offering, will invest in currencies, commodities, stocks, bonds and derivatives.
"This will be the first time that Mellon Capital will offer clients a commodity alpha source," said Eric Goodbar, the firm’s hedge fund strategist.
Reuters UK – NewSmith Capital Partners, one of the hedge fund firms to appear before a parliamentary committee investigating the UK banking crisis in January, has lost six staff as it cuts costs in a tough period for the industry.
According to a regulatory filing obtained by Reuters on Tuesday, Edward Johnson, an analyst on the firm’s resources and energy fund, and Ben Squire, an analyst on the credit fund, are no longer members of the firm.
The firm, which employs around 70 people, has also parted company with Sadiq Currimbhoy, a strategist on the firm’s Global Opportunities fund. A spokesman said investors had taken up an option to withdraw their assets from the liquid part of the fund and keep the remaining part of the portfolio as a private equity vehicle.
Bloomberg – U.S. hedge funds are buying more of the nation’s stocks than they’re selling for the first time since October, while mutual funds and most other investors remain net sellers, according to UBS AG.
In the four weeks ended March 13, net purchases of equities by hedge fund clients of UBS averaged $140 million, according to a March 18 report by David Bianco, the New York-based chief equity strategist at Switzerland’s biggest bank. The inflows into stocks followed 22 straight weeks of outflows.
“Those who are supposedly experts at assessing and managing risk are more confident putting capital to work than they were in October and November,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets LP Jersey City, New Jersey. “That’s an indication that the market has made some constructive moves toward building a base.”
Bloomberg – Japan’s attempts to end financial turmoil failed to lure hedge funds back to its swap markets, leaving premiums paid by domestic borrowers near a record, RBS Securities Japan Ltd. said.
Hedge funds, which lost more than $400 billion through withdrawals and market losses since June, pulled out of Japan’s swap markets after the failure of Lehman Brothers Holdings Inc. led to a seizure in global credit, said Tatsuo Ichikawa, a senior strategist at RBS in Tokyo. Japan’s banks were charged record premiums this month to swap London borrowing rates for those set in Tokyo as a slumping economy exacerbated concern about the health of the nation’s companies.
Seekingalpha.com – To understand which segments of the U.S. equity market were most affected by hedge fund selling pressures late in 2008, a good place to look is 13F filings with the SEC. These are required from institutional investment managers with US$100 million or more in securities.
Citigroup’s small and mid cap stock strategist, Lori Calvasina, reviewed recently released filings for the fourth quarter and found that small and mid cap stocks were hit hardest.
Forbes – Bank of East Asia, Hong Kong’s fifth-largest lender, posted a bigger-than-expected second-half loss and slashed its dividend, after selling a debt portfolio at a steep loss.
The bank (BEA), which reported its first half-year loss since the 1960s, warned of a tough market environment this year but said on Tuesday it had no strong need to raise capital in the near term.
‘BEA may not need to raise capital immediately but the market will remain bearish on the stock as loan growth drops and mortgage demand slows down,’ said Castor Pang, a strategist with Sun Hung Kai Financial.
Reuters – Hedge funds are set to return to their roots as niche products for the happy few as they have been unable to deliver the gleaming returns they were promising ever since the start of the credit crisis.
Hedge fund managers have long been flaunting alpha — returns down to their skills to beat markets by using advanced investment techniques — but many were caught short just as any other investor in this year’s protracted downturn.
The industry now faces rapid shrinkage driven by losses of more than 20 percent, as measured by Hedge Fund Research’s daily HFRX index, and redemptions that are predicted at somewhere between "large" and "catastrophic."
"Eighty percent of the hedge fund sector will not be here in three to four months," Robert McAdie, a credit strategist at Barclays Capital, said at a recent briefing. "Levered strategies are dead in this environment."
Funds have delivered worst-ever losses of 17.70 percent in the 11 months to November, according to Hedge Fund Research, as stocks have slumped and volatility has surged.
SF Gate – There probably won’t be many tears for Larkspur’s Copper River Management LLC. The $1 billion hedge fund’s partiality to short selling earned it obloquy, lawsuits and, ultimately, death.
No trace of company personnel could be found for comment Wednesday, after the Wall Street Journal reported that the fund is "liquidating and returning funds to investors." The only sign of life was a forlorn logo on the company’s Web site. The cause of demise? Some observers predicted it after the company, formerly known as Rocker Partners, got caught on the wrong side of derivative trades with the going-bankrupt Lehman Bros. Others pronounced the patient terminal when the feds banned short selling of financial stocks in September.
CNNMoney.com – When Keith McCullough left his hedge fund job last October to start an independent research company, it may have seemed like a curious move. Fourteen months, a highly prescient call on the market crash, and several key hires from top hedge funds later, McCullough’s company, Research Edge LLC, is forming a partnership with the institutional brokerage division of LaBranche & Co. (LAB) that will see LaBranche process actual trades for its clients based on Research Edge’s research.
The partnership will allow customers of LaBranche Financial Services LLC, including hedge funds, to get access to Research Edge research and immediately trade on that research through LaBranche. Existing customers that are clients of both LaBranche and Research Edge would automatically be able to use LaBranche for the trades, and LaBranche will have a team dedicated to pitching Research Edge to its other clients. LaBranche customers who pay for Research Edge research will be the only LaBranche clients who can act on that research. Neither company would comment on financial terms of the deal.
The Daily Deal - Lehman Brothers Holdings may have gone bankrupt eight weeks ago, but the filing continues to reverberate throughout the financial world and even in some unexpected places like the National Football League’s New York Giants. The latest to join the ranks of the exposed are hedge funds. All those 140,000 failed or reconciled credit derivative swaps trades that PricewaterhouseCoopers is involved in identifying could hit the hedge funds and numerous other Lehman clients next month.
According to the Financial Times, four unnamed U.S. hedge funds are likely to close in mid-December because they cannot access holdings held at the London arm of Lehman Brothers. All of the shares and loans cannot be accessed so that PwC can unravel those CDS’s.
