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.
Bloomberg – Sumitomo Trust Finance (H.K.) Ltd., the asset-management unit of Japan’s fifth-biggest bank, will start a new multi-strategy hedge fund that invests in Japanese stocks, index options, futures and credit-default swaps.
The Tactical Equity Concepts-Japan Fund, also called TEC- Japan, will start June 29 with 10 billion yen ($105 million) of seed money from parent Sumitomo Trust & Banking Co., said Kota Murakami, the Hong Kong-based head of Sumitomo Trust Finance’s investment management group. The fund aims to raise assets to as much as 60 billion yen over the next couple of years, he said.
Wall Street Journal - If you thought the collapse of one of the biggest leveraged buyouts in history would be devastating for merger-arbitrage hedge funds, you’d be right. But pure merger arbitragers weren’t the only hedge funds hurt.
The $41 billion buyout of Canadian telephone company BCE Inc. (BCE) has been officially nixed, sending the stock down to its lowest levels in six years. Even investors who don’t typically play merger deals have gotten hurt.
That’s because starting in mid-September, the spread between the deal price and BCE’s share price had widened considerably, thanks to what turned out to be legitimate
Computerworld Australia - The collapse of Wall Street may help make computer science and other IT careers attractive to students who abandoned those fields in droves after the dot-com bust of 2001.
William Dally, chairman of the computer science department at Stanford University, says that for the past several years, he has watched some students interested in technology go into banking and finance because those fields could be more lucrative.
"Many thought they could make more money in hedge funds," Dally says. He notes that students are returning to computer science because they like the field and not because it will necessarily make them rich.
Globe and Mail – This is how bad things are for hedge funds right now. On the CanadianHedgeWatch.com website, a hub for the hedge business, the lead article one recent day was headlined "The hedge fund collapse."
The article, which originally appeared on the Portfolio.com website, tells us that as many as half the 10,000 hedge funds that existed earlier this year could fail or be wound up in the next 12 months. Outsmarted by the financial crisis of 2008, some prominent hedge fund managers lost 20 to 65 per cent of their assets even before October came. "The hedge fund mystique died with the crash of 2008," the article says.
The mystique is dead for sure, but hedge funds are not. The Horizons Global Contrarian Fund proves it.
What we have in Horizons Global Contrarian is a hedge fund of the old school. Rather than acting as a supercharged equity fund willing to push all risk boundaries, it tries in a measured and conservative way to make money no matter what the stock markets are doing.
Reuters – Malaysia is working on a plan to allow the creation of Islamic hedge funds.
"It is now in the developmental stage,” Goh Ching Yin, an executive director at the Securities Commission, was quoted as saying by Business Times newspaper.
"There’s no timeline, but we are making good progress.”
He said the plan could get off the ground next year, depending on market conditions.
Hedge funds’ bets on falling share prices have been blamed for contributing to the near-collapse of investment bank Bear Stearns, the demise of Lehman Brothers and for a sharp drop in financial stocks in general.
Bloomberg – Mizuho Financial Group Inc., Japan’s second-largest bank by revenue, will start electronic trading in Asia after hiring a team of 16 former Lehman Brothers Holdings Inc. employees, two executives familiar with the plan said.
The team, led by Anthony Brooker, the former head of electronic trading sales for Lehman in Asia, will target hedge funds and institutional investors with electronic products and systems for equities trading, the executives said. They declined to be identified as the plan isn’t public.
Mizuho, which cut its full-year profit forecast 55 percent on Oct. 31 because of rising bad loans and investment losses, is building its equity trading business in Asia to challenge Nomura Holdings Inc. Brooker was among hundreds of Lehman employees who opted to join competitors rather than staying with Nomura after the firm agreed to buy Lehman operations in Asia, the Middle East and Europe. Nomura is taking over about 8,000 Lehman workers following the Wall Street firm’s collapse in September.
Guardian.co.uk – Hedge funds and banks are expected to bear the brunt of derivative losses estimated at $15bn (£9.4bn) linked to the collapse of Iceland’s three major banks – Landsbanki, Glitnir and Kaupthing – which failed in rapid succession last month.
The complex unwinding of trades linked to debt issued by the banks began yesterday with a settlement auction to determine the payout price on credit default swap (CDS) contracts – insurance taken out against the risk of debts going bad – for Landsbanki.
Payouts on all three banks are expected to be some of the largest ever seen in the $54.6tn CDS market – greater than those relating to Lehman Brothers, whose collapse triggered the meltdown of the global financial system.
The high settlement prices for Icelandic bank CDSs will be a blow to hedge funds, banks and other derivative traders who insured the debt.
Times Online – A new front is opening up in the battle between London and New York to be the world’s dominant financial centre.
Hedge funds, and the thorny question of where they decide to do business over the coming months, could mark a turning point in the delicate balance of power between the two market capitals.
Despite widespread fears that hundreds of funds are poised to collapse, any shake-out in the industry will still leave hundreds of healthy firms with billions to invest.
Experts say that some of the industry’s biggest funds are considering whether to move billions of dollars worth of assets across the Atlantic to the United States in the wake of the collapse of Lehman Brothers, the Wall Street investment bank.
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.
Bloomberg – If Sherlock Holmes were analyzing the credit crunch, he would be drawing our attention to the dog that didn’t bark, just as he did in “The Hound of the Baskervilles.”
The dog, of course, would be hedge and private-equity funds.
Anyone tracking markets in recent years will remember the prediction that the unregulated, feverish trading of hedge funds, and the massive debts and complex financial engineering of buyout firms, would cause the next crash.
The crash happened, but it was started by what appeared to be safer institutions. It was the relatively dull mortgage lenders, and the investment banks that supplied their funding through the wholesale money markets, that sparked the collapse.
Guardian Unlimited – After being accused of precipitating the present financial crisis by short-selling banks, hedge funds are now turning their attention to student loans.
Jim Chanos, founder and president of Kynikos, one of the best known short- selling hedge funds in the US, has student loan companies high on his list to short for the foreseeable future.
‘This industry has much in common with the sub-prime mortgage industry,’ Chanos said. ‘Things do not look very bright.’
They don’t. More than two-thirds of American university students rely on loans to pay for college, but loan applications are being turned down in record numbers as the near collapse of the credit market is making all but the most secure loans impossible to write.
Telegraph.com.UK – Sources close to Mrs Lagarde said that she had called the US Treasury Secretary – a close personal friend – well before the ailing bank’s collapse imploring him to act, but he chose not to.
Lehman Brothers’ demise sparked the biggest shake-up on Wall Street in decades and sent shock waves around the world that triggered a massive bailout plan in Britain and Europe.
Mrs Lagarde – attributed with playing a key role in brokering a bailout deal among G7 finance ministers in Washington last weekend – dubbed Mr Paulson’s decision to let the bank go under "horrendous" as it triggered panic in markets and banks to the brink of a 1929-style financial meltdown.
In an interview with the Daily Telegraph, she warned that the world’s hedge funds could be the next institutions to be hit by the financial turmoil.
