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 – Foreign exchange trading volume in Japan has fallen 16 percent this year after many hedge funds closed out investments during the global financial crisis, and Tokyo’s turnover in spot trading now lags behind Singapore.
But steady turnover in FX swaps has helped Tokyo remain ahead of Singapore, its key rival as Asia’s dominant FX trading hub, in overall foreign exchange product trading, data on traditional FX instruments from the Bank of Japan showed.
Bloomberg – Signet Capital Management Ltd., a hedge fund investor that overseas about $2 billion, wrote down to zero an investment in Weavering Capital, the London-based hedge fund that filed for administration last week.
PricewaterhouseCoopers LLP is liquidating the $506 million Weavering Macro Fixed Income Fund after discovering the fund had $637 million in swap agreements with a company controlled by Magnus Peterson, the firm’s founder. That company “lacked the value to support the swaps,” PwC said.
Voiceof San Diego – San Diego County’s pension fund is slashing its $1 billion hedge-fund portfolio and acknowledging that the investments it once championed have become too risky and no longer make sense.
The board of the San Diego County Employees Retirement Association voted unanimously Thursday to reduce the size of its hedge-fund portfolio by more than half. That will free up $600 million, half of which will be held as cash. The rest will be reinvested in the portfolio.
The pension board also agreed to curb the aggressive strategy the $7.5 billion fund used to finance its hedge fund investments. Under the "alpha engine" strategy, the county bought financial derivatives known as swaps that were essentially bets on the market. Much like bets on a Chargers game, the swaps cost nothing initially, which freed up cash for hedge fund investments. When the market rose, the swaps made money, but in recent months, they cost the pension fund millions of dollars. Last month, the board voted to free up $100 million in cash to protect against further declines.
Telegraph.co.uk – Industry sources say private equity and distressed debt specialists have raised about $26bn (£17bn) since the start of October, with some 80pc coming from hedge funds.
Distressed debt funds, which buy debt that is trading at a discount because the borrower is at risk of defaulting, have been around for years but specialists are looking forward to a bonanza year in 2009.
Among the biggest distressed debt fund raisings since October have been Oaktree, which has secured $10.5bn, Towerbrook with $2.75bn, Intermediate Capital with $1.5bn, and Alchemy with $1bn. Hedge funds are also aiming to buy distressed debt directly from banks that are under pressure to offload liabilities to shore up their balance sheets.
Secondary debt, even senior loan notes, often trade below 70p in the pound and yield 25pc over five years if the debt is held – and survives – to maturity. If a company is strugglings with its covenants, debt holders can strike debt-for-equity swaps in return for keeping a company afloat – often a cost effective way of getting a seat at the table or control of a business.
