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 – Freddie Mac, the second largest provider of U.S. home mortgage funding, on Friday posted its first quarterly profit in two years as gains from hedges and a one-time accounting change offset still-lofty credit losses.
For the first quarter in four, Freddie Mac said it would not need a capital injection from the Treasury to maintain its business of providing credit for U.S. housing. But it continues to rely on the government for survival, it said.
Times Online – SRM Global, the hedge fund that became the largest shareholder in Northern Rock, said yesterday that it would continue its fight for government compensation after losing its second legal challenge.
The fund, which owned 11.5% of Northern Rock, is leading a legal campaign claiming that the Treasury’s compensation scheme, which values former shareholders’ stakes at close to zero, is “unlawful and unfair”.
The legal action was launched in conjunction with RAB Special Situations, another hedge fund, and about 200,000 small shareholders in Northern Rock, many of them former employees of the lender.
Reuters UK – Some hedge funds will leave the UK if draft new European law is not changed, said one manager present at a meeting this week with the Treasury, in which the industry expressed grave doubts about the rules.
Proposed new EU rules to force disclosure of leveraged positions and give regulators more control over borrowing levels could drive away managers, David Stewart, the head of Odey Asset Management, told Reuters in an interview.
"They’d have to (leave) in some cases. If you put in the leverage rules and (the fact) that Cayman funds couldn’t be sold into the EU, I don’t know how it operates," he told Reuters.
"There will be some people who go back to America."
Reuters UK – U.S. government efforts to revive a sluggish economy have cheered markets since March, but some of the most successful investors around worry these moves may only make the bad times linger.
Several hedge fund managers at an investment conference this week warned that a number of policy moves by the Obama administration, from its Chrysler intervention to Treasury’s myriad bank bailouts, will only extend the recession.
It would be better, they said, if the government let markets move unimpeded, causing pain now but clearing a path for sustainable recovery.
24/7 Wall St. – Citigroup has gone to the Treasury to beg for bonuses for some of its most important traders, people who make the banks extraordinary amounts of money. The Treasury’s reaction will probably be that it wants to stay out of a fight with Congress and avoid negative public opinion and will turn the request down.
That would be a mistake.
Wall St.’s primary argument for keeping a high level of compensation for its best investment bankers and traders is that, if they leave, overall losses at banks could get worse. People can be profit centers. The most successful ones help offset the red ink created by the series of poor decisions that big financial firms made about mortgage-backed paper and commercial credit loans. It is easy to assess the value of the best traders by looking at a bank’s books.
Times Online – Secretive hedge funds will eventually be subject to the same supervisory rules as banks, under a tightening of Britain’s system of regulation.
The changes, which will require banks and other lenders to build up their reserves in healthy economic times, could become the basis for international efforts to overhaul regulation at the G20 summit in London on April 2. The moves will be proposed on Wednesday in a report by Lord Turner of Ecchinswell, chairman of the Financial Services Authority, who will call for an overhaul of the tripartite links between the FSA, the Bank of England and the Treasury.
They follow repeated pledges from Gordon Brown for a crackdown on the “shadow banking system”.
Reuters – The government is considering injecting as much as 10 billion pounds into Northern Rock to use the nationalised bank to ramp up mortgage lending, the Daily Telegraph reported.
The Treasury has yet to make a final decision on the plan, which may also see the bank hiring new staff, the newspaper reported in its Friday edition.
Spokesmen for the Treasury and Northern Rock, which is due to unveil a new business plan in the next few weeks, could not immediately be reached for comment.
Northern Rock became the first British casualty of the credit crunch in September 2007 when the bank, heavily dependent on wholesale markets for its funding, revealed that it had been forced to seek emergency support from the Bank of England.
The bank was nationalised in early 2008 after attempts to find a private sector buyer fell through.
Reuters – Nations from Europe to Australia rushed out plans on Sunday to shore up their banks, trying to halt a markets crash with pledges to back lending, buy stakes in financial institutions and take other emergency steps.if(window.yzq_d==null)window.yzq_d=new Object(); window.yzq_d['Yl9NCdG_Rvc-']=’&U=13fiorehq%2fN%3dYl9NCdG_Rvc-%2fC%3d632663.12996380.13209191.6227634%2fD%3dLREC%2fB%3d4577807%2fV%3d1′;
European leaders meeting in Paris said their line of attack would help halt the chaos that has frozen credit markets, the lifeblood of the financial system, redrawn the world’s financial industry and threatened a global recession.
"I believe that we will see over the coming few days worldwide action that will make people see that confidence in the banking system can be restored," British Prime Minister Gordon Brown told reporters.
Pioneer Press – Tom Petters, who spent two decades building the Petters Group Worldwide into a far-flung empire with $2 billion in sales and 3,200 employees, resigned Monday amid a federal investigation into allegations of fraud at one of his companies.
The move came days after federal authorities raided company offices, homes and vehicles of people connected to the business as they searched for evidence of an alleged scam dating back to the mid-1990s at Petters Co. Inc., a unit of Petters Group.
"Events of the last few days have made it impossible for me to continue as the leader of these companies," Petters said in a statement released to employees. "My first concern is that these companies continue to go forward and that you as employees feel secure about working here," he said.
Petters no longer would be involved in day-to-day operations of Petters Group or its independent operating companies such as Polaroid or Sun Country Airlines, the statement said.
Financial Times – RAB Capital is planning to restructure its flagship hedge fund, which plunged more than a third this year, and offering investors lower fees in return for agreeing not to withdraw their money for three years.
It is unclear how much of the $1.4bn that RAB Special Situations had at the end of June will be locked up for three years.
But any agreement to limit withdrawals could be good for the London-based fund, much of which is invested in hard-to-sell Aim-listed shares and private equity.
RAB is the latest in a series of hedge funds to offer discounts to investors who agree to stick with a poorly performing manager. Others include Ore Hill, the New York credit fund half-owned by London’s Man Group.
According to people familiar with the requests, RAB could announce the restructuring within a few days.
