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.
Forbes – Britain’s financial regulator on Wednesday banned guaranteed banker bonuses of more than one year, as it leads a global crackdown on a culture of excessive risk-taking that has destabilised economies.
The Financial Services Athourity (FSA), which has been slammed for failing to address problems that led to the near collapse of the financial system last October, also said two thirds of bankers’ bonuses should be spread over three years to discourage short-term decision-making.
The Australian – Blackstone Group posted a wider second-quarter loss, but results beat analysts’ expectations as the private-equity giant reported positive returns and better fund-raising at its credit-oriented and funds-of-hedge-funds businesses.
On a conference call with analysts and investors, chairman and chief Executive Stephen A. Schwarzman said that two-thirds of the companies in Blackstone’s private-equity portfolio expect to see either positive or flat earnings before interest, taxes, depreciation and amortisation, or Ebitda.
That’s compared to 35 per cent of the companies in the Standard & Poor’s 500 that Blackstone expects to see gains in that area.
The Washington Post – The Wall Street herd is at it again. Even as the cleanup crew is carting away the debris left by the last financial crisis, the investment banks, hedge funds and exchanges are busy working on the next one.
Forget collateralized-debt obligations and credit default swaps — the new new thing is high-frequency trading. In the last three years, this practice has boosted trading on the country’s stock exchanges by more than 150 percent, to the point where it now accounts for two-thirds of the daily trading volume.
HedgeCo.net (West Palm Beach) – Hedge funds attracted $19 billion of fresh capital (gross) in June, marking their second consecutive month of net inflows of $6 billion. Nearly 75% of all reporting hedge funds are in the black for H12009, with event driven funds up an impressive 19% (YTD), on average, according to Eurekahedge.
Gross inflows into hedge funds totalled a healthy $19.2 billion (or 1.5% of end-May assets), about two-thirds of which were negated by redemptions of $13 billion. A good portion of these redemptions (nearly $5 billion) represented the assets withdrawn by funds of hedge funds, which continued to witness redemption pressures as investors are increasingly opting to invest directly into hedge funds for better returns and capital protection, as well as relatively lower fees.
The Eurekahedge Hedge Fund Index gained 9.5% while the Standard and Poor 500 rose 1.8% over 1H2009. Since Jan-2007, hedge funds are up 10.4%, while the Standard and Poor 500 is down over 35%.
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Telegraph.co.uk – Mayor Boris Johnson will welcome guests, thought to include Tony Blair, Elton John and Jemima Khan, who have paid up to £100,000-a-table to be at the event at the former Eurostar terminal at Waterloo.
Despite being dubbed Britain’s most extravagant party, the organisers said it will be more low key.
Arpad "Arki" Busson, the French financier and chairman of the dinner’s charity Absolute Return for Kids, said: "We have cut the costs of staging the event by two-thirds and there are two-thirds less luxury lots too. We have to be reflective and respecting of the times."
Whereas in past years, Prince, Elton John and Stevie Wonder have performed, this year the entertainment will be provided by the London Chamber Orchestra.
Globe and Mail – The multimillion-dollar bills continue to creep up on the Olympic village project.
The city has stashed $25-million into a contingency reserve for the project, while its property endowment fund has now disbursed $100-million for the city’s own "public-realm" improvements for the new neighbourhood.
Those amounts are on top of the half a billion dollars that the city had lent to the private builders of the Olympic village by the end of last month, which is about two-thirds of the $860-million the project is anticipated to cost by the end.
Reuters – Hedge fund assets will continue to shrink this year, falling as much as two-thirds from their 2007 peak, but investors will return and assets will rebound when the economy revives, Alex Ehrlich, global head of prime services at Swiss bank UBS, said on Monday.
Last year was the hedge fund industry’s worst ever, as asset values plunged and investors pulled out record amounts of cash. These trends, which forced hundreds of funds to close their doors and some to impose redemption curbs, are likely to continue this year before the industry rebounds, Ehrlich said at the Reuters Private Equity and Hedge Funds Summit in New York.
"All this proves is that the hedge fund industry is cyclical," he said. "But the idea of the death of the hedge fund industry is crazy. The industry will rebound, though it will not rebound to peak levels."
Ehrlich, who runs one of the world’s largest prime brokerages, said that in just the past year hedge fund assets have fallen from roughly $2 trillion to as low as $1 trillion.
Reuters – Investment firm SW1 Capital said on Friday it has bought into hedge fund platform PCE Investors and plans to build a controlling stake, cutting private equity firm Ubequity Capital Partners’ own holding.
PCE runs $1.6 billion (1.1 billion pounds) in assets and by next month will have 21 funds, run by 15 teams, in its stable. SW1 is hoping to exploit greater demand for robust and transparent hedge fund operations, thrown into the spotlight by the financial crisis and Madoff scandal.
The deal initially sees two-thirds owner Ubequity temporarily increase its holding as it and SW1 buy out minority shareholder Schneider Trading Associates.
Miami Herald – Nearly two-thirds said they had lost 70 percent of their investments or more, according to the survey by the Shanghai Securities News, a newspaper affiliated with the stock exchange.
Many Asian hedge funds, meanwhile, took a drubbing and closed shop by the dozens, with their traditionally long bets on the markets’ moves souring amid the furious sell-off.
Whether 2008’s lows, reached mostly in October and November, hold in 2009 is a matter of debate.
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.
New Yorker – “Death by a thousand cuts.” “Fire-sale liquidation.” “A vortex of selling.” No matter how people described the market collapse that hit a month ago, the message was the same: it felt like there was nowhere to go but down, and it felt like we’d be going there forever. (Given last week’s dip, it still does.)
Beginning on September 29th, the U.S. stock market fell on nine of the next ten trading days, plummeting twenty-six per cent; then, after a short, sharp rally, it lost ten per cent more in less than two days.
Explanations for the crash often focussed on the hysteria and panic that periodically seem to seize investors. But the madness of crowds wasn’t the whole story. In a healthy market, there are countercyclical forces—mechanisms and institutions that go against the general market trend and encourage diversity of thinking—that make it harder for feedback loops and vicious cycles to take hold. Lately, though, many of these institutions and mechanisms have become procyclical: instead of countering trends, they amplify them.
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.
