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.
Seattle Times – Five years ago, the mutual- fund world was rocked by the biggest scandal in its 80-year history.
Fund companies gave some customers trading privileges that weren’t open to everyone; those special interests — notably some hedge funds — engaged in rapid trading that netted quick profits at the expense of the average shareholder.
Headlines called it a "market-timing scandal," a misnomer since there’s nothing illegal about trying to time the market. The problem wasn’t even so much the quick-fire trades as it was the special privileges that let traders play games that the ordinary shareholder couldn’t engage in and actually paid for.
Now shareholders in scandal-tainted funds are starting to receive payments to compensate for their losses. The SEC just sent checks worth a total of $40 million to 600,000 Putnam investors. Another $18 million was distributed to some 325,000 Janus shareholders.
Reuters UK – The hedge fund industry’s trade-of-the-moment — betting on falling financial stocks and rising commodities — is set to offer further profits, despite July’s setback, but managers may have to alter their tactics.
Hedge funds may well profit from betting July’s bounce in battered financial stocks and decline in commodities was only a blip in a longer-term trend, since the fundamental reasons for disliking bank stocks and holding commodities remain intact.
However, with investors nervously watching every piece of performance data, many funds have had to scale back the size of these bets to avoid further poor numbers — or are taking bets likely to be less painful if markets go against them.
New York (HedgeCo.Net) – Victory Park Capital, a Chicago-based hedge fund, has received a vote of confidence from FRM Capital Advisors in the form of a major investment. Victory Park Capital plans on expanding their asset-based lending fund in hopes of taking advantage of the favorable market conditions associated with this kind of strategy.
“We are delighted to have the opportunity to partner with such an experienced team,” says FRM Chief Executive Clive Peggram. “We believe it is a very good time in the credit cycle to pursue an asset-based lending strategy.”
Victory Park Capital Advisors was founded last year and provides asset-backed loans to companies who are in need of financing and can’t always turn to the bank. Asset based lending is a popular strategy in today’s current market turmoil with the large amount of high rises and other developments being constructed. High interest rates are usually tacked on the loans, while the building is put up as collateral.
“We’re very pleased to form a relationship with Victory Park Capital,” says Blaine Tomlinson, FRM’s founder and group chairman. “As an established and experienced team, they are in an excellent position to capitalize on the attractive financing opportunities available to those who have capital to deploy.”
FRM Capital Advisors is active in the hedge fund seeding industry, seeking out potential opportunity among new funds. Hedge fund seeding is a great way for new funds to get the capital needed to get off the ground. Companies who provide the financing will work out some sort of the deal with the fund, perhaps sharing in the profits once the fund starts posting returns.
“We are incredibly excited about our relationship with FRM Capital Advisors and we are gratified that it has concluded that our team and strategy warrant such a significant investment,” said Victory Park Managing Principle Richard Levy.
FRM is a global fund of hedge funds group with over $15 billion of assets under management.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
Irish Independant – The fund manager who predicted that the credit crunch would rip a hole through the banking sector has been rewarded with £28m (€35m) in pay and bonuses.
Crispin Odey trousered the bulk of the profits made by his Odey Asset Management Group after a hugely successful year with profits soaring from £16m to £55m. Mr Odey, 49, the founder, paid himself £28m. His 11 partners shared the other £27m.
The performance was driven by the flagship hedge fund Odey European Inc, which generated returns of 55 per cent, and is up 15 per cent in the first half of 2008. Launched in 1992, it is one of the longest established hedge funds in Europe, delivering an annual average return of 14.2 per cent.
The fund made millions from the risky practice of going short on bank stocks – selling shares not already owned in the hope they can be bought back at a lower price later. David Stewart, chief executive officer for Odey Asset Management, said: "We went short of banks and financials because we expected them to have a difficult time. We were long of agricultural and other commodity companies which did well and helped to boost overall performance."
San Francisco Chronicle- The giant housing rescue plan President Bush signed Wednesday might help stanch the bleeding in the housing market, but experts on both sides of the political divide worry that it is, at best, only an emergency step.
In addition to $300 billion in government guarantees to aid homeowners threatened by foreclosure, the administration got extraordinary new powers to backstop mortgage giants Fannie Mae and Freddie Mac after their stocks plunged earlier this month. The legislation gives both companies an open line of credit at the U.S. Treasury and allows the government to buy the companies’ stock through 2009. In return, the companies get a tough new regulator.
But both firms remain weird hybrid entities whose profits are private but whose losses are public, a recipe for excessive risk-taking. The new law makes the government guarantee explicit, exposing taxpayers to losses that could dwarf the savings & loan bailouts of the 1980s that cost taxpayers $300 billion in today’s dollars.
Reuters Tokyo- Tokio Marine Holdings Inc plans to buy non-life insurer Philadelphia Consolidated Holding Corp for about $4.7 billion (2.4 billion pounds), in the largest acquisition by a Japanese financial firm in the United States.
Tokio Marine, Japan’s largest non-life insurer, said it would pay $61.5 in cash for each share of Philadelphia Consolidated Holding, a 73 percent premium to the issue’s closing price on Tuesday of $35.55.
Tokio Marine President Shuzo Sumi told Reuters earlier this month that he was looking at opportunities to acquire U.S. and European competitors to expand outside Japan, where it generates four-fifths of its profits.
Reuters UK- Spanish property firm Martinsa Fadesa’s demise is a sign hedge funds are pushing hard to make profits out of ailing companies and may cause insolvencies in Spain to speed up.
Hedge funds which bought Martinsa Fadesa debt at discounts of as much as 50 percent of its value could now profit from its administration process, because an expected sale of assets may pay them back at a price closer to face value.
Martinsa Fadesa said on Monday it would file for administration after it failed to raise funds and meet debt payments, marking one of the biggest corporate failures in the country’s history.
Such vulture funds may not care if a company goes bust, teaching Spanish companies — used to cosy long-time relationships with regional savings banks such as La Caixa — a painful lesson in modern finance.
New York Times- Christopher Cooper-Hohn and his wife, Jamie, follow a simple economic formula: he makes money, and she gives it away.
Mr. Cooper-Hohn runs the Children’s Investment Fund, or T.C.I., a successful — and controversial — hedge fund that has become a gadfly to corporate giants like CSX, the American railroad. Ms. Cooper-Hohn leads an affiliated charity, the Children’s Investment Fund Foundation, which uses some of the profits that T.C.I. earns to finance programs for underprivileged children.
The partnership has made the Cooper-Hohns the most generous philanthropists in Britain. Last weekend, their foundation reported a £439 million ($856 million) jump in funds for fiscal 2007, reflecting £324 million in donations from T.C.I. and the Cooper-Hohns.
New York (HedgeCo.Net) – A $7.2 billion bailout package was approved Tuesday by 94% of Washington Mutual Shareholders in a move that gives private equity firm TPG control of over 50% of the company, says the Seattle Times.
Not that there was much of an alternative. The other option would come in the form of a $792 million dividend that WaMu would have to pay the company, with increasing payments ahead. Though that didn’t stop protesters led by the Service Employees International Union to emphasize that this was a “toxic deal.”
The Union also stated that the private equity firm would seek high profits in the short term and “squeeze these returns from troubled banks through higher fees for bank customers, unfair lending practices and exorbitant interest rates on credit cards and other consumer products.”
In April, TPG bought 176 million shares of WaMu at $8.75 each, a 33% discount at the time.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
The Lowell Sun – A Burlington hedge fund and its former manager have agreed to pay more than $1 million for trading on inside information surrounding the Citizen Bank’s $10.5 billion purchase of Chapter One.
Federal regulators from the U.S. Securities and Exchange Commission announced a settlement with Global Time Capital Management and former chief Michael Tom, of Waltham, over trades made about six days before the 2004 Citizens Bank deal with Charter One.
Tom has agreed to surrender $801,000 in profits, penalties and interest, while Global time Capital and its GTC Growth Fund will pay an additional $252,000.
