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.
Newark Star-Ledger – Managers of New Jersey’s embattled pension fund, criticized by lawmakers for bailing out a struggling BlackRock hedge fund in October, secretly gave two other hedge funds the same deal, records from the state investment council show.
The Canyon Special Opportunities Fund and GoldenTree Credit Opportunities Fund were each awarded $49.5 million in state funds on the same day the controversial $49.5 million bailout of a BlackRock Inc. fund took place, according to a memo released by the investment council this week.
The cash infusions were a shade below the $50 million threshold that triggers public scrutiny. The BlackRock deal riled prominent Statehouse lawmakers. So does the new revelation that there was not just one such deal, but three.
Petroleumworld.com – The hedge fund of billionaire investor George Soros increased its stake in Brazilian state-run oil company Petroleo Brasileiro ( Petrobras) to 21.1 million American Depositary Receipts as of Sept. 30 from 11.5 million at June 30.
Soros Fund Management LLC made the move as the ADRs tumbled during the quarter to about $44 from about $71 each. Although the fund added nearly 10 million ADRs to its Petrobras stake, the value of the holding only rose to $930.7 million from $811.5 million.
Since the end of the quarter, Petrobras ADRs have fallen further, closing on Friday at $21.45.
Cambridge Varsity Online – Clare College has borrowed £15 million to invest in the stock market. The unprecedented inflation-linked loan is due to be repaid in 2048 and the College expects to make a profit of around £36 million.
Clare has already invested £3.5 million and aims to have invested the full amount within two months. Clare’s Bursar Donald Hearn said he hoped the market would have bottomed out by then: “We think the market is going to go down a bit more, but may begin to recover once the FTSE drops below 3,250.
“We’re borrowing at an interest rate of 1%, and we’re reasonably confident of a useful profit. The money will only be invested in funds which track stock market indices, and will be globally diversified including emerging markets,” he said.‘
Newark Star-Ledger – Prompted by criticism from a prominent state lawmaker, the head of the state’s Division of Investment yesterday defended his decision to invest $144 million in pension funds in a BlackRock Inc.-managed hedge fund in the past two weeks, saying the state needed to act quickly to protect its stake and possibly reap big returns.
Senate President Richard Codey (D-Essex) questioned the transparency of the process, taking issue with the state putting $49.5 million in the hedge fund on Oct. 17 — an amount just shy of the $50 million threshold that requires a review by the state Investment Council. On Friday, the state invested another $94 million in pension funds in the BlackRock venture, following a special meeting of the Investment Council.
Bloomberg – Some hedge fund managers provided inaccurate information to investors in newsletters and monthly fact sheets, Hong Kong’s Securities and Futures Commission said.
In one instance, the hedge fund manager excluded the fund’s largest stock holding from its top five investments because of “oversight,” the regulator said in a statement issued late yesterday to all licensed hedge fund companies in the city. In other cases, the managers misstated the funds’ debt ratios and net asset values “to a limited extent.”
The findings were results of a recent SFC inspection of eight small locally established hedge fund managers overseeing $5 million to $800 million and employing three to 30 people. The regulator didn’t identify the managers involved. Ernest Kong, a SFC spokesman, declined to provide further comments.
Regulators worldwide have been increasing oversight over the $1.7 trillion hedge fund industry amid a crisis that has laden the world’s largest banks and securities firms with more than $670 billion of losses and led to the failure of Lehman Brothers Holdings Inc. Hedge funds are bracing for the industry’s worst year in almost 20 years and trying to stem investor withdrawals.
New York Post – The developers of the famed landmark are fighting back following two multimillion-dollar lawsuits filed against them by separate penthouse buyers within the past two weeks.
Developer El-Ad Properties, which renovated the 101-year-old building to include pricey condos, is countersuing Russian hedge-fund manager Andrei Vavilov for damages totaling $36 million after he claimed he was the victim of a bait-and-switch.
Vavilov, 51, who bought adjoining duplex and triplex apartments for $53.5 million, filed a lawsuit against El-Ad and Stribling & Associates brokers for $30 million plus return of his $10.7 million deposit.
On Wednesday, the buyer of a duplex next to Vavilov’s two units – also said to be a hedge-fund manager – filed a similar suit, for $6.5 million.
In the countersuit filed in Manhattan Supreme Court, El-Ad accuses Vavilov of libel and filing a "sham lawsuit."
Reuters UK – The bankruptcy filing of Lehman Brothers is another blow for the hedge fund industry, but at least the damage is limited from here for funds exposed the U.S. investment bank.
Even legendary fund manager George Soros, who runs around $18 billion (10 billion pounds) in assets, is likely to have been affected after raising his stake in the investment bank to 9.5 million shares in the second quarter.
A spokesman for Soros Fund Management declined to comment on the composition of their portfolio.
British activist hedge fund Algebris is also likely to have been hit by the fall in the share price of Lehman, once the fourth-largest U.S. investment bank.
The hedge fund firm owned just over 4.45 million shares at end-June, Thomson Reuters data show. Algebris sold its stake this year, a spokesman said, declining to give further details.
Reuters – Billionaire investor George Soros hiked his stake in Wall Street firm Lehman Brothers to 9.5 million shares as of June 30 from 10,000 shares, according to a U.S. regulatory filing on Thursday.
Soros disclosed the quarter-over-quarter increase in a filing with the Securities and Exchange Commission.
Soros raised his stake in Lehman ahead of a turbulent month for the investment bank, whose shares plunged in mid-July amid a broader sell-off in financials sparked by concern about government-backed mortgage companies Fannie Mae and Freddie Mac.
Lehman shares rose 63 cents, or 4.1 percent, to close at $16.20 before the news. They are down 18 percent since the end of June and off 75 percent so far this year.
Reuters UK – Fund firm BlackRock held onto the top spot for net sales of British funds to retail investors in the second quarter, according to industry data, helped by sales of its hedge fund-style UK Absolute Alpha fund.
BlackRock had 879.2 million pounds of net sales, up from 713.6 million pounds in the first quarter, according to Lipper Feri’s Fund Sales Report.
The report comes as the funds industry faces lower sales due to volatile and falling markets and investor caution. According to the Investment Management Association, net retail sales were 139.5 million pounds in June, down from 747.8 million pounds a year before.
New York Times – The Blackstone Group may be best known as an immense private equity firm, but the firm’s earnings report on Wednesday made it clear that Blackstone has been buoyed by its hedge fund operations.
Blackstone reported $165.6 million in profit for its second quarter, excluding costs tied to its initial public offering last June. That represented a nearly 75 percent drop from the same period last year, a consequence of the troubles still plaguing the credit markets. On the basis of generally accepted accounting principles, the firm reported a pretax loss of $185.5 million.
Yet Blackstone’s results, which amount to 15 cents a unit, still beat the average analyst estimate of 8 cents a unit, according to Bloomberg News.
Other publicly traded alternative-asset managers also reported quarterly earnings on Wednesday. Och-Ziff Capital Management, a big hedge fund, said it earned $93.3 million, while GLG Partners, a large hedge fund based in London, reported profits of $44.2 million. Both figures exclude costs related to the firms’ public offerings.
News.com.au- Iron ore tycoon Andrew Forrest is under attack from international hedge funds in a co-ordinated short-selling blitz against his Fortescue Metals Group — a campaign that has caused the company’s stock, and the executive’s paper fortune, to slump by more than 37 per cent in just over a month.
The company’s broker, Southern Cross Equities, has sent a note to clients that leaves no doubt as to why it considers the stock has fallen: "FMG shares have been subject to an aggressive and co-ordinated shorting campaign from a high of $13.15."
The stock went as low as $7.91 on Tuesday but by Thursday had rebounded to a $8.70 close on a day of particularly heavy trading, with 45.5 million shares going through.
Milwaukee Business Journal – An activist British hedge fund has taken a 5 percent stake inSovereign Bankcorp Inc.,according to a filing with the Securities and Exchange Commission.
London-based Toscafund Asset Management said its passive stake amounts to 33.5 million shares.
Banco Santander Central Hispano, Spain’s largest bank, owns roughly a quarter of Sovereign’s stock and ultimately can exercise an option to buy the Philadelphia-based bank.
Sovereign has struggled after years of rapid expansion through acquisition. The bank’s stock price has fallen in the last year from roughly $20 and bottomed out at $7 as it suffered negative earnings caused by some problem loans. The stock closed down 1 percent Thursday at $9.52. Under new CEO Joseph Campanelli, Sovereign has focused the last year on reducing the size of its balance sheet risk and zeroing in on its core mid-Atlantic and New England retail markets.
