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.
New York Post – The days of hedge funds operating behind a curtain may soon be over.
Bruised and bloodied by unprecedented losses, hedge-fund investors are rebelling, demanding lower fees, greater transparency and, in a growing number of cases, unfettered access to their dough.
They’re doing this through separately managed accounts (SMAs), which basically act as a portfolio for individual investors.
SMAs are common with brokerage firms but have long been shunned by hedge-fund managers.
Mike Murray of Shoreline Trading Group, which acts as a prime brokerage for small hedge funds, said he’s seeing such a spike in demand for SMAs among hedge fund investors that he expects them to double by next year.
New York Post – Fed up with misbehavior in the hedge-fund industry, respected hedge-fund investor Sandra Manzke is fighting back.
A pioneer in hedge-fund investing and best known for founding Tremont Capital Management, Manzke sent an angry missive to hundreds of her peers earlier this week, calling on them to join together to push for reform in the $1.5 trillion industry.
"I am appalled and disgusted by the activities of a number of hedge-fund managers," said the letter, which raises a fist against what Manzke sees as a general degradation of ethics in the industry.
New York Post – Back-to-back bruising months in September and October have shaved more than 10 percent of hedge funds’ value, translating into hundreds of billions in losses, according to research and advisory firm Hedge Fund Research.
After weathering a brutal September that saw fund managers lose nearly 6 percent, hedge funds suffered further erosion last month, shedding 5.4 percent, according to HFR.
This year, hedge funds are down through Oct. 31 by about 15.5 percent.
New York Post – Three board members at the embattled Dillard’s department-store chain lashed out at a pair of hedge funds that are agitating to oust the retailer’s top management.
In a rare public statement, the Dillard’s trio of independent directors rejected a call by Barington Capital and Clinton Group to fire Chief Executive Bill Dillard Jr. The hedge funds have accused Dillard and his three siblings of being "overpaid and underqualified."
The hedge funds note that the four Dillard siblings have earned more than $16 million annually for the past three years despite a steady decline in the company’s performance and stock price.
But Dillard’s directors Warren Stephens, Peter Johnson and Robert Connor countered that the CEO’s salary was "well below the median in its peer group in 2007," citing a report from Institutional Shareholder Services, a leading proxy adviser. The directors also noted that the board decided against paying out bonuses last year, based on the company’s poor performance.
New York (HedgeCo.Net) – At least David Findel can never be called a band-wagon fan. The owner of mortgage-lender Financial Resources just agreed to pay a record $400,000 to the rights to two of the best seats at the new Meadowlands stadium. That’s just for the rights. The tickets themselves will cost him another $7000 annually.
The New Jersey native told the New York Post that he probably won’t even use the coveted seats.
“I purchased them for my son, Brandon, 11, and my daughter, Brooke, 7. I will probably continue to sit in my current seats.”
Both Jets and Giants fans were informed this season that they would have to pay money to obtain licenses in order to secure seats in the new stadium, which they will be sharing. Though some fans were outraged, the Jets were hoping to raise $170 million by selling licenses that ranged between $4000 and $25,000 per seat. The Giants, coming off a SuperBowl win and leading the solid NFC East Division, planned to charge between $1000 and $20,000 per seat license. The money from both teams will help to pay for the $1.3 billion in construction costs for the new stadium.
Jets owner Woody Johnson doesn’t see anything wrong with charging such outlandish fees in times of economic turmoil.
"People who buy PSLs and suites are looking over the long term," he said. "I know they realize, because I’ve been talking to a lot of them, that this is kind of a once-in-a-lifetime opportunity to buy something that hasn’t been available ever."
Meadowlands Stadium will hold 82,500 seats, making it the second largest stadium in the NFL next to FedEx Field, home of the Redskins.
Findel won the rights at an October 16 auction, outbidding other millionaires like Nobu owner Drew Nieporent. Instead of slightly raising the $140,000 bid for each of the two seats, he shocked the crowd and shot right up to $200,000 per seat. Not exactly the kind of frivolous purchase you see mortgage lenders making lately.
“Although part of the mortgage business is in turmoil, this is an opportunity to invest in my business and to further demonstrate our loyalty to the New York Jets,” Findel told the Post.
Ummm…a Favre jersey would’ve worked too.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Trading Markets – Morgan Stanley is looking at scaling back its prime-brokerage operation, selling assets or buying a faltering regional bank, the New York Post said citing sources.
The firm may also try to work out a way to piggyback on to the $1.3 trillion deposit base of Japan’s Mitsubishi UFJ Financial Group, the paper said citing people familiar with the matter.
Mitsubishi UFJ took a 21 percent stake in Morgan Stanley for $9 billion earlier this week.
The firm is also eyeing trimming its balance sheet and exiting, or scaling back, from businesses that don’t provide high returns, like prime-brokerage, trading of corporate bonds and high-yield debt, the paper added.
New York Post – Billionaire Tom Petters fancied himself the next Warren Buffett – that is until his empire starting crashing down like a house of cards.
The feds accuse Petters, one of Minneapolis’ fastest rising business stars, of secretly being at the center of an elaborate $2 billion corporate ruse, stretching over the past decade, while he hobnobbed with billionaires and movie stars.
Petters stepped down from his Minneapolis-based Petters Group Worldwide after federal agents raided his offices in several cities, acting on a tip from a disgruntled insider.
New York Post – As the Securities and Exchange Commission continues its assault on short sellers, hedge funds are discussing legal action to challenge Chairman Chris Cox’s recent moves – just as funds in the UK are considering lawsuits against their government regulator.
Since Friday, Cox has enacted a hodgepodge of emergency rules in an effort to give struggling Wall Street firms time to recover from their recent battering, including a widespread ban on shorting of financial stocks, and requiring hedge funds to disclose what they short.
That has prompted debate in the hedge fund world about what, if anything, might be done to temper efforts they say hurts good players along with the bad. Talk of legal action is still in the discussion stage, and no lawsuit may emerge.
"There are just a lot of questions right now," said an industry insider.
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."
New York Post – The JPMorgan Chase CEO is seeing the coffers of the bank he runs being filled with "billions of dollars a day" coming from hedge funds that have pulled their cash from Morgan Stanley and Goldman Sachs, according to several large hedge-fund managers and other Wall Street sources.
The flood of new business has actually caused a bottleneck at the banking giant, as the prime brokerage unit scrambles to quickly conduct due diligence and credit checks to set up new clients, a source close to the bank said.
Most of JPMorgan’s new clients are being serviced through the old Bear Stearns prime brokerage force, which was a key part of Dimon’s acquisition of the fallen brokerage firm.
A spokesman for JPMorgan confirmed that the bank has seen a significant jump in volume and "they are managing it well."
He also said the bank is maintaining firm due diligence and credit-review procedures.
New York Post – The Securities and Exchange Commission met last night in emergency session to consider requiring hedge funds to disclose their short positions and institutional traders to secure their records in anticipation of subpoenas.
Under the proposals, managers with more than $100 million invested in securities would have to issue reports of their daily short positions.
The meeting came after the SEC adopted two regulations that go into effect today that will force traders and brokers to actually borrow shares used in all short sales, amid concern that so-called "naked short sales" are driving down prices by flooding markets with sell orders.
New York Post – The next issue for concern in the battered economy is whether there are going to be buyers for the nation’s billions in debt, Mayor Bloomberg said yesterday.
Speaking to students at Georgetown University, Bloomberg pointed out that Wall Street convulsions are being felt around the globe.
"Who’s buying our debt? It’s these overseas funds, these sovereign-wealth funds, these overseas hedge funds. They are in trouble now. So it’s not clear who is going to be buying" US Treasury bills, he said.
Bloomberg was planning to have breakfast in Washington today with Treasury Secretary Henry Paulson – whom he described as an old friend – and Christopher Cox, chairman of the Securities and Exchange Commission.
Meanwhile, city Comptroller Bill Thompson warned that many high-paying jobs on Wall Street may be gone for good.
