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 – Hedge funds are set to return to their roots as niche products for the happy few as they have been unable to deliver the gleaming returns they were promising ever since the start of the credit crisis.
Hedge fund managers have long been flaunting alpha — returns down to their skills to beat markets by using advanced investment techniques — but many were caught short just as any other investor in this year’s protracted downturn.
The industry now faces rapid shrinkage driven by losses of more than 20 percent, as measured by Hedge Fund Research’s daily HFRX index, and redemptions that are predicted at somewhere between "large" and "catastrophic."
"Eighty percent of the hedge fund sector will not be here in three to four months," Robert McAdie, a credit strategist at Barclays Capital, said at a recent briefing. "Levered strategies are dead in this environment."
Funds have delivered worst-ever losses of 17.70 percent in the 11 months to November, according to Hedge Fund Research, as stocks have slumped and volatility has surged.
Hartford Business – State Treasurer Denise L. Nappier said she plans to approve rule changes by January allowing her to allocate up to 8 percent of the state’s $20 billion pension fund in nontraditional investments such as hedge funds.
The move marks a departure from a more conservative investment strategy and comes shortly after the Connecticut funds lost nearly $5 billion in pension assets in the depressed market.
The shift in approach also comes when the hedge fund industry is under stress. The sector’s total assets declined by more than 20 percent between June and October, and the unraveling of Bernard Madoff’s $50 billion Ponzi scheme this month has spotlighted what many see as a general lack of transparency in the industry.
Still, Nappier said investing in hedge funds and other alternative instruments will allow the pension plan to reduce volatility, produce slightly higher returns and create better diversification.
West Palm Beach (HedgeCo.net) - Bernstein Liebhard is investigating whether, among other things, these investment funds conducted proper due diligence before investing heavily in Madoff Securities, and whether these funds ignored the warning signs that Madoff was conducting a large-scale fraud.
Bernstein Liebhard is also investigating whether these funds misrepresented to investors the concentration of the funds’ investments in Madoff Securities. On December 11, 2008, Madoff was arrested by federal authorities who say Madoff admitted to operating a $50 billion Ponzi scheme in which Madoff used the principal investments of new clients to pay fictitious "returns" to other clients.
The criminal action against Madoff is pending in the Southern District of New York, 08-Mag-2735. Although Madoff had only a few individual clients that invested directly with him, individuals and institutions across the world invested indirectly and sometimes unknowingly in Madoff’s scheme through "feeder funds" – such as Fairfield Sentry Ltd. (run by the Fairfield Greenwich Group), Rye Select Fund (run by Tremont Group Holdings), and Kingate Global Fund (run by FIM Advisers LLP) – whose sole purpose was to funnel money to Madoff Securities.
Hedge funds and funds of funds invested heavily with Madoff’s feeder funds (including Fairfield) despite many warning signs that the consistent returns Madoff delivered were too good to be true. "
Hedge fund, fund of funds managers, or other collective investment fund that lost money as a result of its investment in Madoff Securities, may have a right of action to recoup losses," Bernstein Liebhard says "We has assembled a team of former government prosecutors, former SEC trial attorneys, and investigators to analyze the various legal claims available to investors injured by the Madoff scheme."
Bernstein Liebhard is one of the preeminent plaintiffs’ class action law firms in the country, having pursued hundreds of securities and consumer cases and recovering approximately $2 billion for its clients. It has been named to The National Law Journal’s "Plaintiffs’ Hot List" in each of the last six years.
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!
West Palm Beach (HedgeCo.net) - Morningstar presented their monthly analysis of hedge fund performance for November and asset flows through October.
"Hedge funds have a long path to recovery ahead of them," said Hedge Fund Analyst Nadia Papagiannis. "November was a better month than the last two, mostly because hedge funds hoarded cash, but they are still losing money on their investments and facing the ongoing challenge of funding investor redemptions."
Hedge funds slid again in November, as the Morningstar 1000 Hedge Fund Index lost 2.5% for the month and 23.7% year to date. Hedged against the appreciating U.S. dollar, the asset-weighted Morningstar Composite Hedge Fund with MSCI Index fared better dropping only 0.8%. Hedge funds charge performance fees on any new profits earned, but those have been scarce since November 2007.
Compounding the funds’ pain, investors have responded to the lackluster performance by pulling more than $20 billion in October, which accounts for the bulk of the $29 billion withdrawn over the last 12 months from hedge funds.
Hedge funds of funds performed better than multi-strategy hedge funds this month, as the Morningstar Hedge Fund of Funds and the Morningstar Multi-Strategy Hedge Fund Indexes dropped 2.3% and 3.0% respectively.
November returns and October asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of Dec. 16, 2008. Returns for the Morningstar Hedge Fund Indexes with MSCI are based on funds that reported November performance as of Dec. 14, 2008.
As announced in September 2008, Morningstar is also now calculating hedge fund indexes by applying the MSCI Hedge Fund Index Methodology and Hedge Fund Classification Standard to Morningstar’s hedge fund database. These indexes demonstrate the performance of hedge funds to investors who have hedged their currency exposure back into U.S. dollars. The MSCI Hedge Fund Index Methodology classifies hedge funds by investment process, geography, and asset class.
But the news was not all doom and gloom. Once again, the Morningstar Global Trend and Global Non-trend Hedge Fund Indexes performed well, funds in these categories experienced outflows during October, global trend funds saw overall inflows of $9 billion for the first 10 months of the year, more than every other category. Emerging markets fared poorly, as dwindling demand for commodities depressed the equities in commodity-based economies. The Morningstar Emerging Markets Hedge Fund Index lost 5.1% in November.
The Morningstar Developed Asia Hedge Fund Index’s relatively small loss of 0.3% was bolstered by the Bank of Japan’s interest rate cut and stimulus package announcement. The Morningstar Japan with MSCI Hedge Fund Index gained 0.5%. U.S. equity hedge funds performed among the worst this month, small capitalization equities took a beating in November, but most hedge funds hedged, as the Morningstar US Small Cap Equity Hedge Fund Index ended down only 4.6%, as compared to the Russell 2000 Index’s almost 12% decline.
The Morningstar Security Selection with MSCI Hedge Fund Index, with component funds that also take directional bets on equities, lost 2.7%. For the year to date through October, directional Europe and U.S. equity funds experienced significantly more outflows than other categories. Funds that kept a lid on market exposure fared relatively well this month. U.S. Treasuries across the board showed the largest monthly gain in decades amid poor economic data, fears of deflation, and a government plan to buy U.S. mortgage-backed securities.
The Morningstar 1000 Hedge Fund Index, a global, broadly representative benchmark for hedge fund performance, has return history from January 2003.
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!
West Palm Beach, Dec 15, 2008 – Adding to its array of new and interactive features, HedgeCo.Net has unveiled the Hedge Fund blog platform, which provides both accredited investors and the general public the rare opportunity to view the world of hedge funds through the eyes of the industry experts themselves.
The HedgeCo.Net blogs provide a much anticipated compilation of expert analysis and opinion, while giving the user a detailed look into the minds and biases of industry gurus, which are all too often absent in mainstream media.
HedgeCo has already gathered a group of experts who will be contributing their timely knowledge to HedgeCo’s audience through the blogs. Topics will include everything from regulation issues and political influence, to due diligence procedures and tips on investing.
"Over the years HedgeCo.Net has worked towards promoting transparency in the Hedge Fund industry," explains HedgeCo Co-Founder Evan Rapoport. "The HedgeCo.Net database has gone a long way to provide simple communication between accredited investors and hedge funds. The Hedge Fund blogs further promote this idea by providing a way for the general public to get a glimpse into the lives of hedge fund professionals. The traffic and response we have gotten so far has been very positive."
To peruse the blogs or post a response, visit http://www.hedgeco.net/blogs.
New York (HedgeCo.Net) – Just days after what could prove to be the largest Wall Street sham in history, investors that were burned by Bernard Madoff are coming forward in droves.
Spanish bank Santander, along with French bank BNP Paribas both detailed their exposure to the alleged ponzi scheme on Sunday. Santander estimated it had just over $3 billion tied up in the firm, while BNP Paribas has about $470 million at stake.
"While BNP Paribas has no investment of its own in the hedge funds managed by Bernard Madoff Investment Services, it does have risk exposure to these funds through its trading business and collateralized lending to funds of hedge funds," BNP said in a statement.
Santander’s exposure came from a sub fund of their Optimal Fund, called Optimal Strategic US Equity, which used Madoff Securities for their investments.
A handful of hedge funds have also come forward in the wake of the scandal. Fairfield Greenwich Group released a statement on Friday saying they were still trying to assess their losses, but estimated they had about $7.5 billion, or half of its total assets, tied up in Madoff’s firm as of November. Founding Partner Jeffrey Tucker said they were “shocked and appalled by this news.”
Tremont Capital Management also had a hefty amount invested with Madoff through their fund of funds. “Needless to say, our level of anger and dismay over the apparent betrayal by Mr. Madoff and his organization of his 14-year relationship with Tremont is immeasurable,” Tremont stated in a letter to investors on Friday.
Also coming forward on Friday was Maxam Capital Management, who reported losing $280 million through Madoff-linked investments.
Bernard Madoff, owner of Bernard L. Madoff Investment Securities and part founder the Nasdaq stock market, was arrested and charged on Thursday with orchestrating a $50 billion scam that targeted some of the most reputable hedge funds and affluent individuals in the business. The 70-year-old allegedly ran a large ponzi-scheme where new money coming in is used to pay off existing investors, creating the false notion of peak performance and admirable returns.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) - Hong Kong-based hedge fund manager PMA has chosen to more than triple the number of users of PerTrac CMS in the company’s Hong Kong, Tokyo, New York, London, and Dubai offices.
PerTrac CMS is an alternative investment workflow management solution used for investor relations, capital raising and investment management workflows.
"PMA’s marketing reach has expanded significantly over the last 12 months and we now has marketing teams based in our Dubai and London offices as well as representations in New York," noted PMA Chief Technology Officer Shane McPherson.
PMA was established in July 2002 to provide investment advisory and investment with assets over $2 billion, PMA currently has over 70 professionals employed in Hong Kong, Sydney, London and Dubai, and became a member of the SPARX group in April 200, the largest publicly listed asset manager in Asia.
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!
New York Daily News – Is Park Ave. lawyer Marc Dreier a Blood? Or maybe a Crip?
Federal prison officials are refusing to remove the accused hedge fund swindler from 24-hour lockdown until they determine whether he’s a gang member, attorney Gerald Shargel told a judge Thursday.
"How ludicrous is that?" Shargel told Magistrate Judge Douglas Eaton during a failed attempt to get the Yale grad and Harvard Law School alum released on $10 million bail.
Eaton agreed to look into Dreier’s conditions after Shargel said prison officials told him it will be another three weeks before they can remove Dreier from lockdown at theManhattan Correctional Center.
Fort Worth Star Telegram – That sure looked like the Alaska governor moose hunting in downtown Fort Worth on Wednesday.
And she found an already-well-stuffed target: business and political leaders generously donating money for Christmas gifts for 1,500 children, thanks to the Exchange Club of Fort Worth.
By the time Sarah Palin look-alike Kristy Casey of Houston winked her last "You betcha!" and introduced Fort Worth lawyer and political pooh-bah Dee Kelly as a "maverick," the 160 members of the tradition-rich civic club had toasted the holidays and taken up $75,000 for the Star-Telegram’sGoodfellow Fund.
"The Guv" teased Kelly by presenting him a double-sided political yard sign supporting two 2010 candidates for governor: U.S. Sen. Kay Bailey Hutchison and aspiring governor-for-life Rick Perry. The Palin double also dropped off a belated Wendy Davis campaign sign for Fort Worth Mayor Mike Moncrief, a Democrat who backed Republican state Sen. Kim Brimer in a moose-sized defeat.
Law.com – The 8th U.S. Circuit Court of Appeals has become the first circuit in the country to rebuff efforts by a hedge fund to call in a debt based on an alleged technical violation of bond terms in a dispute over an $850 million note issued to United Health Group Inc.
The circuit noted that at least three other federal judges and a New York state court have come down the same way, rejecting the practice used to assert a default claim against United Health in United Health Group Inc. v. Wilmington Trust Co., No. 08-1904 (8th Cir.)
Claims similar to Wilmington Trust’s have cropped up in other cases as an investment strategy derided by attorney Robert Giuffra, as a "shakedown strategy" that takes from shareholders and gives to bondholders. Giuffra of Sullivan & Cromwell in New York represented United Health in the case. "We are pleased with the 8th Circuit’s decision holding that United fully complied with the terms of its indenture, the relevant federal statute and acted in good faith," he said.
Reuters – Even some strong hedge fund managers may not survive the ongoing credit crisis due to a lack of funding or credit, the president of hedge fund John W. Henry & Co. said on Tuesday.
"There are going to be some firms that have good strategies that were strong in terms of discipline and their strategy itself, but may not survive this because they don’t have the assets or the funding to be able to survive," Ken Webster, president of the firm, said at the Reuters Investment Summit in New York.
The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades.
Seeking Alpha – "In my view they didn’t do what they set out to do … which was to hedge. I saw a few hedge funds that did much worse than my long-only fund, which is rather ironic," [Veritas Asset Management manager Ezra Sun] said.
The losses have disappointed many investors who had expected positive returns in all market conditions, and hefty withdrawals of somewhere between a fifth and a third of the industry are widely expected at the end of the year. There was the risk people could perceive hedge funds as a "rip-off" because they had been charging high rates on the implicit promise they could deliver absolute returns, but did not deliver when global markets collapsed.
