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.
The Independant – Insiders at the Securities and Exchange Commission, the Wall Street watchdog, and at the Justice Department say that there are more civil charges and more criminal prosecutions in the offing. Hedge fund managers need to learn to spot the difference between scouring every possible source for trading ideas, and out-and-out insider dealing, and they had better learn fast.
The question now is whether the hedge fund industry is hooked on insider trading, whether the Galleon case is a singular one starring some really rotten apples – or whether, as Mr Rajaratnam was insisting to his staff and investors yesterday, he has been unfairly accused.
It was only a matter of time until Mr Rajaratnam or someone like him ended up in the dock. It is difficult to imagine he will be the last.
WSJ – Citadel Investment Group LLC earned about $1 billion last year from a unit involved in high frequency trading, the Wall Street Journal said, citing the testimony of a former employee of the hedge fund firm.
According to the Journal, Mikhail Malyshev, a former Citadel trader and accused by the firm of violating non-competitive agreements, testified in a Chicago court that the unit also posted returns of $892 million in 2007, up from $75 million in 2005, and about $3 million in 2004.
Hooker-loving ex-Gov. Eliot Spitzer knocked the socks off the students at his lecture Tuesday at City College.
Students attending his law and public policy course laughed and even applauded as Spitzer delivered a lively talk that cited big thinkers ranging from philosopher John Stuart Mill to Bruce Springsteen.
Ashley Dupre, the call girl who brought Spitzer down, was not in the syllabus, but the self-proclaimed “Sheriff of Wall Street” was happy to recall how he went after the fat cats at Goldman Sachs.
Bloomberg – Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.
Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.
“Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics, which analyzes banks for investors.
Wall Street Journal – Hedge fund subscriptions have returned to pre-financial crisis levels and redemptions slowed markedly in August, GlobeOp Financial Services SA, a hedge fund administrator, said Thursday.
The company, which runs middle- and back-office functions for 180 hedge fund firms and other asset managers, including keeping track of money coming in and out of funds, said client subscriptions were more than $2 billion in July and nearly that much in August, marking the first month since September 2008 to exceed that level.
Redemptions of client funds are only $700 million so far in August, sharply down from $6.4 billion in July, and GlobeOp’s schedule of forward redemptions shows “a substantial reduction compared to 2008 and early 2009 levels.”
New York Times Blogs – A closely watched report by Goldman Sachs found that hedge funds made an outsize bet on financial stocks in the second quarter, The Wall Street Journal reported.
The Goldman “Hedge Fund Trend Monitor” said hedge funds increased their ownership in financial stocks by 55 percent to $70 billion, compared with the previous quarter.
Reuters – Harvard University’s multibillion dollar endowment is adopting a strategy of selling off some holdings in hedge funds, private-equity firms and other money managers to bring more money under the control of internal investing staff over the next few years, the Wall Street Journal said.
Jane Mendillo, head of Harvard endowment, told the paper the university’s move would allow it to be more nimble, have better transparency into the portfolio and more liquidity.
Reuters – Harvard University’s multibillion dollar endowment is adopting a strategy of selling off some holdings in hedge funds, private-equity firms and other money managers to bring more money under the control of internal investing staff over the next few years, the Wall Street Journal said.
Jane Mendillo, head of Harvard endowment, told the paper the university’s move would allow it to be more nimble, have better transparency into the portfolio and more liquidity.
ReportonBusiness.com – Financial gurus call it a “rerecuritization of real estate mortgage investment conduits.” On Wall Street, it goes by the acronym Re-Remic (it rhymes with epidemic).
“It actually makes a lot of fundamental sense,” said Brian Bowes, the head of mortgage trading at Hexagon Securities in New York. “It’s taking a bond that doesn’t necessarily have a natural buyer and creating two bonds that might have a natural buyer for each.”
As for the bottom-of-the-barrel bonds that are left over, those are getting sold off for pennies on the dollar to investors and hedge funds willing to take big risk for the chance of a big reward.
Wall Street Journal Blogs – Are hedge-fund managers making a comeback with investors? The great recession hammered the hedge-fund industry in 2008. Returns tumbled, redemptions soared and investors began questioning the very underpinnings of the industry. Active managers promise to beat, rather than match, the market’s overall returns and charge fees that can be at least 10 times higher than those of index funds.
The WSJ reported in June that an increasing number of big investors are concluding that stock and bond pickers failed to add any value in the market turmoil and are shifting to index funds. A survey by Greenwich Associates at the time found that about one in five institutional investors said they recently had shifted money away from active managers and into passive index strategies. That was up from just 4% who expected to make that shift when asked from July to October 2008.
Bloomberg – Volkswagen AG has seen a doubling of short interest in its stock by hedge funds since the middle of last month, with 2 percent of the company’s shares, and almost a third of the common stock available for borrowing, out on loan, the Wall Street Journal reported, citing Dataexplorers, a firm of analysts.
Center for Research on Globalization – The second wave of the world economic depression is coming soon. Larry Summers, the economics czar of the Wall Street puppet regime currently in power in Washington, recently confessed to the Financial Times in an unguarded moment: "I don’t think the worst is over .."
A few weeks earlier, Jacques Attali, who served in the 1980s as the main economics adviser to French President Mitterrand, told an audience at the International Economic and Financial Forum (FIEF) in Paris that the world might well soon face a planetary Weimar "in the form of a hyperinflationary depression similar to the German events of 1922 – 1923.
