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 Times Blogs – E*Trade Financial is in talks with Citadel Investment Group, the hedge fund that is its largest shareholder, about a deal to shore up the struggling brokerage firm’s balance sheet, The Wall Street Journal reported, citing people familiar with the matter.
The two companies have been in negotiations for weeks to find a solution to E*Trade’s financial problems, The Journal said, adding that terms of the deal were unknown.
On Tuesday, E*Trade announced that Citadel Chief Executive Kenneth C. Griffin would be joining the firm’s finance and risk-oversight committee.
Wall Street Journal – The new commissioner of the Food and Drug Administration is among the wealthiest Obama administration appointees, with income of at least $10 million in 2008 thanks mostly to her husband, a hedge-fund executive, according to financial disclosure forms.
Margaret Hamburg and her husband, Peter Fitzhugh Brown, must divest themselves of several hedge-fund holdings as well as some of Mr. Brown’s inherited drug-company stocks so Dr. Hamburg can take the post as the nation’s top food and drug regulator. Mr. Brown is a lieutenant to hedge-fund magnate James Simons.
Wealth Bulletin – AQR Capital Management intends to launch a line-up of mutual funds next month that will use a hedge-fund strategy developed in 1989 by founder Clifford Asness as a doctoral student in finance at the University of Chicago, according to a report in The Wall Street Journal.
Wall Street Journal – Quantitative fund managers, who use computer models rather than human judgment to pick securities, have seen their world turned upside down by the credit crisis.
The first generation of managers and their models have moved on: Their inheritors are having to accommodate a changed landscape full of skeptical investors. In reaction, quant managers have spent 2008 making adjustments to their models, finding new sources of data and tightening secrecy.
Asset managers, in general, are facing tough times, but stock-picking is at least a familiar and well-worn concept for investors. They may not always be happy with their human asset managers, but they are continuing to talk to them. The so-called black boxes that carry out the complex strategies of quantitative funds, on the other hand, are increasingly out of favor with investors and investment consultants.
New York Times – Two weeks from now, a seven-year-old hedge fund called Alson Capital Partners will return around $800 million to its investors, and shut its doors for good.
The fund was founded and managed by Neil Barsky, 51, a former Wall Street Journal reporter-turned-Morgan Stanley analyst, who started his first hedge fund in 1998, just as the “hedge fund decade” was gaining steam. He was an old-fashioned stock picker who ran Alson Capital as a classic “long-short” stock fund, meaning that he bought companies he thought had good long-term prospects, while shorting companies he thought were likely to fall off the cliff. At its peak, Alson Capital had $3.5 billion under management, charged a 1.5 percent management fee, took 20 percent of the profits, and, when you include Mr. Barsky’s predecessor fund, produced compounded annualized returns of 12.11 percent a year. It’s fair to say he’s made a pretty penny.
Reuters – Bank of America CEO Kenneth Lewis is facing a $35 billion headache this morning after financial regulators informed the bank that was the figure it need to find now to pass the so-called stress test for viable financial institutions, the Wall Street Journal and New York Times report.
BoA already has received $45 billion in capital from the federal government, some of it to cover the disastrous purchase of Merrill Lynch.
Seeking Alpha – According to "Calpers Weighs Expanding Own Hedge-Fund Investments" by Jenny Strasburg and Craig Karmin (Wall Street Journal, April 16, 2009), the giant California pension fund may be the first stop for fledgling hedge fund managers who seek start-up resources. Described as a way to have "more control over its money," incubating hedgies would "mirror an approach the $175 billion pension fund has taken with private-equity managers."
Wall Street Journal – As regulators gear up to monitor private pools of capital more, private equity firms have a message they really, really want to get across: we’re not hedge funds.
PE firms hope that they can educate regulators about the many, many ways in which they differ from hedge funds, and thus escape regulation – or at least be regulated differently.
Wall Street Journal Blogs – Wasim Rehman, the 28-year-old head of risk controls at the hedge fund manager Marshall Wace, has resigned from the partnership and plans to retire from the investment industry.
In a statement to the market this morning, Marshall Wace said Rehman would continue as a consultant to the company, initially full-time as chairman of the firm’s quantitative oversight committee, but then becoming part-time and “thereby fulfilling his desire to pursue other opportunities outside of the industry.”
Washington Post – About half a dozen investment managers have put forward bids, ranging between $400 million to $800 million, for troubled insurer American International Group’s asset management business, the Wall Street Journal reported, citing people familiar with the matter.
Private equity firms Ashmore Investment Management, Hellman & Friedman LLC, Rhone Group and TA Associates as well as mutual fund manager Franklin Templeton and asset manager Southgate Alternative Investments are among those who have shown interest, the Journal said in a report on its website.
Wall Street Journal – Prosecutors said $160 million is unaccounted for in a Ponzi scheme allegedly run by hedge-fund manager James Nicholson.
At a bail hearing Thursday, Assistant U.S. Attorney Maria E. Douvas said the government’s investigation showed that $293 million was invested with Mr. Nicholson, who was president and general partner of Westgate Capital Management LLC. Of that, $160 million is unaccounted for, Ms. Douvas said.
Prosecutors had alleged that Mr. Nicholson, of Saddle River, N.J., falsely represented to investors that the firm had assets under management ranging from $600 million to $900 million.
At Thursday’s hearing, U.S. Magistrate Judge Ronald L. Ellis in Manhattan didn’t change the bail conditions set for Mr. Nicholson — a $10 million personal recognition bond, with five co-signers and secured by three pieces of property. He also would be subject to home detention and electronic monitoring.
Wall Street Journal – A lawyer for the court-appointed trustee liquidating Bernard Madoff’s firm confirmed they have located an additional $75 million in Madoff assets — a figure that would put the total above $1 billion.
A lawyer for the court-appointed trustee also said Monday that French authorities are moving to seize Mr. Madoff’s residence in France, to satisfy claims by victims in that country. The residence in Cap d’Antibes, France, was valued at about $1 million, according to a statement of Madoff’s assets as of Dec. 31, 2008.
Last week, U.S. prosecutors indicated they plan to seek the forfeiture of the residence in Mr. Madoff’s criminal case, in which he pleaded guilty earlier this month to perpetrating a massive Ponzi scheme. It wasn’t clear if French efforts would conflict with U.S. recovery efforts. A spokeswoman for U.S. prosecutors did not immediately comment.
