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 – New York Attorney General Andrew Cuomo, probing illegal marketing and sales of auction rate securities (ARS), is likely to file a lawsuit on Monday against Charles Schwab Corp (SCHW.O) for civil fraud, the Wall Street Journal said, citing people familiar with the matter.
As a part of the lawsuit, Cuomo will likely present transcripts of recordings between Schwab brokers and customers that allegedly show how the ARS were misrepresented by brokers as easy-to-sell alternatives to cash, according to the paper.
News1130.com – The Securities and Exchange Commission is continuing its investigation of possible insider trading involving hedge fund Pequot Capital Management and its founder Arthur Samberg, according to a letter to investors obtained by The Wall Street Journal.
The SEC has been examining whether Pequot traded Microsoft Corp. shares on confidential information provided by a former employee of the computer company who was later hired by Pequot.
HeraldTribune.com – An attorney representing newsletter writer Don Rowe, who strongly recommended Arthur G. Nadel’s hedge funds to some investors, is seeking to have a civil fraud suit against his client dismissed.
In an Aug. 3 filing in circuit court in Sarasota County, Tampa attorney Edward O. Savitz claims that Rowe was not the ultimate cause of the investors’ losses: He did not sell or offer any securities and some of the plaintiff’s claims are barred because too much time has passed.
Sarasota attorney Drew Clayton is representing 11 investors in Nadel’s failed hedge funds and seeking damages of $5.4 million. All his clients were subscribers to one of the publications Rowe published from Sarasota: ”Wall Street Digest” or ”Carnegie Asset Management Inc. Reports.”
Wall Street Journal – Jeffrey Gendell’s new hedge fund returned more than 25% during its first quarter, as bets on energy and a steady economic recovery paid off, according to a letter the manager sent recently to investors.
Gendell, who suffered big losses last year and is still winding down some old hedge funds, also criticized some of President Barack Obama’s policies and argued that political ”gridlock” could help equity markets in 2010.
The manager opened the new Tontine Total Return Fund in April after some of Tontine’s other funds lost more than 60% last year. The new fund, which focuses on more liquid, or easily tradable, securities, returned 25.3% in its first quarter after management fees, Gendell said in a July 20 letter to investors.
WNYC – An investigation into corruption at the New York State pension fund has raised questions about the fund’s dealings with Wall Street. Federal and state regulators are examining how the pension fund chooses its private money managers. Last month we reported on the tangled relationships between the pension fund and Wall Street. Today we follow the money. WNYC’s Lisa Chow reports.
REPORTER: It was a Friday morning in May when Tom DiNapoli delivered the bad news.
DINAPOLI: As we are all aware, 2008 was one of the most difficult years in Wall Street history.
Wall Street Journal Blogs – From its 17th-floor offices in the New Beijing Poly Plaza building, the monolithic landmark commissioned by the state-owned conglomerate China Poly Group Corp., China’s massive sovereign-wealth fund has established itself as a prime destination for overseas hedge-fund managers hoping to come home with big checks in their pockets.
Droves of hedge-fund and private-equity fund managers have made the pilgrimage since last year, when China Investment Corp. moved into its new offices, which is itself just two years old.
CIC, established in 2007, wields control over $200 billion, making it one of the world’s youngest but biggest sovereign-wealth funds. It also is emerging as one of the new hedge-fund emperors, a source of fresh cash for an industry thirsty for it.
Marketwatch – China’s sovereign wealth fund has selected Morgan Stanley and Blackstone Group LP to oversee hundreds of millions of dollars in new investments, The Wall Street Journal reported Friday.
The $200 billion China Investment Corp. has finalized an additional allocation of $500 million to Blackstone’s /quotes/comstock/13*!bx/quotes/nls/bx (BX11.42, +0.46, +4.20%) fund-of-funds unit, and an additional allocation of money has been earmarked for investment through Morgan Stanley’s /quotes/comstock/13*!ms/quotes/nls/ms (MS28.31, +1.15, +4.23%) asset-management unit, according to the report, which cited people familiar with the situation.
The sovereign wealth fund is also in discussions to potentially invest billions more in hedge funds, possibly doling out money directly to managers rather than using a fund-of-funds vehicles, the report said.
The Washington Post – The Wall Street herd is at it again. Even as the cleanup crew is carting away the debris left by the last financial crisis, the investment banks, hedge funds and exchanges are busy working on the next one.
Forget collateralized-debt obligations and credit default swaps — the new new thing is high-frequency trading. In the last three years, this practice has boosted trading on the country’s stock exchanges by more than 150 percent, to the point where it now accounts for two-thirds of the daily trading volume.
Wall Street Journal – China Investment Corp.’s $200 billion sovereign-wealth fund is reaching out to old friends in the U.S. as it ventures into hedge-fund investing.
The fund has selected Morgan Stanley and Blackstone Group LP to oversee hundreds of millions of dollars in new private-fund investments, people familiar with the matter said.
CNN Money – John Costas, who helped make UBS AG into one of the world’s biggest investment banks, wants to build a lasting Wall Street player — and put the 2007 demise of hedge fund Dillon Read Capital Management behind him.
Costas and long-time partner Michael Hutchins have launched The PrinceRidge Group, a boutique broker-dealer that is, for now, focused on trading mortgage and corporate debt.
Over time, though, he intends to expand into a mid-size investment bank, seizing "unprecedented" opportunities created by the shake-up on Wall Street.
Reuters – CIT Group Inc (CIT.N), which is looking at selling off some assets, is most likely to sell its aviation-finance and rail-finance operations, the Wall Street Journal said, citing sources familiar with the matter.
The people, who said evaluations were still in the early stages, told the paper that CIT was approached by Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) (BRKb.N) and Leucadia National (LUK.N) to buy parts of the company, but spurned the offers because of low bids.
CIT, which is a lender to nearly a million small- and mid-sized businesses, averted a crisis and bought some time this week with a $3 billion emergency financing from large bondholders to restructure its debt and avoid bankruptcy, after the collapse of rescue talks with the U.S. government.
Salon – John R. Talbott is a former investment banker with Goldman Sachs and the author of "The 86 Biggest Lies on Wall Street," "Contagion," "Obamanomics," and "The Coming Crash in the Housing Market."
Simon Johnson, the former chief economist of the International Monetary Fund (IMF), is the co-founder of the Baseline Scenario, a Web site tracking the ongoing financial crisis. He is one of the most visible public commentators on the ongoing financial crisis and its causes.
From June to July of 2009, Talbott and Johnson held an e-mail conversation on the following topic:
