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.
VC Circle – Flower exporter Karuturi Global is raising Rs 290 crore from its promoter Ramakrishna Karuturi and a consortium of foreign institutional investors (FIIs). Both promoter and FIIs are together subscribing 241.5 million warrants of Rs 12 each, which would converted into one equity share. A group of four FIIs, which include hedge fund Monsoon Capital, are pumping in Rs 248.64 crore in the firm. The rest is being invested by the promoter, Ramakrishna Karuturi. The company is now seeking shareholders approval through a postal ballot.
The four FIIs investing in Karuturi will together hold a 29.82% stake in the post-issued capital. They include Emerging India Focus Fund (8.64%), India Focus Cardinal Fund (14.4%), Elara India Opportunities (3.91%) and Monsoon Capital (2.87%). The warrants can be converted within 18 months, and an amount Rs 3 per warrant would have to paid at the time of warrant allotment. The rest of the amount of Rs 9 would be paid when subscribing each equity share, which would have a lock-in of one year.
Reuters – President Nicolas Sarkozy called at a European Union summit on Wednesday for a clamp-down on hedge funds and offshore centres as part of efforts to better regulate the world financial system.
"I would propose a simple principle, that no financial institution should escape regulation and supervision," he said according to a copy of a speech to the EU summit in Brussels.
"I am thinking, for example, of the regulation that we must apply to the rating agencies, and of the necessary supervision of hedge funds…We must also work to eliminate the grey areas that undermine our efforts at coordination, in this case the offshore centres," he said.
Seeking Alpha – Pop Quiz: Which are more expensive, hedge funds or mutual funds?
Sounds like a pretty dumb question, right? Well as regular readers will know, this question is actually central to our views here at AAA. Over two years ago, we told you about an academic study called “Measuring the True Cost of Active Management by Mutual Funds” by Ross Miller of the State University of New York. Miller argued that since mutual funds could be largely replicated by low-cost index funds or ETFs, the implicit fee for their active management was significantly higher than the posted expense ratios. For good reason, the paper was subsequently included in the Q1 2007 edition of the Journal of Investment Management.
The latest to make this argument is Mark Kritzman of Windham Capital. In his article “Who Charges More: Hedge Funds or Mutual Funds?” (Winter 2008 Journal of Applied Corporate Finance) Kritzman says:
Hedge funds, in principle, hedge out market returns and thereby produce a pure alpha; hence the term “hedge fund.” Alpha, in principle, is uncorrelated with market returns. Mutual funds, by contrast, generate returns that comprise a market component and an alpha component. The returns of mutual funds are typically more than 95% correlated with market returns. Taking these factors into account, it is unclear whether hedge funds or mutual funds are more expensive.
