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 (HedgeCo.net) – Northern Trust has been named the Best Overall Hedge Fund Administrator by HFMWeek in the magazine’s inaugural U.S. Service Provider Awards. The awards recognize companies that have outperformed their peers during 2008-2009 and demonstrated financial progress, growth and genuine innovation.
“Northern Trust was recognized for the strength of its service offering and for demonstrating business momentum and product innovation during a challenging period for the hedge fund industry,” said Lucy Guest, senior publishing executive for HFMWeek.
“The importance of a Third Party Administrator is now being disseminated throughout the industry so that all funds, including start ups, are embracing the need for the service.” Joe Goldstein, Managing Partner at G&S Fund Services, said. “Prior to Madoff, start up and smaller funds were reluctant to use third party administrators even though we provided them with a higher quality of financial management at a lower cost.”
What Goldstein sees as a change in the industry is that the necessity of a hedge fund administrator is now understood by investors. “This change is contributing to the growth of the hedge fund administration business, as funds who were reluctant to use hedge fund administrators are now either turning over their financial administration to a third party, or at very least using them to review and confirm their NAV calculations.” Goldstein said.
Northern Trust has a growing hedge fund servicing business, with assets under administration of $75.5 billion as of June 30, 2009, an increase of 54 percent over the prior year. Northern Trust services nearly 300 hedge funds worldwide as of June 2009, and in the previous 12 months had provided global operations services to more than 120 new fund launches and transitions.
“We’re delighted to be recognized as best overall administrator as it validates our approach of blending innovative technology, strong process and automation with the exceptional service standards that set Northern Trust apart from our competitors,” said Matt Ward, Head of Fund Administration-North America for Northern Trust. “Ultimately this is a service business and our experienced and attentive people are the real strength of our offering.”
West Palm Beach (HedgeCo.net) – Hedge fund events and information group, GAIM, has launched its first not-for-profit business breakfast briefing session.
In an effort to connect the alternative investment community with up to date information and contact with investors and peers in the industry, GAIM said the session would be the first in a series of breakfast seminars offering senior members of the hedge fund community the opportunity to stay connected between the GAIM flagship events that take place throughout the year.
The first meeting is scheduled for September 22, 2009 in New York at the Omni Berkshire, titled: ‘Where the Market Opportunities Will Be and How to Avoid Pitfalls Putting Capital to Work in the Fall’
Speakers include; Ken Akoundi, Head of Pension Strategies, North America, Deutsch Bank Securities Inc, Greggory White, Trustee, Howard University, Jose F. Gonzalez-Heres, Managing Director, Fund of Hedge Funds portfolios and a member of the Investment Committee, Morgan Stanley Alternative Investment Partners.
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) – The Hedge Fund Journal’s Funds of Hedge Funds GLOBAL50, produced in association with Newedge Prime Brokerage Group, reports that minus a few exceptions, funds were happy to participate in the survey and submitted their assets under management figures as at 30th June 2009, which goes some way to prove that funds are taking the issue of transparency more seriously. Those funds that declined to participate have been given estimates based on a variety of data and industry sources.
In responding to the survey, many funds wanted to emphasise that liquidity terms were often the key to how a firm had been able to retain assets, the Journal reports. Those funds with more generous liquidity terms believed, rightly, that they were victims of what is now aptly-called the ‘ATM effect’.
The data shows that between 30th September 2008 and 30th June 2009, over $200 billion was withdrawn from the top 50 funds. Most funds lost an average of between 25% – 30% of their assets under management. However, UBS Alternative and Quantitative Investments remains in pole position, despite losing over 33% of its assets: at 30th June, 2009 assets under management stood at $31.4 billion (down from $46.6 billion in September 2008).
The top 50 funds are certainly managing less, but they are not out of the game. Smaller funds, of course, are facing an even tougher time. Chicago-based Hedge Fund Research (HFR) has reported that over 200 funds of hedge funds liquidated in 2009. This is a significant increase on the last quarter and represents an annual attrition rate of over 8%; nearly double the previous record set in Q4 2008. Falling assets and rising costs due to heightened due diligence and compliance demands from investors will continue to have a strong impact on the business viability of smaller funds.
Hitting rock bottom
The crisis has raised some important questions. Having grown at more than 20% a year between 2000 and 2008, the reversal in fortunes has come as a shock to many within the industry. At their peak, assets under management for funds of hedge funds reached $825 billion according to HFR, but by the end of Q2 2009, assets in the sector had dropped to $530 billion. Importantly, that marked a $5 billion gain from 31st March 2009 and may indicate that redemptions have bottomed out.
But is the fund of hedge funds industry a victim of circumstance or is it a flawed business model? The connection between the Madoff scandal and the industry was unfortunate, if not unfair, (although, some notable funds of hedge funds had invested with Madoff) and as investors sought to retrieve money where possible, it was inevitable that funds of hedge funds would be called upon. “What we have seen is the latest phase of an evolutionary process,” says Permal’s Roberto Giuffrida, Senior Vice President, Regional Director Europe. “Since hedge funds first emerged 60 years ago, there have been three waves of growth and decline, and we are fully expecting to see the fourth wave of growth over the next few years.”
But without doubt there are weaknesses within the model. One major area of weakness is the asset liability mismatch. Funds of hedge funds have traditionally managed their portfolios with a mismatch between portfolio liquidity and terms offered to investors. In the event of a sudden rush of redemptions, funds had a credit facility to bridge the two. In reality, this system proved to be wholly unreliable. Funds were unable to meet the redemption requests and were forced to impose gates.
Adapt or die
Issues such as alignment between investors and managers in terms of fees and investment objectives as well as transparency and the due diligence process are also areas where practices are being reviewed and changed. In the current environment investors are able to affect changes and do not have to settle for second best.
But despite the recriminations, in relative terms, hedge fund investment held up well during the crisis. For example, in 2008 the Hennessee Hedge Fund Index and the Barclay Hedge Index fell 22.42% and 21.63% respectively, while the S&P 500 slid 38.49% and the NASDAQ plunged 40.54%. “The fact that hedge fund indices outperformed the long only indices proves that hedge funds offer the downside protection. And in 2009 we are seeing investor allocations into hedge funds and funds of hedge funds,” explains Optima Managing Director, Graham Martin.
Data clearly shows the rate of redemptions is slowing. They were lower during Q1 2009 than in Q4 2008 according to Standard and Poor’s and they were lower still in the second quarter of 2009. HFR notes that in the last year, funds of hedge funds have dropped fees by three basis points to 1.25%. There is also evidence which suggests that funds with lower management fees outperformed the funds with higher fees, although the data on this is fragmentary. What’s more, liquidity profiles are improving: funds have reduced leverage and many are showing positive cash balances.
Could this be the nadir for the industry? HFR, BNY Mellon and Casey Quirk believe so. Many managers and not a few studies are projecting that assets will grow further in the second half of this year. And regardless of the industry setbacks, funds of funds will continue to be a major channel into single manager hedge funds. But Craig Stevenson, Senior Investment Consultant, Watson Wyatt believes that while funds of hedge funds will stage a comeback, they will face increased competition from single manager funds. He attributes this to the fact that before the crisis, funds of funds could offer capacity to those funds that were closed. The current state of the industry means that single managers are looking to build their own portfolio of institutional assets and virtually all funds, even the most successful, are now open.
Clearly, investors who have less resources and alternative asset experience will continue to invest through funds of hedge funds. “Allocating to hedge funds is a good way of diversifying portfolios and with funds of funds on a base fee for the foreseeable future they are as cheap as they have ever been,” says Stevenson. The business model may indeed be more sound than was thought six months ago since with time investors will return. But some funds that stretched the goodwill of investors may find it is difficult to be fully forgiven.
You can access the Global 50 by clicking on the link below:
West Palm Beach (HedgeCo.net) – Hedge fund prime broker, Newedge, has started using a Dubai Point of Presence (POP) connection to facilitate their access to the Dubai Gold and Commodity Exchange (DGCX). The new connection has high bandwidth and is more secure than an internet-based connection, the company said.
Amaury de Villemandy, CEO of Newedge Europe and Middle East, commented on its fixed line capacity, saying, “Our investment in establishing direct connectivity to DGCX was based on the increased interest among our clients in capitalizing on the commodity and currency trading opportunities offered by the Exchange.”
Newedge is a 50/50 joint venture between Societe Generale and Calyon. With a presence in 25 locations in 17 countries, Newedge primarily serves institutional clients, providing access to more than 85 exchanges.
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
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) – International financial services provider TMF Group has expanded into boutiqe and hedge funds in Australia through the acquisition of Sydney administrator, Kingsway Taitz Fund Administration Pty Ltd,.
Recognised as a leading provider of boutique and hedge fund administration services in the Asia‐Pacific region, Kingsway Taitz has been top ranked in its peer group for the past two years by the annual Global Custodian Hedge Fund Administrator Survey.
"The increasing demand for our services made it apparent that the next phase of growth required the backing of a global fund administrator with strong financial resources." Brian Taitz, managing director of Kingsway Taitz said “This transaction provides the opportunity to align with a like‐minded global fund administration company that shares our values and culture."
“This transaction brings together two highly successful companies – one global and one local with complementary skills and values, and a shared focus on client service and staff development," managing directors of TMF Eric Koolen and Catherine Caradus, said. TMF has over 175 fund administration clients.
Eric Koolen, who has 20 years of fund administration experience, will lead the combined organisation in Australia. Brian Taitz will continue to be involved on a day to day basis for up to six months to ensure a seamless integration of the two organisations. The company says there will be no immediate changes.
Kingsway Taitz has retained Capital Advice as its financial adviser in relation to this transaction.
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) – The Securities and Exchange Commission yesterday recieved permission to freeze the assets of Mohit A. Khanna, who alledgedly raised as much as $70 million from 300 investors though his fund, MAK 1 Enterprises Group, LLC.
The SEC says he solicited investors in Southern California and several other states, as well as a charitable foundation, through word-of-mouth referrals and a website. The defendant claimed to pool investor funds to invest in commercial paper, foreign currency trading products, and other investments, which the SEC believes to be non-existent. Instead, Khanna misused investor funds to pay for several luxury cars and residential properties, including those now owned by his wife, Sharanjit Khanna of San Diego, Calif., who was also named as a relief defendant.
The complaint alleges Khanna fabricated and gave to an accountant a “screen shot” of MAK 1′s online banking activity purporting to show a balance of over $50 million in its bank account, in reality, the average daily balance in that account never exceeded $197,000.
The SEC seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against Khanna and MAK 1. Court will hold a hearing on August 31, 2009.
The SEC had help from the FBI, the U.S. Attorney’s Office for the Southern District of California, U.S. Postal Inspection Service, National Futures Association, and the Better Business Bureau – San Diego.
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) – RBC Capital Markets today reported that for the month of July 2009 the RBC Hedge 250 Index(R) had a net return of 2.10 percent. This brings the year-to-date return of the Index to 13.04 percent. These returns are estimated and will be finalized by the middle of next month. The return for June 2009 has been finalized at 0.33 percent.
Comprised of approximately 250 actual hedge funds, the RBC Hedge 250 Index is positioned as a diversified and representative investable index. The Universe on which the Index is based currently consists of 5,242 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $952 billion.
Since its inception on July 1, 2005 through the end of June 2009, the RBC Hedge 250 Index has had an annualized net return of 2.56 percent. In comparison, over the same period, other investable indices have averaged -1.44 percent while non-investable indices have averaged 4.25 percent, according to information reported by the sponsors of those indices.
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!
HedgeCo.net (West Palm Beach) – Man Investments’ seeding fund, RMF Global Emerging Managers, has completed its second incubation deal of the last two months, providing a cornerstone investment of $50 million for Hong Kong’s Minerva Macro Fund.
In July RMF GEM invested $50 million in the flagship product of 5:15 Capital Management, an unrelated fixed income arbitrage manager based in Connecticut.
Minerva is managed by Stanley Ku, who founded the Hong Kong office of hedge fund Fortress Investment Group and most recently managed $750 million for Fortress’ Drawbridge Global Macro Fund. Dorothy Lau, Minerva’s risk and business manager, formerly worked for JP Morgan and Goldman Sachs.
“Stanley Ku’s work at Fortress and Goldman Sachs has made him a very well respected money manager in Asia,” said Hans Hurschler, head of Man Investments’ hedge fund Ventures. “We believe that Minerva has the potential to generate solid, stable returns and that it may attract substantial assets.”
Minerva is a discretionary global macro fund, focused on Asia. It trades only highly liquid instruments such as interest rate or bond futures, foreign exchange forwards and equity index futures or sector ETFs. The entire portfolio is designed to be liquidated in 48 hours.
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) – Encouraged by a promising investment environment and accelerated investment pace, New York-based special opportunities fund, Atalaya Capital Management LP, today announced that it has expanded its team, adding three investment professionals and a marketing professional.
“Recent positive changes in our target investment markets have prompted Atalaya to bolster our professional platform in order to capitalize on market conditions and new opportunities,” said Ivan Q. Zinn, Founding Partner & Chief Investment Officer.
Josh Ufberg joined as a Principal from Goldman Sachs’ Special Situations Group, while Rana Mitra and Alex Wang have joined the team responsible for the sourcing and purchase of private credit assets as Senior Associate and Associate, respectively. Ashley Fochtman joined the Firm as a Vice President and will be working in a business development capacity. Previously, Ms. Fochtman worked in hedge fund marketing and at Goldman Sachs as an energy derivatives analyst.
Founded by Mr. Zinn in 2006, Atalaya focuses on the opportunistic purchase of senior secured credit from forced sellers, failed financial institutions and sellers in need of liquidity such as banks, commercial finance companies, and other financial and investment institutions.
About Atalaya Capital Management
Atalaya Capital Management is an alternative investment firm focused on investing in small and middle market credit opportunities. Since inception in early 2006, the Firm has successfully invested over $1 billion through (1) the opportunistic purchase of private, senior secured credit from forced sellers, failed financial institutions and sellers in need of liquidity, and (2) proprietary ‘new issue’ credit investments including DIP loans and other senior secured financings.
West Palm Beach (HedgeCo.net) – Salus Alpha (SA) announced that their fund, ‘The Salus Alpha Directional Markets’ stood out from its peers in the Managed Futures space due to its unique approach.
The majority of the managed futures funds, SA said, invests systematically according to computer based trading models. A computer model typically uses different indicators to identify trends on the global financial markets. These models can be characterized as long-term and short-term operating models.
Most managed futures funds use long-term trend following models; this is the reason why most of the famous managed futures funds have had significantly negative performance since the beginning of the year 2009: they didn’t recognize the trend reversal in time.
The Approach of the Salus Alpha Directional Markets Fund differs significantly from competitors – Model Risk is minimized.
"Unlike other firms we do not trust in technical analysis but we forecast futures prices with precision to identify trends. In contrast to other managed futures models the Salus Alpha Directional Markets controls risk on position, sector and portfolio level. Daily risk balancing positions the fund right in stormy weather or trend less markets." SA said.
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) - Research and Markets has announced the addition of the "High Net Worth Alternative Investments" report to their offering.
The report identifies demand for hedge funds, capital protected funds, private equity funds and real estate funds from high net worths, The scope of the report covers France, Germany, Italy, Spain, UK, Nordic region, Belgium/Netherlands, Switzerland, Australia, China, India, Hong Kong, Singapore and Taiwan.
Includings hedge funds, capital protected funds, private equity funds and real estate funds (open ended and closed ended) thr peport shows the results of the Wealth Management Market Leaders survey of 280 wealth management companies worldwide, and on high net worths (those with more than $1m in onshore liquid assets)
HNW alternative investment asset allocations are expected to decline slightly in both Australia and France in the next two years, as high net worths reposition their portfolios. Real estate allocations and commodities allocations will decline among Australian HNWs while both hedge fund and derivative allocations will increase.
While British HNWs plan to increase their exposure to capital protected products and private equity funds, and their wealth managers will devote significant resources to the development of these product areas, they are failing to anticipate their clients demand for closed-ended real estate funds.
At the same time German wealth managers are focusing strongly on capital protected products which, while certainly in demand by most HNWs, will not see a significant increase in terms of portfolio allocations.
HedgeCo.net (West Palm Beach) – Off-shore hedge fund law firm, Sadis & Goldberg LLP, sent out a letter to their clients announcing that the Securities and Exchange Commission (SEC) appears determined to issue more subpoenas and give people more incentives to cooperate with investigations as it works to enhance its oversight of the financial markets.
The letter, obtained by HedgeCo, explains, ”Don’t be surprised if you receive a subpoena or are contacted by the SEC.” Daniel G. Viola, spokesperson for Sadis & Goldberg, said, ”The SEC has significantly increased its enforcement efforts since the recent discovery of certain high profile Ponzi schemes.”
Effective August 11, 2009, the SEC has also made it easier for its staff attorneys to issue subpoenas. Thus, the SEC staff attorneys will no longer have to obtain formal approvals to issue subpoenas; instead, they will simply need approval from their senior supervisor.
”If you receive an inquiry letter or subpoena from the SEC, remain calm, ”Viola said, ”This is not uncommon given the current regulatory climate. Above all, do not respond without first contacting legal counsel.”
The The SEC generally has broad powers to conduct investigations of potential violations of the federal securities laws and often works with the Department of Justice in connection with joint proceedings, often known as ”parallel proceedings.”
The law firms Regulatory Practice Group consists of former SEC personnel and litigators with experience regarding civil and criminal proceedings.
Contact info: Daniel G. Viola at 212.573.8038 (or dviola@sglawyers.com) Christiaan Johnson-Green at 212.573.8169 (or cjohnson-green@sglawyers.com)
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!
