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.
Marketwatch – Shares in hedge fund manager Man Group jumped around 11% Thursday after the firm maintained its dividend payout and launched a new investment management business.
The firm said it expects adjusted pretax profit for the year ending March 31 to fall around 43% to $1.2 billion from $2.1 billion due to the impact of falling markets and withdrawals by institutional investors.
Bloomberg – The global hedge fund industry may shrink by 11 percent this year as funds liquidate and investor withdrawals persist, a Deutsche Bank AG survey said.
Industry assets may fall to $1.33 trillion by December, according to 68 percent of the 1,000 investors surveyed by Germany’s largest bank last month. The respondents, which hold a combined $1.1 trillion of hedge-fund assets, on average expect outflows from the industry to accelerate to $168 billion this year, 8 percent faster than last year.
The deepest financial crisis since the 1930s led to the worst average hedge-fund performance in history last year, prompting funds managed by Citadel Investment Group LLC and D.E. Shaw & Co. LP. to limit withdrawals to stem record outflows.
“If 2008 was a story about performance of hedge funds, 2009 is very much going to be a story about restructuring,” said Sean Capstick, Deutsche Bank’s London-based global head of capital introduction. “Our survey indicates redemptions will continue as a phenomenon for the foreseeable future.”
In a March 13 note to investors, Sanford C. Bernstein & Co. analyst Brad Hintz forecast hedge-fund assets to fall 18 percent this year, dropping below $1 trillion before a recovery in 2013.
The HFRI Fund Weighted Composite Index retreated 18 percent in 2008, its steepest annual decline. Still, that was less than half the 42 percent slump of the MSCI World Index.
Bloomberg – Philip Falcone, who runs the $7 billion Harbinger Capital Partners LLC, is starting a hedge fund that draws on his background in distressed securities, even as investors are locked into his biggest fund.
The Credit Distressed Blue Line Fund will buy troubled loans and bonds, and bet against higher-rated debt, the New York-based firm said in a March 16 letter to investors. The firm’s flagship $5 billion Harbinger Capital Partners Fund I limited withdrawals to 65 percent of its assets last year because of private-equity investments, which are harder to sell than publicly traded stocks.
Bloomberg – Japan’s attempts to end financial turmoil failed to lure hedge funds back to its swap markets, leaving premiums paid by domestic borrowers near a record, RBS Securities Japan Ltd. said.
Hedge funds, which lost more than $400 billion through withdrawals and market losses since June, pulled out of Japan’s swap markets after the failure of Lehman Brothers Holdings Inc. led to a seizure in global credit, said Tatsuo Ichikawa, a senior strategist at RBS in Tokyo. Japan’s banks were charged record premiums this month to swap London borrowing rates for those set in Tokyo as a slumping economy exacerbated concern about the health of the nation’s companies.
Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees.
The dismissals will come on top of the 10,000 jobs that disappeared last year at the investment partnerships, according to estimates by New York-based Options Group, an executive-search firm. Employment peaked at 155,000 in 2007, and has since dropped to about 145,000, the firm said.
Bloomberg – Ray Dalio’s Bridgewater Associates Inc. overtook JPMorgan Chase & Co. to become the biggest U.S. hedge-fund manager, even as the firm lost assets during the industry’s worst year, according to a survey.
Bridgewater, based in Westport, Connecticut, managed $38.6 billion on Jan. 1, down 11 percent from July, according to Absolute Return magazine. New York-based JPMorgan, which owns Highbridge Capital Management LLC, ranked second at $32.9 billion, a decline of 26 percent.
“The bulk of hedge funds were delivering returns that were highly correlated with the market,” said Sharath Sury, chief executive officer of S4 Capital LLC, a Chicago-based firm that advises clients on investing. “So when the markets fell, so did their assets.”
Investment returns dropped an average of 19 percent last year, the most on record, according to data compiled by Chicago- based Hedge Fund Research Inc. Hedge-fund assets shrank to $1.2 trillion at the end of 2008 from the June peak of $1.9 trillion on the market losses and investor withdrawals, according to Morgan Stanley analyst Huw van Steenis in London.
Assets at U.S. hedge funds that managed at least $1 billion each fell 32.3 percent in the second half to $1.1 trillion, according to Absolute Return, which is published by London-based HedgeFund Intelligence Ltd.
Reuters – In a period when volatile markets battered most hedge funds, global macro funds are proving their worth, Graham Capital Chairman Kenneth Tropin told Reuters.
During one of the hedge fund industry’s worst years, Graham delivered gains of up to 41 percent in 2008 by making good bets on currencies, stocks, interest rates and commodities. And because the firm invests in highly liquid futures, clients had monthly access to cash even as many funds blocked withdrawals.
The combination of liquidity and returns that are independent of the broader market could revive interest in global macro funds, Tropin said.
"For a long time there was a perception that the biggest returns, the best risk-adjusted returns, were in other strategies. Then we had a market environment last year where most hedge fund styles ended up being correlated to each other and to the equity markets as well," he said.
Graham manages $4.9 billion in assets in human-directed funds and computer-driven quantitative funds. Funds in both categories invest across fixed income, currency, commodity and equity futures.
"Our style of investing offers some benefits, including liquidity and diversification, that may have not been appreciated as much as they should be," he said.
Graham’s quant funds gained from 20 percent to 41 percent last year, while human-directed funds rose by 6 to 27 percent. By comparison, the average hedge fund lost 28 percent.
Financial Times – New Star has closed two of its hedge funds after withdrawals of the crisis-hit fund manager’s internal capital left them too small to survive.
The manager has shut its three-year-old Firefly fund after Harry Tyser, its manager, quit in December, as well as the six-year-old Apollo fund.
New Star was seized by its banks in December in a debt-for-equity swap and has agreed a sale to larger rival Henderson in a stunning fall from grace for the previously high-flying group.
The closures come as hundreds of hedge funds are expected to shut this year, according to analysts and investors. Many small funds are being closed as their growth prospects recede, while larger funds are shrinking – and some are closing – as they face sizeable withdrawals by their clients.
New York (HedgeCo.Net) – Misha Malyshev, a trader for Citadel Investment Group who headed two of the firm’s hedge funds, has resigned according to a report by Bloomberg News.
Malyshev seemingly had a successful run with Citadel, working for the firm for 6 years and helping the two hedge funds post returns of about 40 percent last year. The hedge funds are estimated to manage about $2 billion in capital.
Malyshev used “high-frequency” trading, which is a computer-dependent strategy that aims to exploit hidden behavior trends in the market, to run the funds. As opposed to real-time data analysis, high-frequency trading uses tick data to uncover information and trends that may be invisible to the average analyst. Complex algorithms and PhD’s are usually standard with this method of trading.
According to the report, Malyshev will take some time off and is unlikely to start working for another fund within the next 18 months, because of contractual obligations.
Citadel, which is run by Kenneth Griffin, seems to be on the up and up this year after a disappointing 2008. Griffin has informed investors that they will be able to make withdrawals from the firm’s biggest funds, Kensington and Wellington. The two funds were frozen last year after losing over half of their value.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – Mohammed Syed has spent the past seven years scouting out the best hedge-fund investments for clients of his Axiom Fund Manager Ltd. Now, he’s seeking to expand the $100 million he oversees by acquiring rivals.
“I am looking for two or even three firms that can complement my business,” said Syed, 45, who founded London-based Axiom in 2002. “A year ago most people wanted huge premiums for their businesses, but now it’s a different story.”
Hedge funds are consolidating after record investment losses and customer withdrawals cut assets by 37 percent in the second half of 2008, squeezing their main source of fees. As many as 40 percent of the 9,000 hedge funds and funds of funds may disappear in the next two years, according to Karamvir Gosal, a New York- based investment banker at Jefferies Putnam Lovell. While some will return money to investors and shut their doors, mergers and acquisitions will be more prevalent than in the past.
New York (HedgeCo.Net) – Spanish bank Santander is seeking to freeze redemptions after stating on Monday that they currently lack the liquidity to meet the rising demands for withdrawals. Investors in the bank’s flagsihip real-estate fund, the Santander Banif Inmobiliario FII, moved to withdraw 80 percent, or $3.3 billion, of the fund’s capital at the end of January according to a regulatory filing yesterday.
Santander stated that investors would receive 10 percent up front of their redemption claims, to be followed by 10 percent increments whenever they could meet those demands. If they are still short on cash, they would inject capital themselves, they added.
The bank is hoping to put a halt on full capital withdrawals for the next two years so they may start an “orderly program of disposals.” They added that if they could not fulfill requests at the end of that period, they would wind down the fund.
The fund suffered losses last year after dropping 15 percent at the start of the fourth quarter after market conditions in residential real estate rentals took a turn for the worse. 67 percent of the fund’s assets were invested in real estate.
Some experts worry that the influx of demands at Santander may spark a domino effect with other Spanish funds invested in real estate, which considering their illiquidity, could pose a major a problem.
Santander has had their share of obstacles recently, including a massive 2.33 billion euro exposure to Bernard Madoff through their Optimal Investment Fund. Shares closed down 4 percent yesterday to 5.49 euros.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@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! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
guardian.co.uk – The shadow business secretary, Kenneth Clarke, has become the latest victim of the credit crunch after losing his job on the board of a hedge fund, the Guardian has learned.
Clarke, who was parachuted back on to the Tory frontbench to beef up the party’s handling of the financial crisis, has been axed from the board of Centaurus Capital as the sector faces its worst crisis in decades.
The hedge fund, which like other investment companies faces huge withdrawals of cash from clients anxious about plunging stock markets, has scrapped its advisory board, which also included José María Aznar, the former Spanish prime minister.
