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.
Telegraph.co.uk – The hedge fund, which has $11bn (£6.7bn) of assets under management, will be the cornerstone investor in the new company called Lothian which will buy oil assets around the world and manage them. The plan is for Lothian to have a market value of as much as $500m.
GLG, which is listed on the New York Stock Exchange, is helping to put together a management team for Lothian that includes Tom Hickey, the former finance director of Tullow Oil, John Kennedy, chairman of Wellstream Holdings – the Newcastle-based manufacturer of pipes for the oil and gas industry – and Andrew Knott, a former analyst at Merrill Lynch who joined GLG last year. It is thought they are looking for one more high-profile director before the flotation.
Financial Standard – US investors can now access a liquid and transparent hedge fund replication strategy after IndexIQ launched the IQ Hedge Multi-Strategy Tracker ETF on the New York Stock Exchange.
The New York based firm’s exchange traded fund (ETF) seeks to replicate the returns of the IQ Hedge Multi-Strategy Index before fees and expenses.
The index holds a range of hedge fund strategies including equity long/short, global macro, market neutral, event driven and fixed income arbitrage.
Bloomberg – Blackstone Group LP, the world’s largest private-equity firm, fell to a record low in New York trading this week on concern that a rebound in leveraged buyouts will lag behind any economic recovery.
“Given the economic outlook and pressure on asset values, even on existing investments, it’s going to be a while before they have a chance to come back,” said Robert Lee, an analyst with Keefe, Bruyette & Woods Inc. in New York. “It’s hard for investors to see through that valley.”
After announcing about $169 billion of buyouts in 2006 and 2007, New York-based Blackstone has since completed $9.2 billion of deals. An absence of financing for new acquisitions and an inability to sell current holdings have idled the firm and competitors such as KKR & Co. and Carlyle Group LP. Investors say deal won’t resume until after the economy starts to grow and banks can rebuild capital depleted by losses on mortgage-backed securities and previous LBO loans.
Blackstone, run by Chairman Stephen Schwarzman, probably will report a loss tomorrow of 31 cents a share, its third in the past four quarters, according to the average estimate of seven analysts in a Bloomberg survey. The company had a profit, excluding some costs, of 8 cents a share in the same quarter a year earlier.
Of the nine analysts who rate Blackstone shares, six have ratings equivalent to hold, including Lee. One analyst, Barclays Capital’s Roger Freeman, suggests selling the stock. Two recommend clients buy the shares.
Blackstone dropped below $4 a share for the first time on Feb. 23, closing at $3.89, almost 90 percent less than its $31 initial public offering price in June 2007. The stock declined 17 cents to $4.12 yesterday in New York Stock Exchange composite trading.
Reuters – Suspected insider trading cases reached an all-time high last year, driven less by hedge funds and more by pillow talk between relatives and friends, the head of surveillance at the New York Stock Exchange said on Wednesday.
In a year when bombshell revelations rocked bank stocks, governments outlawed short-selling, and panicked investors brought on the worst market rout since the 1930s, there was much to tempt those with privileged information.
NYSE Regulation, the Big Board’s oversight body, referred 146 cases of suspected insider trading to the U.S. Securities and Exchange Commission in 2008, five more than in 2007, the previous record year, and more than twice as many as in 2004.
Seekingalpha.com – Since inception, its funds have returned on average 40% annually, which explains how they can charge a 50% performance fee to investors, compared to the normal 20% that most hedge funds charge. They are very active traders and at any given time can account for up to 3% of the volume on the New York Stock Exchange and up to 1% on the Nasdaq. And, if you’re curious, you can see a picture of Cohen’s house here.
Before beginning, we do want to stress that since SAC actively trades positions quite frequently, tracking it via its13F is not necessarily beneficial and we advise that those reading take this with a grain of salt. We are simply covering the fund since it’s a prominent fund and many of our readers were curious about what it was up to these days.
Reuters – In the world of stock exchanges, bigger is better. And although Deutsche Boerse AG said on Sunday that merger talks with NYSE Euronext had ended with no result, exchanges will still have to make cross-border mergers to contain costs.
A merger between the German bourse and the operator of the New York Stock Exchange would have generated huge synergies — around $300 million on a combined $3 billion cost base — and challenged derivatives market CME Group Inc CME.N.
"The more volume they can get on one platform, the better for exchanges, so all the mergers make sense," said Octavio Marenze, head of consultancy firm Celent.
Bloomberg – U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.
These gaps, which caused the Dow Jones Industrial Average to swing as much as 104 points this month in the final minute of trading, suggest investment firms faced with client redemptions and plunging markets may be gaming the closing-auction system. The discrepancies spurred the Financial Industry Regulatory Authority, which oversees 5,000 brokerages, to look for evidence that investors are improperly swaying prices.
General Electric Co., McDonald’s Corp. and the 28 other Dow companies swung 0.6 percent on average at the close the last two weeks, according to data compiled by Bloomberg. That’s almost eight times greater than the average three months ago. Because of the swings, the New York Stock Exchange plans to distribute information on the closing auction more often to help mitigate volatility.
West Palm Beach (HedgeCo.net) – The Morgan Stanley Frontier Emerging Markets Fund, Inc. (the “Fund”) has issued 7,100,000 shares of common stock at a price of $20 per share resulting in gross proceeds to the Fund of approximately $142,000,000. The Fund’s shares began trading on August 25, 2008 on the New York Stock Exchange under the symbol “FFD.”
The newly organized, non-diversified closed-end fund’s investment objective is to seek long-term capital appreciation. "There can be no assurance that the Fund’s investment objective will be achieved." Morgan Stanley said as the Fund’s lead underwriter.
The Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in equity securities of companies operating in frontier emerging market countries.
Frontier emerging market countries in which the Fund currently intends to invest include: Bahrain, Bangladesh, Botswana, Bulgaria, Croatia, Ecuador, Estonia, Ghana, Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lebanon, Lithuania, Macao, Mauritius, Namibia, Nigeria, Oman, Panama, Qatar, Romania, Saudi Arabia, Serbia, Slovenia, Sri Lanka, Trinidad and Tobago, Tunisia, Ukraine, United Arab Emirates and Vietnam.
The Fund’s assets are managed within Morgan Stanley Investment Management’s Emerging Markets Equity team. “We have a long tradition of emerging markets investing dating back to the mid-1980’s, with the objective of helping investors capture growth opportunities in developing economies,” said Ruchir Sharma.
“We launched a Frontier Fund to invest in markets that we believe are continuing to grow and are not currently on most investors’ radar screens. The Fund’s registration in over 30 frontier markets across geographical regions gives us a wide footprint to make active country allocation decisions, and we are excited about the potential opportunities."
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West Palm Beach (HedgeCo.Net) – The global Equities business of UBS announced the launch of Direct Market Access (DMA) for international clients to trade securities on the Bovespa stock exchange in Brazil. UBS is among the first broker-dealers to offer non-Brazilian clients direct electronic equities trading and execution in this major market.
Recent market regulation enacted in Brazil allows for non-domestic investors access to direct electronic trading on Bovespa (Bolsa de Valores de Sao Paulo), a Sao Paulo-based stock exchange. Bovespa is the second-largest stock exchange in the Americas, and the third largest in the world.
"We have a longstanding commitment to providing clients with seamless, direct, electronic access to the major markets all over the world." Mario Campos, Head of Latin America Sales & Trading, said, "We are pleased to be one of the first brokers to offer global clients with DMA in Brazil."
"International DMA is one milestone in providing advanced electronic trading in this market – other tools and strategies will follow very soon," said Will Sterling, Head of Institutional Electronic Trading. "Making DMA available for clients trading into Brazil is particularly exciting, given our global buy-side clients’ increasing focus on this region."
With offices in 50 countries, UBS is present in all major financial centers worldwide. Its shares are listed on the Swiss Stock Exchange (SWX), the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE).
Los Angeles Times- Wall Street regulators are examining whether securities firms adequately police rumor-mongering used to manipulate stocks after shares of Lehman Bros. Holdings Inc., Fannie Mae and Freddie Mac tumbled last week.
The Securities and Exchange Commission’s inspections unit; the Financial Industry Regulatory Authority, which monitors brokerages; and the New York Stock Exchange’s regulatory arm are checking whether firms have controls in place to prevent the intentional spread of misinformation, the SEC said Sunday. The agencies also will look at whether employees have been adequately trained.
"The examinations we are undertaking with FINRA and NYSE Regulation are aimed at ensuring that investors continue to get reliable, accurate information about public companies," SEC Chairman Christopher Cox said.
Regulators already are hunting for traders who may have sought to profit illegally from the credit crisis by falsely stoking panics about the stability of such companies as Bear Stearns Cos., which collapsed in March amid speculation that clients were pulling out their business.
Bloomberg – Merrill Lynch & Co., the third- largest U.S. securities firm, is probing one of its trading desks in London and has suspended a trader after discovering he may have overstated the value of some of the bank’s equity derivatives.
“The firm routinely reviews the marks our traders set,” Merrill spokesman Jezz Farr said May 23 in an e-mailed statement. “Our preliminary review determined that one desk used marks that appear to be outside of our accepted policy. We have suspended a trader and we continue to review this matter.”
The trader, whom Merrill declined to identify, was a member of a team that traded derivatives based on individual stocks for the firm’s own account, according to a person with direct knowledge of the matter. Merrill, based in New York, has determined that he may have overstated the value of some holdings by less than 10 million pounds ($19.8 million) during April, when his marks were detected, the person said.
Declines on European and U.S. markets this year have exposed a growing list of errant traders, tarnishing firms including Credit Suisse Group and Societe Generale SA. The discovery of potential trading lapses at Merrill may spur regulatory scrutiny as Chief Executive Officer John Thain works to reassure shareholders that the firm has improved risk management after his predecessor’s bad bets on mortgages contributed to a record loss of $7.8 billion in 2007.
“This case shows our oversight system works,” Farr said in the statement, referring to the firm’s detection of the suspended trader’s conduct. Merrill dropped $1.35, or 3 percent, to $43.15 at 2:30 p.m. in New York Stock Exchange composite trading on May 23.
Editor & Publisher – Polar Securities, a Toronto-based hedge fund, disclosed Tuesday that it has purchased a big stake in troubled Sun-Times Media Group (STMG).
In two filings with the U.S. Securities and Exchange Commission (SEC), Polar said it has made big purchases of the stock in recent days, and now owns 8,718,163 shares of STMG common stock, or approximately 13.3% of shares outstanding.
Among the Polar entities making the buys is South Pole Capital, which Polar’s Web site describes as a "Canadian distressed securities fund."
STMG, publisher of the Chicago Sun-Times and dozens of other Chicago-area publications, has said it is exploring strategic alternatives including the sale of all or some of the company.
STMG shares were de-listed from the New York Stock Exchange earlier this month and now trade over-the-counter on the Pink Sheet. Shares of the stock (OTC: SUTM.PK) were trading in the early afternoon at 42 cents, down 1 cent, or 2.33%, from its opening.
Polar is headed by Canadian John Paul Sabourin.
STMG Director of Investor Relations confirmed the size of the stake, but declined further comment.
