Exco Resources Inc. announced an agreement to buy producing oil and gas properties in Jackson Parish, Louisiana from Anadarko Petroleum Corp. for $1.6 billion, almost doubling its oil and gas reserves. The total acreage is approximately 66,000 net acres.
Exco's largest shareholder is legendary oilman and billionaire hedge fund manager T. Boone Pickens, who with his two hedge funds, owns 12.5% of Exco's outstanding shares. Pickens is also on the board of directors and this purchase is the largest of six announced this year by Exco.
Exco is the culmination of several acquisitions made in the last few years by Pickens and Exco CEO, Doug Miller. Pickens, 77, started Mesa Petroleum with $2500 in 1956, growing it into one of the world's leading independent oil and gas producers. He is also the founder and chairman emeritus of Clean Energy Fuels, the nation's largest supplier of natural gas to the transportation sector.
The fields are tapped by about 350 wells, and 96% of the proved reserves on the properties are in production, Exco said. The fields have proved reserves equivalent to about 466 billion cubic feet of gas of which 446 is producing today, Exco said. The acquisition also includes gathering systems, compression and treating plants.
Exco will use cash generated by the new fields to accelerate drilling on more than $2-billion of properties acquired since the public offering. The purchase of the Anadarko fields, expected to close in March, will be financed with a new revolving credit facility and a bridge loan from banks, Exco said in a separate statement.
27 Dec 2006
Wine and Hedge Funds
Aside from the hedge fund millionaires investing in the land rich wine making lifestyle, a new trend is now being seen among hedge fund investors in the buying of premium wines. Merryl Lynch noted the surge in wine investment in their 2003 World Wealth Report, which found that the rich were devoting 13% of their assets to so-called alternative investments. The category also included art, hedge funds, and foreign exchange.
Peter Meltzer, author of the recently published "Keys to the Cellar: Strategies and Secrets of Wine Collecting," said in an interview with Reuters that six magnums of Domaine de la Romanee-Conti sold earlier this year for $170,375. "There has been a phenomenal growth in the collection of premium wines," said Peter Meltzer, the caretaker of the Wine Spectator index, a gauge of the most frequently sold premium wines, mostly Bordeaux and Burgundies. A single bottle of Chateau Latour 1955 sold with commission for $28,440.
Wall Street wine mavens interested in purchasing a Burgundy vineyard or expanding their investments, have the opportunity to invest in the some 105 million bottles of chardonnay white wines and 75 million bottles of pinot noir reds produced annually. There are about 4,000 “domaines” and 59 types of soil beneath the Cote d’Or’s 50-kilometer (31-mile) stretch.
It seems however, that buying a bottle of the stuff is less risky than trying to go for buying the vinyard “Owning a domaine is a venture capitalist’s dream, high in risk and if the weather is good and you’re really lucky, you might make a 4 percent return. But owning a domaine is the greatest lifestyle imaginable.” Says Wasserman, a vinyard owner in his own right.
It takes three years after the first harvest for the wine to be ready for market,” says Wasserman, who has been a Burgundy wine trader for 40 of his 62 years. “You’re not making a cent for three years, and then your buyers must wait a minimum of three to four years after that before they can drink it. Perfection wouldn’t appear until the wine is six to eight years old…..The land will cost you $6 million, and that will produce 90 casks of
Peter Meltzer, author of the recently published "Keys to the Cellar: Strategies and Secrets of Wine Collecting," said in an interview with Reuters that six magnums of Domaine de la Romanee-Conti sold earlier this year for $170,375. "There has been a phenomenal growth in the collection of premium wines," said Peter Meltzer, the caretaker of the Wine Spectator index, a gauge of the most frequently sold premium wines, mostly Bordeaux and Burgundies. A single bottle of Chateau Latour 1955 sold with commission for $28,440.
Wall Street wine mavens interested in purchasing a Burgundy vineyard or expanding their investments, have the opportunity to invest in the some 105 million bottles of chardonnay white wines and 75 million bottles of pinot noir reds produced annually. There are about 4,000 “domaines” and 59 types of soil beneath the Cote d’Or’s 50-kilometer (31-mile) stretch.
It seems however, that buying a bottle of the stuff is less risky than trying to go for buying the vinyard “Owning a domaine is a venture capitalist’s dream, high in risk and if the weather is good and you’re really lucky, you might make a 4 percent return. But owning a domaine is the greatest lifestyle imaginable.” Says Wasserman, a vinyard owner in his own right.
It takes three years after the first harvest for the wine to be ready for market,” says Wasserman, who has been a Burgundy wine trader for 40 of his 62 years. “You’re not making a cent for three years, and then your buyers must wait a minimum of three to four years after that before they can drink it. Perfection wouldn’t appear until the wine is six to eight years old…..The land will cost you $6 million, and that will produce 90 casks of
26 Dec 2006
Higher Standards may be Welcomed by Hedge Funds
State Attorney General Richard Blumenthal, one of the nation's most outspoken advocates for increased hedge fund regulation has repeatedly urged regulators and legislators to consider raising the accredited investor standard.
Some hedge funds have now also expressed support for the proposal by the Securities and Exchange Commission that would shrink the pool of eligible hedge fund investors.
The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify. The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement.
"Raising net worth requirements is a critically significant first step toward helping protect vulnerable investors in the higher risk world of hedge fund investment," Blumenthal said in a statement.
"Especially in areas like Connecticut, increasing real estate values have escalated the retailization of hedge funds -- and entitled and exposed exponentially growing masses of middle class investors to hedge funds," Blumenthal said.
Industry insiders agree. "The change is long overdue," said the head of a Connecticut-based multibillion-dollar fund of funds, who declined to give his name because of company policy.
"It's totally appropriate that the SEC should be updating the standard, which has not increased for inflation for many, many years," the fund manager said. The new rule would have "virtually no impact" on the industry in terms of the amount of assets being pumped into hedge funds, he said.
Victor Zimmermann Jr., managing partner of the Stamford office of Curtis, Mallet-Prevost, Colt & Mosle LLC, a law firm with many hedge fund clients, agreed that the impact would not be extreme. "The industry has changed quite a bit in the last five or 10 years," he said. "It is much more dominated by institutional money, rather than individuals."
Even hedge fund startups, which historically sought out wealthy individuals for seed money, are now turning to large banks as initial seed investors, Zimmermann said. "It is just fewer and fewer funds relying on individual investors," he said.
Zimmermann said hedge funds probably won't oppose the SEC rule, recognizing that it wouldn't have much impact on the industry and at the same time might satisfy some state regulators such as Blumenthal who have been clamoring for more oversight.
Some hedge funds have now also expressed support for the proposal by the Securities and Exchange Commission that would shrink the pool of eligible hedge fund investors.
The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify. The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement.
"Raising net worth requirements is a critically significant first step toward helping protect vulnerable investors in the higher risk world of hedge fund investment," Blumenthal said in a statement.
"Especially in areas like Connecticut, increasing real estate values have escalated the retailization of hedge funds -- and entitled and exposed exponentially growing masses of middle class investors to hedge funds," Blumenthal said.
Industry insiders agree. "The change is long overdue," said the head of a Connecticut-based multibillion-dollar fund of funds, who declined to give his name because of company policy.
"It's totally appropriate that the SEC should be updating the standard, which has not increased for inflation for many, many years," the fund manager said. The new rule would have "virtually no impact" on the industry in terms of the amount of assets being pumped into hedge funds, he said.
Victor Zimmermann Jr., managing partner of the Stamford office of Curtis, Mallet-Prevost, Colt & Mosle LLC, a law firm with many hedge fund clients, agreed that the impact would not be extreme. "The industry has changed quite a bit in the last five or 10 years," he said. "It is much more dominated by institutional money, rather than individuals."
Even hedge fund startups, which historically sought out wealthy individuals for seed money, are now turning to large banks as initial seed investors, Zimmermann said. "It is just fewer and fewer funds relying on individual investors," he said.
Zimmermann said hedge funds probably won't oppose the SEC rule, recognizing that it wouldn't have much impact on the industry and at the same time might satisfy some state regulators such as Blumenthal who have been clamoring for more oversight.
New Laws Create Investment Opportunities in Russia
Sberbank, Russia's central bank, says that in 2006 48 Russian banks were fully owned by foreigners, and the total share of non-residents in Russian banks stood at 12.92%.
According to a report by Reuters, the lower house of Russian parliament has just made it easier for foreigners to gain exposure to the booming sector by passing legislation that would put foreign and domestic investors on an equal footing when buying shares in Russian banks, also making it easier for Russian banks to go public.
The new rules would oblige residents and non-residents to inform regulators if they purchase more than a 1% stake in a Russian bank and seek permission to build a stake of more than 20%, according to the report by Reuters.
After approval by the upper chamber of parliament and signed into law by President Vladimir Putin, the amendments should pave the way for a $7.6 billion additional share issue by Russia's largest bank, state-owned Sberbank, as well as a $4 billion initial public offering by domestic rival VTB.
"These amendments will clearly facilitate secondary trading and be positive for all banking stocks traded in Russia," Alfa Bank analysts said in a research note, suggesting the new law will have a positive effect on Russian banks going public.
According to a report by Reuters, the lower house of Russian parliament has just made it easier for foreigners to gain exposure to the booming sector by passing legislation that would put foreign and domestic investors on an equal footing when buying shares in Russian banks, also making it easier for Russian banks to go public.
The new rules would oblige residents and non-residents to inform regulators if they purchase more than a 1% stake in a Russian bank and seek permission to build a stake of more than 20%, according to the report by Reuters.
After approval by the upper chamber of parliament and signed into law by President Vladimir Putin, the amendments should pave the way for a $7.6 billion additional share issue by Russia's largest bank, state-owned Sberbank, as well as a $4 billion initial public offering by domestic rival VTB.
"These amendments will clearly facilitate secondary trading and be positive for all banking stocks traded in Russia," Alfa Bank analysts said in a research note, suggesting the new law will have a positive effect on Russian banks going public.
Citigroup buys Morgan Stanley Fund
Citigroup has agreed to buy wealth manager fund Quilter from rival Morgan Stanley as it seeks to expand in the UK. The acquisition places Citigroup among the top 10 wealth managers in the UK, the bank said in an e-mail.
Quilter, which manages $11 billion, will become part of the bank's global wealth-management division in Europe, run by Marianne Hay, Citigroup said.
Quilter has more than 18,000 clients and 300 employees in 10 offices in Britain, Ireland and the Channel Islands. The fund manages assets worth more than 5.6 billion pounds, has 18,000 clients and employs 300 staff, said the companies, which did not disclose details of the transaction such as the price paid by the bank.
"With strategic investments geared especially for Brazil, India and greater China, Quilter is an important step in establishing a meaningful presence in the UK, with an excellent platform to support the further growth of our Private Bank and international Smith Barney businesses," said Todd Thomson, Chairman and CEO of Citigroup Global Wealth Management, in the Citigroup statement. The bank said it plans to fuse Quilter into its CWA unit.
Quilter, which manages $11 billion, will become part of the bank's global wealth-management division in Europe, run by Marianne Hay, Citigroup said.
Quilter has more than 18,000 clients and 300 employees in 10 offices in Britain, Ireland and the Channel Islands. The fund manages assets worth more than 5.6 billion pounds, has 18,000 clients and employs 300 staff, said the companies, which did not disclose details of the transaction such as the price paid by the bank.
"With strategic investments geared especially for Brazil, India and greater China, Quilter is an important step in establishing a meaningful presence in the UK, with an excellent platform to support the further growth of our Private Bank and international Smith Barney businesses," said Todd Thomson, Chairman and CEO of Citigroup Global Wealth Management, in the Citigroup statement. The bank said it plans to fuse Quilter into its CWA unit.
Goldman Sachs names New Hedge Fund Manager
Goldman Sachs has named the new head of their alternative investments asset-management units as Marc Spilker, he will be overseeing hedge funds and private equity.
Goldman named Spilker, 42, to replace George Walker, who left in May to run the funds unit at Lehman Brothers. Spilker will report to Eric Schwartz and Peter Kraus, co-heads of Goldman Sachs Asset Management.
Spilker is a 16-year veteran of the investment bank, he was co-head of U.S. equituies trading and global head of volatility trading. He previously headed currency options and Japanese fixed-income.
Goldman named Spilker, 42, to replace George Walker, who left in May to run the funds unit at Lehman Brothers. Spilker will report to Eric Schwartz and Peter Kraus, co-heads of Goldman Sachs Asset Management.
Spilker is a 16-year veteran of the investment bank, he was co-head of U.S. equituies trading and global head of volatility trading. He previously headed currency options and Japanese fixed-income.
Asia's $100 Million Bonuses
Some traders in Tokyo and London are rumoured to be in the $100 million bonus club. The "giant" bonuses at Morgan Stanley and the $40 million John Mack took home has started rumors inside Wall Street about who might be in the running to get $100 million checks this year.
Several members of the $100 million club are in Goldman Sachs Asian offices. Morgan Sze, a head trader in Goldman's principal strategies group based in Hong Kong, is mentioned by several sources as a possible member of the club according to the New York Post. Sze's counterpart in London, Pierre-Henri Flamand is also rumored to be receiving a $100 million bonus.
Raanan Agus, who is the New York-based head of Goldman's principal strategies hedge fund group makes bets using nearly $10 billion of the firm's capital, could get $70 million. "Apparently, a $100 million payout isn't as uncommon as some originally thought," said one Goldman source in the Post.
Goldman CEO Lloyd Blankfein is likely to get about $50 million, while co-presidents Gary Cohn and Jon Winkelried are expected to receive between $40 million and $45 million, sources said. Goldman bonuses make up between 80% and 90% of the traders and bankers annual salaries.
Word of the nine-figure bonuses came as Goldman named Marc Spilker to oversee its money management unit's alternative investments operation, which includes private equity and hedge funds.
Several members of the $100 million club are in Goldman Sachs Asian offices. Morgan Sze, a head trader in Goldman's principal strategies group based in Hong Kong, is mentioned by several sources as a possible member of the club according to the New York Post. Sze's counterpart in London, Pierre-Henri Flamand is also rumored to be receiving a $100 million bonus.
Raanan Agus, who is the New York-based head of Goldman's principal strategies hedge fund group makes bets using nearly $10 billion of the firm's capital, could get $70 million. "Apparently, a $100 million payout isn't as uncommon as some originally thought," said one Goldman source in the Post.
Goldman CEO Lloyd Blankfein is likely to get about $50 million, while co-presidents Gary Cohn and Jon Winkelried are expected to receive between $40 million and $45 million, sources said. Goldman bonuses make up between 80% and 90% of the traders and bankers annual salaries.
Word of the nine-figure bonuses came as Goldman named Marc Spilker to oversee its money management unit's alternative investments operation, which includes private equity and hedge funds.
16 Dec 2006
SEC Votes on new Hedge Fund Rules
The Securities and Exchange Commission has voted to propose several new rules to provide additional protection to investors in hedge funds and other pooled investment vehicles.
The proposing release, which has not yet been published on the SEC's website, will need to explain why there is more risk associated with hedge funds than, for example, raising money to start a coffee kiosk or a pet rock distribution organization. Investors and hedge fund managers may decide that the explanation is insufficient and decide to challenge the SEC's authority to make this distinction.
In an email to the company's clients, HedgeCo lawyer Jay Gould describes one of the proposals being discussed as the reinstatement of the Anti Fraud Provision under the Investment Advisers Act of 1940. This proposal would make it a fraudulent, deceptive, or manipulative act, for an investment adviser to a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool.
The other one being the application to hedge funds of the Amendment to Private Offering rules under the Securities Act of 1933. This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The proposed definition would include any person who meets either the net worth test or income test, or owns at least $2.5 million in investments.
The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws. Comments are due 60 days after publication in the Federal Register.
The proposing release, which has not yet been published on the SEC's website, will need to explain why there is more risk associated with hedge funds than, for example, raising money to start a coffee kiosk or a pet rock distribution organization. Investors and hedge fund managers may decide that the explanation is insufficient and decide to challenge the SEC's authority to make this distinction.
In an email to the company's clients, HedgeCo lawyer Jay Gould describes one of the proposals being discussed as the reinstatement of the Anti Fraud Provision under the Investment Advisers Act of 1940. This proposal would make it a fraudulent, deceptive, or manipulative act, for an investment adviser to a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool.
The other one being the application to hedge funds of the Amendment to Private Offering rules under the Securities Act of 1933. This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The proposed definition would include any person who meets either the net worth test or income test, or owns at least $2.5 million in investments.
The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws. Comments are due 60 days after publication in the Federal Register.
Germany to Determine if Hedge Funds are a "Systemic Risk"
Germany's Deputy Finance Minister Thomas Mirow held a briefing with reporters on Germany's upcoming presidency of the Group of Eight in 2007, the G8 are the top 8 major industrialized countries, and Mirow plans to examine next year whether hedge funds pose systemic risks.
Mirow said hedge funds were "insufficiently transparent" and the industry had already seen one big hedge fund fail although with few market repercussions. He said industrial nations would try and coordinate efforts to reduce risks posed from hedge funds by promoting more transparency but not necessarily through regulations.
He said, "All over the world, people who are in charge of the stability of the international financial system are dealing with the problem,....There is a sufficient amount of experts saying we should have a closer look at it so to prevent a possible crisis," he added.
"What we would like to know is are there systemic risks, yes or no, and if so, what could we do to deal with it in a reasonable manner," he said.
Mirow's comment came as the U.S. Securities and Exchange Commission prepared to vote on a proposal on Wednesday to raise the limit investors can invest in hedge funds to $2.5 million from $1 million set in 1982.
The SEC's proposed rule, if adopted, would shut the door on a lot of the just-barely wealthy who have been piling into hedge funds lately, although one market analyst said it would likely not affect larger funds with big clients.
U.S. Treasury Secretary Henry Paulson has also weighed in on the issue on December 8 and said it was important to make sure hedge fund liquidity and borrowing were closely monitored, but said they were making a helpful contribution to financial markets.
Mirow said hedge funds were "insufficiently transparent" and the industry had already seen one big hedge fund fail although with few market repercussions. He said industrial nations would try and coordinate efforts to reduce risks posed from hedge funds by promoting more transparency but not necessarily through regulations.
He said, "All over the world, people who are in charge of the stability of the international financial system are dealing with the problem,....There is a sufficient amount of experts saying we should have a closer look at it so to prevent a possible crisis," he added.
"What we would like to know is are there systemic risks, yes or no, and if so, what could we do to deal with it in a reasonable manner," he said.
Mirow's comment came as the U.S. Securities and Exchange Commission prepared to vote on a proposal on Wednesday to raise the limit investors can invest in hedge funds to $2.5 million from $1 million set in 1982.
The SEC's proposed rule, if adopted, would shut the door on a lot of the just-barely wealthy who have been piling into hedge funds lately, although one market analyst said it would likely not affect larger funds with big clients.
U.S. Treasury Secretary Henry Paulson has also weighed in on the issue on December 8 and said it was important to make sure hedge fund liquidity and borrowing were closely monitored, but said they were making a helpful contribution to financial markets.
Morgan Stanley Gives Record Bonuses
Controversial "Mack the Knife" CEO, John Mack was recently cleared by the SEC after investigations into accusations of hedge fund insider trading. Now he has received a record bonus of $40 million as chief executive officer of Morgan Stanley.
Mack, son of Lebanese immigrants, was given $36.2 million in stock, and about $4 million in options to buy Morgan Stanley shares, the company said in a filing with the U.S. Securities and Exchange Commission. The firm also granted more than $57 million in bonuses for seven other top executives.
The bonus is 44% more than Morgan Stanley gave him last year, the previous record was the $38.3 million bonus Henry Paulson received in 2005 as CEO of Goldman Sachs Group Inc. Shares of Morgan Stanley, the second-biggest U.S. securities firm by market value, are having their best year since 2003 after Mack put the firm on course for record earnings.
Mack, who's also Morgan Stanley's chairman, received the 2006 bonus in stock and options, according to the filing. Last year, Mack declined the $28 million bonus he was offered because he had worked at Morgan Stanley for only five months. He accepted a pro-rata payout of $11.5 million in stock and also received a $337,534 salary.
Since Mack joined, Morgan Stanley has fired more than 1,000 under performing brokers, made acquisitions to bolster the firms energy, fixed-income and hedge fund businesses and created new incentives to keep top-producing employees. Morgan Stanley has surpassed analysts' profit estimates by at least 20% for the past four quarters.
Mack, son of Lebanese immigrants, was given $36.2 million in stock, and about $4 million in options to buy Morgan Stanley shares, the company said in a filing with the U.S. Securities and Exchange Commission. The firm also granted more than $57 million in bonuses for seven other top executives.
The bonus is 44% more than Morgan Stanley gave him last year, the previous record was the $38.3 million bonus Henry Paulson received in 2005 as CEO of Goldman Sachs Group Inc. Shares of Morgan Stanley, the second-biggest U.S. securities firm by market value, are having their best year since 2003 after Mack put the firm on course for record earnings.
Mack, who's also Morgan Stanley's chairman, received the 2006 bonus in stock and options, according to the filing. Last year, Mack declined the $28 million bonus he was offered because he had worked at Morgan Stanley for only five months. He accepted a pro-rata payout of $11.5 million in stock and also received a $337,534 salary.
Since Mack joined, Morgan Stanley has fired more than 1,000 under performing brokers, made acquisitions to bolster the firms energy, fixed-income and hedge fund businesses and created new incentives to keep top-producing employees. Morgan Stanley has surpassed analysts' profit estimates by at least 20% for the past four quarters.
14 Dec 2006
Ritchie sells Hedge Fund to Refund Investors
Ritchie Capital Management Ltd. has "decided to terminate the restructuring and effect an orderly disposition of the assets,'' of its flagship hedge fund, the Multistrategy Global Fund.
After consulting with investors, an email was sent to Ritchie's clients revealing their negotiations with an undisclosed buyer for the assets of the hedge fund, and the plan to return the cash to investors. Ritchie Capital has been struggling the past two years with returns that were below average, the fund suffered last year from losing energy bets.
Thane Ritchie, the founder of the company, had previously planned to refund 80% of clients' money over the next 2 1/2 years and keep the fund open for at least three years. The fund, which invests in everything from bonds to energy, lost more than 2% through August from the start of 2005. That compared with an average gain of 14% for competing funds, according to data compiled by Hedge Fund Research Inc. in Chicago.
The sale does not include the mostly private-equity investments that the firm separated into a so-called side pocket last year. Those holdings accounted for about 20% of the fund. The deal would be structured so that Ritchie Capital will continue to manage the assets, Doug Rothschild, the firm's chief administrative officer, said in an interview with Bloomberg. Based in Geneva, Illinois, Richie capital oversees about $2.8 billion including borrowed money.
After consulting with investors, an email was sent to Ritchie's clients revealing their negotiations with an undisclosed buyer for the assets of the hedge fund, and the plan to return the cash to investors. Ritchie Capital has been struggling the past two years with returns that were below average, the fund suffered last year from losing energy bets.
Thane Ritchie, the founder of the company, had previously planned to refund 80% of clients' money over the next 2 1/2 years and keep the fund open for at least three years. The fund, which invests in everything from bonds to energy, lost more than 2% through August from the start of 2005. That compared with an average gain of 14% for competing funds, according to data compiled by Hedge Fund Research Inc. in Chicago.
The sale does not include the mostly private-equity investments that the firm separated into a so-called side pocket last year. Those holdings accounted for about 20% of the fund. The deal would be structured so that Ritchie Capital will continue to manage the assets, Doug Rothschild, the firm's chief administrative officer, said in an interview with Bloomberg. Based in Geneva, Illinois, Richie capital oversees about $2.8 billion including borrowed money.
12 Dec 2006
Hedge Fund Averages Up this year
An index of managers compiled by Hedge Fund Research climbed 2.45% in November, leaving it up 11.69% this year. Five of the six hedge-fund strategy indexes run by Dow Jones also rose last month.
Hedge funds also outperformed the benchmark Standard & Poor's 500 stock market index in November for the first time since May as managers benefited from a falling U.S. dollar, sliding bond yields and a rebound in energy prices.
Managers tracked by Hedgefund.net returned 2.18% on average last month, compared to 1.65% for the S&P 500, leaving them up 10.65% so far this year.
A rebound in energy prices also helped hedge funds focused on that sector. Energy funds tracked by Hedge Fund Research gained 4.41% in November, leaving them up 16.59% so far this year.
Hedge funds also outperformed the benchmark Standard & Poor's 500 stock market index in November for the first time since May as managers benefited from a falling U.S. dollar, sliding bond yields and a rebound in energy prices.
Managers tracked by Hedgefund.net returned 2.18% on average last month, compared to 1.65% for the S&P 500, leaving them up 10.65% so far this year.
A rebound in energy prices also helped hedge funds focused on that sector. Energy funds tracked by Hedge Fund Research gained 4.41% in November, leaving them up 16.59% so far this year.
Hedge Funds and the Middle East
The Middle East accounted for 8%, or $28.9bn, of the global hedge fund market last year. According to a new Bank of New York study, hedge funds will draw a forecast $140.3bn in investments from the Middle East by 2010, accounting for 15% invested globally. Institutional investors provide 40% of the global market, which will increase to 65% by 2010, the study said.
The report by the Bank of New York and Casey, Quirk and Associates LLC, entitled “Institutional Demand for Hedge Funds 2: A Global Perspective”, also estimates that by 2010 nearly 25% of institutional investors will have investments in hedge funds, up from 15% today. It estimates institutional investors will account for more than 50% of flows into hedge funds through 2010 compared to 30% today.
The forecast demand for hedge funds is set to triple to $1 trillion by 2010, up from $360 billion today, as investors continue to embrace alternative investments, the report shows.
The report by the Bank of New York and Casey, Quirk and Associates LLC, entitled “Institutional Demand for Hedge Funds 2: A Global Perspective”, also estimates that by 2010 nearly 25% of institutional investors will have investments in hedge funds, up from 15% today. It estimates institutional investors will account for more than 50% of flows into hedge funds through 2010 compared to 30% today.
The forecast demand for hedge funds is set to triple to $1 trillion by 2010, up from $360 billion today, as investors continue to embrace alternative investments, the report shows.
11 Dec 2006
Hedge Fund buys stake in A1 Grand Prix
RAB Capital has bought a stake in the A1 Grand Prix. The RAB Special Situations hedge fund, run by Philip Richards, has taken an 80% stake worth £100m. The fund has been known in the past for taking large positions in natural-resources firms.
According to The Times Online, as part of the deal, A1’s management will be restructured, Tony Teixeira will move up to chairman while Peter da Silva, Brazilian-born motor-racing fanatic who has spent 20 years at Siemens, has been appointed chief executive. Ben Hill of RAB will also join the board.
Philip Richards said A1, which was launched two years ago and pits nation against nation rather than team against team as in Formula One, represents an opportunity to make a lot of money in China. “Our focus has always been on western-owned and western-run companies that sell successfully to Asia.
"A1 fits with this. Motor racing is one of the fastest-growing sports in Asia, it is watched by both the elite and the masses. It is also the only single event that spans the region and so offers a unique advertising opportunity for global brands.” Richards said.
“We’ve made a fortune selling natural resources, copper, zinc, coal and so on, to the Chinese. This is the same: we’re selling motor racing to Asians, and with it the only event available for global brands to advertise across the continent in the context of a western company.”
According to The Times Online, as part of the deal, A1’s management will be restructured, Tony Teixeira will move up to chairman while Peter da Silva, Brazilian-born motor-racing fanatic who has spent 20 years at Siemens, has been appointed chief executive. Ben Hill of RAB will also join the board.
Philip Richards said A1, which was launched two years ago and pits nation against nation rather than team against team as in Formula One, represents an opportunity to make a lot of money in China. “Our focus has always been on western-owned and western-run companies that sell successfully to Asia.
"A1 fits with this. Motor racing is one of the fastest-growing sports in Asia, it is watched by both the elite and the masses. It is also the only single event that spans the region and so offers a unique advertising opportunity for global brands.” Richards said.
“We’ve made a fortune selling natural resources, copper, zinc, coal and so on, to the Chinese. This is the same: we’re selling motor racing to Asians, and with it the only event available for global brands to advertise across the continent in the context of a western company.”
Gargoyle's flagship Hedge Fund Exceeds Forecast
Gargoyle Asset Management announced today that its flagship hedge fund, the Gargoyle Hedged Value Master Fund, has exceeded $200 million in assets under management.
This fund is designed to allow investors to participate in the large cap U.S. equity market with enhanced performance and lower risk. Since January 2000, this Fund has shown a cumulative return of 118%. During the same period, the S&P 500 is up 6%. The Gargoyle Hedged Value Funds’ results are driven by a relative value stock selection process tightly coupled to an index option writing strategy. The skillful blending of those components has provided a consistent edge for the Gargoyle funds in all market environments.
Joshua B. Parker and Alan L. Salzbank are the fund’s managers. Additionally, Mr. Parker is a partner in Gargoyle's sister business, one of the country's largest independent market makers for equity options.
The Gargoyle company philosophy endeavors to protect and to grow the treasure of its investing partners through the use and appropriate application of equity options. Their website states that when used properly, equity options, have the potential to enhance investment performance and simultaneously to reduce investment risk.
This fund is designed to allow investors to participate in the large cap U.S. equity market with enhanced performance and lower risk. Since January 2000, this Fund has shown a cumulative return of 118%. During the same period, the S&P 500 is up 6%. The Gargoyle Hedged Value Funds’ results are driven by a relative value stock selection process tightly coupled to an index option writing strategy. The skillful blending of those components has provided a consistent edge for the Gargoyle funds in all market environments.
Joshua B. Parker and Alan L. Salzbank are the fund’s managers. Additionally, Mr. Parker is a partner in Gargoyle's sister business, one of the country's largest independent market makers for equity options.
The Gargoyle company philosophy endeavors to protect and to grow the treasure of its investing partners through the use and appropriate application of equity options. Their website states that when used properly, equity options, have the potential to enhance investment performance and simultaneously to reduce investment risk.
BB&T Asset Management adds Hedge Funds to its Invesment Lineup
BB&T Asset Management, $15 billion investment adviser and subsidiary of BB&T Corporation, said they are now offering a broader range of alternative investment strategies to the bank's Wealth Management and Institutional Services clients.
These strategies will include hedge funds, private equity funds, private real estate funds, structured notes, commodity funds, covered call writing strategies, and multiple tax-efficient single-stock risk management strategies.
"We continue to develop our alternative investment services in order to meet the needs of our clients," said Shawn Gibson, director of Alternative Investments. "Research has shown that these asset classes can add significant diversification and performance benefits to investors, especially if they are invested with the top managers. And our platform includes some of the top alternative investment managers in the world, according to several industry experts."
BB&T Asset Management's Alternative Investment Group will be looking at high investment minimums strategies ranging from $1 million to $10 million, access to the top performing managers, and diversification among managers and strategies. The new lineup of products and services appeals to both conservative and aggressive investors," said BB&T Asset Management President Keith Karlawish.
"We are committed to building out our alternative investment capabilities and will continue to explore the various strategies that are available in the market," Karlawish said. "Our ability to offer these strategies allows us to deliver a complete menu of services and products to our clients."
Raleigh, N.C.-based BB&T Asset Management is a registered investment adviser and subsidiary of BB&T Corporation with more than $15 billion in discretionary assets under management.
Winston-Salem, N.C.-based BB&T Corporation has $118.5 billion in assets under management, BB&T operates more than 1,450 financial centers in the Carolinas, Virginia, Maryland, West Virginia, Kentucky, Tennessee, Georgia, Florida, Alabama, Indiana and Washington, D.C.
These strategies will include hedge funds, private equity funds, private real estate funds, structured notes, commodity funds, covered call writing strategies, and multiple tax-efficient single-stock risk management strategies.
"We continue to develop our alternative investment services in order to meet the needs of our clients," said Shawn Gibson, director of Alternative Investments. "Research has shown that these asset classes can add significant diversification and performance benefits to investors, especially if they are invested with the top managers. And our platform includes some of the top alternative investment managers in the world, according to several industry experts."
BB&T Asset Management's Alternative Investment Group will be looking at high investment minimums strategies ranging from $1 million to $10 million, access to the top performing managers, and diversification among managers and strategies. The new lineup of products and services appeals to both conservative and aggressive investors," said BB&T Asset Management President Keith Karlawish.
"We are committed to building out our alternative investment capabilities and will continue to explore the various strategies that are available in the market," Karlawish said. "Our ability to offer these strategies allows us to deliver a complete menu of services and products to our clients."
Raleigh, N.C.-based BB&T Asset Management is a registered investment adviser and subsidiary of BB&T Corporation with more than $15 billion in discretionary assets under management.
Winston-Salem, N.C.-based BB&T Corporation has $118.5 billion in assets under management, BB&T operates more than 1,450 financial centers in the Carolinas, Virginia, Maryland, West Virginia, Kentucky, Tennessee, Georgia, Florida, Alabama, Indiana and Washington, D.C.
8 Dec 2006
Hedge Fund Survey
Hennessee Group's 12th annual hedge fund manager survey reported that hedge fund assets grew 21% from $1.009 trillion as of June 30, 2005, to $1.2 trillion by Oct. 31.
"Hedge funds are evolving in a manner similar to that of investment banks of old," said Charles Gradante, managing principal of Hennessee's survey. "The fact that they’re getting into venture capital and private equity is no big surprise," Mr. Gradante said. Though the investment vehicles once were "pigeonholed" as bond and stock players, today’s hedge funds have taken significant positions in tech and biotech companies, are floating bonds and are even funding movies made by actor Tom Cruise after his split with Paramount Pictures. A New York-based hedge fund, Fortress Investment Group, with $26 billion in assets, has become the first in the nation to file for an IPO.
The 2006 Hennessee survey also found that the number of hedge funds grew 10%, from 8,050 to 8,900. The survey was conducted on 440 hedge funds from 97 management companies representing over $256 billion in assets.
Though hedge funds traditionally have stood apart from regulated investments like mutual funds, the survey found that 86% of hedge funds are registered with a regulatory agency, such as the Securities and Exchange Commission, the NASD or state authorities. That compares with 61% in the earlier period.
Mr. Gradante likened the changes in hedge funds to the evolution of investment banks such as Lehman Brothers and Goldman Sachs from the 1930s to the early 1990's. "Hedge funds are evolving in the same way investment banks evolved," he said. "They’ll play an important role in financing venture capital in the future." Mr. Gradante also noted that one of the white-shoe investment banks, Goldman Sachs, also is the nation’s No. 1 hedge fund.
"Hedge funds are evolving in a manner similar to that of investment banks of old," said Charles Gradante, managing principal of Hennessee's survey. "The fact that they’re getting into venture capital and private equity is no big surprise," Mr. Gradante said. Though the investment vehicles once were "pigeonholed" as bond and stock players, today’s hedge funds have taken significant positions in tech and biotech companies, are floating bonds and are even funding movies made by actor Tom Cruise after his split with Paramount Pictures. A New York-based hedge fund, Fortress Investment Group, with $26 billion in assets, has become the first in the nation to file for an IPO.
The 2006 Hennessee survey also found that the number of hedge funds grew 10%, from 8,050 to 8,900. The survey was conducted on 440 hedge funds from 97 management companies representing over $256 billion in assets.
Though hedge funds traditionally have stood apart from regulated investments like mutual funds, the survey found that 86% of hedge funds are registered with a regulatory agency, such as the Securities and Exchange Commission, the NASD or state authorities. That compares with 61% in the earlier period.
Mr. Gradante likened the changes in hedge funds to the evolution of investment banks such as Lehman Brothers and Goldman Sachs from the 1930s to the early 1990's. "Hedge funds are evolving in the same way investment banks evolved," he said. "They’ll play an important role in financing venture capital in the future." Mr. Gradante also noted that one of the white-shoe investment banks, Goldman Sachs, also is the nation’s No. 1 hedge fund.
Hedge Fund Breaks Asset Record
MW Tops, an Amsterdam hedge fund, has outperformed in a variety of market conditions, breaking the world record for a listed hedge fund float after successfully raising €1.5 billion. Capital was first allocated to the Tops strategy in 2002 by Marshall Wace Asset Management Limited, a London hedge fund manager.
The amount is well over three times as much as the previous record holder, an offering from the Anglo-French hedge fund group Boussard & Gavaudan, which raised €440 million, according to the Times Online.
MW Tops is chaired by the former Bank of England deputy governor Sir Andrew Large. Marshall Wace Asset Management was established in 1997 by Paul Marshall and Ian Wace and transferred its business in 2003 to Marshall Wace LLP, a limited liability partnership incorporated in England and Wales.
According to Marshall Wace, the greatest interest in new hedge fund managers is being shown by rich individuals or family offices, private fund management operations devoted to managing wealth.
New investors include institutions precluded from conventional investment in illiquid, unlisted hedge funds, including some pension funds and insurance companies, as well as wealthy individuals. Investors are also attracted by the liquidity and visibility of a listed stock, where a price is also quoted. Traditional hedge funds are highly illiquid, with investors paying big penalties for sudden redemptions.
The minimum investment was set at €75,000 for the initial offering, but small investors will from today have access to MW Tops for the price of a €10 share in the secondary market.
The amount is well over three times as much as the previous record holder, an offering from the Anglo-French hedge fund group Boussard & Gavaudan, which raised €440 million, according to the Times Online.
MW Tops is chaired by the former Bank of England deputy governor Sir Andrew Large. Marshall Wace Asset Management was established in 1997 by Paul Marshall and Ian Wace and transferred its business in 2003 to Marshall Wace LLP, a limited liability partnership incorporated in England and Wales.
According to Marshall Wace, the greatest interest in new hedge fund managers is being shown by rich individuals or family offices, private fund management operations devoted to managing wealth.
New investors include institutions precluded from conventional investment in illiquid, unlisted hedge funds, including some pension funds and insurance companies, as well as wealthy individuals. Investors are also attracted by the liquidity and visibility of a listed stock, where a price is also quoted. Traditional hedge funds are highly illiquid, with investors paying big penalties for sudden redemptions.
The minimum investment was set at €75,000 for the initial offering, but small investors will from today have access to MW Tops for the price of a €10 share in the secondary market.
7 Dec 2006
4 Billion Hedge Fund Rewrites Contract
Deephaven Capital Management, a $4 billion hedge fund is close to making a multimillion-dollar contract with Knight Capital Group.
Knight bought the hedge fund more than three years ago and Deephaven is listed on the companys website as their in house asset management business.
Deephaven is an alternative investment manager founded in 1994, with more than 120 people in Minneapolis, Hong Kong, and London. The new contracts are expected to be completed as early as next week and could give Deephaven chief Colin Smith and his deputies millions more than they previously earned.
Smith and other Deephaven managers have been in heated negotiations with Jersey City-based Knight since September. That has some investors speculating that the firms principals might separate from Knight or try to buy majority control of the firm, according to the New York Post.
Any deal struck between the two parties comes as profits from Deephaven have continued to boost Knight's earnings at a time when the traditional trading business has slowed.
In the third quarter alone, Deephaven contributed $50 million to Knight's $203 million in overall revenue - a threefold increase from the year before.
As Deephaven's assets under management surpass the $4 billion mark, the cash from management fees alone could amount to $80 million a year.
Under the current contracts, which are set to expire at the end of the year, Deephaven's management team earned roughly $20 million through September, according to an analysis by CIBC World Markets.
Knight bought the hedge fund more than three years ago and Deephaven is listed on the companys website as their in house asset management business.
Deephaven is an alternative investment manager founded in 1994, with more than 120 people in Minneapolis, Hong Kong, and London. The new contracts are expected to be completed as early as next week and could give Deephaven chief Colin Smith and his deputies millions more than they previously earned.
Smith and other Deephaven managers have been in heated negotiations with Jersey City-based Knight since September. That has some investors speculating that the firms principals might separate from Knight or try to buy majority control of the firm, according to the New York Post.
Any deal struck between the two parties comes as profits from Deephaven have continued to boost Knight's earnings at a time when the traditional trading business has slowed.
In the third quarter alone, Deephaven contributed $50 million to Knight's $203 million in overall revenue - a threefold increase from the year before.
As Deephaven's assets under management surpass the $4 billion mark, the cash from management fees alone could amount to $80 million a year.
Under the current contracts, which are set to expire at the end of the year, Deephaven's management team earned roughly $20 million through September, according to an analysis by CIBC World Markets.
The Hedge Fund Hearings
The Senate Judiciary Committee conducted re-investigation hearings Dec. 5 on the hedge fund industry, looking into the handling of hedge fund giant Pequot Capital.
The Committee hearing focused on the regulation and enforcement issue. It is trying to determine whether the Securities & Exchange Commission might have been improperly influenced when it allowed Morgan Stanley Chief Executive John Mack to avoid questioning in an inquiry.
Although the SEC has cleared Pequot Capital and Morgan Stanley chief John Mack, questions still linger over allegations that the initial investigation was quashed when the lead investigator sought to subpoena Mack. Now two Senate investigations are underway to determine whether the SEC failed to thoroughly conduct the initial investigation and whether politics played a role in that failure.
The inquiry is focused on the trades that involved Morgan Stanley and Pequot, where Mack previously worked as chairman. As the hearings proceed industry observers will be looking for clues into just how much enthusiasm lawmakers have for imposing broader controls on the hedge fund industry.
Many hedge funds done tremendously well, attracting more capital and allowing them to pull off larger, higher-profile deals. But lawmakers and the media have focused on the blow up of a few funds, such as Amaranth Advisors.
Such problems have been relatively few in number, and the damage has largely been contained. Yet they have nonetheless led to calls for more regulation of hedge funds, which have been drawing more money from pension funds and even from some smaller, individual investors.
Earlier this year there was an effort to require hedge funds to register as investment companies, which would force them to disclose a certain amount of information about their strategy. The U.S. Court of Appeals in Washington overturned an SEC rule that would have required hedge fund registration. Some industry executives fear that would depress returns because funds would tip off their moves to rivals.
If the government were to impose leverage limits, the impact on the markets could be significant, industry observers say. Firms use debt to boost their return on investment. If deals become less profitable as a result of leverage limits, big pension funds may cut back on their allocations to alternative investments. Deals could become less competitive, and deal volume and price could decline as a result, weakening the investment market overall.
The Committee hearing focused on the regulation and enforcement issue. It is trying to determine whether the Securities & Exchange Commission might have been improperly influenced when it allowed Morgan Stanley Chief Executive John Mack to avoid questioning in an inquiry.
Although the SEC has cleared Pequot Capital and Morgan Stanley chief John Mack, questions still linger over allegations that the initial investigation was quashed when the lead investigator sought to subpoena Mack. Now two Senate investigations are underway to determine whether the SEC failed to thoroughly conduct the initial investigation and whether politics played a role in that failure.
The inquiry is focused on the trades that involved Morgan Stanley and Pequot, where Mack previously worked as chairman. As the hearings proceed industry observers will be looking for clues into just how much enthusiasm lawmakers have for imposing broader controls on the hedge fund industry.
Many hedge funds done tremendously well, attracting more capital and allowing them to pull off larger, higher-profile deals. But lawmakers and the media have focused on the blow up of a few funds, such as Amaranth Advisors.
Such problems have been relatively few in number, and the damage has largely been contained. Yet they have nonetheless led to calls for more regulation of hedge funds, which have been drawing more money from pension funds and even from some smaller, individual investors.
Earlier this year there was an effort to require hedge funds to register as investment companies, which would force them to disclose a certain amount of information about their strategy. The U.S. Court of Appeals in Washington overturned an SEC rule that would have required hedge fund registration. Some industry executives fear that would depress returns because funds would tip off their moves to rivals.
If the government were to impose leverage limits, the impact on the markets could be significant, industry observers say. Firms use debt to boost their return on investment. If deals become less profitable as a result of leverage limits, big pension funds may cut back on their allocations to alternative investments. Deals could become less competitive, and deal volume and price could decline as a result, weakening the investment market overall.
5 Dec 2006
Hedge Funds in Stock
Brookville Capital Management, a 4 year old hedge fund with less than ten employees and about $221 million in assets under management, has been bought by Morgan Stanley.
Morgan Stanley has already acquired a large stock of hedge funds, in late October the giant agreed to buy FrontPoint Partners, a hedge fund with about $5.5 billion, for about $400 million. Last month said it would buy a minority stake in Avenue Capital Group, which oversees about $12 billion of distressed debt investments, and in Landsdowne Partners. John Mack, Morgan Stanley’s chief executive, has assembleed these hedge funds to help the firm catch up with rivals like Goldman Sachs in offering clients alternative investments.
The company said in a memorandum that the expansion is part of Morgan Stanley's aggressive push to catch up with rivals in providing hedge funds and other alternatives to traditional money management products such as mutual funds. The price of the acquisition was not disclosed in the memo.
Brookville is based in New York and was formed in August 2002 by former Bankers Trust New York Corp. traders David Reiss, Jacob Gulkowitz and Abraham Gulkowitz. The hedge fund specializes in what is known as credit arbitrage, taking long and short positions in companies whose stock prices are driven by takeover speculation and other "event-driven" opportunities, the memo said.
The memo was signed by Owen Thomas, president of Morgan Stanley's asset management division, along with alternatives investment chief Stu Bohart and the group's strategic acquisitions and absolute return strategies head, Yie-Hsin Hung.
Morgan Stanley has already acquired a large stock of hedge funds, in late October the giant agreed to buy FrontPoint Partners, a hedge fund with about $5.5 billion, for about $400 million. Last month said it would buy a minority stake in Avenue Capital Group, which oversees about $12 billion of distressed debt investments, and in Landsdowne Partners. John Mack, Morgan Stanley’s chief executive, has assembleed these hedge funds to help the firm catch up with rivals like Goldman Sachs in offering clients alternative investments.
The company said in a memorandum that the expansion is part of Morgan Stanley's aggressive push to catch up with rivals in providing hedge funds and other alternatives to traditional money management products such as mutual funds. The price of the acquisition was not disclosed in the memo.
Brookville is based in New York and was formed in August 2002 by former Bankers Trust New York Corp. traders David Reiss, Jacob Gulkowitz and Abraham Gulkowitz. The hedge fund specializes in what is known as credit arbitrage, taking long and short positions in companies whose stock prices are driven by takeover speculation and other "event-driven" opportunities, the memo said.
The memo was signed by Owen Thomas, president of Morgan Stanley's asset management division, along with alternatives investment chief Stu Bohart and the group's strategic acquisitions and absolute return strategies head, Yie-Hsin Hung.
Hedge Fund Clones
Goldman Sachs has set up a hedge fund replication tool in a move that could lead to a shake-up of the $1,300bn hedge fund industry.
With a minimum investment of £10.00 ($19.87)and £10.00 Issue Price, Goldman’s Absolute Return Tracker index will undercut the high fees of the hedge fund sector with a 1% flat fee. Hedge funds and funds of funds can charge 47%. At maturity, the investor receives a one-for-one exposure to the performance of theiiindex return.
According to the Financial Times the tracker is set to be among the first of a flood of hedge fund cloning products likely to be launched in a revolution being compared with the arrival of index trackers in the mutual fund world a generation ago. “There is a lot of dead wood in the industry – people who should not be running hedge funds,” said Harry Kat, professor of risk management at London’s Cass Business School, who has just launched his own hedge fund replication tool.
Replication strategies are based on academic research that suggests hedge fund performance is largely driven by movements in underlying markets, such as equity, bond and commodity prices, rather than the intrinsic skill of managers.
Goldman has spent two years developing the algorithm that underpins its platform. The performance characteristics of thousands of hedge funds will be fed into the system monthly and Art is designed to decompose these data and calculate the aggregate position of the hedge fund universe. This position can then be replicated, potentially allowing Goldman to generate hedge fund performance at a fraction of the cost.
It will be far more liquid, with trading available on a daily basis. “This may be ideal for any large institution that has been looking at hedge funds but doesn’t like the fact that it takes six months to put money [in] and to take it out again,” said Edgar Senior, executive director in Goldman’s fund derivatives structuring team.
With a minimum investment of £10.00 ($19.87)and £10.00 Issue Price, Goldman’s Absolute Return Tracker index will undercut the high fees of the hedge fund sector with a 1% flat fee. Hedge funds and funds of funds can charge 47%. At maturity, the investor receives a one-for-one exposure to the performance of theiiindex return.
According to the Financial Times the tracker is set to be among the first of a flood of hedge fund cloning products likely to be launched in a revolution being compared with the arrival of index trackers in the mutual fund world a generation ago. “There is a lot of dead wood in the industry – people who should not be running hedge funds,” said Harry Kat, professor of risk management at London’s Cass Business School, who has just launched his own hedge fund replication tool.
Replication strategies are based on academic research that suggests hedge fund performance is largely driven by movements in underlying markets, such as equity, bond and commodity prices, rather than the intrinsic skill of managers.
Goldman has spent two years developing the algorithm that underpins its platform. The performance characteristics of thousands of hedge funds will be fed into the system monthly and Art is designed to decompose these data and calculate the aggregate position of the hedge fund universe. This position can then be replicated, potentially allowing Goldman to generate hedge fund performance at a fraction of the cost.
It will be far more liquid, with trading available on a daily basis. “This may be ideal for any large institution that has been looking at hedge funds but doesn’t like the fact that it takes six months to put money [in] and to take it out again,” said Edgar Senior, executive director in Goldman’s fund derivatives structuring team.
1 Dec 2006
Nomura launches Fund of Funds in Ireland
Garry Topp, a director at Nomura International said on Thursday that the company hoped to raise more than $100 million for a new open-ended global fund of funds invested in property securities which offered investors downside protection.
Based in Ireland, Nomura said its Global Property 80% Protected Fund would initially be spread across six funds run by Morgan Stanley, Henderson, and Credit Suisse, with each focusing on European, U.S. or Asian securities such as property company shares an real estate investment trusts (REITs). The fund's relative regional weightings will be reviewed every quarter. Nomura said it will charge a 1.5% annual management fee for the fund. The fund has invested 100% in property from the start, but wants to to ensure a continuous level of protection for 80% of the fund's highest value.
Topp said property securities offered investors a reasonable proxy for direct property and provided a more flexible form of global real estate investment. "The benefits of liquidity is that it allows people to move around the different parts of the property cycle around the world, allowing them to move between residential developers in the U.S., say, and offices in Australia," he said.
Topp said the fund was primarily aimed at the high-net-worth and the sophisticated end of the retail investment market. But he said it would also interest institutional investors looking to take some profits on their existing property investments and to put the proceeds to work in a liquid and diversified global property portfolio that offered them protection over any future gains.
The European branch of Nomura is headquartered in London, with offices in major financial centers across Europe. Nomura works closely with Asian and American networks, as well as with Tokyo. Their four business lines (Global Markets, Investment Banking, Merchant Banking and Asset Management) are co-ordinated globally, however each European operating entity is incorporated and regulated separately and reports to local management as well as to Tokyo-based business heads.
Based in Ireland, Nomura said its Global Property 80% Protected Fund would initially be spread across six funds run by Morgan Stanley, Henderson, and Credit Suisse, with each focusing on European, U.S. or Asian securities such as property company shares an real estate investment trusts (REITs). The fund's relative regional weightings will be reviewed every quarter. Nomura said it will charge a 1.5% annual management fee for the fund. The fund has invested 100% in property from the start, but wants to to ensure a continuous level of protection for 80% of the fund's highest value.
Topp said property securities offered investors a reasonable proxy for direct property and provided a more flexible form of global real estate investment. "The benefits of liquidity is that it allows people to move around the different parts of the property cycle around the world, allowing them to move between residential developers in the U.S., say, and offices in Australia," he said.
Topp said the fund was primarily aimed at the high-net-worth and the sophisticated end of the retail investment market. But he said it would also interest institutional investors looking to take some profits on their existing property investments and to put the proceeds to work in a liquid and diversified global property portfolio that offered them protection over any future gains.
The European branch of Nomura is headquartered in London, with offices in major financial centers across Europe. Nomura works closely with Asian and American networks, as well as with Tokyo. Their four business lines (Global Markets, Investment Banking, Merchant Banking and Asset Management) are co-ordinated globally, however each European operating entity is incorporated and regulated separately and reports to local management as well as to Tokyo-based business heads.
Judge Favours Hedge Funds in Company Sale
Delaware Vice Chancellor Stephen Lamb ordered Metromedia International Group Inc. to hold a shareholder vote on its plan for asset sale.
The deal follows years of lawsuits among its 20% owner, John Kluge, and 18% owner Stuart Subotnick, against minority investors, many of them hedge funds, over the company's failure to hold annual shareholders' meetings or file income statements with the U.S. Securities and Exchange Commission.
Metromedia claimed that since it has been unable to file financial statements for several years due to accounting issues, it can not legally hold a shareholder vote on the sale. Instead, it planned to file for Chapter 11 bankruptcy protection to execute the sale, even though it is not insolvent.
Hedge funds Esopus Creek Value LP and Black Horse Capital, which together hold 8.2% of the over-the-counter traded stock, sued the company and certain directors on Aug. 18 in Delaware to force it to hold a vote on the sale.
According to court documents released on Thursday, Judge Lamb favoured the hedge funds that sued the communications company. He ruled that the proposed sale has "glaring inequities," in that it allows preferred stockholders to vote on the deal but not common shareholders. He also ruled that preferred shareholders would get "excess" payments through the sale compared with those accorded common stockholders. "Metromedia's proposed transactional scheme, though technically within the letter of the law, works a profound inequity upon the company's common stockholders," Lamb ruled.
Metromedia, founded by billionaire media mogul John Kluge, had previously disclosed that it plans to sell its main asset, a 50.1% stake in Magticom, a leading wireless phone provider in the Republic of Georgia, for $480 million. The proposed buyers of Metromedia include Emergent in Salford Georgia, of which Badri Patarkatsishvili is a major client, and Istithmar, described in the company's press release as a "leading alternative investment house in Dubai, United Arab Emirates."
The deal follows years of lawsuits among its 20% owner, John Kluge, and 18% owner Stuart Subotnick, against minority investors, many of them hedge funds, over the company's failure to hold annual shareholders' meetings or file income statements with the U.S. Securities and Exchange Commission.
Metromedia claimed that since it has been unable to file financial statements for several years due to accounting issues, it can not legally hold a shareholder vote on the sale. Instead, it planned to file for Chapter 11 bankruptcy protection to execute the sale, even though it is not insolvent.
Hedge funds Esopus Creek Value LP and Black Horse Capital, which together hold 8.2% of the over-the-counter traded stock, sued the company and certain directors on Aug. 18 in Delaware to force it to hold a vote on the sale.
According to court documents released on Thursday, Judge Lamb favoured the hedge funds that sued the communications company. He ruled that the proposed sale has "glaring inequities," in that it allows preferred stockholders to vote on the deal but not common shareholders. He also ruled that preferred shareholders would get "excess" payments through the sale compared with those accorded common stockholders. "Metromedia's proposed transactional scheme, though technically within the letter of the law, works a profound inequity upon the company's common stockholders," Lamb ruled.
Metromedia, founded by billionaire media mogul John Kluge, had previously disclosed that it plans to sell its main asset, a 50.1% stake in Magticom, a leading wireless phone provider in the Republic of Georgia, for $480 million. The proposed buyers of Metromedia include Emergent in Salford Georgia, of which Badri Patarkatsishvili is a major client, and Istithmar, described in the company's press release as a "leading alternative investment house in Dubai, United Arab Emirates."
Judge Favours Hedge Funds in Company Sale
Delaware Vice Chancellor Stephen Lamb ordered Metromedia International Group Inc. to hold a shareholder vote on its plan for asset sale, the deal follows years of lawsuits among its 20% owner, John Kluge, and 18% owner Stuart Subotnick, against minority investors, many of them hedge funds, over the company's failure to hold annual shareholders' meetings or file income statements with the U.S. Securities and Exchange Commission.
Metromedia claimed that since it has been unable to file financial statements for several years due to accounting issues, it can not legally hold a shareholder vote on the sale. Instead, it planned to file for Chapter 11 bankruptcy protection to execute the sale, even though it is not insolvent.
Esopus Creek Value LP and Black Horse Capital, which together hold 8.2% of the over-the-counter traded stock, sued the company and certain directors on Aug. 18 in Delaware to force it to hold a vote on the sale.
According to court documents released on Thursday, Judge Lamb favoured the hedge funds that sued the communications company. He ruled that the proposed sale has "glaring inequities," in that it allows preferred stockholders to vote on the deal but not common shareholders. He also ruled that preferred shareholders would get "excess" payments through the sale compared with those accorded common stockholders. "Metromedia's proposed transactional scheme, though technically within the letter of the law, works a profound inequity upon the company's common stockholders," Lamb ruled.
Metromedia, founded by billionaire media mogul John Kluge, had previously disclosed that it plans to sell its main asset, a 50.1% stake in Magticom, a leading wireless phone provider in the Republic of Georgia, for $480 million. The proposed buyers of Metromedia include Emergent in Salford Georgia, of which Badri Patarkatsishvili is a major client, and Istithmar, described in the company's press release as a "leading alternative investment house in Dubai, United Arab Emirates."
Metromedia claimed that since it has been unable to file financial statements for several years due to accounting issues, it can not legally hold a shareholder vote on the sale. Instead, it planned to file for Chapter 11 bankruptcy protection to execute the sale, even though it is not insolvent.
Esopus Creek Value LP and Black Horse Capital, which together hold 8.2% of the over-the-counter traded stock, sued the company and certain directors on Aug. 18 in Delaware to force it to hold a vote on the sale.
According to court documents released on Thursday, Judge Lamb favoured the hedge funds that sued the communications company. He ruled that the proposed sale has "glaring inequities," in that it allows preferred stockholders to vote on the deal but not common shareholders. He also ruled that preferred shareholders would get "excess" payments through the sale compared with those accorded common stockholders. "Metromedia's proposed transactional scheme, though technically within the letter of the law, works a profound inequity upon the company's common stockholders," Lamb ruled.
Metromedia, founded by billionaire media mogul John Kluge, had previously disclosed that it plans to sell its main asset, a 50.1% stake in Magticom, a leading wireless phone provider in the Republic of Georgia, for $480 million. The proposed buyers of Metromedia include Emergent in Salford Georgia, of which Badri Patarkatsishvili is a major client, and Istithmar, described in the company's press release as a "leading alternative investment house in Dubai, United Arab Emirates."
30 Nov 2006
Research shows Big Gains in '07 for Hedge Funds
Hedge funds, which control about $1.3 trillion in assets worldwide, have attracted $44.5 billion in the third quarter, the most since at least 2003, Hedge Fund Research said last month. Hedge funds are becoming more institutionalised and have begun to build organisations with often hundreds of employees.”
Union Bancaire Privee, the world’s second-largest manager of funds that invest in hedge funds believes that hedge funds will continue to attract superior investment talent in 2007, making more money in stocks than in bonds, with bets on rising markets likely to be more profitable than those on declining prices, the hedge fund manager said returns will be “significantly equity-driven” while opportunities to profit from falling prices will be “less numerous” next year, said Jan-Erik Frogg, head of alternative investments at UBP, which manages more than $33 billion in hedge-fund assets.
Event driven hedge funds in the Credit Suisse Tremont Index are up an average of 12% in the 10 months through October. The Standard & Poor’s 500 Index, which is a common indicator of US stocks, has added 11% in the period, while Lehman Brothers Aggregate Bond Index has climbed 4.6%.
Fund managers such as Union Bancaire Privee have benefited from well established hedge funds re opening to new investments from their biggest clients as they see more opportunities. Hedge funds that take new capital are “not announcing to the whole world they’re re-opening, they like to take money from sources they trust and work well with,” Mr Frogg said.
Union Bancaire Privee, the world’s second-largest manager of funds that invest in hedge funds believes that hedge funds will continue to attract superior investment talent in 2007, making more money in stocks than in bonds, with bets on rising markets likely to be more profitable than those on declining prices, the hedge fund manager said returns will be “significantly equity-driven” while opportunities to profit from falling prices will be “less numerous” next year, said Jan-Erik Frogg, head of alternative investments at UBP, which manages more than $33 billion in hedge-fund assets.
Event driven hedge funds in the Credit Suisse Tremont Index are up an average of 12% in the 10 months through October. The Standard & Poor’s 500 Index, which is a common indicator of US stocks, has added 11% in the period, while Lehman Brothers Aggregate Bond Index has climbed 4.6%.
Fund managers such as Union Bancaire Privee have benefited from well established hedge funds re opening to new investments from their biggest clients as they see more opportunities. Hedge funds that take new capital are “not announcing to the whole world they’re re-opening, they like to take money from sources they trust and work well with,” Mr Frogg said.
IncreMental Conference on Asset Classes
IncreMental Advantage, LLC announced today that they will be holding their first conference on due diligence for board members and fiduciaries of pension funds, endowments and foundations on February 6, 2007 at the Harvard Club in New York City.
The conference, which will cover both the role of the board member in selecting investments and sessions on the major alternative asset classes, will bring some of the top experts in many fields together. Last month IncreMental held a 'Hedge Fund Due Diligence Conference' to shed light on all aspects of researching hedge funds. Following the success of that meeting, this one will explain the basics of each asset class.“It isn’t easy to be on the board of a pension fund. You are trying to make sure that you have everything that you need for your fellow employees, but there are so many different options out there,” said Justin Meyer, Senior Research Analyst with IncreMental Advantage. “How do you know when you have the right team? This conference will give you the answers.”
The conference is even more relevant in the wake of the decision by the US Court of Appeals in Chao v Merino. In that case, two pension fund fiduciaries were found to be personally liable for over $175,000 because of the actions of a vender with whom they had contracted. “The court sent a very clear message,” said Meyer. “You have a responsibility to protect the money that is entrusted to you. And if you don’t take that responsibility seriously enough, you are looking at a lot of trouble.”
IncreMental Advantage is a think tank that publishes research developments on issues ranging from hedge funds to advertising to water utilities. Their research is highly regarded among institutional investors and senior executives from all over the world. The world’s largest companies sponsor and send their senior executives to their conferences.
The conference, which will cover both the role of the board member in selecting investments and sessions on the major alternative asset classes, will bring some of the top experts in many fields together. Last month IncreMental held a 'Hedge Fund Due Diligence Conference' to shed light on all aspects of researching hedge funds. Following the success of that meeting, this one will explain the basics of each asset class.“It isn’t easy to be on the board of a pension fund. You are trying to make sure that you have everything that you need for your fellow employees, but there are so many different options out there,” said Justin Meyer, Senior Research Analyst with IncreMental Advantage. “How do you know when you have the right team? This conference will give you the answers.”
The conference is even more relevant in the wake of the decision by the US Court of Appeals in Chao v Merino. In that case, two pension fund fiduciaries were found to be personally liable for over $175,000 because of the actions of a vender with whom they had contracted. “The court sent a very clear message,” said Meyer. “You have a responsibility to protect the money that is entrusted to you. And if you don’t take that responsibility seriously enough, you are looking at a lot of trouble.”
IncreMental Advantage is a think tank that publishes research developments on issues ranging from hedge funds to advertising to water utilities. Their research is highly regarded among institutional investors and senior executives from all over the world. The world’s largest companies sponsor and send their senior executives to their conferences.
Judge holds Hedge Fund manager in Contempt of Court
U.S. District Judge Kenneth Ryskamp in West Palm Beach ruled that John Kim, 38, head portfolio manager of collapsed West Palm Beach hedge fund firm KL Group, was in contempt of court for allegedly defying an asset freeze by spending money that is to be returned to investors.
Ryskamp cited Kim's use of $384,658 from the sale of a home in South Korea, and $110,000 from selling his wife's Mercedes and his Porsche 911. Investigators say the hedge fund took in more than $200 million from about 230 investors from 1999 to February 2005, when SEC examiners raided KL's luxurious offices overlooking Palm Beach.
KL Group closed March 1 after the SEC and FBI spent two days examining the firm's offices at the Esperante building in downtown West Palm Beach. An investigation by the SEC and court-appointed receiver Guy Lewis, a former U.S. Attorney for South Florida, indicates a shortfall of at least $200 million and perhaps as much as $300 million in KL Group's six hedge funds.
SEC records do not show any Florida hedge fund failures with losses larger than KL Group. An undetermined number of South Floridians were among the investors in the KL funds.
Ryskamp cited Kim's use of $384,658 from the sale of a home in South Korea, and $110,000 from selling his wife's Mercedes and his Porsche 911. Investigators say the hedge fund took in more than $200 million from about 230 investors from 1999 to February 2005, when SEC examiners raided KL's luxurious offices overlooking Palm Beach.
KL Group closed March 1 after the SEC and FBI spent two days examining the firm's offices at the Esperante building in downtown West Palm Beach. An investigation by the SEC and court-appointed receiver Guy Lewis, a former U.S. Attorney for South Florida, indicates a shortfall of at least $200 million and perhaps as much as $300 million in KL Group's six hedge funds.
SEC records do not show any Florida hedge fund failures with losses larger than KL Group. An undetermined number of South Floridians were among the investors in the KL funds.
29 Nov 2006
Hedge Funds and Artificial Intelligence
Investment firms have increasingly begun exploring mathematics to it fullest, as arbitrage opportunities disappear so quickly now, neural networks have emerged that can consider thousands of scenarios at once.
Ray Kurzweil, an inventor and new hedge fund manager, said at a conference sponsored earlier this month by the Capital Group Companies, "Artificial intelligence is becoming so deeply integrated into our economic ecostructure that some day computers will exceed human intelligence......Machines can observe billions of market transactions to see patterns we could never see."
Microsoft executive and chairman of the Nasdaq stock market, Michael Brown, is an investor in Kurzweil's new hedge fund, FatKat, and Bill Gates once described him as "the best person I know at predicting the future of artificial intelligence."
Complicated stock-picking methods are nothing new. For decades, Wall Street firms and hedge funds like D.E. Shaw have snapped up people with math and engineering doctorates, the so-called quants, and assigned them to find hidden market patterns. When these analysts discover subtle relationships, like similarities in the price movements of Microsoft and IBM, investors seek profits by buying one stock and selling the other when their prices diverge, betting that historical patterns will eventually push them back into synchronicity.
"Five years ago it would have taken $500,000 and 12 people to do what today takes a few computers and co-workers," said Louis Morgan, managing director of HG Trading, a three-person hedge fund in Wisconsin. "I'm executing 1,500 to 2,000 trades a day and monitoring 1,500 pairs of stocks. My software can automatically execute a trade within 20 milliseconds - five times faster than it would take for my finger to hit the buy button."
Orhan Karaali, a computer scientist and director at the $1.7 billion hedge fund Advanced Investment Partners said "A machine that can generate complicated rules a person would never have thought of, and that can learn from past mistakes is a powerful tool."
The Apama Algorithmic Trading Platform has made it possible for day traders to build complicated trading algorithms almost as easily as they drag an icon across a digital desktop. Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million.
Ray Kurzweil, an inventor and new hedge fund manager, said at a conference sponsored earlier this month by the Capital Group Companies, "Artificial intelligence is becoming so deeply integrated into our economic ecostructure that some day computers will exceed human intelligence......Machines can observe billions of market transactions to see patterns we could never see."
Microsoft executive and chairman of the Nasdaq stock market, Michael Brown, is an investor in Kurzweil's new hedge fund, FatKat, and Bill Gates once described him as "the best person I know at predicting the future of artificial intelligence."
Complicated stock-picking methods are nothing new. For decades, Wall Street firms and hedge funds like D.E. Shaw have snapped up people with math and engineering doctorates, the so-called quants, and assigned them to find hidden market patterns. When these analysts discover subtle relationships, like similarities in the price movements of Microsoft and IBM, investors seek profits by buying one stock and selling the other when their prices diverge, betting that historical patterns will eventually push them back into synchronicity.
"Five years ago it would have taken $500,000 and 12 people to do what today takes a few computers and co-workers," said Louis Morgan, managing director of HG Trading, a three-person hedge fund in Wisconsin. "I'm executing 1,500 to 2,000 trades a day and monitoring 1,500 pairs of stocks. My software can automatically execute a trade within 20 milliseconds - five times faster than it would take for my finger to hit the buy button."
Orhan Karaali, a computer scientist and director at the $1.7 billion hedge fund Advanced Investment Partners said "A machine that can generate complicated rules a person would never have thought of, and that can learn from past mistakes is a powerful tool."
The Apama Algorithmic Trading Platform has made it possible for day traders to build complicated trading algorithms almost as easily as they drag an icon across a digital desktop. Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million.
28 Nov 2006
Hedge Funds and Film Companies
Hedge fund managers are beginning to see film financing as a high return sector that is on the rise, the global audio visual sector is expected to be worth $1.3 trillion by 2008 and is not correlated to returns in the stock, bond or commodities markets.
Hedge fund investors are developing a trend of financing film producers with a proven record of success directly. In dealing with the producer, the investors avoid the expensive and time consuming hassle of working through a major studio production agency.
Mark DiSalle, CEO of BioPassword, now has plans to launch his own hedge fund, Colosseum pictures. BioPassword is an Issaquah company that has developed software to protect computer passwords based on how users type. DiSalle bought the BioPassword technology for $500,000 in a bankruptcy sale three years ago, he said its roots can be traced to Morse code operators in World War II who figured out how to determine message senders based upon tapping patterns. BioPassword has already acquired over $25 million in venture capital and strategic investments.
Some major studios are also actively looking to outside financing sources to back independently produced films. Outside financing reduces the studio’s risk, reduces the amount of cash they have tied up in projects, and still allows them to obtain product for distribution in their existing pipeline.
Other hedge funds investing in film include Mark Cuban, entrepreneur and owner of the Dallas Mavericks, and eBay founder Jeff Skoll, each have a fledgling film company. Billionaire Phillip Anschutz is financing big budget films, David Sacks, a founder of PayPal, financed "Thank You for Smoking," for $7.5 million, and it has worldwide gross of over $27 million. Bob Yari, who made millions in real estate development, is backing the production of numerous films. Bill Pohlad, a multi-millionaire whose family owns the Minnesota Timberwolves, made "Brokeback Mountain" for $14 million and it has grossed $184 million worldwide. A recent $220 million deal with an individual producer included investors such as J.P. Morgan, D.E. Shaw, and GE Capital. George Soros also bought the DreamWorks library in a deal that valued the 59 film library portfolio at $900 million, later releasing all of them.
Hedge fund investors are developing a trend of financing film producers with a proven record of success directly. In dealing with the producer, the investors avoid the expensive and time consuming hassle of working through a major studio production agency.
Mark DiSalle, CEO of BioPassword, now has plans to launch his own hedge fund, Colosseum pictures. BioPassword is an Issaquah company that has developed software to protect computer passwords based on how users type. DiSalle bought the BioPassword technology for $500,000 in a bankruptcy sale three years ago, he said its roots can be traced to Morse code operators in World War II who figured out how to determine message senders based upon tapping patterns. BioPassword has already acquired over $25 million in venture capital and strategic investments.
Some major studios are also actively looking to outside financing sources to back independently produced films. Outside financing reduces the studio’s risk, reduces the amount of cash they have tied up in projects, and still allows them to obtain product for distribution in their existing pipeline.
Other hedge funds investing in film include Mark Cuban, entrepreneur and owner of the Dallas Mavericks, and eBay founder Jeff Skoll, each have a fledgling film company. Billionaire Phillip Anschutz is financing big budget films, David Sacks, a founder of PayPal, financed "Thank You for Smoking," for $7.5 million, and it has worldwide gross of over $27 million. Bob Yari, who made millions in real estate development, is backing the production of numerous films. Bill Pohlad, a multi-millionaire whose family owns the Minnesota Timberwolves, made "Brokeback Mountain" for $14 million and it has grossed $184 million worldwide. A recent $220 million deal with an individual producer included investors such as J.P. Morgan, D.E. Shaw, and GE Capital. George Soros also bought the DreamWorks library in a deal that valued the 59 film library portfolio at $900 million, later releasing all of them.
27 Nov 2006
Investec-Rowland-Blackfish Hedge Fund
The Rowland family and Investec have both invested $20m in Blackfish-Investec Resources Special Sitaution Fund and plan to raise a further $250m from other institutions and high net worth families. The fund plans to buy or sell underlying commodities to hedge equity investments. The pair have teamed up after the big success in revamping Western Goldfields earlier this year.
The two companies, having pooled their skills, expertise and resources plan to establish an event driven special situations hedge fund with a long strategic bias and opportunistic shorting. The fund will in the main target undervalued companies in the natural resources sector as well as seek to profit from shorting overvalued situations or use short positions as a hedge.
The financial and infrastructural support will be carried out by Investec Bank, contributing seed capital, personnel, systems and marketing support. The hedge fund offers a differentiated deal flow, and an investment philosophy to achieve returns throughout the commodity cycle.
The hedge fund is to be led by Martyn Konig and George Rogers, the Fund Advisors are supported by the Commodities and Resource Finance team of Investec, Blackfish Capital Managements Natural Resource team and the Fund's Advisory Panel.
The two companies, having pooled their skills, expertise and resources plan to establish an event driven special situations hedge fund with a long strategic bias and opportunistic shorting. The fund will in the main target undervalued companies in the natural resources sector as well as seek to profit from shorting overvalued situations or use short positions as a hedge.
The financial and infrastructural support will be carried out by Investec Bank, contributing seed capital, personnel, systems and marketing support. The hedge fund offers a differentiated deal flow, and an investment philosophy to achieve returns throughout the commodity cycle.
The hedge fund is to be led by Martyn Konig and George Rogers, the Fund Advisors are supported by the Commodities and Resource Finance team of Investec, Blackfish Capital Managements Natural Resource team and the Fund's Advisory Panel.
Update-Ashburton Launches Chindia Fund
The Jersey based asset management firm Ashburton has launched a new fund which invests in both China and India, the Chindia Equity Fund plans to provide access to proven expertise in these rapidly-expanding economies.
Economic forecasts expect China to grow at a rate of 8% to 10% a year, while a growth rate of 8% per year is projected for India, combined, these two countries will be the second largest economic power in the next 15 years worth approximately US$16trillion, according to Ashburton.
The Chindia Equity fund, managed by Jonathan Schiessl has a minimum investment of £10,000. An initial fee of 5% is charged as well as a 1.75% annual management fee. Schissel has had responsibility for the Asia-Pacific region for the past six years at Asbhurton.
Schiessl said: “This growth will be primarily driven by demographics as the working population of both countries is expected to increase by 250m by 2020. Furthermore, reliance on growth from exports is decreasing in both China and India, and consumer demand is growing exponentially as a result of an expanding generation with much higher aspirations. Combined, these two countries will be the second largest economic power in the next 15 years and the opportunities this offers to investors is tremendous."
The Ashburton Chindia Equity Fund is open for investment from 10 November 2006 and launching on 1 December 2006, which allows clients to invest in these fast growing regions. Ashburton has successfully obtained the all important Foreign Institutional Investor (FII) status in India and established links in China that enable the fund to directly access these markets.
Economic forecasts expect China to grow at a rate of 8% to 10% a year, while a growth rate of 8% per year is projected for India, combined, these two countries will be the second largest economic power in the next 15 years worth approximately US$16trillion, according to Ashburton.
The Chindia Equity fund, managed by Jonathan Schiessl has a minimum investment of £10,000. An initial fee of 5% is charged as well as a 1.75% annual management fee. Schissel has had responsibility for the Asia-Pacific region for the past six years at Asbhurton.
Schiessl said: “This growth will be primarily driven by demographics as the working population of both countries is expected to increase by 250m by 2020. Furthermore, reliance on growth from exports is decreasing in both China and India, and consumer demand is growing exponentially as a result of an expanding generation with much higher aspirations. Combined, these two countries will be the second largest economic power in the next 15 years and the opportunities this offers to investors is tremendous."
The Ashburton Chindia Equity Fund is open for investment from 10 November 2006 and launching on 1 December 2006, which allows clients to invest in these fast growing regions. Ashburton has successfully obtained the all important Foreign Institutional Investor (FII) status in India and established links in China that enable the fund to directly access these markets.
24 Nov 2006
India as Asia's top Performer
India's benchmark BSE index is up nearly 45% this year, making it Asia-Pacific's best performer. It rose 42 percent in 2005, 13 percent in 2004 and 73 percent in 2003 as investors poured money into stocks to ride the rapid expansion of Asia's fourth-largest economy.
Indian software, banking and infrastructure-related stocks were still attractive investments, but the runaway rises of recent years can no longer be expected, the head of fund management at HSBC Asset Management (India) said. Mihir Vora, who oversees of 33 billion rupees of equity investments, said on Tuesday his funds were underweight on stocks in the commodities, energy and personal care sectors.
"Returns still will resemble corporate profitability growth of 15-20% compounded for next few years,...We have gone up very significantly in a short period of time," he said, adding other risks included a renewed rise in oil prices, interest rates and a change in sentiment on emerging markets.
State-run banks looked good value and, in a time of rapid growth in credit demand, their extensive branch networks were an advantage in raising term deposits that could be lent out.
"Their valuations are amongst the cheapest in the sector and the market. They are undervalued and the volatility in earnings has gone," Vora said.
Government and private investment to upgrade infrastructure could ensure steady earnings growth for companies in the engineering and construction sectors, and demand for outsourcing of software services would continue to be robust, he said.
Indian software, banking and infrastructure-related stocks were still attractive investments, but the runaway rises of recent years can no longer be expected, the head of fund management at HSBC Asset Management (India) said. Mihir Vora, who oversees of 33 billion rupees of equity investments, said on Tuesday his funds were underweight on stocks in the commodities, energy and personal care sectors.
"Returns still will resemble corporate profitability growth of 15-20% compounded for next few years,...We have gone up very significantly in a short period of time," he said, adding other risks included a renewed rise in oil prices, interest rates and a change in sentiment on emerging markets.
State-run banks looked good value and, in a time of rapid growth in credit demand, their extensive branch networks were an advantage in raising term deposits that could be lent out.
"Their valuations are amongst the cheapest in the sector and the market. They are undervalued and the volatility in earnings has gone," Vora said.
Government and private investment to upgrade infrastructure could ensure steady earnings growth for companies in the engineering and construction sectors, and demand for outsourcing of software services would continue to be robust, he said.
23 Nov 2006
Hedge Fund Blogger Celebrities
Tyler Cowen, an economics professor at the George Mason University started a blog three years ago with colleague Alex Tabarrok. The blog, called Marginal Revolution, has had more than 6 million visitors, Cowen has become an economics celebrity. Since he began writing about economics and hedge funds in "understandable language", people are approaching him on the street and, "I'm invited to give a speech or something at least once a week," Cowen said.
The readers find commentary about regulating hedge funds combined with a section featuring odd inventions such as a fan that attaches to chopsticks and cools noodles as they're being eaten? The postings are injecting life into the field often called the dismal science.
He isn't the only economist who has found an audience on the Web. Nobel laureate Gary S. Becker and former Harvard President Lawrence H. Summers are among those who have set up blogs, which are typically part lecture, part journal and part college seminar, with reader participation expected. Becker started a blog two years ago with federal appeals court judge Richard A. Posner.
Gregory Mankiw, a Harvard lecturer and former chairman of President Bush's Council of Economic Advisors, started a blog in the spring to supplement his lectures for the popular course "Social Analysis 10: Principles of Economics." He had been getting queries from students who weren't enrolled in the class and thought the blog was the best way to make information accessible to all. He quickly had 5,000 readers a day.
Econo-fans are responding, Becker figures, because the blogs put important pocketbook issues into understandable language. Whereas former Federal Reserve Chairman Alan Greenspan had "Greenspeak" — the carefully convoluted jargon whose comprehensibility rivaled that of Klingon — the blogs connect economics to daily life.
"Most people are afraid of economics. It seems so technical," Becker said. "But what is surprising is that if you put economics in a simple enough phrase, people are very much interested in it." Most of the economists say their readers aren't students. Cowen describes his fans as "high IQ, possibly nerdy, looking for kicks or for something different."
The readers find commentary about regulating hedge funds combined with a section featuring odd inventions such as a fan that attaches to chopsticks and cools noodles as they're being eaten? The postings are injecting life into the field often called the dismal science.
He isn't the only economist who has found an audience on the Web. Nobel laureate Gary S. Becker and former Harvard President Lawrence H. Summers are among those who have set up blogs, which are typically part lecture, part journal and part college seminar, with reader participation expected. Becker started a blog two years ago with federal appeals court judge Richard A. Posner.
Gregory Mankiw, a Harvard lecturer and former chairman of President Bush's Council of Economic Advisors, started a blog in the spring to supplement his lectures for the popular course "Social Analysis 10: Principles of Economics." He had been getting queries from students who weren't enrolled in the class and thought the blog was the best way to make information accessible to all. He quickly had 5,000 readers a day.
Econo-fans are responding, Becker figures, because the blogs put important pocketbook issues into understandable language. Whereas former Federal Reserve Chairman Alan Greenspan had "Greenspeak" — the carefully convoluted jargon whose comprehensibility rivaled that of Klingon — the blogs connect economics to daily life.
"Most people are afraid of economics. It seems so technical," Becker said. "But what is surprising is that if you put economics in a simple enough phrase, people are very much interested in it." Most of the economists say their readers aren't students. Cowen describes his fans as "high IQ, possibly nerdy, looking for kicks or for something different."
Hedge Fund Regulator Opposes Over-regulation
Hedge fund regulator and Edinburgh's top financial services commissioner Charlie McCreevy said in a statement Tuesday that Europe’s hedge fund managers may shift operations from the continent to less-regulated jurisdictions if the European Union started regulating the investments designed for wealthy clients and institutions.
This is why the 25-nation group made a decision last week to leave scrutiny of the funds at a country level. “If we went too far we could drive the industry out of Europe,” McCreevy said. Hedge funds have attracted attention from regulators and politicians concerned that their growing influence in financial markets may hurt investors.
Earlier this month, International Financial Services London said European managers oversee $401 billion of hedge fund assets under management, about $317 billion of that is managed in London. Criticism of hedge funds in Germany followed a campaign by some managers to oust Deutsche Boerse executives. “There are some people who are philosophically opposed to hedge funds and who would like to have them regulated out of existence,” McCreevy said.
US Senate Finance Committee chairman Charles Grassley requested more scrutiny of the $1.3 trillion industry after the collapse of Amaranth Advisors in September. The Financial Services Authority in the UK said earlier this year it was probing whether the funds treated customers fairly and whether they accurately valued their assets. Former German chancellor Gerhard Schroeder last year sought unified international rules for hedge funds after ordering a three-ministry probe into the funds.
The SEC is probing potential insider trading by hedge funds, while US Treasury Secretary Henry Paulson said on Tuesday his department would “continually assess their actions and impact on the market.”
Amaranth’s collapse was the biggest since Long-Term Capital Management’s 1998 demise. In Europe, rules that can help limit the effects of a fund’s collapse are already in existence, McCreevy said.
This is why the 25-nation group made a decision last week to leave scrutiny of the funds at a country level. “If we went too far we could drive the industry out of Europe,” McCreevy said. Hedge funds have attracted attention from regulators and politicians concerned that their growing influence in financial markets may hurt investors.
Earlier this month, International Financial Services London said European managers oversee $401 billion of hedge fund assets under management, about $317 billion of that is managed in London. Criticism of hedge funds in Germany followed a campaign by some managers to oust Deutsche Boerse executives. “There are some people who are philosophically opposed to hedge funds and who would like to have them regulated out of existence,” McCreevy said.
US Senate Finance Committee chairman Charles Grassley requested more scrutiny of the $1.3 trillion industry after the collapse of Amaranth Advisors in September. The Financial Services Authority in the UK said earlier this year it was probing whether the funds treated customers fairly and whether they accurately valued their assets. Former German chancellor Gerhard Schroeder last year sought unified international rules for hedge funds after ordering a three-ministry probe into the funds.
The SEC is probing potential insider trading by hedge funds, while US Treasury Secretary Henry Paulson said on Tuesday his department would “continually assess their actions and impact on the market.”
Amaranth’s collapse was the biggest since Long-Term Capital Management’s 1998 demise. In Europe, rules that can help limit the effects of a fund’s collapse are already in existence, McCreevy said.
22 Nov 2006
Hedge Fund buys 4 million shares in Pogo Producing
Activist hedge fund Third Point LLC, said in a statement on Tuesday that the company has acquired a 7.2% stake of U.S. oil and gas producer Pogo Producing Co.
In a filing with the Securities and Exchange Commission, the hedge fund said it also bought options to purchase 200,000 additional shares in addition to the 4 million shares of Pogo common stock.
Third Point, which has about $4 billion in assets under management, holds stakes in several publicly traded companies. The hedge fund is New York based and is known for taking activist positions. The fund, run by Chief Investment Officer Danies Loeb, has frequently been a loud critic of the companies in which it invests.
In the filing with the SEC, Third Point said it believes Pogo "represents an attractive investment." The fund also said it "may suggest or take a position with respect to potential changes in the operations, strategy, management or capital structure of such companies as a means of enhancing shareholder value."
Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 4,800,000 gross leasehold acres in major oil and gas provinces in North America, 6,354,000 acres in New Zealand and 1,480,000 acres in Vietnam. Pogo common stock is listed on the New York Stock Exchange under the symbol “PPP.”
In a filing with the Securities and Exchange Commission, the hedge fund said it also bought options to purchase 200,000 additional shares in addition to the 4 million shares of Pogo common stock.
Third Point, which has about $4 billion in assets under management, holds stakes in several publicly traded companies. The hedge fund is New York based and is known for taking activist positions. The fund, run by Chief Investment Officer Danies Loeb, has frequently been a loud critic of the companies in which it invests.
In the filing with the SEC, Third Point said it believes Pogo "represents an attractive investment." The fund also said it "may suggest or take a position with respect to potential changes in the operations, strategy, management or capital structure of such companies as a means of enhancing shareholder value."
Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 4,800,000 gross leasehold acres in major oil and gas provinces in North America, 6,354,000 acres in New Zealand and 1,480,000 acres in Vietnam. Pogo common stock is listed on the New York Stock Exchange under the symbol “PPP.”
21 Nov 2006
Rare Coin Dealer faces 18 years
The guilty party in the 2005 loss of up to $13 million in a rare-coin fund managed by Maumee coin dealer Thomas W. Noe, has played out with Noe receiving the maximum sentence for his involvement in the scandal.
Judge Thomas J. Osowik sentenced Noe to 18 years in prison for for stealing state money from the Ohio Bureau Compensation fund. The judge also has scheduled a hearing to determine what restitution Noe must pay. Prosecutors are seeking at least $13.7 million, the amount they say Noe stole from the coin funds. Osowik also fined Noe $139,000, plus the nearly $3 million cost of the investigation.
Noe began stealing and spending state money seven years ago in order to buy yachts, positions on state boards, a multimillion dollar house in the Florida Keys and other luxuries in order to present himself as having a "bottomless cup of wealth and luxury", while managing the $50 million rare-coin investment for the state.
Osowik also ordered that Noe begin serving the state sentence after he finishes a 27-month prison term on an unrelated federal conviction for illegally funneling $45,400 to President Bush’s reelection campaign. Ohio Democrats used the scandals Noe sparked to help reclaim the governor’s office and other statewide posts in the Nov. 7 election. "Tom Noe violated the public trust by using $50 million as his own ATM, living a lavish lifestyle at the expense of real people whose lives depended on agency monies."
The loss of up to $13 million in the rare-coin fund managed by the Maumee coin dealer was made public on the heels of the unrelated MDL Capital loss of $215 million from what was a $355 million investment. The hedge fund founded by Aliquippa entrepreneur Mark D. Lay, also lost $215 million last year in a case involving the activities of the Ohio Bureau of Workers’ Compensation investment fund.
MDL Capital also manages $500 million for the Pennsylvania State Workers Insurance Fund, and $91 million of the nearly $27 billion portfolio of the Pennsylvania State Employees Retirement System. MDL Capital is one of 13 fixed-income portfolio managers. Since it started in December 2000, the annualized return on its portfolio has been 4.5 percent.
Judge Thomas J. Osowik sentenced Noe to 18 years in prison for for stealing state money from the Ohio Bureau Compensation fund. The judge also has scheduled a hearing to determine what restitution Noe must pay. Prosecutors are seeking at least $13.7 million, the amount they say Noe stole from the coin funds. Osowik also fined Noe $139,000, plus the nearly $3 million cost of the investigation.
Noe began stealing and spending state money seven years ago in order to buy yachts, positions on state boards, a multimillion dollar house in the Florida Keys and other luxuries in order to present himself as having a "bottomless cup of wealth and luxury", while managing the $50 million rare-coin investment for the state.
Osowik also ordered that Noe begin serving the state sentence after he finishes a 27-month prison term on an unrelated federal conviction for illegally funneling $45,400 to President Bush’s reelection campaign. Ohio Democrats used the scandals Noe sparked to help reclaim the governor’s office and other statewide posts in the Nov. 7 election. "Tom Noe violated the public trust by using $50 million as his own ATM, living a lavish lifestyle at the expense of real people whose lives depended on agency monies."
The loss of up to $13 million in the rare-coin fund managed by the Maumee coin dealer was made public on the heels of the unrelated MDL Capital loss of $215 million from what was a $355 million investment. The hedge fund founded by Aliquippa entrepreneur Mark D. Lay, also lost $215 million last year in a case involving the activities of the Ohio Bureau of Workers’ Compensation investment fund.
MDL Capital also manages $500 million for the Pennsylvania State Workers Insurance Fund, and $91 million of the nearly $27 billion portfolio of the Pennsylvania State Employees Retirement System. MDL Capital is one of 13 fixed-income portfolio managers. Since it started in December 2000, the annualized return on its portfolio has been 4.5 percent.
Hedge Fund Investment possibilities in India, Pakistan and China
Emerging markets are again catching the eye of more foreign firms as an investment destination.
Morgan Stanley sees India's FDI rising to $10 billion, or 1 percent of GDP by 2008, with the flows mostly targeting low capital services and manufacturing for the domestic market, rather than factories for exports like many in China.
Since the start of 2002, the Pakistan market has risen 741%, topping the 297% gain for India's Sensex. Still, Pakistan stocks only trade at about 10.6 times forecast profits, while Indian stocks trade at 20 times earnings. Pakistan, one of the world's hottest emerging markets despite current instability, has an economy that grew by 6.6% in the financial year that ended in June, a rate that the government expects will rise to 7% this year. Liberal rules on foreign investment are luring overseas players, with foreign investors pouring $307 million into the market since July 1.
Pakistan's biggest listed firm, Oil and Gas Development Co., is planning the the $1.4 billion sale of global depository receipts (GDRs) and local shares in December. Money from the Middle East, and increasingly Singapore and elsewhere in East Asia, has been helping drive growth, with infrastructure, energy, financial services and makers of consumer goods such as motorcycles seen as attractive plays.
Last month, MCB Bank raised $150 million in a London GDR issue. Earlier this month, Pakistan Mobile Communications (Pvt.) (Mobilink) attracted nearly $4 billion in orders for its $250 million bond, the country's first corporate offshore bond issue.
The Karachi 100 index is up 12 percent this year on daily turnover that exceeds $400 million, making it more active than markets such as Thailand, Indonesia, and Malaysia.
In China the government wants foreign money to help with an estimated $350 billion worth of projects to build an efficient road network, expand ports and address a woeful power deficit. Michael J. Cannon-Brookes, vice president of business development for China and India at IBM, said to Reuters in Bejing; "In manufacturing you need infrastructure to run your plants, get your goods to market and bring in supplies. That's clearly a strong selling point for China."
Morgan Stanley sees India's FDI rising to $10 billion, or 1 percent of GDP by 2008, with the flows mostly targeting low capital services and manufacturing for the domestic market, rather than factories for exports like many in China.
Since the start of 2002, the Pakistan market has risen 741%, topping the 297% gain for India's Sensex. Still, Pakistan stocks only trade at about 10.6 times forecast profits, while Indian stocks trade at 20 times earnings. Pakistan, one of the world's hottest emerging markets despite current instability, has an economy that grew by 6.6% in the financial year that ended in June, a rate that the government expects will rise to 7% this year. Liberal rules on foreign investment are luring overseas players, with foreign investors pouring $307 million into the market since July 1.
Pakistan's biggest listed firm, Oil and Gas Development Co., is planning the the $1.4 billion sale of global depository receipts (GDRs) and local shares in December. Money from the Middle East, and increasingly Singapore and elsewhere in East Asia, has been helping drive growth, with infrastructure, energy, financial services and makers of consumer goods such as motorcycles seen as attractive plays.
Last month, MCB Bank raised $150 million in a London GDR issue. Earlier this month, Pakistan Mobile Communications (Pvt.) (Mobilink) attracted nearly $4 billion in orders for its $250 million bond, the country's first corporate offshore bond issue.
The Karachi 100 index is up 12 percent this year on daily turnover that exceeds $400 million, making it more active than markets such as Thailand, Indonesia, and Malaysia.
In China the government wants foreign money to help with an estimated $350 billion worth of projects to build an efficient road network, expand ports and address a woeful power deficit. Michael J. Cannon-Brookes, vice president of business development for China and India at IBM, said to Reuters in Bejing; "In manufacturing you need infrastructure to run your plants, get your goods to market and bring in supplies. That's clearly a strong selling point for China."
Hedge Fund Mergers show Substantial Profits
Atticus, a New York-based hedge fund that manages more than $12 billion has been having talks with Freeport-McMoRan Copper & Gold Inc. Freeport has already undertaken the world's biggest mining takeover, valued at about $26 billion when the mining company acquired hedge-fund Phelps Dodge Corp.
Phelps Dodge Corp manager Timothy R. Barakett saw his investment jump by about $517 million, capping a 13-month campaign to find a buyer for the mining company and get more of its cash. Shares of Phelps Dodge are trading at below Freeport's offer price, which may mean investors don't expect a higher bid, analysts said.
Atticus Capital is the largest Phelps Dodge shareholder, with about a 10% stake.
Barakett had been seeking a buyer for the copper producer since he opposed a proposal by Phelps Dodge CEO J. Steven Whisler to acquire two Canadian nickel producers for $40 billion. Before that, Barakett successfully pushed for the company to give more of its $2.5 billion cash pile to investors, after a rally in metals prices sent profit to a record.
"Some of their efforts have done shareholders of Phelps Dodge a great service," said John Rosenberg, who helps manage $900 million including Phelps Dodge shares at Geneve Capital Group in Stamford, Conn. "There's a place in the market for activism."
According to financial research firm Dealogic, the value of global mergers and acquisitions for 2006 reached a record $3.368 trillion, beating the previous high set in 2000 of $3.332 trillion. Private equity firms such as hedge funds accounted for 22% of total global M&A volume in the first nine months of the year, hitting a new record of $570.1 billion in deals.
Phelps Dodge Corp manager Timothy R. Barakett saw his investment jump by about $517 million, capping a 13-month campaign to find a buyer for the mining company and get more of its cash. Shares of Phelps Dodge are trading at below Freeport's offer price, which may mean investors don't expect a higher bid, analysts said.
Atticus Capital is the largest Phelps Dodge shareholder, with about a 10% stake.
Barakett had been seeking a buyer for the copper producer since he opposed a proposal by Phelps Dodge CEO J. Steven Whisler to acquire two Canadian nickel producers for $40 billion. Before that, Barakett successfully pushed for the company to give more of its $2.5 billion cash pile to investors, after a rally in metals prices sent profit to a record.
"Some of their efforts have done shareholders of Phelps Dodge a great service," said John Rosenberg, who helps manage $900 million including Phelps Dodge shares at Geneve Capital Group in Stamford, Conn. "There's a place in the market for activism."
According to financial research firm Dealogic, the value of global mergers and acquisitions for 2006 reached a record $3.368 trillion, beating the previous high set in 2000 of $3.332 trillion. Private equity firms such as hedge funds accounted for 22% of total global M&A volume in the first nine months of the year, hitting a new record of $570.1 billion in deals.
20 Nov 2006
Investcorp to offer Global Depositary Reciepts
Investcorp, one of the leading institutional investors in hedge funds with approximately $9.8 billion under management has said their bank has decided to proceed with an offer of ordinary shares in the form of Global Depositary Receipts (GDRs).
The new GDRs application for admittance for trading on the London Stock Exchange will be listed under the ticker symbol IVC.
Nemir A. Kirdar, Investcorp’s president and chief executive officer, said: “This offering and our GDR listing on London’s main market will help us scale our platform to capture the accelerating growth in alternative investments in the Gulf, while also further enhancing our international presence through improved brand awareness.”
The program offers clients a selection of funds of hedge funds with varying risk/return profiles. These are invested across different strategies through approximately 40 hedge fund managers. Investcorp launched the world’s first collateralized debt structure backed by hedge funds.
Investcorp specializes in four lines of business, hedge funds, private equity and venture capital in North America and Western Europe and real estate in the United States. Its investment products are offered to institutional and individual clients, primarily in the Persian Gulf.
Investcorp also plans to expand existing product lines in the fiscal year 2007 by launching a private equity fund targeted at North American and European institutional investors, and a real estate fund dedicated to mezzanine investments.
40% of Investcorp is owned by more than half of its total staff. A further 40% is owned by a group of the Firm’s most prominent clients, some of whom are also Directors of the Firm. The balance of the stock is held by public shareholders through Investcorp’s listing on the Bahrain Stock Exchange.
The new GDRs application for admittance for trading on the London Stock Exchange will be listed under the ticker symbol IVC.
Nemir A. Kirdar, Investcorp’s president and chief executive officer, said: “This offering and our GDR listing on London’s main market will help us scale our platform to capture the accelerating growth in alternative investments in the Gulf, while also further enhancing our international presence through improved brand awareness.”
The program offers clients a selection of funds of hedge funds with varying risk/return profiles. These are invested across different strategies through approximately 40 hedge fund managers. Investcorp launched the world’s first collateralized debt structure backed by hedge funds.
Investcorp specializes in four lines of business, hedge funds, private equity and venture capital in North America and Western Europe and real estate in the United States. Its investment products are offered to institutional and individual clients, primarily in the Persian Gulf.
Investcorp also plans to expand existing product lines in the fiscal year 2007 by launching a private equity fund targeted at North American and European institutional investors, and a real estate fund dedicated to mezzanine investments.
40% of Investcorp is owned by more than half of its total staff. A further 40% is owned by a group of the Firm’s most prominent clients, some of whom are also Directors of the Firm. The balance of the stock is held by public shareholders through Investcorp’s listing on the Bahrain Stock Exchange.
17 Nov 2006
Sears as a Hedge Fund?
The prominent investor, Edward Lampert, who runs his own hedge fund in Greenwich, Conn., and is chairman of Hoffman Estates-based Sears, has has turned the largest U.S. department-store chain into an investment vehicle.
Cash holdings have doubled in the past year, and Lampert says he’s looking for acquisitions, perhaps outside of retailing. The investors in Sears Holdings Corp. are getting their payoff even as sales are falling. In the reported third quarter profit, more than half, $101 million of $196 million, came from investments as sales fell. Sears warned in its most recent earnings report, “These investments are highly concentrated and involve substantial risks.”
“At the end of the day, what you’re going to have is a publicly traded hedge fund” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm.
Lampert has proved adept at investing the company’s cash in financial assets. Sears had $2.1 billion in cash on hand at the end of the third quarter ended Oct. 28, almost double the $1.2 billion from a year earlier and down from $4.4 billion at the end of January.
Investors flocked to Sears after Lampert acquired the Hoffman Estates, Illinois-based chain for $12.3 billion in March 2005, combining it with his Kmart Holding Corp. Anticipating cost cuts and sell-offs of weaker stores, they sent shares up 35 percent between March 24, 2005, the day shareholders approved the merger, and Nov. 15.
Hedge funds and private equity funds are attracting billions of dollars from private investors giving them unimaginable financial strength in order to make friendly acquisitions. In some cases they use these funds to position themselves, even in a hostile manner, commanding significant stakes in large companies where they perceive the management is not doing a good enough job and that value can be extracted by using shareholders’ rights to push for changes in management.
Cash holdings have doubled in the past year, and Lampert says he’s looking for acquisitions, perhaps outside of retailing. The investors in Sears Holdings Corp. are getting their payoff even as sales are falling. In the reported third quarter profit, more than half, $101 million of $196 million, came from investments as sales fell. Sears warned in its most recent earnings report, “These investments are highly concentrated and involve substantial risks.”
“At the end of the day, what you’re going to have is a publicly traded hedge fund” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm.
Lampert has proved adept at investing the company’s cash in financial assets. Sears had $2.1 billion in cash on hand at the end of the third quarter ended Oct. 28, almost double the $1.2 billion from a year earlier and down from $4.4 billion at the end of January.
Investors flocked to Sears after Lampert acquired the Hoffman Estates, Illinois-based chain for $12.3 billion in March 2005, combining it with his Kmart Holding Corp. Anticipating cost cuts and sell-offs of weaker stores, they sent shares up 35 percent between March 24, 2005, the day shareholders approved the merger, and Nov. 15.
Hedge funds and private equity funds are attracting billions of dollars from private investors giving them unimaginable financial strength in order to make friendly acquisitions. In some cases they use these funds to position themselves, even in a hostile manner, commanding significant stakes in large companies where they perceive the management is not doing a good enough job and that value can be extracted by using shareholders’ rights to push for changes in management.
Hedge Funds Sued by Attorney General
State Attorney General Eliot Spitzer sued Samaritan Asset Management Services Inc, their advisors, Johnson Capital Management Inc, and Edward Owens, a principal at the hedge fund.
The company allegedly engaged in a fraudulent mutual fund market-timing scheme. The defendants secretly “piggy-backed” their trades on the investment accounts of retirement plans. The suit claims that the market timing trades hurt long-term investors and the suit seeks restitution and an order to stop them from carrying out improper trades.
Last month Spitzer also sued the mutual fund manager J. & W. Seligman for the same practice, contending that it owes investors $80 million in compensation for improper market-timing trades. In July, Waddell & Reed Financial Inc., one of the nation’s oldest mutual fund management companies, agreed to pay $50 million to settle Spitzer’s investigation into improper trading.
That was the 19th settlement for Spitzer since he began the mutual fund investigation in 2003. Investors have received $3.4 billion in restitution under the settlements, Spitzer said.
Market timing involves rapid in-and-out trades that can disadvantage ordinary shareholders by diluting the value of their shares. It’s not illegal but it’s prohibited by many funds, as any standard that favors one investor at the expense of another tends to undermine the credibility of the industry.
The company allegedly engaged in a fraudulent mutual fund market-timing scheme. The defendants secretly “piggy-backed” their trades on the investment accounts of retirement plans. The suit claims that the market timing trades hurt long-term investors and the suit seeks restitution and an order to stop them from carrying out improper trades.
Last month Spitzer also sued the mutual fund manager J. & W. Seligman for the same practice, contending that it owes investors $80 million in compensation for improper market-timing trades. In July, Waddell & Reed Financial Inc., one of the nation’s oldest mutual fund management companies, agreed to pay $50 million to settle Spitzer’s investigation into improper trading.
That was the 19th settlement for Spitzer since he began the mutual fund investigation in 2003. Investors have received $3.4 billion in restitution under the settlements, Spitzer said.
Market timing involves rapid in-and-out trades that can disadvantage ordinary shareholders by diluting the value of their shares. It’s not illegal but it’s prohibited by many funds, as any standard that favors one investor at the expense of another tends to undermine the credibility of the industry.
16 Nov 2006
New Frontiers of Risk: The 360° Hedge Fund study
According to a report by the Bank of New York, pension plans and nonprofit organizations worldwide are attracted to hedge funds because of the losses that pension plans suffered in the equity bear market after 2000.
The study, “New Frontiers of Risk: The 360° Risk Manager for Pensions and Nonprofits,” found that while market risk remains the foremost concern for plan sponsors, managers are now spending close to 40% of their risk-related time on operational and political considerations, an increase of nearly 20% from five years ago, and about 80% indicate they will increase the time spent on operational risk over the next five years.
The report predicts that by 2010, institutions will put half of the assets directly into a hedge fund and the other half through a fund-of-fund platform. As institutional clients become more confident about investing in the $1.7 trillion hedge fund industry, these clients will increasingly demand that fund-of-hedge-fund companies give tailor-made advice and consultancy service in order to justify their fees.
The Bank of New York and Casey, Quirk & Associates report predicted that institutional investors like pension plans and insurance firms will hold more than $1 trillion of assets in hedge funds by 2010, up from $360 billion now.
According to the study, several factors are influencing the popularity of hedge funds, including the widespread under funding of pension funds. More than half of the participants categorized their funds as “under-funded”.
“The study shows that investors increasingly recognize the non traditional risk factors associated with the global investment landscape. The challenge for all organizations will be embracing this new 360° view and taking the formal steps necessary for eliminating, transferring or managing critical risks,” said Debra Baker, managing director and head of Global Risk Services for The Bank of New York.
The study found that plan sponsors such as hedge funds can ably evaluate fund-wide allocation decisions, broadly monitor market risks, and tap new asset classes with more security and knowledge than ever before. Working together, hedge funds and industry providers are developing advanced analytics and reporting required to quantify risk level and focus on interventions.
Results were compiled from surveys of more than 75 representatives from leading pension institutions and nonprofit organizations from around the world. It is the latest in a series of studies conducted by The Bank of New York, including ones on institutional demand for hedge funds.
The study, “New Frontiers of Risk: The 360° Risk Manager for Pensions and Nonprofits,” found that while market risk remains the foremost concern for plan sponsors, managers are now spending close to 40% of their risk-related time on operational and political considerations, an increase of nearly 20% from five years ago, and about 80% indicate they will increase the time spent on operational risk over the next five years.
The report predicts that by 2010, institutions will put half of the assets directly into a hedge fund and the other half through a fund-of-fund platform. As institutional clients become more confident about investing in the $1.7 trillion hedge fund industry, these clients will increasingly demand that fund-of-hedge-fund companies give tailor-made advice and consultancy service in order to justify their fees.
The Bank of New York and Casey, Quirk & Associates report predicted that institutional investors like pension plans and insurance firms will hold more than $1 trillion of assets in hedge funds by 2010, up from $360 billion now.
According to the study, several factors are influencing the popularity of hedge funds, including the widespread under funding of pension funds. More than half of the participants categorized their funds as “under-funded”.
“The study shows that investors increasingly recognize the non traditional risk factors associated with the global investment landscape. The challenge for all organizations will be embracing this new 360° view and taking the formal steps necessary for eliminating, transferring or managing critical risks,” said Debra Baker, managing director and head of Global Risk Services for The Bank of New York.
The study found that plan sponsors such as hedge funds can ably evaluate fund-wide allocation decisions, broadly monitor market risks, and tap new asset classes with more security and knowledge than ever before. Working together, hedge funds and industry providers are developing advanced analytics and reporting required to quantify risk level and focus on interventions.
Results were compiled from surveys of more than 75 representatives from leading pension institutions and nonprofit organizations from around the world. It is the latest in a series of studies conducted by The Bank of New York, including ones on institutional demand for hedge funds.
15 Nov 2006
Hedge Fund commitee Object to Dura's Bankruptcy Filing
Hedge funds with large holdings in Dura Automotive Systems Inc.’s $1.7 billion debt are protesting the auto parts maker’s plan to finance its bankruptcy, saying the deal threatens to jeopardize their rights.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
US Hedge Fund to parner with Investcorp
Bahrain-based Investcorp has formed an alliance with US hedge fund manager Silverback Asset Management, a convertible arbitrage-focused hedge fund in Chapel Hill, N.C.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
10 Nov 2006
Man Group Gains Higher than Forecast
Overall gains at Man Group, the world’s largest listed hedge fund, were higher than the company forecast. Sales for the six-month period came in at $10.6 billion, compared with the $10.4 billion forecast in September.
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Women in Hedge Funds
Pomegranate Capital, in a international study by CEO Susan Solovay, found that there are 250 female hedge fund managers worldwide, and wants to open the first fund to invest in hedge funds solely run by women.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
9 Nov 2006
Hedge Funds and Elections
Democrats have said they will differ from Republicans by being tougher watchdogs of corporate wrongdoing and government spending, recomending heightened scrutiny of sectors such as hedge funds, pharmaceuticals and defense spending.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
8 Nov 2006
Indian company Expanding through Hedge Fund Investments
Optical networking vendor Tejas Networks India Ltd. has plans to further expand its operations outside India and into Southeast Asia.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
Average Hedge Fund Returns fall Short
According to the recently released data by Hedge Fund Research Inc., hedge funds returned a global average of 1.98% in October, but managers still failed to keep pace with gains by the Standard & Poor’s 500 index and average returns fell short.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Hedge Funds in Hollywood
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
26 Oct 2006
MPs warned against Over-regulation of Hedge Funds
MPs warned against Over-regulation of Hedge Funds
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
Investors dissatisfied with Fund of Hedge Fund Results
According to Mercer Investment Consulting, a global survey has revealed that despite growing interest in hedge funds, less than a quarter of the pension schemes that invest in them are satisfied with their investment returns.
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
25 Oct 2006
Indian Stock Prices Rising
India is at the top of the BSE index in emerging markets with a 30-share benchmark. The country’s trading has recovered from a steep sell off earlier this year to hit a record high last week of 12,994.45.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Hedge Funds to Finance Football Club
Sam Hammam quit his post as Cardiff chairman and has been replaced by Peter Ridsdale as the club prepares for a huge new investment strategy. The identities of the new investors are still unknown, but in a statement Hamman revealed that they are looking to hedge funds to manage Cardiff’s £24m debt in exchange for equity in the club.
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
Hedge Fund wants Board Seat
Hedge fund Basswood Capital Management, a New York hedge fund with about $2 billion in assets under managements, is asking for a boad seat with WCI Communities Inc., due to the company’s “extreme underperformance”.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
24 Oct 2006
Hedge Funds see Record Results
Hedge Fund Research(HFR) reported this week that hedge funds took $44.5 billion in the third quarter this year, almost as much as the $46.9 billion invested in the whole of 2005.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
Two banks set up Hedge Funds
Eastern Europe
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Senator Alarmed by lack of Hedge Fund Transparency
U.S. Senate Finance Committee Chairman Charles Grassley said in a letter to federal agency heads that he plans to look into risks posed by hedge funds to pension funds.
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
19 Oct 2006
German Comapny Moves to Restructure with London Hedge Funds
A group of hedge funds based in London have been restructuring an agreement with Schefenacker, a German vehicle parts company with whom they have investments.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
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