Robert Lyster, co-founder of hedge fund Lyster Watson Management Inc. has found a new investment for his hedge fund millions, the land rich, cash poor, winemaking lifestyle.
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.
The draw for wannabe wine landowners is investing in the legacy of 2,000 years of Cote d’Or winemaking that goes back to Roman times, but the lure of being part of that legacy can can be a fatal attraction, according to a Bloomberg report.
“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 approximately 25,000 bottles of wine.”
Wasserman says it would cost an additional $4 million to revamp the domaine and keep it running for three years with workers, equipment and a new winemaker.
Wholesale, the wine would fetch between 15 euros and 30 euros a bottle, the price more dependent on media hype than quality. On the shelf, the wine would probably retail for $50 to $55 a bottle.
“Your first sale on a $10 million investment at best would net less than $500,000 after three years,....And you’re not going to sell all 25,000 bottles.”
As founding partner of his hedge fund Robert C. Lyster conducts in depth research on the strategies and results of more than 2,400 hedge funds representing all investment styles, hedge funds are not only more complex, but because they are also influenced by market factors in different ways than traditional investments, hedge fund analysis calls for specialization and focus. Lyster Watson has focused exclusively on hedge funds for the last 13 years.
28 Sept 2006
26 Sept 2006
Hedge Funds Cash out on Good weather
So far this year hurricanes are few and far between, but the intensity of last years storms caused hedge funds to bet billions of dollars on reinsurance.
The hedge funds that put these billion dollar bets on another Hurricane Katrina not hitting the U.S. coastline now have high expectations due to the forecasters prediction of a a mild hurricane season. There could be massive returns on their investment in CAT bonds.
A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy. If a big enough storm hits, the investors could lose everything.
Hedge funds “will have made a bomb”, according to one reinsurance broker. But it is difficult to calculate precisely the returns that hedge funds will make from reinsurance, given that most catastrophe bonds will have been bought and sold in private transactions.
Hedge funds piled into the reinsurance market after last year’s record hurricane season, which inflicted huge losses on the global insurance and reinsurance industries. Sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year. Cat bonds emerged after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
The hedge funds that put these billion dollar bets on another Hurricane Katrina not hitting the U.S. coastline now have high expectations due to the forecasters prediction of a a mild hurricane season. There could be massive returns on their investment in CAT bonds.
A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy. If a big enough storm hits, the investors could lose everything.
Hedge funds “will have made a bomb”, according to one reinsurance broker. But it is difficult to calculate precisely the returns that hedge funds will make from reinsurance, given that most catastrophe bonds will have been bought and sold in private transactions.
Hedge funds piled into the reinsurance market after last year’s record hurricane season, which inflicted huge losses on the global insurance and reinsurance industries. Sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year. Cat bonds emerged after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
25 Sept 2006
Oil Slump and Hedge funds
Traders said today that the precious metals market is under pressure because of a sharp drop in oil in the recent past. Prices fell more than 3% this week, taking it almost $17 below a record-high of $78.40 in July. Oil prices then spiked on Sept 20, bringing US light crude up 10 cents at $61.76.
Some traders speculate that the volatile surges may be linked to billion dollar losses at prominent hedge funds. “As the market seems to fear that further hedge funds could liquidate long positions, we expect energy prices to test even lower levels during the next days,” Dresdner Kleinwort said in a daily market report. Dresdner Kleinwort is the investment bank of Dresdner Bank AG and a member of Allianz, headquartered in London and Frankfurt
US crude stocks were forecast to fall 1.6 million barrels, which would still leave them in the upper end of the average range for this time of the year, a Reuters poll showed. Gasoline stocks were expected to rise by 100,000 barrels.
Private US weather forecaster AccuWeather said on Sept 19 it expected colder than normal temperatures in the US Northeast, home to 80% of US heating oil demand, and in the Midwest, where gas is the home heating fuel of choice.
Some Opec ministers have signalled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The Opec basket stood at $58.67 on Sept 18.
Some traders speculate that the volatile surges may be linked to billion dollar losses at prominent hedge funds. “As the market seems to fear that further hedge funds could liquidate long positions, we expect energy prices to test even lower levels during the next days,” Dresdner Kleinwort said in a daily market report. Dresdner Kleinwort is the investment bank of Dresdner Bank AG and a member of Allianz, headquartered in London and Frankfurt
US crude stocks were forecast to fall 1.6 million barrels, which would still leave them in the upper end of the average range for this time of the year, a Reuters poll showed. Gasoline stocks were expected to rise by 100,000 barrels.
Private US weather forecaster AccuWeather said on Sept 19 it expected colder than normal temperatures in the US Northeast, home to 80% of US heating oil demand, and in the Midwest, where gas is the home heating fuel of choice.
Some Opec ministers have signalled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The Opec basket stood at $58.67 on Sept 18.
Harvard Hedge Fund hits 29 billion
The Harvard University investment arm, Harvard Management Co., manages the largest education based endowment in the world. Harvard has a long record of success in beating the market, but this years $29.2 billion rate of returns falls slightly from last years high. Big gains in commodities and foreign stocks were among the endowment’s investment highlights.
Harvard’s hedge fund endowment grew $3.3 billion during the fiscal year ending June 30, reaching an all time high of $29.2 billion, returning 16.7% on its investments.
Harvard Management said its most recent annual performance was particularly strong in emerging markets, included gains of 37.8% in emerging market stocks, which includes industrializing economies such as India, China, Russia, and Brazil.
The report also showed gains of 26.7% in commodities, 26.5% in more developed foreign stock markets, and 22.7% in real estate. It earned 22.7 percent in private equity investments and 15 percent in hedge funds categorized as “absolute return and special situations.”
El Erian, the new head at the Harvard hedge fund, since Jack R. Meyer left in September, said that investors are copying Harvard’s endowment strategies. “The minute something becomes attractive in terms of showing that it results in consistent returns, a lot of people want to do it,” he said.
Harvard’s hedge fund endowment grew $3.3 billion during the fiscal year ending June 30, reaching an all time high of $29.2 billion, returning 16.7% on its investments.
Harvard Management said its most recent annual performance was particularly strong in emerging markets, included gains of 37.8% in emerging market stocks, which includes industrializing economies such as India, China, Russia, and Brazil.
The report also showed gains of 26.7% in commodities, 26.5% in more developed foreign stock markets, and 22.7% in real estate. It earned 22.7 percent in private equity investments and 15 percent in hedge funds categorized as “absolute return and special situations.”
El Erian, the new head at the Harvard hedge fund, since Jack R. Meyer left in September, said that investors are copying Harvard’s endowment strategies. “The minute something becomes attractive in terms of showing that it results in consistent returns, a lot of people want to do it,” he said.
20 Sept 2006
Congressman calls for Hedge Fund Study
Mike Castle, a congressman from Delaware and president of the republican main street partnership, introduced a bill last week requiring regulators to study and make recommendations about hedge funds, Castle’s office said Monday. The study should focus on disclosure of information, the congressman said.
Mike Castle serves on the House Financial Services Committee, which has jurisdiction over banking with the securities and insurance industries. Among Castle’s other priorities are immigration reform, stem cell research and deficit reduction.
“Transparency in our financial system is important for market discipline and investor confidence,” Castle said. Castle’s bill comes as a hedge fund based in Greenwich, Conneticut, Amaranth Advisors LLC is reportedly shutting down and returning investors’ money following heavy losses on natural gas investments. In June, a U.S. court overturned an SEC rule requiring hedge fund advisers to register with the agency.
Mike Castle serves on the House Financial Services Committee, which has jurisdiction over banking with the securities and insurance industries. Among Castle’s other priorities are immigration reform, stem cell research and deficit reduction.
“Transparency in our financial system is important for market discipline and investor confidence,” Castle said. Castle’s bill comes as a hedge fund based in Greenwich, Conneticut, Amaranth Advisors LLC is reportedly shutting down and returning investors’ money following heavy losses on natural gas investments. In June, a U.S. court overturned an SEC rule requiring hedge fund advisers to register with the agency.
Deutsche Bank to open Japan Hedge Fund
Hedge funds are seeking opportunities in Japan after the recent cut backs in corporate debt has improved the chances of companies increasing dividends and buying back shares.
There are about 220 Japan-focused hedge funds overseeing a total of $35 billion assets, up from 100 funds managing $6 billion of investments in 2002, according to Eurekahedge, a Singapore-based research company.
Ed Rogers, who ran Deutsche Bank AG’s Japan hedge fund brokerage unit until May, is raising $500 million to give U.S. money managers access to some of his former clients in the world’s second-largest economy.
In an ivterview with Bloomberg press, he said, “It’s a great time for this product since Japan is finally emerging from a 14-year economic slump.” Rogers set up Rogers Investment Advisors this year in Tokyo and is advising Wolver Hill Asset Management Ltd., a New York-based company, to raise $500 million within a year, mostly from U.S. investors. Rogers also said Wolver Hill also plans to start an Asia-focused fund of funds that may raise another $500 million by February, he said.
Wolver Hill Japan Multi-strategy Fund will be the first fund of hedge funds located in Japan that’s open to investors in the U.S., Rogers said. The Wolver Hill fund will invest in 10 to 20 local hedge funds.
The fund will put half of its assets into equities, including short positions in which investors sell borrowed stock in the anticipation they can buy it back at a lower price. The rest will be committed to strategies that profit from price differences of related corporate securities, or so-called arbitrage funds.
Hedge funds in Japan have faced more difficult conditions this year. The Eurekahedge Japan Hedge Fund Index, which tracks 123 funds, fell 4.18 percent in the eight months through August, preliminary data show. The Eurekahedge Asian Hedge Fund Index is up 5.35 percent. The Nikkei 225 Stock Average, which gained 41.5 percent in 2005, has slipped 1.5 percent this year.
There are about 220 Japan-focused hedge funds overseeing a total of $35 billion assets, up from 100 funds managing $6 billion of investments in 2002, according to Eurekahedge, a Singapore-based research company.
Ed Rogers, who ran Deutsche Bank AG’s Japan hedge fund brokerage unit until May, is raising $500 million to give U.S. money managers access to some of his former clients in the world’s second-largest economy.
In an ivterview with Bloomberg press, he said, “It’s a great time for this product since Japan is finally emerging from a 14-year economic slump.” Rogers set up Rogers Investment Advisors this year in Tokyo and is advising Wolver Hill Asset Management Ltd., a New York-based company, to raise $500 million within a year, mostly from U.S. investors. Rogers also said Wolver Hill also plans to start an Asia-focused fund of funds that may raise another $500 million by February, he said.
Wolver Hill Japan Multi-strategy Fund will be the first fund of hedge funds located in Japan that’s open to investors in the U.S., Rogers said. The Wolver Hill fund will invest in 10 to 20 local hedge funds.
The fund will put half of its assets into equities, including short positions in which investors sell borrowed stock in the anticipation they can buy it back at a lower price. The rest will be committed to strategies that profit from price differences of related corporate securities, or so-called arbitrage funds.
Hedge funds in Japan have faced more difficult conditions this year. The Eurekahedge Japan Hedge Fund Index, which tracks 123 funds, fell 4.18 percent in the eight months through August, preliminary data show. The Eurekahedge Asian Hedge Fund Index is up 5.35 percent. The Nikkei 225 Stock Average, which gained 41.5 percent in 2005, has slipped 1.5 percent this year.
Hedge Fund suspect in Stock Manipulation Investigation
Hedge fund Aeneas, and it’s founder Thomas Grossman, are under scrutiny in Malaysia as the Securities Commission is probing allegations of stock manipulation.
The $400 million hedge fund firm specializes in long-short emerging markets strategies. The “investigations relating to the manipulation of certain shares are ongoing and individuals acquainted with the facts of the cases have been called in to assist,” a Securities Commission spokeswoman told Dow Jones Newswires.
Hedge fund Aeneas Capital Management L.P. suffered big losses that reportedly followed investments in Malaysian shares such as smart card maker Iris Corp., poultry producer Farm’s Best Bhd., and Internet related systems provider Mobif Bhd. According to Bursa filings from early 2006, Aeneas bought and sold substantial amounts of shares in these companies.
The official, speaking on condition of anonymity, declined to say if the commission is working with the U.S. Securities and Exchange Commission in its probe.
The $400 million hedge fund firm specializes in long-short emerging markets strategies. The “investigations relating to the manipulation of certain shares are ongoing and individuals acquainted with the facts of the cases have been called in to assist,” a Securities Commission spokeswoman told Dow Jones Newswires.
Hedge fund Aeneas Capital Management L.P. suffered big losses that reportedly followed investments in Malaysian shares such as smart card maker Iris Corp., poultry producer Farm’s Best Bhd., and Internet related systems provider Mobif Bhd. According to Bursa filings from early 2006, Aeneas bought and sold substantial amounts of shares in these companies.
The official, speaking on condition of anonymity, declined to say if the commission is working with the U.S. Securities and Exchange Commission in its probe.
19 Sept 2006
Hedge Funds and US Elections
Hedge funds are proving to be a growing power in the political arena, complicating the issues by pouring funding into the Democratic side of the playing field, giving mostly to candidates and causes that interest them personally, rather than targeting key lawmakers with influence over regulating the industry.
Hedge funds priorities seldom align with those of others in a sector already full of conflict. The rise of hedge fund managers as a political force is expanding the financial sector’s Washington presence.
“The hedge funds have tremendous political clout but they also have significant enemies. The mutual funds hate the hedge funds … The corporate community sees them as destabilizing,” said Columbia University Law School Professor John Coffee in an interview with Reuters.
Campaign finance records show 20 of the most successful U.S. hedge fund managers have pumped more than $3.1 million into campaigns so far in 2005-2006, up from about $1.1 million by the same group in the last mid-term election cycle.
Donors such as George Soros, of Soros Fund Management, has given more than $2.3 million, according to PoliticalMoneyLine, a campaign finance research group. D.E. Shaw & Co. has given $78,600 so far and the Gaine group has donated $122,500 in this cycle.
James Chanos, president of hedge fund Kynikos Associates, set up a group called the Coalition of Private Investment Companies to urge hedge fund managers to be more politically active. Hillary Clinton is also a frequent recipient of hedge fund donations.
Hedge fund giving is still not as strategically targeted as donations made by bankers, insurers and other, older financial interests, which are generally more pro-Republican.
Hedge funds priorities seldom align with those of others in a sector already full of conflict. The rise of hedge fund managers as a political force is expanding the financial sector’s Washington presence.
“The hedge funds have tremendous political clout but they also have significant enemies. The mutual funds hate the hedge funds … The corporate community sees them as destabilizing,” said Columbia University Law School Professor John Coffee in an interview with Reuters.
Campaign finance records show 20 of the most successful U.S. hedge fund managers have pumped more than $3.1 million into campaigns so far in 2005-2006, up from about $1.1 million by the same group in the last mid-term election cycle.
Donors such as George Soros, of Soros Fund Management, has given more than $2.3 million, according to PoliticalMoneyLine, a campaign finance research group. D.E. Shaw & Co. has given $78,600 so far and the Gaine group has donated $122,500 in this cycle.
James Chanos, president of hedge fund Kynikos Associates, set up a group called the Coalition of Private Investment Companies to urge hedge fund managers to be more politically active. Hillary Clinton is also a frequent recipient of hedge fund donations.
Hedge fund giving is still not as strategically targeted as donations made by bankers, insurers and other, older financial interests, which are generally more pro-Republican.
Hedge Fund's double Bond Trading
In a report late last week by Greenwich Associates, 45% of annual trading in emerging market bonds, 47% of distressed debt and 55% of credit derivatives in the 12 months were reported to be hedge fund trading of bonds and derivatives in the US, more than doubling the tolal in the past year, giving the hedge funds so much influence that some markets can’t operate efficiently without them.
The report’s surveyed 1,281 investors, including 174 hedge funds. The investors surveyed accounted for $19.6 trillion in annual trading, according to the report.
Karan Sampson, a Greenwich consultant who cowrote the report said, “Because of the huge portion of the market that they represent, in some respects they (hedge funds) are becoming the market maker…..the broker is going to have to come up with faster and better products to retain the activity of the hedge fund,” Sampson said.
Hedge funds represented 15% of all trading in bonds and derivatives in the 12-month period, attracting $42.1 billion in investment in the second quarter, the most since 2003, and have returned 7% to investors this year through August, according to the Chicago based Hedge Fund Research.
Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Of course, speculators may trade with other speculators as well as with hedgers. In most financial derivatives markets, the value of speculative trading is far higher than the value of true hedge trading. As well as outright speculation, derivatives traders may also look for arbitrage opportunities between different derivatives on identical or closely related underlying securities.
Other uses of derivatives are to gain an economic exposure to an underlying security in situations where direct ownership of the underlying is too costly or is prohibited by legal or regulatory restrictions, or to create a synthetic short position.
The increasing influence of hedge funds is causing investors to worry that they are increasing risk, or creating more uncertainty, in financial markets, the report said.
The report’s surveyed 1,281 investors, including 174 hedge funds. The investors surveyed accounted for $19.6 trillion in annual trading, according to the report.
Karan Sampson, a Greenwich consultant who cowrote the report said, “Because of the huge portion of the market that they represent, in some respects they (hedge funds) are becoming the market maker…..the broker is going to have to come up with faster and better products to retain the activity of the hedge fund,” Sampson said.
Hedge funds represented 15% of all trading in bonds and derivatives in the 12-month period, attracting $42.1 billion in investment in the second quarter, the most since 2003, and have returned 7% to investors this year through August, according to the Chicago based Hedge Fund Research.
Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Of course, speculators may trade with other speculators as well as with hedgers. In most financial derivatives markets, the value of speculative trading is far higher than the value of true hedge trading. As well as outright speculation, derivatives traders may also look for arbitrage opportunities between different derivatives on identical or closely related underlying securities.
Other uses of derivatives are to gain an economic exposure to an underlying security in situations where direct ownership of the underlying is too costly or is prohibited by legal or regulatory restrictions, or to create a synthetic short position.
The increasing influence of hedge funds is causing investors to worry that they are increasing risk, or creating more uncertainty, in financial markets, the report said.
18 Sept 2006
Banks and Asian Central Hedge Funds
A number of Asian central banks, among the biggest investors in U.S. government debt, are looking at alternative targets for their vast dollar holdings.
Since 1997, currency reserves at Asia’s central banks have risen to about $3 trillion, leaving fewer dollar denominated securities in which hedge funds can trade, putting hedge funds on the defensive.
A report showing the U.S. economy is holding its ground may drive the dollar higher. Central banks such as the People’s Bank of China may see that as a perfect opportunity to sell a chunk of their U.S. holdings, pushing the market in a direction that traders don’t expect.
Central banks often carefully choose the moments when they expect an increase in market liquidity, when Federal Reserve officials speak or Japan releases inflation data, to make adjustments in their holdings. More and more, it’s turning Asia’s central banks into market heavyweights.
In the last couple of years, many speculators bet on a drop in U.S. debt prices. That left plenty of securities for purchases by foreign central banks.
The issue may be high on the list of topics discussed at next week’s IMF meeting in Singapore. It’s not about looking out for hedge funds; it’s about taming volatility in economies. Yet it’s also about exploring the wisdom of central banks amassing ever-growing stockpiles of reserves.
A recent paper from the Bank for International Settlements underlines the urgency. In it, BIS staffers Madhusudan Mohanty and Philip Turner express surprise that the reserve buildup hasn’t caused inflation.
In Taiwan, the current system for managing the nation’s $206.63 billion in reserves, the third-largest in the world, “might not be an efficient use of our resources,” says government minister Hu Sheng-cheng. Taiwan’s central bank has accumulated “too much” foreign exchange from Taiwanese exporters and from inflows to its capital markets, he says. Mr. Hu is heading a task force that will announce in the next few weeks details of a plan to use reserves to help local companies buy machinery and intellectual property rights overseas, he says.
Elsewhere in Asia in recent weeks, however, some governments have begun discussing plans to chip away at their dollar mountains. The initial amounts are small, but taken together they send a clear signal. South Korea’s plans are the most ambitious and could have the biggest impact on the dollar.
The International Monetary Fund’s last meeting in Asia was in 1997 and featured a debate about hedge funds. U.S. Treasury Secretary Robert Rubin argued that hedge funds were a vital source of liquidity when markets dry up. Asian policy makers saw them as predators causing undue volatility and overwhelming central banks. Either way, hedge funds are taking a backseat in Asia to the new Asian central banks.
Since 1997, currency reserves at Asia’s central banks have risen to about $3 trillion, leaving fewer dollar denominated securities in which hedge funds can trade, putting hedge funds on the defensive.
A report showing the U.S. economy is holding its ground may drive the dollar higher. Central banks such as the People’s Bank of China may see that as a perfect opportunity to sell a chunk of their U.S. holdings, pushing the market in a direction that traders don’t expect.
Central banks often carefully choose the moments when they expect an increase in market liquidity, when Federal Reserve officials speak or Japan releases inflation data, to make adjustments in their holdings. More and more, it’s turning Asia’s central banks into market heavyweights.
In the last couple of years, many speculators bet on a drop in U.S. debt prices. That left plenty of securities for purchases by foreign central banks.
The issue may be high on the list of topics discussed at next week’s IMF meeting in Singapore. It’s not about looking out for hedge funds; it’s about taming volatility in economies. Yet it’s also about exploring the wisdom of central banks amassing ever-growing stockpiles of reserves.
A recent paper from the Bank for International Settlements underlines the urgency. In it, BIS staffers Madhusudan Mohanty and Philip Turner express surprise that the reserve buildup hasn’t caused inflation.
In Taiwan, the current system for managing the nation’s $206.63 billion in reserves, the third-largest in the world, “might not be an efficient use of our resources,” says government minister Hu Sheng-cheng. Taiwan’s central bank has accumulated “too much” foreign exchange from Taiwanese exporters and from inflows to its capital markets, he says. Mr. Hu is heading a task force that will announce in the next few weeks details of a plan to use reserves to help local companies buy machinery and intellectual property rights overseas, he says.
Elsewhere in Asia in recent weeks, however, some governments have begun discussing plans to chip away at their dollar mountains. The initial amounts are small, but taken together they send a clear signal. South Korea’s plans are the most ambitious and could have the biggest impact on the dollar.
The International Monetary Fund’s last meeting in Asia was in 1997 and featured a debate about hedge funds. U.S. Treasury Secretary Robert Rubin argued that hedge funds were a vital source of liquidity when markets dry up. Asian policy makers saw them as predators causing undue volatility and overwhelming central banks. Either way, hedge funds are taking a backseat in Asia to the new Asian central banks.
Fund of Hedge Fund Investment
According to a Reuters poll this week, funds of hedge fund managers have downgraded expectations for returns over the next six months as global growth and a commodities bull run cooled.
A fund of hedge funds is an investment company that invests in hedge funds, rather than investing in individual securities. Not all funds of hedge funds register with the SEC. Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.
The quarterly survey of 13 funds of hedge fund managers, which together manage more than $100 billion, showed they expected average returns, with only a few strategies, such as emerging markets, anticipated to bring above average results.
The poll, carried out between August 30 and September 8, showed a shift down in sentiment from the last survey, when half of all strategies were forecast to deliver superior returns in one or both of the following two quarters.
While some managers expect to benefit from an increase in volatility that has gripped markets in recent months, most are turning to strategies that aim to offer consistent returns in any market cycle, such as multi-strategy hedge funds which allocate funds to various sectors and regions.
And while managers trimmed down their exposure to emerging markets, they also forecast above average returns there in the fourth quarter this year.
These funds accounted for 44 percent of new money in 2005, down from 50 percent a year before. Total assets covered by the survey stood at $1.26 trillion (670 billion pounds) last year, up by about a fifth on 2004.
Investors have been encouraged to look beyond the traditional asset strongholds of listed equities, bonds and cash in recent years to reduce exposure to volatile stocks and be sure of getting income they need as populations age.
Funds of hedge funds allow investors to spread their money among a variety of hedge fund strategies in a single package deal.
Last year, pension funds globally invested more than $77 billion pounds of new money in alternative assets, up from $62 billion in 2004.
Property took the biggest share of pension funds’ new money to alternatives, at 35 percent, followed by 34 percent into funds of hedge funds.
Retirement funds are the single largest holder of alternative assets, accounting for about $465 billion, or 37 percent, of the total assets covered by the survey.
A fund of hedge funds is an investment company that invests in hedge funds, rather than investing in individual securities. Not all funds of hedge funds register with the SEC. Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.
The quarterly survey of 13 funds of hedge fund managers, which together manage more than $100 billion, showed they expected average returns, with only a few strategies, such as emerging markets, anticipated to bring above average results.
The poll, carried out between August 30 and September 8, showed a shift down in sentiment from the last survey, when half of all strategies were forecast to deliver superior returns in one or both of the following two quarters.
While some managers expect to benefit from an increase in volatility that has gripped markets in recent months, most are turning to strategies that aim to offer consistent returns in any market cycle, such as multi-strategy hedge funds which allocate funds to various sectors and regions.
And while managers trimmed down their exposure to emerging markets, they also forecast above average returns there in the fourth quarter this year.
These funds accounted for 44 percent of new money in 2005, down from 50 percent a year before. Total assets covered by the survey stood at $1.26 trillion (670 billion pounds) last year, up by about a fifth on 2004.
Investors have been encouraged to look beyond the traditional asset strongholds of listed equities, bonds and cash in recent years to reduce exposure to volatile stocks and be sure of getting income they need as populations age.
Funds of hedge funds allow investors to spread their money among a variety of hedge fund strategies in a single package deal.
Last year, pension funds globally invested more than $77 billion pounds of new money in alternative assets, up from $62 billion in 2004.
Property took the biggest share of pension funds’ new money to alternatives, at 35 percent, followed by 34 percent into funds of hedge funds.
Retirement funds are the single largest holder of alternative assets, accounting for about $465 billion, or 37 percent, of the total assets covered by the survey.
15 Sept 2006
AmericaVest Lauches "10/10" Hedge Fund
AmericaVest Capital Management LLC has announced the launching of its new flagship hedge fund, the AmericaVest “10/10 Fund”. Drawing on over 70 years of collective experience in financial services, wealth management and asset backed investing.
The hedge fund offers investors the opportunity for a fixed priority annual return of 10%. The strategy is designed to target absolute returns and outperform traditional equity and bond markets, with low volatility. The hedge fund believes that diversification, low correlation and consistent capital appreciation can be achieved through active portfolio management and exposure to a combination of carefully selected pools of mortgage loans.
AmericaVest Capital Management doesn’t participate in any of the performance of the portfolio until after investors have received their priority return on a quarter over quarter basis. Once the specified fixed annualized priority return is achieved, investors then share in 10% of the hedge fund’s net profits, the proirity return has a high water mark.
The AmericaVest 10/10 Fund aim is to provide investors with consistent steady returns according to released statement. The minimum investment requirement is $250,000. Additions are monthly, with a 36 month lockup and quarterly redemptions.
AmericaVest Capital’s management team will also tailor Structured Portfolios to meet the specific requirements of qualified accredited, private and institutional investors.
The hedge fund’s goal is to acquire, manage, securitize and liquidate pools of performing,underperforming or distressed mortgages and hard money loans, for both commercial and residential. The fund provides diversification through an asset class which has low-correlation to other traditional assets classes
The new hedge fund will be managed by two veteran managers, Robert D.Damigella, Nelson A. Garcia and and their experienced portfolio management team.
Mr. Damigella has nearly 25 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. During most of the first 10 years of his career, Mr. Damigella was a vice president for Lehman Brothers.
Mr. Garcia has over 23 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. Mr.Garcia’s primary experience is in fixed income where he began his career at Glickenhaus & Co and then moved on to Gruntal & Co where he distributed fixed income investments to institutions and high net worth individuals.
AmericaVest Capital Managements portfolio management team, is the architect behind the fund’s core investment strategy. The team has over 24 years of experience with real estate investments. For the past 10 years,they has been managers of more than 50 individual investment funds.
More Details on the AmericaVest 10/10 Fund visit www.americavest.net and can be found in the fund’s listing on the HedgeCo.Net Free Hedge Fund Database found at www.hedgeco.net.
The hedge fund offers investors the opportunity for a fixed priority annual return of 10%. The strategy is designed to target absolute returns and outperform traditional equity and bond markets, with low volatility. The hedge fund believes that diversification, low correlation and consistent capital appreciation can be achieved through active portfolio management and exposure to a combination of carefully selected pools of mortgage loans.
AmericaVest Capital Management doesn’t participate in any of the performance of the portfolio until after investors have received their priority return on a quarter over quarter basis. Once the specified fixed annualized priority return is achieved, investors then share in 10% of the hedge fund’s net profits, the proirity return has a high water mark.
The AmericaVest 10/10 Fund aim is to provide investors with consistent steady returns according to released statement. The minimum investment requirement is $250,000. Additions are monthly, with a 36 month lockup and quarterly redemptions.
AmericaVest Capital’s management team will also tailor Structured Portfolios to meet the specific requirements of qualified accredited, private and institutional investors.
The hedge fund’s goal is to acquire, manage, securitize and liquidate pools of performing,underperforming or distressed mortgages and hard money loans, for both commercial and residential. The fund provides diversification through an asset class which has low-correlation to other traditional assets classes
The new hedge fund will be managed by two veteran managers, Robert D.Damigella, Nelson A. Garcia and and their experienced portfolio management team.
Mr. Damigella has nearly 25 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. During most of the first 10 years of his career, Mr. Damigella was a vice president for Lehman Brothers.
Mr. Garcia has over 23 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. Mr.Garcia’s primary experience is in fixed income where he began his career at Glickenhaus & Co and then moved on to Gruntal & Co where he distributed fixed income investments to institutions and high net worth individuals.
AmericaVest Capital Managements portfolio management team, is the architect behind the fund’s core investment strategy. The team has over 24 years of experience with real estate investments. For the past 10 years,they has been managers of more than 50 individual investment funds.
More Details on the AmericaVest 10/10 Fund visit www.americavest.net and can be found in the fund’s listing on the HedgeCo.Net Free Hedge Fund Database found at www.hedgeco.net.
14 Sept 2006
Citigroup offers Alternative Investment Hedge Fund arm in Asia
Citigroup offers Alternative Investment Hedge Fund arm in Asia
Citigroup has launched an administration business hedge fund in Asia Pacific. The service will benefit hedge fund mangers by easing their administration burden. In effect clients will be outsourcing their administration requirements to Citigroup.
In a statement, Matthew Brown, Asia Pacific head of fund services said, “Hedge fund managers increasingly want an integrated service provider. The combination of prime brokerage and alternative investment administration services means Citigroup is able to offer clients the complete transaction banking service. From fund administration, to global custody and cash management to prime brokerage, Citigroup can now offer the full service to clients in Asia Pacific,”
Asia Pacific is one of the fastest growing regions in terms of funds under management. According to Eurekahedege, the number of new fund launches is forecast to hit 216 in 2006, up from 95 in 2003 and assets under management have doubled since 2003, according to data from Eurekahedge.
The business will compete with firms including HSBC Holdings Plc, and Fortis to provide accounting, valuation, record keeping, reporting and other services for Asian hedge funds.
The Citigroup division, which has about 150 employees globally, already administers about $45 billion in hedge fund assets. The hedge fund administration in Asia is under the local command of managing director Matt Brown.
The firm already offers these services elsewhere in the world, as the world’s largest bank, Citibank said it had launched its hedge fund administration business into Asia, hoping to win a slice of the fast growing market. It established its hedge-fund administration services originally in the United States in December 2004, and now has $45 billion in assets under administration and employs a roster of 150 staff.
Citigroup is a leading provider of alternative investment around the world and the launch of this servicing capability in Asia Pacific will complement the growth of the emerging markets.
Citigroup has launched an administration business hedge fund in Asia Pacific. The service will benefit hedge fund mangers by easing their administration burden. In effect clients will be outsourcing their administration requirements to Citigroup.
In a statement, Matthew Brown, Asia Pacific head of fund services said, “Hedge fund managers increasingly want an integrated service provider. The combination of prime brokerage and alternative investment administration services means Citigroup is able to offer clients the complete transaction banking service. From fund administration, to global custody and cash management to prime brokerage, Citigroup can now offer the full service to clients in Asia Pacific,”
Asia Pacific is one of the fastest growing regions in terms of funds under management. According to Eurekahedege, the number of new fund launches is forecast to hit 216 in 2006, up from 95 in 2003 and assets under management have doubled since 2003, according to data from Eurekahedge.
The business will compete with firms including HSBC Holdings Plc, and Fortis to provide accounting, valuation, record keeping, reporting and other services for Asian hedge funds.
The Citigroup division, which has about 150 employees globally, already administers about $45 billion in hedge fund assets. The hedge fund administration in Asia is under the local command of managing director Matt Brown.
The firm already offers these services elsewhere in the world, as the world’s largest bank, Citibank said it had launched its hedge fund administration business into Asia, hoping to win a slice of the fast growing market. It established its hedge-fund administration services originally in the United States in December 2004, and now has $45 billion in assets under administration and employs a roster of 150 staff.
Citigroup is a leading provider of alternative investment around the world and the launch of this servicing capability in Asia Pacific will complement the growth of the emerging markets.
Singapore Encouraging Hedge Fund Growth
Tokyo is currently Asia’s biggest currency market, bur Singapore now too will target hedge funds, commodities trading and Islamic finance to sustain growth, said Heng Swee Keat, managing director of the Central Bank of Singapore.
After seeing the booming economies of emerging BRIC markets; India and China, Singapore is also trying to cash in on the region’s growing number of millionaires.
The Monetary Authority of Singapore predicts “very strong growth” in asset management, which stood at $458 billion in 2005 after five years of expansion. The $118 billion economy expanded 6.4 percent in 2005. Financial services account for about 10 percent of gross domestic product.
Singapore beat 174 other nations to take first place in the World Bank’s annual ranking of business conditions, which looks at property rights, taxes, access to credit, labor laws and regulations on customs and licenses.
The Singapore government is also offering tax breaks as incentives to attract hedge funds and companies engaged in derivatives trading. There are over 100 hedge funds in Singapore overseeing about $10 billion in total assets, according to the central bank.
After seeing the booming economies of emerging BRIC markets; India and China, Singapore is also trying to cash in on the region’s growing number of millionaires.
The Monetary Authority of Singapore predicts “very strong growth” in asset management, which stood at $458 billion in 2005 after five years of expansion. The $118 billion economy expanded 6.4 percent in 2005. Financial services account for about 10 percent of gross domestic product.
Singapore beat 174 other nations to take first place in the World Bank’s annual ranking of business conditions, which looks at property rights, taxes, access to credit, labor laws and regulations on customs and licenses.
The Singapore government is also offering tax breaks as incentives to attract hedge funds and companies engaged in derivatives trading. There are over 100 hedge funds in Singapore overseeing about $10 billion in total assets, according to the central bank.
Fink Steps Down from MAN Hedge Fund
Stanley Fink, the chief executive of Man Group hedge fund is stepping down as chief executive after almost twenty years at the company. He will be succeeded on 1 April 2007, by Peter Clarke, the firm’s finance director, according to MAN group.
Mr Fink took over as chief executive in 2000 and led the transformation of Man Group from a commodities trader into a hedge fund manager. During his tenure as CEO the firm has seen its investment funds under management grow from $4.7 billion to over $54 billion at 30 June 2006, while pretax profits have risen to $1.2 billion.
Mr Clarke has worked at Man for the past 13 years, has been finance director for the last six. Analysts said the transition at the top would do little to shake investor confidence.
Clarke studied law at Queens’ College in Cambridge, England, and became a solicitor in 1985. After a stint at the law firm of Slaughter and May in London, he worked in mergers and acquisitions at Morgan Grenfell and Citicorp.
Harvey McGrath, Chairman of Man Group said in a statement, “Stanley has indicated to the board his wishes to become nonexecutive, not least in order to be able to commit more time to personal interests, in particular his philanthropic activities,”
Stanley Fink is valued to be worth around £8.3 billion, with his personal shareholding in value to £111 million.
Mr Fink took over as chief executive in 2000 and led the transformation of Man Group from a commodities trader into a hedge fund manager. During his tenure as CEO the firm has seen its investment funds under management grow from $4.7 billion to over $54 billion at 30 June 2006, while pretax profits have risen to $1.2 billion.
Mr Clarke has worked at Man for the past 13 years, has been finance director for the last six. Analysts said the transition at the top would do little to shake investor confidence.
Clarke studied law at Queens’ College in Cambridge, England, and became a solicitor in 1985. After a stint at the law firm of Slaughter and May in London, he worked in mergers and acquisitions at Morgan Grenfell and Citicorp.
Harvey McGrath, Chairman of Man Group said in a statement, “Stanley has indicated to the board his wishes to become nonexecutive, not least in order to be able to commit more time to personal interests, in particular his philanthropic activities,”
Stanley Fink is valued to be worth around £8.3 billion, with his personal shareholding in value to £111 million.
Canada Reports Suspicious Activty in Debt Market
The Bank of Canada warned 19 of the countries largest bond dealers not to take advantage of Canadian debt by manipulating the bond market. The bank suspected a hedge fund might have bought up a large share of the issue and used that stake to manipulate prices in its favour.
The bank issued a public statement and is making no secret of the fact that it doesn’t like to see irregular trading activity on the secondary bond market. Dealers and hedge funds could face fines of $5 million or more, or up to three times the amount of money illicitly gained. Dealers can also be kicked out of the organization, losing their rights to buy and sell bonds.
At stake is Canada’s reputation as a stable place to invest. The fact that the central bank is calling this gathering points to just how easy it has become for even small financial players and hedge funds to influence the fixed income market.
The meeting stems from an investigation of suspicious bond trading activity in the last three weeks of May, when the price spiked on benchmark government of Canada 10-year debt and derivates priced off that bond.
There are $10-billion of these bonds outstanding, but the IDA’s initial investigation turned up “insufficient grounds” for further digging.
The federal government has billions of dollars at stake in the bond market, and a smoothly functioning bond trade is crucial for the country’s economic health.
The bank issued a public statement and is making no secret of the fact that it doesn’t like to see irregular trading activity on the secondary bond market. Dealers and hedge funds could face fines of $5 million or more, or up to three times the amount of money illicitly gained. Dealers can also be kicked out of the organization, losing their rights to buy and sell bonds.
At stake is Canada’s reputation as a stable place to invest. The fact that the central bank is calling this gathering points to just how easy it has become for even small financial players and hedge funds to influence the fixed income market.
The meeting stems from an investigation of suspicious bond trading activity in the last three weeks of May, when the price spiked on benchmark government of Canada 10-year debt and derivates priced off that bond.
There are $10-billion of these bonds outstanding, but the IDA’s initial investigation turned up “insufficient grounds” for further digging.
The federal government has billions of dollars at stake in the bond market, and a smoothly functioning bond trade is crucial for the country’s economic health.
Emerging Markets see continued Hedge Fund Intrest
Recent TABB survey forcasts, surveying 81 U.S. hedge funds managing some $89 billion in early 2006, confirming research which suggests that money continues to flow into emerging market hedge funds, largely from institutional investors looking for above market returns.
Hedge fund industry assets are variously estimated to be anywhere from $1.2 trillion to $1.5 trillion. U.S. hedge funds are expected to dramatically raise their investment in overseas markets in coming years as domestic markets get more crowded and returns diminish, according to analysis released on late last week.
The biggest percentage investment increases are expected to be in Asia Pacific markets, which could see U.S. hedge fund assets nearly double to $107 billion from 2006 to 2008, according to TABB Group, an independent research firm.
But in dollars, European markets are expected to be the biggest beneficiaries of U.S. hedge fund investment, seen growing to $437 billion in 2008 from some $330 billion in 2006, TABB said.
There are currently approximately 8,500 hedge funds, they are usually private and don’t publicly disclose assets.
TABB also forecasted Latin American investment by U.S. hedge funds will grow to $29 billion in 2008 from $19 billion in 2006, while investment in other emerging markets will grow to $21 billion from $14 billion during that period.
Adam Sussman, TABB senior research analyst, said U.S. hedge funds are less likely to be concerned about recent volatility in emerging markets than retail investors.
Overseas investing “is a continuing trend. I don’t think they are going to be scared off by a few volatile months,” said Sussman in an interview with Reuters. “Long term, more and more hedge funds are going to be invested in emerging markets.”
Hedge fund industry assets are variously estimated to be anywhere from $1.2 trillion to $1.5 trillion. U.S. hedge funds are expected to dramatically raise their investment in overseas markets in coming years as domestic markets get more crowded and returns diminish, according to analysis released on late last week.
The biggest percentage investment increases are expected to be in Asia Pacific markets, which could see U.S. hedge fund assets nearly double to $107 billion from 2006 to 2008, according to TABB Group, an independent research firm.
But in dollars, European markets are expected to be the biggest beneficiaries of U.S. hedge fund investment, seen growing to $437 billion in 2008 from some $330 billion in 2006, TABB said.
There are currently approximately 8,500 hedge funds, they are usually private and don’t publicly disclose assets.
TABB also forecasted Latin American investment by U.S. hedge funds will grow to $29 billion in 2008 from $19 billion in 2006, while investment in other emerging markets will grow to $21 billion from $14 billion during that period.
Adam Sussman, TABB senior research analyst, said U.S. hedge funds are less likely to be concerned about recent volatility in emerging markets than retail investors.
Overseas investing “is a continuing trend. I don’t think they are going to be scared off by a few volatile months,” said Sussman in an interview with Reuters. “Long term, more and more hedge funds are going to be invested in emerging markets.”
Islamic Hedge Fund Niche
Hedge fund Shariah Capital, is looking for strategic partners in the Middle East among the local banks with international funds, and major investment institutions and high net worth individuals. “Hedge funds are all about diversification” they say.
But wealthy Muslim investors in the Gulf Arab region and Asia have traditionally frowned on hedge funds because they adopt strategies that are considered forbidden by Shariah.
So several fund managers have been trying to develop Shariah compliant strategies that will emulate the strong returns of hedge funds and tap some of the estimated $750bn in Islamic assets parked equity and property related funds.
The ideal ‘fund of caution’ for the Arabian investor is an Islamic hedge fund of funds, argues Eric Meyer, President and CEO of US based Shariah Capital who visited Dubai for the Islamic Funds World Conference to promote what is believed to be the first Shariah compliant fund of hedge funds.
“Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. This is one reason for their strength. It is true that borrowing by hedge funds improves return in a bull market but this will also magnify losses in a downturn.” Meyer said.
Amiri, a UK-based Islamic investment manager with a partner in Bahrain, believes it has found a Sharia compliant way to emulate one of the conventional hedge fund strategies short selling. He plans to launch a global long short equity hedge fund in 2007 that it says will comply with Shariah.
A conventional short is forbidden by shariah because it requires a hedge fund to sell something it does not own, while pay out interest to brokers, considered usury in Islam.
UK-based investment manager said the $1.3tn global hedge fund industry plans to develop a viable $50bn Islamic niche market in the next three years.
But wealthy Muslim investors in the Gulf Arab region and Asia have traditionally frowned on hedge funds because they adopt strategies that are considered forbidden by Shariah.
So several fund managers have been trying to develop Shariah compliant strategies that will emulate the strong returns of hedge funds and tap some of the estimated $750bn in Islamic assets parked equity and property related funds.
The ideal ‘fund of caution’ for the Arabian investor is an Islamic hedge fund of funds, argues Eric Meyer, President and CEO of US based Shariah Capital who visited Dubai for the Islamic Funds World Conference to promote what is believed to be the first Shariah compliant fund of hedge funds.
“Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. This is one reason for their strength. It is true that borrowing by hedge funds improves return in a bull market but this will also magnify losses in a downturn.” Meyer said.
Amiri, a UK-based Islamic investment manager with a partner in Bahrain, believes it has found a Sharia compliant way to emulate one of the conventional hedge fund strategies short selling. He plans to launch a global long short equity hedge fund in 2007 that it says will comply with Shariah.
A conventional short is forbidden by shariah because it requires a hedge fund to sell something it does not own, while pay out interest to brokers, considered usury in Islam.
UK-based investment manager said the $1.3tn global hedge fund industry plans to develop a viable $50bn Islamic niche market in the next three years.
Hedge Fund Hurricane
Hedge funds are embracing the risk of CAT, or catostrophe bonds, as insurers sell more of the securities to protect themselves from increasingly unstable weather triggered by global warming.
After seeing yields of as much as 40 percentage points more than investment grade debt, investors forecast sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year.
A CAT, or catastrophe bond is high yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. Interest generally ranges between 4 percent and 16 percent.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
Now these investors have placed a billion-dollar bet that another Hurricane Katrina won’t hit the U.S. coastline. A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy.
After the busy 2004 storm season, in which four hurricanes hit Florida, and last year, when hurricanes Katrina and Rita devastated the Gulf Coast, more cat bonds are being issued than ever. If a big-enough storm hits, the investors could lose everything.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
Comments
After seeing yields of as much as 40 percentage points more than investment grade debt, investors forecast sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year.
A CAT, or catastrophe bond is high yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. Interest generally ranges between 4 percent and 16 percent.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
Now these investors have placed a billion-dollar bet that another Hurricane Katrina won’t hit the U.S. coastline. A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy.
After the busy 2004 storm season, in which four hurricanes hit Florida, and last year, when hurricanes Katrina and Rita devastated the Gulf Coast, more cat bonds are being issued than ever. If a big-enough storm hits, the investors could lose everything.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
Comments
Oppenheim to launch internal Hedge Fund
Sal Oppenheim Jr. & Cie. has plans to invest E 150 million with a Zurich based hedge fund that will operate a long short global equities investment. The hedge fund is aiming to raise E 300 million to E 400 million in funds managed, according to sources.
Oppenheim’s investment involves just over 1% of its overall E 136 billion in assets under management. Of Oppenheim’s E 136 billion total assets, £6.3 billion is managed by their Swiss subsidiary.
The in house hedge fund is part of a push at Oppenheim’s Swiss bank into investment banking under Siegfried Piel, a partner in the Swiss subsidiary.
Other private banks such as EFG International, which last week saw its CMA Global Hedge PCC Ltd. raise $402 million in an initial public offering. Vontobel Holding AG, bought a large stake in hedge fund house Harcourt last year, and larger banks such as Swiss giant UBS, have financed hedge funds within their operations as a way of stemming defections of key executives and traders for hedge funds.
Shares at Oppenheim are up in price at period end 2006, at E 81.90, compared with last years E 65.32.
Oppenheim’s investment involves just over 1% of its overall E 136 billion in assets under management. Of Oppenheim’s E 136 billion total assets, £6.3 billion is managed by their Swiss subsidiary.
The in house hedge fund is part of a push at Oppenheim’s Swiss bank into investment banking under Siegfried Piel, a partner in the Swiss subsidiary.
Other private banks such as EFG International, which last week saw its CMA Global Hedge PCC Ltd. raise $402 million in an initial public offering. Vontobel Holding AG, bought a large stake in hedge fund house Harcourt last year, and larger banks such as Swiss giant UBS, have financed hedge funds within their operations as a way of stemming defections of key executives and traders for hedge funds.
Shares at Oppenheim are up in price at period end 2006, at E 81.90, compared with last years E 65.32.
Hedge Funds Dig Mining companies
Terence Ortslan, managing director of TSO & Associates, said in his analysis regarding the mining industry, “There’s a clear message that the market is more interested in cash than in building companies.” this brings to light the growing power of hedge funds in the mining sector.
With a focus on independent mining, minerals and fertilizer research for financial institutions. Ortslan brings a great deal of Investment Industry and technical experience to the world of volatile investment strategy.
An example of major companies looking to hedge funds for financing is Phelps Dodge, the Arizona-based copper producer, who has abandoned it’s pursuit of Inco, leaving Brazil’s CVRD as the only bidder for the Canadian nickel miner.
Phelps joined forces with Inco in June to help finance an improved offer by Inco for Falconbridge, another Toronto-based nickel miner. But they were unable to match a hostile bid by Xstrata, the Anglo-Swiss group, which has bought Falconbridge.
Ortslan said the battles for Falconbridge and Inco illustrated the growing trend in seeking out and using the available cash flow that hedge funds offer.
Inco held out hope that the termination of its friendly deal with Phelps might enable it to drum up interest from other potential buyers. It said management had been authorised to explore “potential value-enhancing alternatives”.
CVRD, which is the world’s largest iron ore producer but has diversified in recent years, has made an all-cash offer of C$86 a share, valuing Inco at C$16.1bn (US$14.6bn).
Terence Ortslan worked as a Senior Mining Analyst with firms such as BBN James Capel, LOM, Merrill Lynch, Deacon Barclays de Zoete Wedd Ltd. and Jones Heward. His Investment Industry experience dates back to the mid 1970’s. He is also a member of the Canadian Institute of Mining and Metallurgy, the Society of Mining and Metallurgical Engineers, the National Association of Business Economists, the Prospectors and Developers Association and the Minerals Industry Analyst Group.
With a focus on independent mining, minerals and fertilizer research for financial institutions. Ortslan brings a great deal of Investment Industry and technical experience to the world of volatile investment strategy.
An example of major companies looking to hedge funds for financing is Phelps Dodge, the Arizona-based copper producer, who has abandoned it’s pursuit of Inco, leaving Brazil’s CVRD as the only bidder for the Canadian nickel miner.
Phelps joined forces with Inco in June to help finance an improved offer by Inco for Falconbridge, another Toronto-based nickel miner. But they were unable to match a hostile bid by Xstrata, the Anglo-Swiss group, which has bought Falconbridge.
Ortslan said the battles for Falconbridge and Inco illustrated the growing trend in seeking out and using the available cash flow that hedge funds offer.
Inco held out hope that the termination of its friendly deal with Phelps might enable it to drum up interest from other potential buyers. It said management had been authorised to explore “potential value-enhancing alternatives”.
CVRD, which is the world’s largest iron ore producer but has diversified in recent years, has made an all-cash offer of C$86 a share, valuing Inco at C$16.1bn (US$14.6bn).
Terence Ortslan worked as a Senior Mining Analyst with firms such as BBN James Capel, LOM, Merrill Lynch, Deacon Barclays de Zoete Wedd Ltd. and Jones Heward. His Investment Industry experience dates back to the mid 1970’s. He is also a member of the Canadian Institute of Mining and Metallurgy, the Society of Mining and Metallurgical Engineers, the National Association of Business Economists, the Prospectors and Developers Association and the Minerals Industry Analyst Group.
Exotic Mortgages and Hedge funds
Hedge funds have been particularly active in the ARM mortgage trade, buying risky loans directly from banks and cutting out the middle men.
These hedge funds are willing to buy risky loans, as they can set their own terms that help insulate them from losses. And the banks make up the difference by taking more from the buyers, many of whom qualify for lower rates based on their credit histories.
Some $182 billion of the option ARMs written in 2004 and 2005 and an additional $83 billion this year have been sold to investors as mortgage-backed securities, says Bear, Stearns & Co.
To get the deals done, banks have turned increasingly to unregulated mortgage brokers such as hedge funds, who now account for 80% of all mortgage originations, double what it was 10 years ago,
Research forecasts total defaults of $300 billion across all types of loans, not just option ARMs, over the next five years, with lenders losing only $100 billion. Leaving the majority of the losses on the homeowners heads, as the less a borrower chooses to pay now, the more is tacked onto the balance, with steep penalties to prevent them from refinancing.
The ARM is an adjustable rate mortgage whose interest rate can go up or down. At first glance, an ARM looks like a good deal next to a fixed rate, as the average ARM rate nationwide is usually less than the average fixed-rate.
With an ARM the payments are lower for the first three or four years, and will stay low, provided interest rates in general don’t increase. If they do, the lender typically will adjust the ARM rate upward by a maximum of 2 percentage points a year, and a max of 6 percent over the entire loan period.
Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year. So after prolonging the boom, these exotic mortgages could worsen the bust.
These hedge funds are willing to buy risky loans, as they can set their own terms that help insulate them from losses. And the banks make up the difference by taking more from the buyers, many of whom qualify for lower rates based on their credit histories.
Some $182 billion of the option ARMs written in 2004 and 2005 and an additional $83 billion this year have been sold to investors as mortgage-backed securities, says Bear, Stearns & Co.
To get the deals done, banks have turned increasingly to unregulated mortgage brokers such as hedge funds, who now account for 80% of all mortgage originations, double what it was 10 years ago,
Research forecasts total defaults of $300 billion across all types of loans, not just option ARMs, over the next five years, with lenders losing only $100 billion. Leaving the majority of the losses on the homeowners heads, as the less a borrower chooses to pay now, the more is tacked onto the balance, with steep penalties to prevent them from refinancing.
The ARM is an adjustable rate mortgage whose interest rate can go up or down. At first glance, an ARM looks like a good deal next to a fixed rate, as the average ARM rate nationwide is usually less than the average fixed-rate.
With an ARM the payments are lower for the first three or four years, and will stay low, provided interest rates in general don’t increase. If they do, the lender typically will adjust the ARM rate upward by a maximum of 2 percentage points a year, and a max of 6 percent over the entire loan period.
Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year. So after prolonging the boom, these exotic mortgages could worsen the bust.
Overstock at Overstock.com
Hedge funds have been practicing a tactic called “naked short selling”, which means selling the same piece of property several times over such as shares in companies like Overstock.com.
Patrick Byrne has been fighting an ongoing crusade against the hedge funds and stock market speculators that use these tactics, since his shares went into freefall 18 months ago. He argues that speculators are using dubious tactics to drive down his company’s share price unfairly.
Naked short selling, or naked shorting, is a controversial form of selling shares of securities short. Some forms of naked short-selling are legal and some are not. The controversy has surrounded naked short-selling aimed at profiting from share price declines.
As Overstock.com’s founder and chief executive, Byrne told the Herald that he is willing to consider yanking his company from the stock market altogether through a management buyout worth well over half a billion dollars.
“Management is certainly reviewing all such options open to us,” he said. “If the right…fund or buyout firm came along and wanted to be our partner, it is something we would look at.”
Byrne says as it is, nearly four Overstock shares have been promised for sale for each real one in public hands. Which has caused a share price collapse when the people who think they own the stock will find they only have an IOU.
This practice discourages the smaller, entrepreneurial companies from coming to the stock market.
Byrne says the Securities & Exchange Commission should have a closer look at these tactics and put a stop to it, he said, “The shorts (speculators) are very tight with the people in the Department of Justice, the SEC, the FBI… Canada, Caribbean…I think this leads back to organized crime in central and eastern Europe. This is all mobbed up.”
Patrick Byrne received a bachelor’s degree from Dartmouth College, a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.
Patrick Byrne has been fighting an ongoing crusade against the hedge funds and stock market speculators that use these tactics, since his shares went into freefall 18 months ago. He argues that speculators are using dubious tactics to drive down his company’s share price unfairly.
Naked short selling, or naked shorting, is a controversial form of selling shares of securities short. Some forms of naked short-selling are legal and some are not. The controversy has surrounded naked short-selling aimed at profiting from share price declines.
As Overstock.com’s founder and chief executive, Byrne told the Herald that he is willing to consider yanking his company from the stock market altogether through a management buyout worth well over half a billion dollars.
“Management is certainly reviewing all such options open to us,” he said. “If the right…fund or buyout firm came along and wanted to be our partner, it is something we would look at.”
Byrne says as it is, nearly four Overstock shares have been promised for sale for each real one in public hands. Which has caused a share price collapse when the people who think they own the stock will find they only have an IOU.
This practice discourages the smaller, entrepreneurial companies from coming to the stock market.
Byrne says the Securities & Exchange Commission should have a closer look at these tactics and put a stop to it, he said, “The shorts (speculators) are very tight with the people in the Department of Justice, the SEC, the FBI… Canada, Caribbean…I think this leads back to organized crime in central and eastern Europe. This is all mobbed up.”
Patrick Byrne received a bachelor’s degree from Dartmouth College, a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.
SEC Drops Fraud Charges
Paul Flynn, the former Canadian Imperial Bank of Commerce official who was arrested two years ago and charged with five felonies, is free of the legal entanglement which developed at his former job as a managing director at Canadian Imperial Bank of Commerce.
The SEC’s enforcement division, which has three weeks to appeal the ruling to the five-member commission, was seeking to have Flynn fined up to $2 million and banned from the securities industry. The division said in its February 2004 lawsuit that from 2001 to 2003 Flynn “knew or was reckless in not knowing” that the hedge funds, Canary Capital Partners LLC and Samaritan Asset Management were engaging in the improper trades.
But Judge Robert G. Mahony, who presided over a trial in March, ruled that Flynn was not aware that any actions he took helped the hedge funds make improper trades. He ruled that Security Trust, a Phoenix-based retirement plan, and also the two hedge funds, had broken security rules with their trading strategies.
Last November, state Attorney General Eliot Spitzer requested and got the dismissal of five felony counts he had lodged against Flynn. A criminal conviction could have resulted in Flynn, a Canadian citizen, being deported from the United States.
“We are very pleased with the SEC’s decision not to appeal,” he said. “It finally puts an end to Paul’s long nightmare.”
Flynn “is now eager to get back to life as normal, along with his wife and children,” Piper Hall, spokeswoman at Flynn’s Washington-based law firm, Dickstein Shapiro, said in an e-mail.
The SEC’s enforcement division, which has three weeks to appeal the ruling to the five-member commission, was seeking to have Flynn fined up to $2 million and banned from the securities industry. The division said in its February 2004 lawsuit that from 2001 to 2003 Flynn “knew or was reckless in not knowing” that the hedge funds, Canary Capital Partners LLC and Samaritan Asset Management were engaging in the improper trades.
But Judge Robert G. Mahony, who presided over a trial in March, ruled that Flynn was not aware that any actions he took helped the hedge funds make improper trades. He ruled that Security Trust, a Phoenix-based retirement plan, and also the two hedge funds, had broken security rules with their trading strategies.
Last November, state Attorney General Eliot Spitzer requested and got the dismissal of five felony counts he had lodged against Flynn. A criminal conviction could have resulted in Flynn, a Canadian citizen, being deported from the United States.
“We are very pleased with the SEC’s decision not to appeal,” he said. “It finally puts an end to Paul’s long nightmare.”
Flynn “is now eager to get back to life as normal, along with his wife and children,” Piper Hall, spokeswoman at Flynn’s Washington-based law firm, Dickstein Shapiro, said in an e-mail.
Hedge Funds Show Cruise the Money
Less than a week after Paramount Pictures cut its ties with Tom Cruise ended their 14-year relationship, his company announced a deal with First and Goal L.L.C., an investor group headed by Daniel M. Snyder, owner of the Washington Redskins and chairman of the Six Flags amusement parks.
The financing is well under $10 million, according to Paula Wagner, Mr. Cruises business partner. Under the deal, Cruise-Wagner Productions will receive funds to cover overhead and develop new projects. Although she suggested last week that hedge funds were eager to invest up to $100 million in the company, it appeared yesterday that such financing had not yet materialized.
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
Mr. Cruise and Ms. Wagner, though, insisted that they had already decided to start their own company and strike out on their own before Mr. Redstone made the announcement.
The financing is well under $10 million, according to Paula Wagner, Mr. Cruises business partner. Under the deal, Cruise-Wagner Productions will receive funds to cover overhead and develop new projects. Although she suggested last week that hedge funds were eager to invest up to $100 million in the company, it appeared yesterday that such financing had not yet materialized.
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
Mr. Cruise and Ms. Wagner, though, insisted that they had already decided to start their own company and strike out on their own before Mr. Redstone made the announcement.
Hedge Fund Investors Warned of Energy Risks
The Energy Hedge Fund Center recently observed an increasing investor risk, due to the collapse of at least one energy commodity trading hedge fund, and also large reported losses at other funds and banks trading in energy commodities. The Energy Hedge Fund Center LLC offers analysis and consulting services in energy and environment.
This continues to demonstrate that energy is a risky sector for investors. Although many energy hedge funds continue to perform significantly better than funds focused on other asset classes, EHFC Principals, Peter C. Fusaro and Dr. Gary M. Vasey continue to warn investors about the additional and often poorly understood risks involved in energy.
The Energy Hedge Funds Center is set up to provide basic information on hedge funds that are active in the energy industry and trading energy commodities. Hedge Funds are highly secretive and it is difficult to obtain information about them and their strategies. This new InfoGrid, developed and maintained in association with Global Change Associates is the only online community focused on energy and environmental alternative investments.
“To some extent, due diligence has become mechanistic following pre-prepared questionnaires that were designed for more traditional investments,” reports Dr. Gary M. Vasey. “This mechanistic approach also speaks to a lack of understanding on the part of the majority of investors as to the underlying additional risks inherent in the energy industry. Energy is the hot asset class for investing but investors be warned, energy expertise is required to perform proper due diligence and to insure that effective risk mitigation is in place.”
In a recent article published by leading energy and utilities industry analysts and consultants UtiliPoint International, Inc., Dr. Vasey stated, “The moral of the story for investors is simply don’t be greedy and understand and mitigate your risks. This means understanding the energy industry in some detail but it also means performing proper due diligence on the investment vehicle that you chose, especially hedge funds.”
Peter C. Fusaro and Dr. Gary M. Vasey are also the co-authors of “Energy and Environmental Hedge Funds”, “The New Investment Paradigm” published by John Wiley.
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This continues to demonstrate that energy is a risky sector for investors. Although many energy hedge funds continue to perform significantly better than funds focused on other asset classes, EHFC Principals, Peter C. Fusaro and Dr. Gary M. Vasey continue to warn investors about the additional and often poorly understood risks involved in energy.
The Energy Hedge Funds Center is set up to provide basic information on hedge funds that are active in the energy industry and trading energy commodities. Hedge Funds are highly secretive and it is difficult to obtain information about them and their strategies. This new InfoGrid, developed and maintained in association with Global Change Associates is the only online community focused on energy and environmental alternative investments.
“To some extent, due diligence has become mechanistic following pre-prepared questionnaires that were designed for more traditional investments,” reports Dr. Gary M. Vasey. “This mechanistic approach also speaks to a lack of understanding on the part of the majority of investors as to the underlying additional risks inherent in the energy industry. Energy is the hot asset class for investing but investors be warned, energy expertise is required to perform proper due diligence and to insure that effective risk mitigation is in place.”
In a recent article published by leading energy and utilities industry analysts and consultants UtiliPoint International, Inc., Dr. Vasey stated, “The moral of the story for investors is simply don’t be greedy and understand and mitigate your risks. This means understanding the energy industry in some detail but it also means performing proper due diligence on the investment vehicle that you chose, especially hedge funds.”
Peter C. Fusaro and Dr. Gary M. Vasey are also the co-authors of “Energy and Environmental Hedge Funds”, “The New Investment Paradigm” published by John Wiley.
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Fake hedge funds cost Investors millions
Kirk Wright, formerly of supposed hedge fund, International Management Associates, skipped town with between $115 and $185 million after it became clear to many of his clients, which include several prominent National Football League players, that something was amiss with International’s management of their money.
After he was caught three months later by the pool at a ritzy hotel in Florida, U.S. Magistrate Stephen Brown in Miami denied the government’s request for detention on a mail fraud charge, and ordered a $1 million corporate surety bond. But before the bond is granted, Wright must prove the collateral backing the bond comes from legitimate sources.
He now also faces 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars. Additionally, Wright and his company face a federal lawsuit from the Securities and Exchange Commission filed Feb. 27 and a civil complaint filed in Georgia state court on Feb. 17.
Examples of Wright’s alleged duplicity are listed in court documents. When several investors demanded to see brokerage account statements from hedge funds in October, Wright produced statements he said were from online brokerage Ameritrade, showing over $166.6 million in assets spread across five hedge funds. To date, authorities and creditors have located less than $200,000.
In hindsight, there were many red flags at International Management: unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager. Not to mention the lavish wedding reception at his sprawling home, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, and concerts, the Bentley, the Jaguar, the Aston Martin, the BMW, and the Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright’s own mother, who’s not a plaintiff in the suits.
Another fraudulent hedge fund, GLT Venture Fund, pled guilty to federal charges that may have cost investors as much as $14 million, admitting that he lied to investors about the fraudulent operation. More than 40 investors poured money into Capital Management from September 2000 to January 2005, when the company was abruptly closed.
John Sahenk, the alias of former New York University student Hakan Yalincak, cost investors more than $7 million in a fake hedge fund scheme. The FBI seized blank checks and a counterfeit $8.8 million check in Yalincak’s name, prosecutors said. Also seized were 23 credit cards, including 13 in Yalincak’s name, and documents in the name of Yalincak’s alias. He is now pleading guilty.
Prosecutors say Terrence Gasper, chief financial officer of the Ohio state’s $15 billion insurance fund for injured workers is charged with a felony count of violating the Racketeer Influenced and Corrupt Organizations Act. He had tried to keep mounting losses in a hedge fund managed by MDL Financial Management quiet. Those losses ultimately hit $215 million, he also played a central role in the state’s $50 million rare-coin investment and the loss of $216 million of bureau money in a Bermuda-based hedge fund.
The 2006 Financial Executive Report on Risk Management surveyed financial executives about their feelings on hedge funds. Extremely popular today, hedge funds now number more than 8,000. The growth of these largely unregulated investment vehicles has been considerable, more than quadrupling their assets since 1999, today hedge funds manage close to $1 trillion.
Nearly all respondents, 92 percent, feel leery about hedge funds, reporting they do not have any of their personal funds invested in hedge funds. Accordingly, 94 percent of respondents feel hedge funds should be required to have a higher-level of transparency. Many fraud cases are dropped by the courts, as investors carry most of the responsibility as to whom they choose to invest in.
After he was caught three months later by the pool at a ritzy hotel in Florida, U.S. Magistrate Stephen Brown in Miami denied the government’s request for detention on a mail fraud charge, and ordered a $1 million corporate surety bond. But before the bond is granted, Wright must prove the collateral backing the bond comes from legitimate sources.
He now also faces 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars. Additionally, Wright and his company face a federal lawsuit from the Securities and Exchange Commission filed Feb. 27 and a civil complaint filed in Georgia state court on Feb. 17.
Examples of Wright’s alleged duplicity are listed in court documents. When several investors demanded to see brokerage account statements from hedge funds in October, Wright produced statements he said were from online brokerage Ameritrade, showing over $166.6 million in assets spread across five hedge funds. To date, authorities and creditors have located less than $200,000.
In hindsight, there were many red flags at International Management: unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager. Not to mention the lavish wedding reception at his sprawling home, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, and concerts, the Bentley, the Jaguar, the Aston Martin, the BMW, and the Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright’s own mother, who’s not a plaintiff in the suits.
Another fraudulent hedge fund, GLT Venture Fund, pled guilty to federal charges that may have cost investors as much as $14 million, admitting that he lied to investors about the fraudulent operation. More than 40 investors poured money into Capital Management from September 2000 to January 2005, when the company was abruptly closed.
John Sahenk, the alias of former New York University student Hakan Yalincak, cost investors more than $7 million in a fake hedge fund scheme. The FBI seized blank checks and a counterfeit $8.8 million check in Yalincak’s name, prosecutors said. Also seized were 23 credit cards, including 13 in Yalincak’s name, and documents in the name of Yalincak’s alias. He is now pleading guilty.
Prosecutors say Terrence Gasper, chief financial officer of the Ohio state’s $15 billion insurance fund for injured workers is charged with a felony count of violating the Racketeer Influenced and Corrupt Organizations Act. He had tried to keep mounting losses in a hedge fund managed by MDL Financial Management quiet. Those losses ultimately hit $215 million, he also played a central role in the state’s $50 million rare-coin investment and the loss of $216 million of bureau money in a Bermuda-based hedge fund.
The 2006 Financial Executive Report on Risk Management surveyed financial executives about their feelings on hedge funds. Extremely popular today, hedge funds now number more than 8,000. The growth of these largely unregulated investment vehicles has been considerable, more than quadrupling their assets since 1999, today hedge funds manage close to $1 trillion.
Nearly all respondents, 92 percent, feel leery about hedge funds, reporting they do not have any of their personal funds invested in hedge funds. Accordingly, 94 percent of respondents feel hedge funds should be required to have a higher-level of transparency. Many fraud cases are dropped by the courts, as investors carry most of the responsibility as to whom they choose to invest in.
Hedge Funds bet on Government Debt
Hedge Funds bet on Government Debt
Hedge fund speculators at the Chicago Board of Trade bet a record $35 billion that the prices of government debt will continue to rise, according to research by CBOT.
CBOT Holdings, Inc. operates a marketplace for the trading of interest rate, agricultural, equity index and metals, energy and other futures contracts, as well as options on futures contracts through its exchange subsidiary, the Board of Trade of the City of Chicago, Inc.
According to CBOT, hedge funds have 347,559 futures in contracts, and wagered that the price of 10 year Treasury notes would rise, in order to profit on their investment. The contracts would not profit from a decline. Hedge funds wager for or against their stock, meaning they can make money whether the market goes up or down.
The Commodities Futures Trading Commission reported 675,003 bets that prices will rise on 10 year notes. In its Commitments of Traders report from Washington it also said that traders believe two years of interest-rate increases by the U.S. Federal Reserve are slowing growth enough to curb inflation.
In contrast, the total of wagers on a decline were 327,444.
Hedge fund speculators at the Chicago Board of Trade bet a record $35 billion that the prices of government debt will continue to rise, according to research by CBOT.
CBOT Holdings, Inc. operates a marketplace for the trading of interest rate, agricultural, equity index and metals, energy and other futures contracts, as well as options on futures contracts through its exchange subsidiary, the Board of Trade of the City of Chicago, Inc.
According to CBOT, hedge funds have 347,559 futures in contracts, and wagered that the price of 10 year Treasury notes would rise, in order to profit on their investment. The contracts would not profit from a decline. Hedge funds wager for or against their stock, meaning they can make money whether the market goes up or down.
The Commodities Futures Trading Commission reported 675,003 bets that prices will rise on 10 year notes. In its Commitments of Traders report from Washington it also said that traders believe two years of interest-rate increases by the U.S. Federal Reserve are slowing growth enough to curb inflation.
In contrast, the total of wagers on a decline were 327,444.
Tom Cruise looking to Hedge Funds for Funding
Motion picture association Paramount pictures recently ended their 14-year association with Cruise/Wagner Productions, a company that Cruise floated with Paula Wagner. But the energetic and outspoken Tom Cruise has let rumours slip that he and Wagner had already found funding worth $100 million to produce independent films, something that the two had been planning for a while, adding that two hedge funds had already committed to the $100 million.
A recent wave of hedge funds and private equity investment in the business have been popping up to help steady studio film slates, allowing studios to finance pics at stratospheric budgets.
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.”
As austerity becomes the norm, executives will be forced to rationalize more unconventional projects, or lavish producer deals. The latter may look like a waste of money on Wall Street, but for studios they can mean a steady flow ideas into the system.
The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over US$2 billion globally and were responsible for 15 per cent of the gross income the studio generated in the last 10 years.
Wagner said of the new hedge fund financial plan, “This is something we’ve dreamt of, to have an independently financed production company, where we can decide the films that we make, from high-concept to more personal pictures. I think we’re in the forefront of a trend. For us, this is a very new and exciting direction. We look forward to working with all the studios,”
The Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” with “two top hedge funds.” The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $200 to $300 million per year.
A recent wave of hedge funds and private equity investment in the business have been popping up to help steady studio film slates, allowing studios to finance pics at stratospheric budgets.
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.”
As austerity becomes the norm, executives will be forced to rationalize more unconventional projects, or lavish producer deals. The latter may look like a waste of money on Wall Street, but for studios they can mean a steady flow ideas into the system.
The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over US$2 billion globally and were responsible for 15 per cent of the gross income the studio generated in the last 10 years.
Wagner said of the new hedge fund financial plan, “This is something we’ve dreamt of, to have an independently financed production company, where we can decide the films that we make, from high-concept to more personal pictures. I think we’re in the forefront of a trend. For us, this is a very new and exciting direction. We look forward to working with all the studios,”
The Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” with “two top hedge funds.” The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $200 to $300 million per year.
Former Hedge Fund Manager creates financial Cartoon Website
“Imagine Jon Stewart, Bill Maher and Shrek, rolled into a cohesive and scalable platform, providing valuable market insight with snarky humour and cunning wit.” This is how Todd Harrison, former president of Cramer Berkowitz, a $400 million hedge fund, describes his new creation.
The web site was started in 2002 as Harrison’s blog, he used personifications of the traditional Wall Street bull and bear characters to represent his current trading stance, and other characters such as “Snapper” the turtle (who represents a “snap back” in the market). His blog used these characters’ conversations, with him and with each other, to illustrate the multiple competing viewpoints of stock market dynamics. Collectively, he called these creations “critters” or “minyans”.
At minyanville.com, Hoofy, Boo and the other minyans have been given form as cartoon characters. New content appears on the site every day that the American stock markets are open. “News & Views” consists of about ten articles per day of a page or more in length, usually including at least two by Todd Harrison and two by Minyanville Staff. Other regular writers include John Succo, Kevin A. Tuttle and Laurie McGuirk.
“Buzz & Banter” provides up to forty short submissions per day from a wider set of contributors. Buzz & Banter allows dialogue among contributors, minute-by-minute market commentary, opinions and business news throughout the trading day from market pros.
Harrison gave up a 15 year career in fast paced and physically draining world of hedge funds and Wall Street trading houses to found Minyanville, the ambition being to do for finance what Sesame Street did for education, what MTV did for music and what ESPN did for sports.
“The vision of the company is to create a fiscal fitness franchise, or Walt Disney meets Wall Street,” said Harrison, a resident of New York City.
Minyanville now has eight employees and 33 contract writers who contribute content to the site. The site is generating 1.6 million to 2 million page views monthly from more than 100 countries, with the traffic doubling since January, according to Wassong. Much of the site is free and is advertising-supported.
The web site was started in 2002 as Harrison’s blog, he used personifications of the traditional Wall Street bull and bear characters to represent his current trading stance, and other characters such as “Snapper” the turtle (who represents a “snap back” in the market). His blog used these characters’ conversations, with him and with each other, to illustrate the multiple competing viewpoints of stock market dynamics. Collectively, he called these creations “critters” or “minyans”.
At minyanville.com, Hoofy, Boo and the other minyans have been given form as cartoon characters. New content appears on the site every day that the American stock markets are open. “News & Views” consists of about ten articles per day of a page or more in length, usually including at least two by Todd Harrison and two by Minyanville Staff. Other regular writers include John Succo, Kevin A. Tuttle and Laurie McGuirk.
“Buzz & Banter” provides up to forty short submissions per day from a wider set of contributors. Buzz & Banter allows dialogue among contributors, minute-by-minute market commentary, opinions and business news throughout the trading day from market pros.
Harrison gave up a 15 year career in fast paced and physically draining world of hedge funds and Wall Street trading houses to found Minyanville, the ambition being to do for finance what Sesame Street did for education, what MTV did for music and what ESPN did for sports.
“The vision of the company is to create a fiscal fitness franchise, or Walt Disney meets Wall Street,” said Harrison, a resident of New York City.
Minyanville now has eight employees and 33 contract writers who contribute content to the site. The site is generating 1.6 million to 2 million page views monthly from more than 100 countries, with the traffic doubling since January, according to Wassong. Much of the site is free and is advertising-supported.
Hedge Funds Score in Adult Entertainment
New Frontier Media, producer and distributor of adult themed entertainment has been put into the hedge fund spotlight. One of the company’s biggest shareholders is Steel Partners, a hedge fund run by Warren Lichtenstein, a manager with a reputation as a demanding investor and exercising shareholder rights when necessary.
His activist hedge fund has invested in over 100 companies, primarily in the United States and Japan. Lichtenstein is active in many of his investments attempting to increase transparency and corporate governance levels of publicly listed firms. Steel Partners currently has a reported $4 billion in assets under management.
Earnings at New Frontier Media (NOOF) have increased by 40%as the video porn company expects to generate revenue between $60 million and $62 million. Under the TEN trademark, the Company delivers seven full time, adult themed pay per view networks to cable and satellite operators across the United States.
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His activist hedge fund has invested in over 100 companies, primarily in the United States and Japan. Lichtenstein is active in many of his investments attempting to increase transparency and corporate governance levels of publicly listed firms. Steel Partners currently has a reported $4 billion in assets under management.
Earnings at New Frontier Media (NOOF) have increased by 40%as the video porn company expects to generate revenue between $60 million and $62 million. Under the TEN trademark, the Company delivers seven full time, adult themed pay per view networks to cable and satellite operators across the United States.
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PlusFunds Files $1 Lawsuit
A bankrupt hedge-fund manager, PlusFunds Group Inc, sued S&P (Standard and Poor’s) over its decision to pull the plug on the hedge fund index.
In the lawsuit filed with the U.S. Bankruptcy Court in Manhattan, PlusFunds contended S&P violated the terms of a license agreement by terminating the Hedge Fund Index on June 30. It asked a judge to order S&P to sell its copyright and other proprietary rights involving the index to Plusfunds for $1.
PlusFunds, which has said it expects to go out of business by the end of the month, has said that if it obtains those rights it can sell them for a “substantial” profit. It filed its lawsuit Wednesday, just as U.S. Bankruptcy Judge James M. Peck ruled that S&P’s termination of its agreement with PlusFunds didn’t violate bankruptcy laws.
The company filed a voluntary petition under chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York. This agreement is subject to an auction seeking higher or better offers pursuant to the bid procedures established by the Court.
In pulling the plug on the Hedge Fund Index, S&P said PlusFunds’ data had become unreliable partly because as many as eight of the 40 managers whose funds were tracked by the index had ended their dealings with PlusFunds. In addition, it said, some of the data PlusFunds provided last month contained “material errors” that were caught only because of S&P’s vigilance.
PlusFunds objected to the termination of its agreement with S&P, saying S&P “knowingly and intentionally” broke bankruptcy law by deciding unilaterally to kill the hedge fund index. That decision gives “PlusFunds a claim for compensatory and punitive damages,” Plus Funds said in court papers earlier this month.
In the lawsuit filed with the U.S. Bankruptcy Court in Manhattan, PlusFunds contended S&P violated the terms of a license agreement by terminating the Hedge Fund Index on June 30. It asked a judge to order S&P to sell its copyright and other proprietary rights involving the index to Plusfunds for $1.
PlusFunds, which has said it expects to go out of business by the end of the month, has said that if it obtains those rights it can sell them for a “substantial” profit. It filed its lawsuit Wednesday, just as U.S. Bankruptcy Judge James M. Peck ruled that S&P’s termination of its agreement with PlusFunds didn’t violate bankruptcy laws.
The company filed a voluntary petition under chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York. This agreement is subject to an auction seeking higher or better offers pursuant to the bid procedures established by the Court.
In pulling the plug on the Hedge Fund Index, S&P said PlusFunds’ data had become unreliable partly because as many as eight of the 40 managers whose funds were tracked by the index had ended their dealings with PlusFunds. In addition, it said, some of the data PlusFunds provided last month contained “material errors” that were caught only because of S&P’s vigilance.
PlusFunds objected to the termination of its agreement with S&P, saying S&P “knowingly and intentionally” broke bankruptcy law by deciding unilaterally to kill the hedge fund index. That decision gives “PlusFunds a claim for compensatory and punitive damages,” Plus Funds said in court papers earlier this month.
Hedge Funds bet on Hurricanes
Hedge Funds bet on Hurricanes
In an article by Mike Anderson and Oliver Suess, Bloomberg poses a story with a twist on hedge funds and “catastrophe bonds.” As insurers sell more of the securities to protect themselves from increasingly unstable weather triggered by global warming.
Hurricane Katrina produced record claims of more than $90 billion last year. Hedge funds are embracing that risk, after seeing yields of as much as 40 percentage points more than investment-grade debt. Investors forecast sales of catastrophe bonds may triple to $4 billion this year.
A catastrophe bond is high-yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the issuer (insurance or reinsurance company) suffers a loss from a particular pre-defined catastrophe, then the issuer’s obligation to pay interest and/or repay the principal is either deferred or completely forgiven.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
``Global warming is leading to higher sea surface temperatures in the Atlantic, which is the most important factor for the rising intensity of hurricanes,’’ says Eberhard Faust, head of climate risk research at Munich Re’s Geo Risk Research department. The unit employs some 25 people, including scientists who analyze the likelihood of earthquakes, hurricanes and floods.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering then-record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest-risk bonds, which paid more than 39 percentage points over the London interbank offered rate, or Libor, says Martin Bisping, the Zurich-based head of risk- sharing at Swiss Re. Those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms and earthquakes in California and Japan.
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In an article by Mike Anderson and Oliver Suess, Bloomberg poses a story with a twist on hedge funds and “catastrophe bonds.” As insurers sell more of the securities to protect themselves from increasingly unstable weather triggered by global warming.
Hurricane Katrina produced record claims of more than $90 billion last year. Hedge funds are embracing that risk, after seeing yields of as much as 40 percentage points more than investment-grade debt. Investors forecast sales of catastrophe bonds may triple to $4 billion this year.
A catastrophe bond is high-yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the issuer (insurance or reinsurance company) suffers a loss from a particular pre-defined catastrophe, then the issuer’s obligation to pay interest and/or repay the principal is either deferred or completely forgiven.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
``Global warming is leading to higher sea surface temperatures in the Atlantic, which is the most important factor for the rising intensity of hurricanes,’’ says Eberhard Faust, head of climate risk research at Munich Re’s Geo Risk Research department. The unit employs some 25 people, including scientists who analyze the likelihood of earthquakes, hurricanes and floods.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering then-record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest-risk bonds, which paid more than 39 percentage points over the London interbank offered rate, or Libor, says Martin Bisping, the Zurich-based head of risk- sharing at Swiss Re. Those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms and earthquakes in California and Japan.
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Investigation into "Emerging Threat" of Hedge Funds
The head of the Bush administration’s task force on corporate crime is taking a strong stance on hedge fund regulation and investigation. Deputy Attorney General Paul McNulty said the potential for fraud in the $1.2 trillion hedge-fund industry poses an “emerging threat”
McNulty said “Wrongdoing in the lightly regulated investment pools makes them ripe for scrutiny by prosecutors, regulators and investigators. The corporate-fraud task force is also studying the scandal involving backdating stock options for executives”
Hedge fund and stock options issues have become part of the Bush administration task force agenda, they will discuss hedge-fund fraud at its next meeting at the end of this month, McNulty said. “There’s been some interest in the media recently on hedge funds, and that would be a good example of an emerging threat that we would want to talk about and ensure that we are handling,”
Last month, a federal appeals court in Washington threw out SEC rules requiring hedge funds to register with the agency and undergo inspections of their books and records. But McNulty said critics who say his unit should be shut down are wrong. “The corporate fraud task force is alive and well,” McNulty said. “The need for it in our view is still very clear and strong.”
A federal judge last month ruled that the attorney-fee tactic violated the rights of former KPMG LLP executives being tried on charges of selling illegal tax shelters. McNulty said he disagreed with the ruling. “As of today, that is the policy of the department and it will remain that way until we reach a decision that it should change in some way….We think the message has gotten out loud and clear, but that doesn’t mean we shouldn’t keep watching,” he said. “This ultimately is an environment that is enticing to those who are subject to excessive greed.’‘
Along with McNulty, the task force has or will soon have several recent additions, including incoming Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox and Reuben Jeffery, chairman of the Commodity Futures Trading Commission. The group crafts policies on pursuing corporate crime and coordinates investigations.
When the task force identifies an emerging threat, it usually will consider whether more regulation is needed and whether agencies investigating wrongdoing are properly coordinating their efforts and using their resources.
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McNulty said “Wrongdoing in the lightly regulated investment pools makes them ripe for scrutiny by prosecutors, regulators and investigators. The corporate-fraud task force is also studying the scandal involving backdating stock options for executives”
Hedge fund and stock options issues have become part of the Bush administration task force agenda, they will discuss hedge-fund fraud at its next meeting at the end of this month, McNulty said. “There’s been some interest in the media recently on hedge funds, and that would be a good example of an emerging threat that we would want to talk about and ensure that we are handling,”
Last month, a federal appeals court in Washington threw out SEC rules requiring hedge funds to register with the agency and undergo inspections of their books and records. But McNulty said critics who say his unit should be shut down are wrong. “The corporate fraud task force is alive and well,” McNulty said. “The need for it in our view is still very clear and strong.”
A federal judge last month ruled that the attorney-fee tactic violated the rights of former KPMG LLP executives being tried on charges of selling illegal tax shelters. McNulty said he disagreed with the ruling. “As of today, that is the policy of the department and it will remain that way until we reach a decision that it should change in some way….We think the message has gotten out loud and clear, but that doesn’t mean we shouldn’t keep watching,” he said. “This ultimately is an environment that is enticing to those who are subject to excessive greed.’‘
Along with McNulty, the task force has or will soon have several recent additions, including incoming Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox and Reuben Jeffery, chairman of the Commodity Futures Trading Commission. The group crafts policies on pursuing corporate crime and coordinates investigations.
When the task force identifies an emerging threat, it usually will consider whether more regulation is needed and whether agencies investigating wrongdoing are properly coordinating their efforts and using their resources.
Comments
Exotic Emerging Bubble
Emerging market hedge funds who are investing in Exotic stocks, such as Brazil, Russia, India and China, have seen some stormy weather in the past two months. Almost all the emerging markets have since turned around, but the selloff looked like a sign that emerging stocks may be overvalued according to Birinyi Associates, a stock research firm.
In the selloff that started in May and lasted until Wednesday, when many markets began to recover, emerging market losses were steep, the Morgan Stanley Capital International Emerging Markets Index dropping over 10 percent.
Some hedge funds investing in emerging markets lost over 4 percent in May/June, as stock markets from India to Chile slumped. Hedge funds focusing on Eastern Europe and the former Soviet Union suffered the most, dropping more than 6 percent, according to Hedge Fund Research. Asia-focused funds shed 3.63 percent. The Latin America index fell 1.56 percent. In the weeks between May 9 and June 13, stocks in Brazil fell 29.59 percent. Indian stocks fell 32.44 percent, tumbling from their all-time high, and stocks in Mexico dropped 24.72 percent, according to Birinyi. In one month, foreign investors pulled $2.7 billion out of Indian stocks alone.
Emerging markets in general are much more resilient today than they were a decade ago, but fears about higher worldwide interest rates and the next move by the Federal Reserve lopped $6.26 trillion in value off all markets, including the U.S., according to an analysis by Birinyi Associates.
Much of the inflow of funds in recent years was driven by a search for yield at a time of ultra-low interest rates in the developed world. As interest rates rise in the US, eurozone and Japan, this trade has come under pressure and investors have poured so much money into emerging markets, that some on Wall Street are comparing it to the tech-stock bubble of the 1990s.
The recent and sudden input of new money, especially from hedge funds, many of which now are among the largest shareholders of companies in Turkey, Argentina and Mexico, may not have had the experience to withstand the unstability of these markets. Investors poured almost $340 billion into hedge funds globally during the past five years, increasing the industry’s assets to $1.3 trillion, according to Hedge Fund Research.
In the selloff that started in May and lasted until Wednesday, when many markets began to recover, emerging market losses were steep, the Morgan Stanley Capital International Emerging Markets Index dropping over 10 percent.
Some hedge funds investing in emerging markets lost over 4 percent in May/June, as stock markets from India to Chile slumped. Hedge funds focusing on Eastern Europe and the former Soviet Union suffered the most, dropping more than 6 percent, according to Hedge Fund Research. Asia-focused funds shed 3.63 percent. The Latin America index fell 1.56 percent. In the weeks between May 9 and June 13, stocks in Brazil fell 29.59 percent. Indian stocks fell 32.44 percent, tumbling from their all-time high, and stocks in Mexico dropped 24.72 percent, according to Birinyi. In one month, foreign investors pulled $2.7 billion out of Indian stocks alone.
Emerging markets in general are much more resilient today than they were a decade ago, but fears about higher worldwide interest rates and the next move by the Federal Reserve lopped $6.26 trillion in value off all markets, including the U.S., according to an analysis by Birinyi Associates.
Much of the inflow of funds in recent years was driven by a search for yield at a time of ultra-low interest rates in the developed world. As interest rates rise in the US, eurozone and Japan, this trade has come under pressure and investors have poured so much money into emerging markets, that some on Wall Street are comparing it to the tech-stock bubble of the 1990s.
The recent and sudden input of new money, especially from hedge funds, many of which now are among the largest shareholders of companies in Turkey, Argentina and Mexico, may not have had the experience to withstand the unstability of these markets. Investors poured almost $340 billion into hedge funds globally during the past five years, increasing the industry’s assets to $1.3 trillion, according to Hedge Fund Research.
Bayou Bankrupcy
The Connecticut-based hedge fund, Bayou Group, filed yesterday in the United States Bankruptcy Court in New York under a Chapter 11 petition. They listed more than $100 million in assets and an equal amount in debts, officials said.
Investigators believe that Bayou’s deceptions go back as far as 1998, and it is thought that the firm had lured investors to commit some $300 million by overstating returns and concealing losses in the intervening years. It has also emerged that Bayou used a phony accounting firm to audit its financial statements, which, according to federal prosecutors, contained glaring errors; one entity, Bayou Superfund, reported assets of $192 million and trading gains of $27 million at end 2003 when in reality it had a value of $53 million and had lost $35 million.
The founder of Bayou, Samuel Israel III, abruptly shut down the fund last July, saying that he wanted to spend more time with his children after a messy divorce. On August 11 he wrote to investors saying that 90% of their money would be returned within a week and the remainder by the end of the month. Samuel Israel III, and its finance chief, Daniel Marino, finaly pled guilty to fraud and conspiracy charges in September 2005. However, investors are still waiting to be reimbursed.
Bayou’s lawyers “are preparing to launch an aggressive bankruptcy and litigation initiative” to recover “phony profits” paid out to some early investors, Jeff J. Marwil, a lawyer appointed to oversee the handling of the funds’ assets, said in a court filing.
A recent revelation of a 6 page confession cum sucide note (of a sucide which never happened) from the company’s Chief Financial Officer, Daniel E. Marino, has helped to throw some light on the entire modus operandi of the master bluffer. Arizona Authorities have recently seized $101 million seized which seems to belong to Bayou Funds investors further confirms some part of the story. “If you intend to steal someone’s money, based on our experience, they would have left, not spoken to the clients at all,” Intelisano told the cable television network. He also said that the last two months of statements from the fund were “certainly false.”
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Investigators believe that Bayou’s deceptions go back as far as 1998, and it is thought that the firm had lured investors to commit some $300 million by overstating returns and concealing losses in the intervening years. It has also emerged that Bayou used a phony accounting firm to audit its financial statements, which, according to federal prosecutors, contained glaring errors; one entity, Bayou Superfund, reported assets of $192 million and trading gains of $27 million at end 2003 when in reality it had a value of $53 million and had lost $35 million.
The founder of Bayou, Samuel Israel III, abruptly shut down the fund last July, saying that he wanted to spend more time with his children after a messy divorce. On August 11 he wrote to investors saying that 90% of their money would be returned within a week and the remainder by the end of the month. Samuel Israel III, and its finance chief, Daniel Marino, finaly pled guilty to fraud and conspiracy charges in September 2005. However, investors are still waiting to be reimbursed.
Bayou’s lawyers “are preparing to launch an aggressive bankruptcy and litigation initiative” to recover “phony profits” paid out to some early investors, Jeff J. Marwil, a lawyer appointed to oversee the handling of the funds’ assets, said in a court filing.
A recent revelation of a 6 page confession cum sucide note (of a sucide which never happened) from the company’s Chief Financial Officer, Daniel E. Marino, has helped to throw some light on the entire modus operandi of the master bluffer. Arizona Authorities have recently seized $101 million seized which seems to belong to Bayou Funds investors further confirms some part of the story. “If you intend to steal someone’s money, based on our experience, they would have left, not spoken to the clients at all,” Intelisano told the cable television network. He also said that the last two months of statements from the fund were “certainly false.”
Comments
Shanghi Hedge Fund Ball
Morgan Stanley is throwing an Asia-specific hedge fund ball. The Shanghai hosted gala is exclusive only to Morgan Stanley’s 7% of Oriental hedge fund prime brokerage clients.
Established veterans expanding existing funds need to entice clientele, so prime brokers such as Morgan Stanley have brought investors and hedge fund managers together under one roof. This Shanghai conference is in its second year. Morgan Stanley runs its US version “Breakers” conference for managers in Palm Beach Florida, plus an emerging managers conference, they also run an event in Europe.
In an interview with AsianInvestors, Ashutosh Sinha, managing partner and CEO of a new long/short Asian hedge fund, Amoeba Capital said regarding the benefits of attending, “If I get a 4-6% hit rate and each one allocates $10 million, that gets me to my initial $100 million target and I will be operating above my estimated $50 million break-even.”
These events can be expensive to hold, with prices running into the millions, so Morgan Stanley wants to encourage investors and hedge funds to make the long trip. For this event, organisers chose Shanghai as a city that represents a metaphor for what Asia has to offer, and as a place where investors and managers would like to visit.
Established veterans expanding existing funds need to entice clientele, so prime brokers such as Morgan Stanley have brought investors and hedge fund managers together under one roof. This Shanghai conference is in its second year. Morgan Stanley runs its US version “Breakers” conference for managers in Palm Beach Florida, plus an emerging managers conference, they also run an event in Europe.
In an interview with AsianInvestors, Ashutosh Sinha, managing partner and CEO of a new long/short Asian hedge fund, Amoeba Capital said regarding the benefits of attending, “If I get a 4-6% hit rate and each one allocates $10 million, that gets me to my initial $100 million target and I will be operating above my estimated $50 million break-even.”
These events can be expensive to hold, with prices running into the millions, so Morgan Stanley wants to encourage investors and hedge funds to make the long trip. For this event, organisers chose Shanghai as a city that represents a metaphor for what Asia has to offer, and as a place where investors and managers would like to visit.
22 year old Pleads Guilty in Hedge Fund Scam
John Sahenk, the alias of former New York University student Hakan Yalincak, cost investors more than $7 million in a fake hedge fund scheme. The FBI seized blank checks and a counterfeit $8.8 million check in Yalincak’s name, prosecutors said. Also seized were 23 credit cards, including 13 in Yalincak’s name, and documents in the name of Yalincak’s alias.
He is now pleading guilty. Prosecutors said Yalincak portrayed himself as the head of a wealthy Turkish family. He spent the money on a Porsche, and other luxuries. The Yalincaks were also involved in a bank fraud case in which Yalincak is accused of passing $43 million worth of bad checks in a check-kiting scheme.
A computer and a telephone were all Yalincak needed for the bank fraud and check counterfeiting, prosecutors said.
He is now pleading guilty. Prosecutors said Yalincak portrayed himself as the head of a wealthy Turkish family. He spent the money on a Porsche, and other luxuries. The Yalincaks were also involved in a bank fraud case in which Yalincak is accused of passing $43 million worth of bad checks in a check-kiting scheme.
A computer and a telephone were all Yalincak needed for the bank fraud and check counterfeiting, prosecutors said.
Hedge fund demands sale of company's namesake property.
California Coastal Communities, Inc. (NASDAQ: CALC) has been told by a hedge fund group holding 11 percent of its stock, to auction off its 105-acre Brightwater Project. The 349-unit project lies on 105 acres overlooking the Bolsa Chica Ecological Reserve and was was approved in April by the California Coastal Commission.
The hedge fund, Mellon HBV Alternative Strategies, is the not the only shareholder to recently call on California Coastal to abandon development plans. Mercury Real Estate Advisors LLC, a fund holding some 9.4 percent of the company, told the company in an April 26 letter that it should sell the company rather than develop Bolsa Chica. The Mellon HBV demand comes amid a spate of activist moves by hedge funds, who typically buy large stakes in underperforming companies and demand strategic changes to make a quicker return. Often such demands escalate into proxy contests for board seats.
According to a letter to California Coastal Communities that the hedge fund has filed with the U.S. Securities and Exchange Commission, Mellon claimed that they “did not want to assume the risk of developing the property nor wait two years before recognizing a return on our investment…We would suggest that if management wants to assume that risk (of developing the property), they and any stockholders with a similar view can do it themselves by taking the company private.” said Mellon HBV in the letter.
In 1992, Henley Properties changed its name to The Bolsa Chica Company upon merger with The Henley Group, Inc. The Company once again changed its name in 1993 to Koll Real Estate Group, Inc. upon the acquisition of the commercial development business of The Koll Company. In 1998, the Company sold its commercial development business and changed its name to California Coastal Communities, Inc. The Company and its subsidiaries are headquartered in Irvine, California and currently employs 64 professionals. Their common stock is listed with the National Association of Securities Dealer, Inc.
Last Sale: $ 33.97 Net Change: 0.25 0.73%
Share Volume: 65,315 Previous Close: $ 34.22
Today’s High: $ 34.61 Today’s Low: $ 32.90
Best Bid: N/A Best Ask: N/A
52 Week High: $ 40.10 52 Week Low: $ 27
P/E Ratio: 13.87 Shares Outstanding: 10,161,000
Earnings Per Share (EPS): $ 2.45 Market Value: $ 345,169,170
NASDAQ Official Open Price: $ 34.28 Date of Open Price: May 12, 2006
NASDAQ Official Close Price: $ 33.97 Date of Close Price: May 12, 2006
The hedge fund, Mellon HBV Alternative Strategies, is the not the only shareholder to recently call on California Coastal to abandon development plans. Mercury Real Estate Advisors LLC, a fund holding some 9.4 percent of the company, told the company in an April 26 letter that it should sell the company rather than develop Bolsa Chica. The Mellon HBV demand comes amid a spate of activist moves by hedge funds, who typically buy large stakes in underperforming companies and demand strategic changes to make a quicker return. Often such demands escalate into proxy contests for board seats.
According to a letter to California Coastal Communities that the hedge fund has filed with the U.S. Securities and Exchange Commission, Mellon claimed that they “did not want to assume the risk of developing the property nor wait two years before recognizing a return on our investment…We would suggest that if management wants to assume that risk (of developing the property), they and any stockholders with a similar view can do it themselves by taking the company private.” said Mellon HBV in the letter.
In 1992, Henley Properties changed its name to The Bolsa Chica Company upon merger with The Henley Group, Inc. The Company once again changed its name in 1993 to Koll Real Estate Group, Inc. upon the acquisition of the commercial development business of The Koll Company. In 1998, the Company sold its commercial development business and changed its name to California Coastal Communities, Inc. The Company and its subsidiaries are headquartered in Irvine, California and currently employs 64 professionals. Their common stock is listed with the National Association of Securities Dealer, Inc.
Last Sale: $ 33.97 Net Change: 0.25 0.73%
Share Volume: 65,315 Previous Close: $ 34.22
Today’s High: $ 34.61 Today’s Low: $ 32.90
Best Bid: N/A Best Ask: N/A
52 Week High: $ 40.10 52 Week Low: $ 27
P/E Ratio: 13.87 Shares Outstanding: 10,161,000
Earnings Per Share (EPS): $ 2.45 Market Value: $ 345,169,170
NASDAQ Official Open Price: $ 34.28 Date of Open Price: May 12, 2006
NASDAQ Official Close Price: $ 33.97 Date of Close Price: May 12, 2006
Morgan Stanley veteran introduces event-driven hedge fund
The former Morgan Stanley head of corporate finance in Singapore is moving his hedge fund, FCM Absolute Return Fund, into active external marketing with plans to raise $400 million. The hedge fund will target private banks, distributors, fund of funds and prime-broking capital introductions and in anticipating capital restructuring and turnarounds. The hedge fund’s assets currently under management are worth $40 million, and with the new strategy Michael Lein plans to raise it up to $400 million. The fund targets absolute returns of 12-15% and volatility of 6-8%. The Sharpe ratio in 2005 was 1.3%.
Lien is the director heading these changes, a board member of UOB advertisement and currently the manager of the Lien family fortune. Before moving back to Singapore with Morgan Stanley Lien worked for US bank in Indonesia and started his investment banking career with Standard Chartered.
“Singapore has seen banking sector consolidation and now experiences far more competitive benchmarking of returns on capital,” Lein said in an interview with Asian Investor. “We envisage a similar trend evolving in Malaysia and Korea and, in due course, Taiwan.”
The fund management industry in Singapore is regulated by the Monetary Authority of Singapore, according to Asian Investor. However, FCM is exempt from holding a Capital Markets license and will be restricted to marketing the fund to qualified institutions and high net worth individuals.
Lien is the director heading these changes, a board member of UOB advertisement and currently the manager of the Lien family fortune. Before moving back to Singapore with Morgan Stanley Lien worked for US bank in Indonesia and started his investment banking career with Standard Chartered.
“Singapore has seen banking sector consolidation and now experiences far more competitive benchmarking of returns on capital,” Lein said in an interview with Asian Investor. “We envisage a similar trend evolving in Malaysia and Korea and, in due course, Taiwan.”
The fund management industry in Singapore is regulated by the Monetary Authority of Singapore, according to Asian Investor. However, FCM is exempt from holding a Capital Markets license and will be restricted to marketing the fund to qualified institutions and high net worth individuals.
Investing in hedge funds on campus
Harvard and Yale reported larger than usual returns on their multibillion dollar endowments this year. As of June 30, 2005, Harvard and Yale had 12% and 25% of their respective endowments set aside for alternative investments, namely hedge funds. That success has encouraged many of the nation’s biggest schools to follow the Ivy Leauge into hedge fund investment. Reed College in Portland, Ore., now has 58% of its endowment in hedge funds, up from 43.7% in June. Hobart and William Smith Colleges is at 54.7%, up from 51.6% in June.
Schools with endowments of $1 billion or more had an average of 21.7% in hedge funds in 2005, according to the nonprofit National Association of College & University Business Officers (NACUBO). But leading in percentages are some smaller schools, who are hedging even more agressivly than their larger, better known peers. Included are the College of Wooster in Wooster, Ohio, at 82.4%, and Yeshiva University in New York City, at 65.3%. Wooster is a small, liberal arts college in Ohio who has had rich rewards in the world of hedge fund management. Enabling them to be more competitive with faculty salaries, and allowing an increase in financial aid. Wooster has over 80% of the school’s endowment’s assets invested in hedge funds, recently causing their endowment to climb from $89 million in 1990, to $250 million today.
More than 8,800 hedge funds are curently operating in the U.S. with $1.2 trillion in assets. Hedge funds are expected to maintain their rapid growth by using agressive trading strategy in every imaginable asset class. But like all hedge funds, they impose limits on when investors can cash out. Many hedge funds only disclose what they’re buying and selling in general terms to shareholders, so assessing actual risk can be tough.
There are also some rising concerns toward this new trend, some endowments that have been trading in hedge funds are reconsidering. Oberlin College in Oberlin, Ohio, is one of them. “Hedge funds tend not to fully disclose their holdings, which exposes [investors] to some risk,” says Ron Watts, the college’s vice-president for finance. “That can make it challenging for us to fulfill our fiduciary responsibility.” On Apr. 1, Oberlin hired a consultant to review its policies. “We’re looking at reallocating money to areas we believe will be the future outperformers,” says chief investment officer Marcia Miller.
But it’s difficult to argue with the numbers. For the year that ended June 30, 2005, the dozen colleges with the most exposure to hedge funds earned from 6.7% to 15.6%, according to a BusinessWeek analysis of NACUBO data. All but one beat the Standard & Poor’s 500-stock index, which returned 7.4%.
Schools with endowments of $1 billion or more had an average of 21.7% in hedge funds in 2005, according to the nonprofit National Association of College & University Business Officers (NACUBO). But leading in percentages are some smaller schools, who are hedging even more agressivly than their larger, better known peers. Included are the College of Wooster in Wooster, Ohio, at 82.4%, and Yeshiva University in New York City, at 65.3%. Wooster is a small, liberal arts college in Ohio who has had rich rewards in the world of hedge fund management. Enabling them to be more competitive with faculty salaries, and allowing an increase in financial aid. Wooster has over 80% of the school’s endowment’s assets invested in hedge funds, recently causing their endowment to climb from $89 million in 1990, to $250 million today.
More than 8,800 hedge funds are curently operating in the U.S. with $1.2 trillion in assets. Hedge funds are expected to maintain their rapid growth by using agressive trading strategy in every imaginable asset class. But like all hedge funds, they impose limits on when investors can cash out. Many hedge funds only disclose what they’re buying and selling in general terms to shareholders, so assessing actual risk can be tough.
There are also some rising concerns toward this new trend, some endowments that have been trading in hedge funds are reconsidering. Oberlin College in Oberlin, Ohio, is one of them. “Hedge funds tend not to fully disclose their holdings, which exposes [investors] to some risk,” says Ron Watts, the college’s vice-president for finance. “That can make it challenging for us to fulfill our fiduciary responsibility.” On Apr. 1, Oberlin hired a consultant to review its policies. “We’re looking at reallocating money to areas we believe will be the future outperformers,” says chief investment officer Marcia Miller.
But it’s difficult to argue with the numbers. For the year that ended June 30, 2005, the dozen colleges with the most exposure to hedge funds earned from 6.7% to 15.6%, according to a BusinessWeek analysis of NACUBO data. All but one beat the Standard & Poor’s 500-stock index, which returned 7.4%.
May 16: US Senate Panel to Hold Hedge Fund Hearing
May 16: US Senate Panel to Hold Hedge Fund Hearing
The chairman of a Senate Banking subcommittee Sen. Chuck Hagel, a Nebraska Republican, said on Wednesday he plans to hold a hearing May 16th on the role that lightly regulated hedge funds play in the U.S. financial markets. Hagel is chairman of the Senate Banking Committee’s securities and investment subcommittee.
“That’s an area we haven’t paid enough attention to,” he said in an interview with Reuters. He did not specify if he believed further regulation of hedge funds by the U.S. Securities and Exchange Commission was necessary. Earlier this year, the SEC began requiring hedge funds, which have typically released little information about their investment strategies, to register basic information with the agency.
The industry assets of the hedge fund market have doubled to more than $1 trillion in the past five years, and are expected to double again in the next two to four years, according to analysts. But they avoid some of the mainstream funding such as pensions because they would have to give more explanations to investors about how they manage money.
The chairman of a Senate Banking subcommittee Sen. Chuck Hagel, a Nebraska Republican, said on Wednesday he plans to hold a hearing May 16th on the role that lightly regulated hedge funds play in the U.S. financial markets. Hagel is chairman of the Senate Banking Committee’s securities and investment subcommittee.
“That’s an area we haven’t paid enough attention to,” he said in an interview with Reuters. He did not specify if he believed further regulation of hedge funds by the U.S. Securities and Exchange Commission was necessary. Earlier this year, the SEC began requiring hedge funds, which have typically released little information about their investment strategies, to register basic information with the agency.
The industry assets of the hedge fund market have doubled to more than $1 trillion in the past five years, and are expected to double again in the next two to four years, according to analysts. But they avoid some of the mainstream funding such as pensions because they would have to give more explanations to investors about how they manage money.
Dalton Investments to Liquidate Two Distressed Debt Hedge Funds
Investment management firm, Dalton Investments, which manages about $1.3 billion, will send back roughly $300 million to people who invested in its 7-year old Dalton Global Opportunity Fund and its 2-year old Dalton Distressed Debt Fund, liquidating this part of it’s hedge fund strategy.
Dalton’s principals, Steve Persky, CFA, James Rosenwald, CFA and Gifford Combs each have over twenty years of portfolio management experience. All of their strategies are based on a combination of rigorous bottom-up fundamental analysis, disciplined portfolio management and clearly defined risk control measures. Some of Daltons investment strategies include global hedged equity, global distressed debt, Japan equity long-only, Japan equity long-short, and Greater China equity long-short.
“Although the past performance of these funds was excellent, we believe it will become increasingly difficult to produce above-average returns with a distressed strategy for the foreseeable future,” said Steven Persky, who founded the firm with James Rosenwald in 1998.
Recent access to relatively cheap capital, plus strong economic growth, have allowed many companies to try to shore up balance sheets, which has made it more difficult for investors to find lucrative distressed debt bets.
Dalton’s principals, Steve Persky, CFA, James Rosenwald, CFA and Gifford Combs each have over twenty years of portfolio management experience. All of their strategies are based on a combination of rigorous bottom-up fundamental analysis, disciplined portfolio management and clearly defined risk control measures. Some of Daltons investment strategies include global hedged equity, global distressed debt, Japan equity long-only, Japan equity long-short, and Greater China equity long-short.
“Although the past performance of these funds was excellent, we believe it will become increasingly difficult to produce above-average returns with a distressed strategy for the foreseeable future,” said Steven Persky, who founded the firm with James Rosenwald in 1998.
Recent access to relatively cheap capital, plus strong economic growth, have allowed many companies to try to shore up balance sheets, which has made it more difficult for investors to find lucrative distressed debt bets.
Close Fund Management opens Hedge Fund to Retail Investors
Close Fund Management is teaming up next month with BlueCrest, a well known US hedge fund manager with more than $9bn under management. This will give access to more private investors interested in hedge fund returns. The Credit Suisse Tremont hedge fund index was up 1.82 per cent in March and almost 5.5 per cent so far this year.
Close Fund Management has had a successful year and recently won the Lipper Fund Award for 2006 for the Equity Sector—Information Technology for Close FTSE TechMARK Fund.
As hedge funds slowly enter the mainstream, wealth managers are seeking to tap into growing awareness of these funds. The main attraction of hedge funds is that returns are normally not closely correlated to mainstream asset classes such as bonds or equities, making them an attractive diversification tool for investors.
According to the Financial Times; Marc Gordon, managing director of Close Fund Management, says its new fund will follow a multi-strategy approach investing in seven different hedge funds managed by BlueCrest.
Initially, almost a third of the fund will be invested in BlueCrest Equity fund, which takes both long and short positions on stocks, in theory enabling it to profit from both share price rises and falls.
This fund seeks to follow a market-neutral strategy, meaning it should be unaffected by a stock market crash. Gordon says the new Close All-Blue fund is different from other hedge funds of funds as all hedge fund allocation and strategy decisions are taken by BlueCrest.
The new fund will be listed on Aim, the junior exchange. Close hopes to raise £200m but has set itself a minimum target of £50m. The minimum investment is £37,500.
Close Fund Management has had a successful year and recently won the Lipper Fund Award for 2006 for the Equity Sector—Information Technology for Close FTSE TechMARK Fund.
As hedge funds slowly enter the mainstream, wealth managers are seeking to tap into growing awareness of these funds. The main attraction of hedge funds is that returns are normally not closely correlated to mainstream asset classes such as bonds or equities, making them an attractive diversification tool for investors.
According to the Financial Times; Marc Gordon, managing director of Close Fund Management, says its new fund will follow a multi-strategy approach investing in seven different hedge funds managed by BlueCrest.
Initially, almost a third of the fund will be invested in BlueCrest Equity fund, which takes both long and short positions on stocks, in theory enabling it to profit from both share price rises and falls.
This fund seeks to follow a market-neutral strategy, meaning it should be unaffected by a stock market crash. Gordon says the new Close All-Blue fund is different from other hedge funds of funds as all hedge fund allocation and strategy decisions are taken by BlueCrest.
The new fund will be listed on Aim, the junior exchange. Close hopes to raise £200m but has set itself a minimum target of £50m. The minimum investment is £37,500.
Hedge Fund Chief to Plead Guilty to Investor Fraud
Keith G. Gilabert, the founder of an investment firm that operated a hedge fund called the GLT Venture Fund has agreed to plead guilty to federal charges that may have cost investors as much as $14 million, admitting that he lied to investors about the fraudulent operation. More than 40 investors poured money into Capital Management from September 2000 to January 2005, when the company was abruptly closed.
The Justice Department said Gilabert stole at least $2.5 million of investor money for his own use. And he continued marketing his fund throughout 2004, officials said, even though Capital Management’s investment advisor registration had been revoked by the California Department of Corporations in 2003, Gilabert declined to comment.
Both CMG, which was based in Valencia, and Gilabert were named in a federal lawsuit filed today by the United States Securities and Exchange Commission. Gilabert has agreed to cooperate with the Justice Department and securities regulators under terms of a plea agreement.
In the plea agreement Gilabert acknowledged that he operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund. Gilabert was touting 27% returns at GLT in late 2004 and far from earning such returns, the fund lost more than $7 million and distributed to investors some $4.6 million in money falsely labeled as profits, securities officials charged. Gilabert concealed the fact that he had lost most of the investors’ funds and that he had misappropriated investors’ funds throughout most of GLT’s operation. Gilabert also admitted that he conspired with an account manager at a major brokerage firm to mislead CMG investors with regard to, among other things, the performance history of the GLT fund, the risk associated with investing in CMG, and the oversight of CMG by the major brokerage firm.
Upon entering his plea to the conspiracy charge, Gilabert will face a maximum sentence of five years in federal prison. He was ordered to appear in District Court on May 22, his case is the product of an investigation by the Federal Bureau of Investigation. The SEC and the Justice Department said they were continuing to investigate Gilabert and those who worked with him.
The Justice Department said Gilabert stole at least $2.5 million of investor money for his own use. And he continued marketing his fund throughout 2004, officials said, even though Capital Management’s investment advisor registration had been revoked by the California Department of Corporations in 2003, Gilabert declined to comment.
Both CMG, which was based in Valencia, and Gilabert were named in a federal lawsuit filed today by the United States Securities and Exchange Commission. Gilabert has agreed to cooperate with the Justice Department and securities regulators under terms of a plea agreement.
In the plea agreement Gilabert acknowledged that he operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund. Gilabert was touting 27% returns at GLT in late 2004 and far from earning such returns, the fund lost more than $7 million and distributed to investors some $4.6 million in money falsely labeled as profits, securities officials charged. Gilabert concealed the fact that he had lost most of the investors’ funds and that he had misappropriated investors’ funds throughout most of GLT’s operation. Gilabert also admitted that he conspired with an account manager at a major brokerage firm to mislead CMG investors with regard to, among other things, the performance history of the GLT fund, the risk associated with investing in CMG, and the oversight of CMG by the major brokerage firm.
Upon entering his plea to the conspiracy charge, Gilabert will face a maximum sentence of five years in federal prison. He was ordered to appear in District Court on May 22, his case is the product of an investigation by the Federal Bureau of Investigation. The SEC and the Justice Department said they were continuing to investigate Gilabert and those who worked with him.
Hedge Fund D E Shaw Enter India Markets
New York hedge fund D E Shaw hopes to unlock more of India’s trading potential. D E Shaw is the world’s second-largest hedge fund, the group is a specialized investment and technology development firm. Its activities range from computer-based quantitative investment management to the development and financing of technology-oriented business ventures. With a new manager, Anil Chawla, to join the fund in June as the country head and $17.1 billion in assets, DE shaw will set up its operations in June.
Anil Chawla has been chief executive officer of commercial finance in India & South East Asia since 1999. Chawla had joined GE Capital as an assistant vice-president in April 1996. He heads the corporate growth team which GE set up last year to triple revenues in India in 3 years to $3 billion by 2008. It will invest in private equity as well as distressed assets in India, providing a lot of liquidity to the market.
Analysts expect to see a 40% growth in investments in Indian markets as investors expect higher rates of growth from markets outside Europe and the US. Investors in these regions consist of a greater percentage of institutional owners, such as government entities and insurers. Hedge fund investors expect the amount they put in to such funds to increase steadily, according to a survey by Goldman Sachs, the investment bank. The survey found several developments that indicated the industry was growing more acceptable to institutions.
Anil Chawla has been chief executive officer of commercial finance in India & South East Asia since 1999. Chawla had joined GE Capital as an assistant vice-president in April 1996. He heads the corporate growth team which GE set up last year to triple revenues in India in 3 years to $3 billion by 2008. It will invest in private equity as well as distressed assets in India, providing a lot of liquidity to the market.
Analysts expect to see a 40% growth in investments in Indian markets as investors expect higher rates of growth from markets outside Europe and the US. Investors in these regions consist of a greater percentage of institutional owners, such as government entities and insurers. Hedge fund investors expect the amount they put in to such funds to increase steadily, according to a survey by Goldman Sachs, the investment bank. The survey found several developments that indicated the industry was growing more acceptable to institutions.
Old Lane Hedge Fund Selects Trading Platform
On Thursday, Old Lane hedge fund stated that they chose Triple Point as their current trading platform. In the press release Old Lane stated that Triple Point offered the only solution that met all the firm’s requirements: rapid (3 month) implementation; a single platform for physical and financial trading of commodities, including, power, oil, and gas; intuitive for diverse users; and scalable for future needs.
Old Lane hedge fund was founded by former senior executives of Morgan Stanley, and the hedge fund is currently launching a $3 billion hedge fund and a $500 million India-specific private equity fund that will invest in the market infrastructure. It is looking more and more like the East will outgrow the West in the next 10-15 years. The relative sizes of the economies will become so huge that the East can no longer be taken for granted.
Triple Point Technology specializes in trading, risk management, scheduling and logistics solutions for commodities, including power, oil, gas, coal, metals, agricultural products, and freight. The selection by Old Lane hedge fund reinforces Triple Point’s position as one of the leading solutions for multi-commodity trading and risk management.
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Old Lane hedge fund was founded by former senior executives of Morgan Stanley, and the hedge fund is currently launching a $3 billion hedge fund and a $500 million India-specific private equity fund that will invest in the market infrastructure. It is looking more and more like the East will outgrow the West in the next 10-15 years. The relative sizes of the economies will become so huge that the East can no longer be taken for granted.
Triple Point Technology specializes in trading, risk management, scheduling and logistics solutions for commodities, including power, oil, gas, coal, metals, agricultural products, and freight. The selection by Old Lane hedge fund reinforces Triple Point’s position as one of the leading solutions for multi-commodity trading and risk management.
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Cazenove Launches Equity Hedge Fund
Cazenove Capital Management is preparing to launch a new equity hedge fund on May 31, 2006. The hedge fund is to be managed by investment specialist Tim Love who has over 20 years of experience. Some previous positions include fund management roles with HSBC Asset Management and Mercury Asset Management followed by senior strategy positions at ING Barings and most lately Deutsche Bank, advising the world’s leading institutional investors.
Cazenove plans to diversify it’s investment three ways, one will be long bias-invested in emerging markets, the second will target expected developed country winners and the third will short expected developed country losers. With a capacity limit of $1.5 billion, the possibilities of high performance and growth in emerging markets shows yet another well planned move by Cazenove capital .
In an interview with Reuters, Cazenove Capital stated: “The fund has generated considerable interest in London, Europe and the Middle East, with investors finding Tim’s process and approach very different to other global fund managers. The hedge fund seeks alpha through identifying opportunities from global structural changes; in particular themes arising from developing economies. These themes can be both macro and secular”
“The concept is to look at global winners and losers combined with emerging markets to provide the sustainability of annualised returns rather than the … volatility we have seen from emerging market exposure,” Robin Minter-Kemp, managing director of Cazenove Capital, told Reuters.
Cazenove currently has about $850 million under management in three other hedge funds based in Europe.
Comments
Cazenove plans to diversify it’s investment three ways, one will be long bias-invested in emerging markets, the second will target expected developed country winners and the third will short expected developed country losers. With a capacity limit of $1.5 billion, the possibilities of high performance and growth in emerging markets shows yet another well planned move by Cazenove capital .
In an interview with Reuters, Cazenove Capital stated: “The fund has generated considerable interest in London, Europe and the Middle East, with investors finding Tim’s process and approach very different to other global fund managers. The hedge fund seeks alpha through identifying opportunities from global structural changes; in particular themes arising from developing economies. These themes can be both macro and secular”
“The concept is to look at global winners and losers combined with emerging markets to provide the sustainability of annualised returns rather than the … volatility we have seen from emerging market exposure,” Robin Minter-Kemp, managing director of Cazenove Capital, told Reuters.
Cazenove currently has about $850 million under management in three other hedge funds based in Europe.
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Hedge Fund Insider Trading at SunSource
Hedge Fund Insider Trading at SunSource
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc.
The lawsuit filed in U.S. District Court in Manhattan claims his funds made $1.34 million after profiting from inside information provided by Peter Black, a GE Capital analyst. Black received the tip from Thomas Strickland, 33, who was an employee of GE Capital and had access to confidential documents regarding the merger.
The suit claims that with prior knowledge of the merger of Allied Capital Corp and SunSource Inc., Obus directed the purchase of 287,200 shares of SunSource stock at $4.75 on June 8, 2001, according to the SEC complaint.
In a press release yesterday to investors, Obus and Wynnefield denied the charges and called the allegations “absolutely baseless.” The letter noted Wynnefield had invested in SunSource prior to the deal and had been working with them for over ten years.
“This smacks of heavy-handed regulatory over-reaching of the type that’s been so much in the news lately,” the letter said.
“The allegations are totally baseless and we will prove that in court,” said Joel Cohen in an interview with Reuters. Mr Cohen is an attorney in New York representing Obus and the Wynnefield funds.
The SEC is seeking disgorgement of the illicit gains plus civil penalties. It also seeks to prohibit Obus and Black from serving as officers or directors of public companies.
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc.
The lawsuit filed in U.S. District Court in Manhattan claims his funds made $1.34 million after profiting from inside information provided by Peter Black, a GE Capital analyst. Black received the tip from Thomas Strickland, 33, who was an employee of GE Capital and had access to confidential documents regarding the merger.
The suit claims that with prior knowledge of the merger of Allied Capital Corp and SunSource Inc., Obus directed the purchase of 287,200 shares of SunSource stock at $4.75 on June 8, 2001, according to the SEC complaint.
In a press release yesterday to investors, Obus and Wynnefield denied the charges and called the allegations “absolutely baseless.” The letter noted Wynnefield had invested in SunSource prior to the deal and had been working with them for over ten years.
“This smacks of heavy-handed regulatory over-reaching of the type that’s been so much in the news lately,” the letter said.
“The allegations are totally baseless and we will prove that in court,” said Joel Cohen in an interview with Reuters. Mr Cohen is an attorney in New York representing Obus and the Wynnefield funds.
The SEC is seeking disgorgement of the illicit gains plus civil penalties. It also seeks to prohibit Obus and Black from serving as officers or directors of public companies.
Hedge Fund Insider Trading at SunSource
Hedge Fund Insider Trading at SunSource
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc.
The lawsuit filed in U.S. District Court in Manhattan claims his funds made $1.34 million after profiting from inside information provided by Peter Black, a GE Capital analyst. Black received the tip from Thomas Strickland, 33, who was an employee of GE Capital and had access to confidential documents regarding the merger.
The suit claims that with prior knowledge of the merger of Allied Capital Corp and SunSource Inc., Obus directed the purchase of 287,200 shares of SunSource stock at $4.75 on June 8, 2001, according to the SEC complaint.
In a press release yesterday to investors, Obus and Wynnefield denied the charges and called the allegations “absolutely baseless.” The letter noted Wynnefield had invested in SunSource prior to the deal and had been working with them for over ten years.
“This smacks of heavy-handed regulatory over-reaching of the type that’s been so much in the news lately,” the letter said.
“The allegations are totally baseless and we will prove that in court,” said Joel Cohen in an interview with Reuters. Mr Cohen is an attorney in New York representing Obus and the Wynnefield funds.
The SEC is seeking disgorgement of the illicit gains plus civil penalties. It also seeks to prohibit Obus and Black from serving as officers or directors of public companies.
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc.
The lawsuit filed in U.S. District Court in Manhattan claims his funds made $1.34 million after profiting from inside information provided by Peter Black, a GE Capital analyst. Black received the tip from Thomas Strickland, 33, who was an employee of GE Capital and had access to confidential documents regarding the merger.
The suit claims that with prior knowledge of the merger of Allied Capital Corp and SunSource Inc., Obus directed the purchase of 287,200 shares of SunSource stock at $4.75 on June 8, 2001, according to the SEC complaint.
In a press release yesterday to investors, Obus and Wynnefield denied the charges and called the allegations “absolutely baseless.” The letter noted Wynnefield had invested in SunSource prior to the deal and had been working with them for over ten years.
“This smacks of heavy-handed regulatory over-reaching of the type that’s been so much in the news lately,” the letter said.
“The allegations are totally baseless and we will prove that in court,” said Joel Cohen in an interview with Reuters. Mr Cohen is an attorney in New York representing Obus and the Wynnefield funds.
The SEC is seeking disgorgement of the illicit gains plus civil penalties. It also seeks to prohibit Obus and Black from serving as officers or directors of public companies.
China and hedge Funds
China and hedge Funds
As the Chinese government continues to broaden its financial markets to foreign investors, hedge fund interest in the region has climbed.
Sandra Manzke, a hedge fund industry veteran in an interview with CNN stated, “We really are becoming a more global economy. You will start seeing a lot more interest in China as they move into allowing more foreign ownership.” Sandra Manzke last year founded Maxam Capital, which runs investment products that are based on indexes of hedge funds.
In the last ten years, $400 billion to $500 billion in foreign direct investment has flowed into the country, more than the rest of Asia combined. The inflow of foreign investment brings with it new business practices that inject vitality into the old economic system. Since 1993, labor productivity has increased four fold.
China’s December 2001 accession into the World Trade Organization (WTO) is expediting economic reforms, and expected to contribute 1 to 2 percent of gross domestic product (GDP) each year. This new economic growth has inevitably whipped up investor interest as well, with hedge funds leading the charge.
China-based hedge funds gained 16.8 percent through March of this year, according to publishing and research firm Hedge Fund Intelligence (HFI).
Estimates for the U.S. hedge fund market range from $1.2 to $1.5 trillion, but assets in Asia-Pacific hedge funds now account for $115 billion, according to HFI. Assets in Hong Kong-based hedge funds have jumped from $1.8 billion in 2000 to $15.9 billion in 2005.
US Global Investors China Region Opportunity Fund is one company taking advantage of this climbing market. The fund’s objective is to achieve capital appreciation by capitalizing on the economic growth in the Greater China Region, including China, Hong Kong, Singapore and Taiwan. Also new to the scene is the Alger China-U.S. Growth Fund – This new fund invests not only in greater China, but in Hong Kong, U.S. and other Asian or multinational companies that stand to benefit from China’s economic expansion.
As the Chinese government continues to broaden its financial markets to foreign investors, hedge fund interest in the region has climbed.
Sandra Manzke, a hedge fund industry veteran in an interview with CNN stated, “We really are becoming a more global economy. You will start seeing a lot more interest in China as they move into allowing more foreign ownership.” Sandra Manzke last year founded Maxam Capital, which runs investment products that are based on indexes of hedge funds.
In the last ten years, $400 billion to $500 billion in foreign direct investment has flowed into the country, more than the rest of Asia combined. The inflow of foreign investment brings with it new business practices that inject vitality into the old economic system. Since 1993, labor productivity has increased four fold.
China’s December 2001 accession into the World Trade Organization (WTO) is expediting economic reforms, and expected to contribute 1 to 2 percent of gross domestic product (GDP) each year. This new economic growth has inevitably whipped up investor interest as well, with hedge funds leading the charge.
China-based hedge funds gained 16.8 percent through March of this year, according to publishing and research firm Hedge Fund Intelligence (HFI).
Estimates for the U.S. hedge fund market range from $1.2 to $1.5 trillion, but assets in Asia-Pacific hedge funds now account for $115 billion, according to HFI. Assets in Hong Kong-based hedge funds have jumped from $1.8 billion in 2000 to $15.9 billion in 2005.
US Global Investors China Region Opportunity Fund is one company taking advantage of this climbing market. The fund’s objective is to achieve capital appreciation by capitalizing on the economic growth in the Greater China Region, including China, Hong Kong, Singapore and Taiwan. Also new to the scene is the Alger China-U.S. Growth Fund – This new fund invests not only in greater China, but in Hong Kong, U.S. and other Asian or multinational companies that stand to benefit from China’s economic expansion.
European Central Bank sees Hedge Funds as Risky
European Central Bank (ECB) is warning traders that hedge funds have created a “major risk” to global financial stability. Franz Müntefering, who is the deputy German chancellor, described them as “locusts”.
In an interview with Scotland’s Sunday Herald, the ECB put that risk right up there along with a major bird flu pandemic in terms of shocks that could trigger a disruption in financial markets. It warns of the risk of an “idiosyncratic collapse of a key hedge fund or a cluster of smaller funds”.
The ECB review also pointed out that current hedge funds work in a herd-like way, investing in the same kind of assets returns, therfore able to create a domino-like effect in collapsing. This behaviour was seen just before the near collapse of Long-Term Capital Management in 1998. That company was developed by the combined brainpower of Nobel Prize winning economists, and even that did not stop its spectacular failure.
But the ECB has been easier on hedge funds than most. Along with Germany’s Bundesbank and its proposed self-regulatory strategy, the International Monetary Fund and the Bank of England have had a less-alarmist approach to the possible impact of hedge funds on the global financial system.
In an interview with Scotland’s Sunday Herald, the ECB put that risk right up there along with a major bird flu pandemic in terms of shocks that could trigger a disruption in financial markets. It warns of the risk of an “idiosyncratic collapse of a key hedge fund or a cluster of smaller funds”.
The ECB review also pointed out that current hedge funds work in a herd-like way, investing in the same kind of assets returns, therfore able to create a domino-like effect in collapsing. This behaviour was seen just before the near collapse of Long-Term Capital Management in 1998. That company was developed by the combined brainpower of Nobel Prize winning economists, and even that did not stop its spectacular failure.
But the ECB has been easier on hedge funds than most. Along with Germany’s Bundesbank and its proposed self-regulatory strategy, the International Monetary Fund and the Bank of England have had a less-alarmist approach to the possible impact of hedge funds on the global financial system.
Former UBS Manager to set New Hedge Fund Record
Jon Wood is planning to raise up to $6 billion for a new hedge fund. If all goes as planned he will have set a record for the largest start up in the European hedge fund market to date.
The SRM Global fund will be launched in August, and Mr Wood has already raised $3 billion for it’s debut. SRM will require investors to lock up their cash in the fund for three to five years. It is charging a 1 per cent to 1.5 per cent slice of assets under management for expenses, and 25 per cent of returns.
Mr Jon Wood first made a name for himself at the Swiss Banking Corporation, where his bold application of options theory made him a star performer. But it was not until he teamed up with the late Brian Keelan that his reputation soared.
Together they rewrote the book on takeovers, bringing Wood’s mathematical mind and aggression and Keelan’s brokering to the world of mergers and acquisitions. The takeover panel amended its code after being tested to the limit by Wood and Keelan at SBC Warburg, which later became UBS.
After operating one of the City’s largest proprietory trading operations from the Bahamas, Wood moved to Switzerland where he managed a portfolio for UBS. He will however be leaving at the end of the summer. Nevertheless, UBS will continue to back Mr Wood with a $500 million investment. The bank said: “UBS confirms that its Strategic Risk Management team led by Jon Wood is planning to spin out of the investment bank later this year in order to launch a global investment
fund.”
The SRM Global fund will be launched in August, and Mr Wood has already raised $3 billion for it’s debut. SRM will require investors to lock up their cash in the fund for three to five years. It is charging a 1 per cent to 1.5 per cent slice of assets under management for expenses, and 25 per cent of returns.
Mr Jon Wood first made a name for himself at the Swiss Banking Corporation, where his bold application of options theory made him a star performer. But it was not until he teamed up with the late Brian Keelan that his reputation soared.
Together they rewrote the book on takeovers, bringing Wood’s mathematical mind and aggression and Keelan’s brokering to the world of mergers and acquisitions. The takeover panel amended its code after being tested to the limit by Wood and Keelan at SBC Warburg, which later became UBS.
After operating one of the City’s largest proprietory trading operations from the Bahamas, Wood moved to Switzerland where he managed a portfolio for UBS. He will however be leaving at the end of the summer. Nevertheless, UBS will continue to back Mr Wood with a $500 million investment. The bank said: “UBS confirms that its Strategic Risk Management team led by Jon Wood is planning to spin out of the investment bank later this year in order to launch a global investment
fund.”
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