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30 Nov 2006

Research shows Big Gains in '07 for Hedge Funds

Hedge funds, which control about $1.3 trillion in assets worldwide, have attracted $44.5 billion in the third quarter, the most since at least 2003, Hedge Fund Research said last month. Hedge funds are becoming more institutionalised and have begun to build organisations with often hundreds of employees.”

Union Bancaire Privee, the world’s second-largest manager of funds that invest in hedge funds believes that hedge funds will continue to attract superior investment talent in 2007, making more money in stocks than in bonds, with bets on rising markets likely to be more profitable than those on declining prices, the hedge fund manager said returns will be “significantly equity-driven” while opportunities to profit from falling prices will be “less numerous” next year, said Jan-Erik Frogg, head of alternative investments at UBP, which manages more than $33 billion in hedge-fund assets.

Event driven hedge funds in the Credit Suisse Tremont Index are up an average of 12% in the 10 months through October. The Standard & Poor’s 500 Index, which is a common indicator of US stocks, has added 11% in the period, while Lehman Brothers Aggregate Bond Index has climbed 4.6%.

Fund managers such as Union Bancaire Privee have benefited from well established hedge funds re opening to new investments from their biggest clients as they see more opportunities. Hedge funds that take new capital are “not announcing to the whole world they’re re-opening, they like to take money from sources they trust and work well with,” Mr Frogg said.

IncreMental Conference on Asset Classes

IncreMental Advantage, LLC announced today that they will be holding their first conference on due diligence for board members and fiduciaries of pension funds, endowments and foundations on February 6, 2007 at the Harvard Club in New York City.

The conference, which will cover both the role of the board member in selecting investments and sessions on the major alternative asset classes, will bring some of the top experts in many fields together. Last month IncreMental held a 'Hedge Fund Due Diligence Conference' to shed light on all aspects of researching hedge funds. Following the success of that meeting, this one will explain the basics of each asset class.“It isn’t easy to be on the board of a pension fund. You are trying to make sure that you have everything that you need for your fellow employees, but there are so many different options out there,” said Justin Meyer, Senior Research Analyst with IncreMental Advantage. “How do you know when you have the right team? This conference will give you the answers.”

The conference is even more relevant in the wake of the decision by the US Court of Appeals in Chao v Merino. In that case, two pension fund fiduciaries were found to be personally liable for over $175,000 because of the actions of a vender with whom they had contracted. “The court sent a very clear message,” said Meyer. “You have a responsibility to protect the money that is entrusted to you. And if you don’t take that responsibility seriously enough, you are looking at a lot of trouble.”

IncreMental Advantage is a think tank that publishes research developments on issues ranging from hedge funds to advertising to water utilities. Their research is highly regarded among institutional investors and senior executives from all over the world. The world’s largest companies sponsor and send their senior executives to their conferences.

Judge holds Hedge Fund manager in Contempt of Court

U.S. District Judge Kenneth Ryskamp in West Palm Beach ruled that John Kim, 38, head portfolio manager of collapsed West Palm Beach hedge fund firm KL Group, was in contempt of court for allegedly defying an asset freeze by spending money that is to be returned to investors.

Ryskamp cited Kim's use of $384,658 from the sale of a home in South Korea, and $110,000 from selling his wife's Mercedes and his Porsche 911. Investigators say the hedge fund took in more than $200 million from about 230 investors from 1999 to February 2005, when SEC examiners raided KL's luxurious offices overlooking Palm Beach.

KL Group closed March 1 after the SEC and FBI spent two days examining the firm's offices at the Esperante building in downtown West Palm Beach. An investigation by the SEC and court-appointed receiver Guy Lewis, a former U.S. Attorney for South Florida, indicates a shortfall of at least $200 million and perhaps as much as $300 million in KL Group's six hedge funds.

SEC records do not show any Florida hedge fund failures with losses larger than KL Group. An undetermined number of South Floridians were among the investors in the KL funds.