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4 Aug 2008

(Update) HedgeWorld's Abrupt End Not In The Cards

In a press call with HedgeCo, a global forum for the alternative asset community, Joe Christinat of Thomson Reuters clarified the story of HedgeWorld's abrupt closing.

Christinat said that HedgeWorld will retain the format that it is in currently. They will continue to offer TASS database, and have the service provider/jobs/conference section as well as publish several newsletters including the alternative advantage newsletter.

Although unable to comment on the rumors of staff changes, Christinat said that they are continuing to follow the Thomson Reuters strategy since the purchase of Reuters by Thomson.

Launched in 1999, HedgeWorld became one of hedge fund industry’s premier information provider for individual and institutional accredited investors and their professional advisers, fund managers and service providers in the global hedge fund industry.

Global Consulting For Structured Finance In Film, Media & Entertainment

Noci Pictures Entertainment has launched a one-stop global film finance and production service consulting division. The fund is aimed at hedge funds, ultra high net worth investors, tax credit buyers, purchaser representatives, family offices, and private equity firms.

According to Noci, "Many established filmmakers and agencies involved in independent film finance and packaging face the same dilemma of throwing multiple film projects against the wall and hoping one will stick with a limited number of studios and private equity."

With a plethora of incentives ranging from United States state and federal tax incentives that in some instances can be monetized upfront to cover a portion of a budget and offset risk to private equity investors, to overseas co-production incentives that can be maximized to finance quality films, Noci Pictures Entertainment's stratrgy is to be a one stop resource, including arranging debt finance, foreign sales agency representation, talent packaging, and more.

Countries such as Canada, UK, Ireland, South Africa, Germany, Australia, And New Zealand have film finance incentives that can be accessed to finance any number of film projects, according to the company.

The Monetization of Hedge Fund Management Firms

Opalesque is hosting a Webinar on July 10th 2008 10 am New York time: The Monetization of Hedge Fund Management Firms.

The hedge fund publishing company says there are five methods to partially monetize interests in a hedge fund management company:
(1) a traditional IPO
(2) a reverse merger into a public shell (or SPAC)
(3) a listing on AIM, without any capital being raised
(4) selling less than 100% of the equity or
(5) selling a revenue interest.

Examples of traditional IPOs would include Man, Och-Ziff, Gottex, RAB Capital; BlueBay, Polar, and Ashmore (plus Fortress, Blackstone, and Partners Group, if extended to alternative asset managers). These should not be confused with the IPOs of publicly traded closed ended funds.

Examples of reverse mergers would include GLG and Asset Alliance. Examples of an AIM listing without raising capital would include Absolute and Charlemagne. An example of a partial sale would include Highbridge and examples of revenue interests would include AQR, First Quadrant, Avenue, Lansdowne, Winton, and most firms backed by seeding platforms.

With the exception of Man and the Partners Group in Switzerland, each of the IPOs has been a disappointment relative to their initial public offering price. As for Reverse mergers, GLG has not been a success thus far, even after GLG coughed up nearly $500 million in slippage to get the deal done. The Asset Alliance - Tailwind reverse merger which was announced nearly 5 months ago has gone radio silent, which is not a positive sign.

AIM listings without raising capital lack a third party value validation when offered to the public and Absolute has been nothing short of a disaster, while Charlemagne is off more than 50%. Selling less than 100% of the equity or a revenue interest seems to work best, but a minority equity stake often imposes restrictions under which hedge fund managers chafe, while revenue interests do not. Whether a less than 100% equity stake or a revenue interest, each method still begs the question of how to monetize the rest of the ownership.

The only way to fully monetize a hedge fund management business is to sell out. Unfortunately, a total sale usually ends up with the sellers leaving at the first opportunity and the buyer usually has great difficulty in maintaining the value that it purchased. Examples of this include Glenwood, RMF, HBV, and Old Lane. As such, buyers will naturally be(a)ware and pricing will usually be lower than in other industries as a result.

A new alternative is for the hedge fund manager to sponsor the creation of a reinsurer or bank that allocates all of its investable assets to the sponsoring manager, providing a significant amount of permanent capital for the manager (making the management firm more valuable) and producing significantly higher returns for investors than the manager's funds without a proportionate increase in risk. Once the reinsurer or bank is fully developed, it can acquire some or all of the hedge fund management firm.

In this manner, the monetization process is able to benefit from many of the better points of other monetization alternatives. For example, it permits a total sale (without the normal problem of loss of control) and creates a public market for the interests of the hedge fund manager, but as a reinsurer or bank, rather than as an asset manager (which probably means higher market multiples). Carefully crafted, the transaction can be structured on a very tax efficient basis, particularly if partnership taxation for publicly traded managers or deferred compensation for offshore funds is lost.

While this alternative is yet unproven, it is more or less how Warren Buffett transitioned from being a hedge fund manager and monetized his asset management business. This summer a $15 billion hedge fund manager is likely to announce a merger with a Swiss private bank as the first step in a similar process.

The Panel:

Joseph K. Taussig is the Founder of Taussig Capital and has acted as a merchant banker for numerous financial services startups since 1990. Most of the capital for these companies has been provided by the hedge fund industry or hedge fund investors and most of the startups invest their assets in hedge fund strategies.

Matthias Knab, Director of Opalesque Ltd, will moderate this webinar. Matthias Knab is an internationally recognized expert on hedge funds and alternatives and has frequently served as chairman of hedge fund conferences in New York, Tokyo, Shanghai, Hong Kong, Miami, Bahamas, Stockholm, Dubai etc. In addition, he has presented or moderated at hedge fund events in Sydney, Cape Town, Madrid, and Bombay, and lectured at numerous universities on the subjects of hedge funds and the state of the global alternative asset management industry.

Participation in the Webinar on June 5th at 10 am New York time is limited to founders (or partners owning more than 15%) of hedge fund or FoHF management companies who would like to learn more about creating a reinsurer or bank in order to generate significant amounts of permanent capital and provide superior returns (without a proportionate increase in risk) for their investors. Provided that a founder or 15% partner is present, additional colleagues from the hedge fund or FoHF management company may also participate.

Each week, Opalesque publications are read by more than 400,000 industry professionals from all over the globe.

Hedge Fund Blackstone Opens Office in Beijing

Global alternative asset manager the Blackstone Group is opening a representative office in Beijing with former Vice President of Beijing Mainstreets Investment Group, Mr. Shan Fu as chief representative.

"The opening of our Beijing office and the appointment of Shan further underlines our deep commitment to China and the Chinese market." Stephen Schwarzman, Chairman, CEO and Co- Founder, of Blackstone, said, "We welcome Shan to the firm and we look forward to working together."

Fu previously worked in China’s National Development and Reform Commission (“NDRC”), the State Economic and Trade Commission of China, the Office of Economic and Trade in State Council of China, and the Office of Production of the State Council of China.

Fu commented: "I am very excited about joining Blackstone as its Chief Representative in Beijing. I look forward to working with the Blackstone China team to channel the global reach and resources of Blackstone’s alternative asset and advisory platform and increase its presence in the China markets."