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30 Jan 2009

Hedge Fund Manager to Appear in Court

Hedge fund manager Arthur Nadel is scheduled for a bail hearing in federal court in Tampa this afternoon.

Nadel faces a federal charge of securities and wire fraud after using “manipulative and deceptive devices” to bilk investors out of hundreds of millions. Shortly after the infamous arrest of Bernard Madoff, Nadel’s family reported him missing on January 14.

The day Nadel disappeared, he was expected to disburse $50 million in redemptions to investors from the six total funds he managed. Nadel reportedly wrote a letter to his wife before he missing.

According to the criminal complaint, Nadel’s fraud dates back to at least 2003 and has affected over 100 victims nationwide. There is also a civil complaint filed against Nadel by the U.S. Securities and Exchange Commission, who alleges that he transferred $1.25 million into secret bank accounts.

29 Jan 2009

Green Alternative Investment Software To Be Developed

CommodityPoint, a utilities analyst and consulting firm of UtiliPoint International, is partnering with Global Change Associates, convergence of energy and environmental financial markets specialist, to undertake a multi-client research project and to produce a study report around emissions trading & monitoring software.

“Green trading has now become established and various 'green' commodities are now actively traded by a variety of participants including carbon, SOx and Nox as well as RECs (Renwable Energy Credits). Investor interest in trading these commodities is at an all time high. Consequently there is a growing demand for software products that will support these trading and risk management activities as well as in those software products that monitor and help manage emissions," said Dr. Gary M. Vasey of CommodityPoint. "Indeed, as forecast in our book 'Trends in Energy Trading, Transaction and Risk Management Software - a Primer' (Booksurge, 2006), these two software categories are morphing as the two software markets collide."

“The emerging greenhouse gas market is now ripe for software solutions on an enterprise level. Today, the environmental software space is quite small. It is estimated at $100 million with many small companies developing and extending their domain expertise into this area and beyond energy company applications (energy companies have had to comply with environmental laws in many jurisdictions for over a decade),“ said Mr. Peter C. Fusaro of Global Change Associates Inc.“The need to measure and manage greenhouse gas emissions data is becoming a new area of business development for software companies especially with impending federal greenhouse gas laws in the United States."

28 Jan 2009

Deephaven's Hedge Fund Bought by Stark Investments

Deephaven Capital Management signed a deal on Tuesday to sell the assets of its flagship hedge fund, Knight Capital Group Inc., to Stark Investments.

The founders, Brian Stark and Mike Roth, will give Deephaven investors the option to become investors in Stark Funds by contributing their share of their Deephaven Fund portfolio positions, they said in a letter to shareholders. Deephaven in October suspended withdrawals from its $1.6 billion Deephaven Global Multi-Strategy funds after being overwhelmed by investor redemption requests.

"We believe this agreement is advantageous for Stark's and Deephaven's investors, and we are excited about the prospect of retaining their high quality investor base," Mike Roth said, "In strategically managing the business, we have put ourselves in a position to capitalize upon these types of situations. We will continue to be on the lookout for additional opportunities that complement our strategic plan and strengthen our organization."

Stark has headquarters in Milwaukee, Miami, London and Hong Kong.

27 Jan 2009

Eze & Reuters Sponsor Obama Hedge Fund Strategy Panel

Hedge fund tech. provider Eze Castle Integration and Thomson Reuters are sponsoring a panel to discuss hedge fund strategies and regulatory considerations for the Obama administration, the 'Obama Administration & Hedge Fund Strategies panel'.

Hedge funds and investment firms are discussing whether the Obama administration will have a positive or negative impact on existing hedge fund strategies.

Moderated by Daniel Burns, Reuters U.S. Financial Markets Editor, the panel also includes Reuters correspondents Jeff Mason and Jennifer Ablan and hedge fund managers Dan Castro, Chief Risk Officer of Huxley Capital and Theresa R. Patti, CFA, Managing Director of QFS Asset Management.

The Obama Administration & Hedge Fund Strategies panel will take place in New York City on Wednesday, January 28, from 5:30 – 7:30 p.m., at the Thomson Reuters office at 3 Times Square, New York.

Eurekahedge Forecasts More Hedge Fund Launches in 2009

Hedge funds returned a healthy 1% in January, wrapping up a tumultuous 2008 at -12.3%, according to Eurekahedge. Hedge fund assets fell $380 billion or 20% in 2008, from just under $1.9 trillion to just over $1.5 trillion.

Eurekahedge's forecast expects to see more hedge fund start-ups in the near future, given the increasing number of people moving out of investment banks (whether voluntarily or otherwise) to venture into the hedge fund space.

In terms of returns, hedge funds are in a better position to generate superior returns than most other conventional managers and market players, owing to the flexibility that hedge fund managers enjoy, the Eurekahedge report says, their ability to identify new trends and investment ideas and act on them promptly.

"We anticipate trend-following strategies to continue benefiting from market movements across the currency and commodity markets, as they had through most of 2008. We expect the equity markets to remain volatile and range-bound over the next few months, but long/short managers could potentially benefit from pockets of opportunities (even if short-term ones) on both the long and the short side, given the uncertainty around the 4Q08 earnings reports and deeply discounted valuations across most sectors."

FX Trading Grows 250% as Investors Look For Alternative to Hedge Fund Trading

Deutsche Bank's foreign exchange (FX) trading platform,, reported a surge in customer numbers in 2008 as FX grew as an asset class of choice for investors amid the financial crisis.

The trading platform saw customer numbers increase by over 250%, as investors looked to FX as an alternative, and uncorrelated, asset class to equities and bonds. Volumes also notably increased from 2007, as investors took advantage of significant volatility in the market.

From a currency perspective, the EUR/USD was the most popular currency pair on the platform accounting for 41% of all trades, versus 20% of volume the previous year.

"Retail FX’s popularity as an asset class truly soared in 2008 from a customer and trading perspective," Betsy Waters, Global Director of, commented, "Looking ahead, we’re very bullish about the long term prospects for retail FX. As active traders become disenchanted with the equity markets they will turn to the FX markets for trading opportunities. In many countries, retail traders can only buy and hold equities, while FX markets offer the ability to buy and sell currencies based on your market views."

"Ultimately, FX is proven to be uncorrelated to bond and equity markets so it’s no surprise that retail investors are looking to FX, which is a proven asset class with institutional investors as a means of generating returns.” Waters concluded.

26 Jan 2009

Hedge Fund Operational Due Diligence - Book Review

Informative book by Jason Scharfman on, well, pretty much everything you need to run a hedge fund, from risk management to disaster recovery, all need-to-know material for both investors and hedge fund analysts.

Included are examples of past hedge fund management mistakes, showing exactly where the managers went wrong, and how to avoid downfalls such as the ‘but everyone is doing it’ excuse, among others.

Technical though understandable, Scharfman also expains the reliance on technology that is becoming ever more apparent in hedge funds, the dangers of phantomware, and questions that should be asked before commiting to any new technology.

I liked this book for the simple reason that it explains just about everything, almost like a handbook, the index makes an excellent resource.

Since writing the book he has left his position at Morgan Stanley and now runs an operational due diligence consulting firm called Corgentum Consulting. Corgentum works with hedge funds and investors to diagnose and mitigate operational risk at hedge funds and improve upon the of the operational due diligence process.

Available at Amazon

Gates Donates Despite Economic Distress

In a letter scheduled to be released today, January 26th, Bill Gates is offering insight to the world both about the current financial crisis as well as what his foundation has been able to do despite it.

Matthew Bishop, New York Bureau Chief and American Business Editor for The Economist conducted the interview, where Gates said his foundation’s assets may be shrinking, but it is increasing its giving in 2009, from $3.3 billion last year to $3.8 billion—the biggest ever annual budget for a charitable foundation.

Much of this will go towards finding ways to reduce deaths from the 20 diseases that kill the most people in poor countries, according to the Economist. Gates has high hopes that the number of children who die each year can be cut by half, to 5m, within 20 years, just as it was cut by half in the past half-century. Polio will soon be eradicated, he believes, and deaths from malaria can fall by half by 2015.

In a year of economic distress and record losses, optimism and generosity are still central to Gates, he says in the interview. With projected increases in giving in 2009, The Bill and Melinda Gates Foundation will continue to focus on healthcare issues around the world as well as education reforms.

Similarly, he says he is optimistic that Barack Obama’s administration will make progress on school reform, pointing to the extra spending on schools contained in Mr Obama’s economic stimulus package and the fact that the new education secretary, Arne Duncan, welcomed Gates-funded charter schools in Chicago.

23 Jan 2009

EUEC Workshop fo Carbon Hedge Funds

Two prominent carbon and CDM Experts, Peter C. Fusaro, Dr. Prabhu Dayal are presenting the 'EUEC 2009' in Phoenix, Arizona, the Carbon Trading course includes practical case studies for the design and development of CDM Projects and Certified Emission Reductions (CERs).

Aletrnative investment strategist, Global Change Associates, says the workshop will provide insights on the state of carbon trading markets and finance in the US and Europe and what some of the investment opportunities are in this emerging asset class for investors.

Case studies of renewable energy projects being developed by C TRADE in the Philippines will be used to illustrate the certification process for CERs, where methane gas emissions are avoided and electric power generated using waste methane bio-digester gas recovered from animal manure.

Fusaro is a Global Change Associates carbon expert and best selling author of "What Went Wrong at Enron", Dayal is President of C TRADE and Chair for EUEC.

Veteran of U.S. Secret Service Heads Up AlphaMetrix’s Financial Investigations Group

To root out fraud and to give investors increased confidence that their assets are being managed with institutions of integrity and honesty, AlphaMetrix formally introduced AlphaMetrix Financial Investigations, LLC, run by David Fisher, a 24-year veteran of the US Secret Service.

AlphaMetrix is a research and investment platform for managed futures and other liquid alpha strategies with approximately $1.7 billion on the platform.

“Under David's leadership, the alternative investment company seeks to set a new standard for the due diligence on financial institutions,” the company said in a letter received by HedgeCo, “first focusing on those on the AlphaMetrix platform, and later as a third-party provider of due diligence services.”

Fisher has a strong domestic and international investigative background in financial fraud, background investigations, security planning and electronic crimes. In addition to responsibilities associated with the Secret Service’s well-known role protecting the President, Vice President and visiting Heads of State, Fisher also brings extensive experience from the agency’s core investigative mission into financial institution fraud, computer and telecommunications fraud, false identification documents, access device fraud, advance fee fraud, electronic funds transfers and money laundering.

“AlphaMetrix has always been known for our deep trading manager research capabilities, and the new Financial Investigations group takes that to an even higher level, with comprehensive background checks and reviews of operational risk,” said Aleks Kins, CEO of AlphaMetrix.

“This type of due diligence work takes a consummate professional, so we are particularly excited to have someone of David Fisher’s caliber on board to build AlphaMetrix Financial Investigations into a thriving organization,” he added.

22 Jan 2009

Novices Given $1 Million to Start a Hedge Fund on TV

Avanta is making its UK television debut with Million Dollar Traders on BBC2. Aired for 3 weeks in January, the series will play out at Avanta's Austin Friars business centre in London.

The program gives eight ordinary people a million dollars and two weeks of intensive training to help prepare them to launch their own hedge fund and try to make their fortune in the stocks and shares market.

The traders set up camp in one of the buildings grade A office suites, buying and selling in the stock market in an attempt to make their millions.

Avanta was formed in 2004 by David Alberto, previously with Regus and former Managing Director at MWB Business Exchange. The company offers unbranded office space with advanced and competitively priced technology. In the UK it currently manages over 670,000 sq ft of office space in prime locations in London, the Thames Valley, Manchester, Birmingham and Edinburgh. Avanta’s first international business centre in New Delhi, India opened in September 2008 and a further two centres are now open in Mumbai.

Fidelity Launches Indian Fund of Hedge Funds

Fidelity International is launching the Fidelity Wealth Builder Fund through it's Indian asset management arm, the new fund is an open ended fund of funds scheme offering asset allocation options with three plans.

The investment objective of the fund is to seek to generate reasonable returns based on the plan selected with minimum and maximum asset allocation between debt and equity. The fund manager will use a two-tier investment approach – asset allocation and fund selection – to invest in Fidelity’s funds. The NFO will be open from January 14 to February 5, 2009. The Fund will open for ongoing purchases and redemptions from March 2, 2009

“Asset allocation decisions can drive as much as 91.5% of investment returns variability, as studies have shown." Ashu Suyash, Managing Director and Country Head - India, Fidelity International, said, "In the current market conditions of heightened volatility, a fund like the Fidelity Wealth Builder Fund provides investors a convenient route to benefit from disciplined asset allocation. We are in an environment where attractive returns are likely in the bond market and there is potential for bear-market rallies in equities on the back of increasingly attractive valuations.”

Ms. Suyash added, “To encourage investors who have turned risk averse, the Fidelity Wealth Builder Fund is a fund with no entry load. Whether investors invest through their advisers or directly, they will not be charged an entry load. Moreover, the Fund also offers investors free switch-in and switch-out facility between the Plans, if, over time, investors’ outlook for debt and equity changes.”

The Fund will offer Growth and Dividend options. A dividend is proposed to be declared, subject to availability of distributable surplus, on a Quarterly basis under Plan A and Plan B. Under Plan C, the dividend may be declared by the Trustee, at its discretion, from time to time subject to the availability of distributable surplus.

The minimum initial investment is Rs.5000.($100K )Investors can invest in the Fidelity Wealth Builder Fund even through the SIP route with a minimum amount of Rs. 500 per installment with the total of all installments not being less than Rs.5000. In addition, the systematic transfer and systematic withdrawal plans are also available.

FIL Fund Management Private Limited is the Indian arm of Fidelity International, one of the world's leading global investment management companies with operations in 23 countries and more than $197.9 billion in assets under management.

Morningstar Reviews 2008's Losses and Gains

In their summary of hedge fund performance for the fourth quarter and full year of 2008 as well as asset flows through November, Morningstar reported that 2008's low returns wiped out the last two years gains.

Investors lost their appetite for hedge funds in 2008, Morningstar says, as the vehicles intended to deliver absolute returns were forced to resort to relative claims of success.

"In 2008, hedge fund managers generally failed to deliver," said Morningstar Hedge Fund Analyst Nadia Papagiannis. "The average hedge fund may have lost less than the stock market, thanks in part to large cash allocations, but this level of performance was not why investors agreed to pay 2% management fees and 20% performance fees."

Hedge fund inflows peaked in June 2007 and bottomed in October 2008, when more than $21 billion left the industry. In November 2008, another $19.4 billion flowed out of hedge funds, setting the year-to-date outflows at more than $44 billion.

The number of funds dropping out of Morningstar`s database increased more than 150% in 2008 from 2007—1,158 single-manager funds and 490 funds of funds were removed in 2008 compared to 434 single-manager funds and 208 funds of funds in 2007. (Funds are removed from Morningstar’s database if the fund liquidates, if the manager wishes to stop reporting returns, or if funds fail to report returns for six months.)

Emerging market equities proved to be the worst strategy in 2008, along with convertible arbitrage funds, which took a big hit in 2008.

The best-performing strategy this year was global trend following, a systematic strategy that tracks price trends in liquid derivatives such as futures, options, and currency forwards.

Morningstar has approximately 8,400 hedge funds and funds of hedge funds in its database.

21 Jan 2009

GLG Partners Adds Pendragon Hedge Fund Managers

Global alternative asset manager, GLG Partners LP, is teaming up with two of the founding partners of London hedge fund Pendragon Capital, Kaveh Sheibani and Julian Harvey Wood, to focus on event driven strategies.

In addition, GLG Partners LP will become the investment manager of the funds and accounts managed by Pendragon Capital. Before founding and managing Pendragon Capital with Gordon Lawson, Kaveh and Julian had worked together managing European proprietary trading in equities at Salomon Brothers (subsequently Citigroup).

"Kaveh and Julian are both highly experienced, event driven professionals and we expect that this team will greatly enhance and expand GLG's own event driven franchise," Emmanuel Roman, Co-CEO of GLG commented.

As of September 30, 2008, GLG managed net AUM of over $17 billion.

20 Jan 2009

Independent Hedge Fund Management Key to Investor Trust

The recent wave of scandal related to hedge funds and funds of funds has made investors think twice about investing in self-administrated funds, see 'Andrew Schneider on Nadel Funds'.

Dermot Butler, Chairman of alternative fund administrator, Custom House Group, said, “In today’s new investment environment, more than ever hedge funds and funds-of-funds must have independent outside administrators as a foundation to help rebuild investor confidence and attract new investment capital.”

Fund administrators, such as the $35 billion Custom House Group, provide a range of services to funds and fund-of-funds including (but not limited to), fund accounting, portfolio valuation, NAV calculation and shareholder services as well as anti-money laundering services and reconciliation services and record-keeping functions.

“In anything less than an independent fund administration relationship, there is at the very least a perception that a conflict of interest may exist that could prevent objective verification of a fund’s investment activities and even the existence of underlying assets in a given fund, let alone an objective and accurate valuation of the fund's assets,” Butler said. “This perceived conflict may occur when an outside administrator is affiliated with a financial institution, with an investment manager, or when the administrator is associated with a hedge fund itself.”

“As stand-alone companies, independent administrators have no affiliations to any outside financial entities, et ergo, no such conflicts exist,” he concluded.

Excerpts and Commentary on Ben McGrath’s "The Dystopians" – Jan 26th, New Yorker

"Bad times are boom times for some."

The article starts off with US resident Dmitry Orlov, from Leningrad, who has been living on a semi-self-sustainable boat in a form 'bourgeois survivalism' for 2 ½ years, riding a bicycle and skipping the TV.

After the downfall of the Soviet Union he learned a lesson for future reference: “When faced with a collapsing economy, one should stop thinking of wealth in terms of money.”

In his 2008 book, “Reinventing Collapse: The Soviet Example and American Prospects,” Orlov identifies the ingredients of what he calls “superpower collapse soup” — a severe shortfall in the production of crude oil, a worsening foreign-trade deficit, an oversized military budget, and crippling foreign debt.

“We don’t have a long wait before sail-based transport is the only option,” he said, anticipating dire environmental conditions. Should the need to raise chickens arise, Orlov and his wife will "set sail and relocate to a more rural base of operations," where the boat, Hogfish, which has a flat bottom, can double as a trailer home.

In 2006, Orlov published an online manifesto, “The New Age of Sail,” where he writes that sailing has the additional benefit of providing “isometric exercise similar to a Pilates workout,” because of the constant jostling of the sea. “People who live aboard are rarely overweight.”

In a blog that he maintains, Club Orlov, he categorises his readers into three basic cultural categories;

1. “back-to-the-land types,” united in their opposition to industrial agriculture;

2. “peak oilers,” who worry about the shock effects on energy markets of reaching the maximum global crude-extraction rate; and all-around Cassandras, and

3. “people who sometimes derisively are called doomers.” (The doomers are currently enjoying a little less derision, which is a mixed blessing, because it is axiomatic among true believers that mainstream respect means that it is too late for anything to be done.)

Orlov has recently acquired a fourth audience, composed of financial professionals, who have been, as he said, “bolstering my gut feeling that the United States is bankrupt.” A number of them have placed orders for multiple copies of his book, and he took some pleasure in imagining them passing it on to their friends and families this past holiday season as a grim kind of stocking stuffer.

Also mentioned is Jim Sinclair and his website:, on which he posts daily blitzes of commentary with headers like “What Happens in Iceland Doesn’t Always Stay in Iceland.”

Ben McGrath meets James Howard Kunstler, author of “The Geography of Nowhere,” and “World Made by Hand,” which is set in a small town north of Albany, where the residents have no oil, no coffee, no spices, no mail delivery, and only sporadic electricity, but marijuana cultivation is booming and they’re growing “buds the size of plums.”

Also recommended for dystopians are Cormac McCarthy’s “The Road,” and Nassim Nicholas Taleb’s best-selling book “The Black Swan,” about the inevitability of unforeseeable events.

“I’d say an emergency meeting of the G7 is pretty much the front entrance,” Kunstler said. “Although who would have thought Iceland would be the first to go?...... Capitalism and human ingenuity persist; it’s only the economic incentives that change."

Kunstler likes to say that the United States has “a railroad system that the Bulgarians would be ashamed of,” and told a joke involving orders from the Treasury Secretary, Henry Paulson, to his underlings, to “buy the Dow,” in order to stave off consumer panic.

Three days after the Presidential election, in Montpelier, Vermont, at a convention of nearly two hundred “neo-Luddites, anarchists, socialists, freegans, steampunks, homeschoolers, folksingers, knitters and yak farmers”, Knustler called himself “an emissary from a place you may someday regard as foreign: New York State. . . . For the moment, we remain sister and brother states in a nation that is enduring a convulsion.”

He declared that the airline industry as we know it will not exist within forty-eight months, or by the end of President Obama’s first term.

These were people whose solution to the imminent death of the American dream was secession: a Vermont Independence Convention, sponsored by the Second Vermont Republic, a “nonviolent citizens’ network and think tank opposed to the tyranny of Corporate America and the U.S. Government.”

Also speaking were Chellis Glendinning, the author of “My Name Is Chellis and I’m in Recovery from Western Civilization,” and Lynette Clark, the chair of the Alaskan Independence Party,

The speeches were accompanied by comic and musical interludes from the Bread & Puppet Theatre, whose members wore bear costumes and danced around with plungers, and by the singing of the Vermont secession anthem: “It’s Vermonters to the lifeboats, this is a sinkin’ ship....”

Alex Akesson
Editor for

Along these lines I would also recommend reading: "Game Over" how to prosper in a shattered economy – by Stephen Leeb.

Obama's Stimulus Package - New Yorker Review

I received an advance copy of an article from the financial pages of next weeks New Yorker, "A Smarter Stimulus", where James Surowiecki describes the pros and cons of Obama's plan to include more than a hundred billion dollars in individual tax rebates in his stimulus package.

Although his promised tax cuts are a surefire political winner, he has also earned criticism from both ends of the political spectrum, Surowiecki writes, "Skeptics on both sides worry that most people will save the rebate rather than spend it."

In the past, as in 2001, less than half of the tax rebate was estimated to have been spent, the article says. And while the results of last year’s rebate seem to have been somewhat more encouraging, much of it still went unspent.

Surowiecki also explains how people will either on spend or save depending on where the money comes from, "Casino winnings are more likely to be spent than, say, money from an inheritance." he says, "A key factor is whether people think of a windfall as wealth or as income. If they think of it as wealth, they’re more likely to save it, and if they think of it as income they’re more likely to spend it."

The article concludes: "On its own, Obama’s rebate plan isn’t going to resurrect the economy. But it’s a policy that works with people as they are, rather than as we imagine they should be. And that’s a stimulus in itself."

Available from January 26th, "A Smarter Stimulus" by James Surowiecki, New Yorker.

Third Party Administrators to Improve Hedge Fund Transparency

In an example of how hedge funds and CTAs are turning to third-party administrators with an eye on offering their investors improved transparency, hedge fund and FoHF provider Spectrum Global Fund Administration has teamed up with with AlphaMetrix LLC, a managed futures investment platform.

AlphaMetrix says it chose Spectrum for their "ability to easily provide estimated daily NAVs and to facilitate semi-monthly liquidity, critical differentiators at a time of heightened investor sensitivity regarding alternative investments." The platform will provide investors with access, research and real-time performance reporting to managed futures funds and commodity trading advisors (CTAs).

“The AlphaMetrix value proposition is built on what we call ‘TLC,’ which stands for transparency, liquidity and custody,” said Aleks Kins, founder and CEO of AlphaMetrix. “In partnering with Spectrum, we have selected the only fund administrator that can produce the estimated daily NAV reporting our clients demand, and handle the increased complexity associated with more frequent liquidity.”

Currently, client assets allocated over the AlphaMetrix Platform total approximately $1.7 billion, which includes both direct investments and managed account tracking.

Hedge Fund Manager SVM Launches Long/Short Fund

Privately-owned investment management company, SVM Asset Management, is seeking approval from the Financial Services Authority for the launch of the long/short SVM UK Absolute Alpha Fund, which has a similar investment approach to their SVM Saltire fund, which returned +19.7% in 2008.

The fund, if approved, will have the flexibility to move from a net long to a net short position differentiating it from other absolute return funds, the company says. Managed by Colin McLean, returns will be driven by stock selection and the net position of the fund will be determined by whether the manager has more long or short stock ideas at the time.

"In 2008 just 31 of the stocks in the FTSE All Share ended the year higher, and 580 were down. It is therefore not surprising that few long only managers were able to profit," McLean says, "Without question this year will be challenging for the economy. However, at a company level there will be winners and losers and fundamental stock picking skills will be required to identify them."

The focus will be on generating positive returns over the long term rather than positive performance each month, as such SVM believes the appropriate time frame for investing in the new fund is at least three years.

Based in Edinburgh, SVM focuses principally on global fund of funds, UK and European equities.

16 Jan 2009

HK Fund to team up with Paulson Hedge Fund in Offshore Launch

One of Hong Kong’s largest independent financial institutions, Sun Hung Kai Financial, is teaming up with hedge fund Paulson & Co, launching a distressed asset investment fund, according to a Reuters report.

John Paulson will act as the new $100 million offshore fund's investment manager. The fund will only be open to professional investors and will feed into Paulson’s existing “recovery fund”, which invests in distressed financial assets, according to the report.

With approximately $29 billion in assets under management Paulson hedge fund has offices in New York, London and Hong Kong. Sun Hung Kai has over HK$50 billion ($6.45 billion) in assets under management, together, the funds plan to invest globally, but are focused mainly on the United States.

Rizal Wijono, Managing Director at SHK Fund Management Limited, the Sun Hung Kai's asset management business said, “There is a lot of turmoil in the U.S., which is Paulson’s home market. They’ve been looking at a approximately 100 financial institutions who they think are going to be the survivors and the failures,” he said, “To date, they’re looking into Asia, but they haven’t identified potential positions yet. If you’re looking for maximum appreciation, the obvious place is the developed world.”

Bankrupt Tulsa Execs Receive Over $3 Milllion in Bonuses

A pair of SemGroup LP executives are the only two administrators named to receive bonuses from both the bankrupt Tulsa company and its publicly held and struggling subsidiary, SemGroup Energy Partners LP, first reported Thursday.

Pete Schwiering and Jerry Parsons were named among 10 SemGroup LP leaders slated to receive up to $3.8 million in combined incentives if the Tulsa-based company meets or exceeds certain criteria, according to bankruptcy court records in Delaware. The incentives are designed to keep employees on board while SemGroup LP sells off assets or emerges from Chapter 11 protection.

Schwiering and Parsons both could gain up to $468,750 in additional pay under the SemGroup LP incentive plan. Schwiering heads up SemCrude oil operations, while Parsons leads the company's SemMaterials asphalt unit.

Last month, SemGroup Energy Partners' compensation committee approved bonus pay for five executives, including CEO Kevin Foxx, Schwiering and Parsons, according to a Securities and Exchange Commission filing.

Parsons' bonus pay for his SGLP asphalt work totaled $215,000, while Schwiering received an additional $120,000 for leading the public company's crude oil operations, according to reports.

The parent SemGroup filed for bankruptcy protection July 22 after admitting its traders lost $2.4 billion in failed oil futures transactions. The company also owes $2.5 billion to banks and other lenders and up to $1 billion to oil and gas producers who sold their product on credit, according to reports.

Hedge funds Manchester Securities and Alerian Capital Management gained SGLP board control when the parent company defaulted on a $150 million loan, and the public firm tried to find other, third-party customers for its storage and pipeline services.

SemGroup Energy Partners is not a debtor in the bankruptcy case, but it suffers from its own credit default and cash-flow challenges, records show. Schwiering has worked for SemGroup since 2000, the year that it was founded. Parsons joined SemGroup in 2006. Neither SemGroup LP or SGLP spokesmen could be reached for comment.

15 Jan 2009

December Investor Survey finds Managment fees too High

When surveyed about what they think about fee levels and value for money offered by investment managers, investors believe that managment fees are too high.

Two surveys were conducted by bfinance in December, questioning institutional investors and asset managers from Europe, North America, and the Gulf Region.

"The results indicate that pension funds believe investment management fees are too high and need to come down, and a majority of managers seem to agree." David Vafai, CEO of bfinance commented.

With regards to hedge fund and fund of hedge fund fee levels, pension funds generally feel that all fees need to be reduced. 77% of respondents state their first priority is for lower base fees, followed by 52% who indicate their desire for performance fees to be reduced and for there to be an increase in hurdle rates. Also, 65% of investors say that these performance fees should be calculated over a four or five year period.

"Clearly, investors are still willing to pay performance fees to reward long-term skill but are no longer willing to pay active fees for beta or for 'luck'", commented Olivier Cassin, Managing Director, Research and Development for bfinance.

Hedge fund managers agree that fees would likely go down and indicate they expect the median level for base fees for FoHFs to decline 9% to 95bps and for the median level of performance fees for hedge funds to decline 25% to 13%.

Vafai concluded, "Although the study indicates disenchantment with the industry in general, and disenchantment with Fund of Hedge Funds and GTAA managers comes out particularly clearly, the study also rather paradoxically suggests that allocations to FoHFs, as well GTAA, Infrastructure, Real Estate and Private Equity FoFs are set to increase in the future. This confirms the results of our recent study on the impact of the crisis on pension fund asset allocation"

14 Jan 2009

Alternative Investment Specialist Joins Canadian Hedge Fund Manager

Todd Groome is joining Diversified Global Asset Management (DGAM) as a Managing Director, effective February 1, 2009. Responsible for business development, Groome will also advise the investment team on macro investment themes and the global economic and policy environment.

"I am extremely pleased to join DGAM, a firm that is known for its expertise in hedge fund investing, its focus on business and operational integrity, and its leading edge thinking in a variety of investment areas, including in particular DGAM's strong commitment to building strategic relationships with its clients." Todd Groome said." Groome will be based out of DGAM's Toronto office.

With a wealth of experience in capital markets in both the public and private sectors, previously positioned as Managing Director and Head of the Financial Institutions Groups of Deutsche Bank and Credit Suisse in London, managing the European High Yield origination business for a period of time.

He also worked with Merrill Lynch and was a consultant to Hovde Capital Advisors, a hedge fund and merchant banking operation in Washington, focusing on financial institutions.

In December, 2008, Groome was named non-Executive Chairman of the Alternative Investment Management Association ("AIMA"), with effect from January 1, 2009.

George Main, CEO of DGAM, commented further, saying "I am delighted that Todd Groome will be joining the firm. Todd's deep experience, insights and stature in the global financial community will be invaluable assets as we take DGAM into our next growth phase."

13 Jan 2009

Hedge Fund Editor to Join NetSalonFX as Adviser

Chris Gillick, currently an associate editor with Trader Monthly and Dealmaker magazines, has agreed to join NetSalonFX as an adviser, principal/branch manager, and regulatory liaison, having just completed his NASD Series 30 exam.

As an editor for Trader Monthly and Dealmaker, he has covered the hedge fund industry, brokerages, private equity and investment banking. In 2008, he helped produce several widely followed industry lists such as the Trader Monthly 100, the Trader Monthly Top 30 Under 30, the Dealmaker Top 40 Under 40, and Dealmaker's Party Crashers, featuring the top women in private equity.

"I am happy to have Chris aboard," Says Lance A. Perry, CEO of NetSalonFX and its parent company, NetSalon Software Development Inc, "He brings great credibility as a financial professional with deep knowledge of the foreign exchange market, and as a journalist covering so many sectors of the financial world. He's going to be a great asset to our clients."

"I'm very much looking forward to working with the NetSalonFX team," says Gillick. "I'm excited to get my into the trading world while still pursuing my passion of journalism."

NetSalonFX's clients are all accredited investors, whom Gillick is accustomed to conversing with regularly in his coverage of the world of high finance. "I have had the privilege of meeting people in every corner of the world of finance, including introducing brokers in the foreign exchange market. Unfortunately not all IBs have the best intentions when selling their products. However, NetSalonFX has done a great job of screening out unqualified investors and building a community of traders who understand fully the great risks, and rewards, of the foreign exchange market."

Eze's Virtual Hotel Suites

Hedge fund manager, Eze Castle Integration has introduced a web version of its "hedge fund hotel" for small hedge funds with fewer than 10 people.

The company introduced the fully managed physical suite in November 2007 and the Eze says that the new offering has many of the same options now, over the Internet, using Citrix servers and thin clients. Users pay a monthly subscription fee for this hosted platform using their own desktops and basic networking.

"We act as a cloud," says Bob Guilbert, managing director. "As we add more applications to our back end data center, we'll enable clients to get things like CRM services, accounting services and anything else that might be necessary to run a back office operation. The benefit of this solution is they don't have to build out an IT infrastructure, they don't have to build out a data center. That makes it very easy for them to become operational."

12 Jan 2009

Directory of Commodity Exchange Traded Funds Launched by Energy Hedge Fund Center

The Energy Hedge Fund Center, an online community focused on energy and environmental alternative investments, has launched a Directory of Commodity-focused Exchange Traded Funds that will appeal to ordinary investors. The Directory lists Exchange Traded Funds, Exchange Traded Notes and Exchange Traded Commodities in Excel format.

"Over the last several years there has also been an explosion of Exchange Traded instruments accessible by ordinary investors that are designed to provide exposure to commodities," reports Dr. Gary M. Vasey, Co-Principal of EHFC. "This directory is designed as a single source for investors interested in these vehicles."

"The financial crisis has driven more business to exchanges and ETFs. We expect more growth in this sector next year," said Peter Fusaro, Co-Principal, Energy Hedge Fund Center.

Debt Crisis for New York Times Hedge Fund Shareholders

Some analysts are saying that the mighty New York Times might be headed down the same path as the bankrupt Tribune Company, owner of the Chicago Tribune and Los Angeles Times.

Hedge fund shareholders, Harbinger Capital Partners Funds ("Harbinger") and Firebrand Partners ("Firebrand") own 19% of The New York Times Company, and the outlook does not look good. NYT is approximately $1 billion in debt, the result of its move to a new building on Eighth Avenue a couple of years ago.

Harbinger Capital Partners has grown to one of the 15 largest hedge funds, by assets, in America. Firebrand Partners is an operational activist firm that invests in publicly-traded companies whose brand equity represents significant upside relative to their market capitalization.

The New York Times Company includes The New York Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers.

Northern Arizona Land Eyed by Hedge Funds

Rolling Hills Ranches, LLC has has been in talks with a number of investors and hedge funds in recent weeks, engaging experts from the Master Planned Communities group of Kitchell Construction to provide planning oversight for further commercial development of the Rolling Hills Ranches community.

Von Jenson, General Manager, Rolling Hills Ranches, says, "If you're invested in stocks to retire on.... you'll definitely need a nice place to retire - Rolling Hills Ranches in northern Arizona is a great place to ease into a fresh lifestyle to enjoy yourself."

Kitchell is a diversified corporation providing general contracting, construction management and real estate development services to public and private sector clients from offices in Arizona, California and Nevada.

Rolling Hills Ranches is a developed ranch community located in northern Arizona. The ranch is comprised of lots suitable for home building or ranching and is ideal for those who wish to enjoy a rural lifestyle. Power and water are available and the community is bordered by paved roads on two sides.

8 Jan 2009

Millennium Outsources all Fund Managment to GlobeOp

Millennium Management LLC, a global multi-strategy investment management firm with over $11 billion in assets under management, has outsourced fund administration to hedge fund manager GlobeOp Financial Services.

GlobeOp became administrator of record for all three Millennium funds on January 1, 2009 (Millennium USA, LP, Millennium International, Ltd., and Millennium Global Estate, LP).

“We are sending a strong signal about our commitment to transparency and the independent validation of Millennium’s portfolio positions, asset pricing and expense allocation by appointing GlobeOp as an independent administrator, and by increasing our online investor portfolio reporting,” said Terry Feeney, co-president and chief operating officer of Millennium. “This is also consistent with our strategy of enabling our fund investment professionals to concentrate their energies on what they do best - managing portfolios – supported by the trading, operational, technology and risk management infrastructure which is essential in this industry. The quality of the services GlobeOp has provided since 2006 was key to our appointing them as our independent administrator.”

“We welcome this opportunity to strengthen our relationship with Millennium by providing independent fund administration services,” said Vernon Barback, GlobeOp president and chief operating officer. “We will quickly demonstrate to Millennium’s investors the value of our robust and scalable technology platform, 24/5 global support network, and process controls affirmed by SAS 70 Type ll certification.

Established in 2000, GlobeOp serves more than 180 clients worldwide, representing $95billion in assets under administration. As an independent financial technology specialist, GlobeOp provides automated, integrated middle and back-office administration to hedge funds and asset management firms—including banks, insurance companies, mutual & pension funds and proprietary traders.

7 Jan 2009

Rival Launches RRSP Fund

Canadian hedge fund manager Rival Capital Management Inc., announced the launch of the Rival North American RRSP Growth Fund, an RRSP eligible fund that will invest in the current Rival North American Growth Fund LP.

The new fund plans to buy units in the current fund instead of holding individual securities, the fund enables accredited investors who wish to make RRSP investments to gain access to the Firm’s flagship Fund through their RRSP.

Investing primarily from both a long and short perspective in small and midcap growth stocks listed in Canada and the US, the fund’s investment process is centered around a top-down disciplined technical and fundamental approach. The fund employs a rigorous proprietary screening process to identify stocks exhibiting certain technical and fundamental characteristics that Rival considers key to identifying long term performance.

Tony Warzel, Chief Investment Officer and head of the Rival investment team is primarily responsible for stock selection as well as overall portfolio management of the Rival North American Growth Fund.

With approximately $14.9 million in assets under management, Rival Capital was founded in 2006. It is a niche investment management firm that provides pooled fund portfolio management services to accredited investors.

Chairman of Hedge Funds Care to Ring the NASDAQ Closing Bell

President and Chairman of Hedge Funds Care (HFC), John Budzyna, will preside over the Closing Bell to mark the 11th Annual New York Open Your Heart to the Children Benefit to be held at Cipriani 42nd Street on February 11, 2009.

Hedge fund industry professionals established HFC, a charitable organisation focused on assisting young victims of abuse, in 1998. Since that time, chapters have opened in New York, San Francisco, Chicago, Atlanta, Boston, Denver, Toronto, Cayman, and most recently in London.

The organisation comprises those companies with interests in hedge funds, including investment managers, investors, prime brokers, attorneys, accountants, administrators and information providers.

5 Jan 2009

Finvest Launches Private Equity Fund

After being awarded $2.5 billion in allocation for investment in private equity, hedge fund manager Finvest Asset Management, announced the launch of a private equity initiative. Finvest is also separately dedicating $300 million to a fund of funds.

The $2.5 billion capital allocation to Finvest is being made by a European family office seeking to increase its exposure in the private equity space.

Targeting companies which are listed on the main boards in Northern American and European markets, the fund will seek to allocate capital to between 25 and 100 companies, with each allocation ranging in a value of between $10 million and $250 million.

The new fund's time horizon will be between 3-5 years, although liquidity will be an important criterion assessing risk. Companies below a $200 million market capitalization will not be discounted, however, the fund will be favorably disposed towards companies with higher market capitalization levels, and which exhibit a high percentage of outstanding shares. The model which is being applied by Finvest is slightly different to the typical private equity structure, which generally would consider stakes in private companies which are not listed and perhaps seek to extract value through an IPO.

The team at the Finvest Private Equity fund indicated that their due diligence turn around period is quite aggressive. "While we are not looking to cut corners on due diligence, we are looking to fast track the allocation process, so that we can take advantage of a market which has been beaten to shreds," said Finvest portfolio strategist Mayer Greenwald.

"We do not have an agenda to take control or necessarily secure a controlling interest in the firm. We typically would base an interest in a company on the fact that management know what they are doing, and understand their area of endeavor better than others. Our philosophy is to provide company management with additional capital, and give them the opportunity to continue running with the ball. Obviously, we appreciate regular feedback on progress or challenges which are being faced in the industry." Greenwald concluded.

Hedge Fund Manager Waives Managment Fees

Renaissance Institutional Futures, a $3 billion futures fund run by hedge fund management company, Renaissance Technologies, has waived all it's management fees for 2009, even if the fund delivers good results in 2009, according to the Wall Street Journal.

Renaissance told investors in a end-of-year letter that the futures fund was waiving it's 1% fixed management fee following poor performance in 2008. The discount is estimated by the Journal to save investors $30 million.

Renaissance Technologies was started in 1982 by James Simons, Renaissance currently has approximately $20 billion in assets under management. The company operates in East Setauket, Long Island, New York, near Stony Brook University. Administrative functions are handled out of offices in Manhattan.

2 Jan 2009

Altos Places Hedge Fund Shareholders on Board

French IT services group Atos Origin is holding a shareholder meeting on Feb. 10, making board changes and initiating a plan to speed up recovery spearheaded by its new chief executive Thierry Breton.

Atos Origin is replacing it's current structure for a single managing board headed by a Chairman and CEO, according to a Reuters report.

Benoit d'Angelin, who represents hedge fund Centaurus on Atos's current supervisory board, will not seek a seat on the new board, Centaurus recently cut its direct stake in Atos in September to 6.66% from around 12%, selling its shares to PAI Partners.

PAI Partners, which is Atos's main shareholder with a 22.61% holding, would now have three representatives on Atos's new board, the list showed. Centaurus, together with Pardus Capital, forced board changes at Atos Origin last year after a long-running battle between the company and the activist hedge funds. The two funds still own a combined 16.71% of Atos capital.

Pardus, which sources have said has no plans to sell its stake in Atos, will keep its representative on Atos's new board, Behdad Alizadeh.

Meanwhile Jean-Paul Bechat, the former head of Safran's managing board, and LVMH executive Nicolas Bazire, will sit on the new board as independent members.

Atos Origin gave the following composition of the 12-member board, which has yet to be approved by shareholders:

Rene Abate, former chairman of Boston consulting Group; Bedhad Alizadeh, Partner, Pardus Capital Management; Nicolas Bazire, LVMH Exec Committee member, Acquisitions; Jean-Paul Bechat, former head of Safran Managing Board; Thierry Breton, Atos Origin Chief Executive; Dominique Megret, Chairman of Pai Partners; Bertrand Meunier, Head of Investments at Pai Partners; Michel Paris, Senior Partner at Pai Partners; Vernon Sankey, former Chair and CEO of Reckitt & Colman, UK; Jean-Philippe Thierry, AGF Chairman; also on the list is one independent member, who has yet to be named and one representative of the workers holding Atos shares.