West Palm Beach (HedgeCo.net) - A recent paper by AlternativeSoft regarding the influence of hedge fund size and strategy during the recent crisis, showed that that from July to December 2008, large and medium hedge funds outperformed their smaller peers in terms of returns; also large hedge funds outperformed smaller hedge funds in term of Sharpe ratio.
The study was done using the AlternativeSoft software platform, enabling the group to quickly run statistics on individual funds, as well as on a group of hedge funds.
Looking at CTA strategies, Equity Long-Short, Macro and Multi-Strategies, AlternativeSoft found that from July to December 2008, medium sized hedge funds using CTA, Equity Long-Short and Multi-Strategy performed the best; however the large sized funds had the best Sharpe Ratio. This indicates that the medium sized hedge funds were exposing themselves to slightly more risk (assuming risk is defined with volatility only). In Macro, the large funds had higher returns and larger Sharpe ratio than smaller funds.
In conclusion, the analysis found that the larger funds performed better than their smaller peers, occurring because larger funds were able to better manage risk than smaller funds. In addition, the larger funds had more experience as shown below with a longer track record history. So experience matters when crash comes.
The average track record for a hedge fund is:
Small, 66 months
Medium, 78 months
Large, 91 months
Super Large, 139 months
A basic strategy investing in the 10 Super Large hedge funds mixed with large hedge funds ($500m), would have easily outperformed the hedge fund indices and other smaller hedge funds, in term of returns and Sharpe ratio during 2008.
Hedge funds with assets over $10 million and funds of hedge funds were not included in the study. December 2008 data were not available for all funds. In the ‘Super-large’ group, two hedge funds had large returns, which may skew the results. AlternativeSoft intentionally does not use statistical measures like R-squared, t-statistics or Granger causality in order to keep the paper readable.
31 Mar 2009
30 Mar 2009
Tax Information Assistance In Cayman Islands Extended to 20 Countries
The Cayman Islands Government today announced that it will provide access to comprehensive tax information assistance to 20 countries, including the majority of Cayman’s major trading partners.
Ireland, Japan, the Netherlands and South Africa now join eight other countries afforded tax information assistance to OECD standards, with a "unilateral mechanism, which does not require a bilateral treaty."
“The Cayman Islands took the proactive step of introducing the unilateral mechanism for the provision of information in tax matters, as a complement to our bilateral negotiation programme,” Cayman Islands Leader of Government Business, the Honourable Kurt Tibbetts said. “We recognised the need to increase the pace at which we could enter into tax information arrangements, while offering a phased approach to our negotiating partners under our bilateral programme in appropriate circumstances. We look forward to continuing this progressive approach.”
In combination, the arrangements noted above cover four of the seven G-7 states and 17 of the 30 OECD member states.
Based on its current negotiating programme – which reflects OECD countries (including significant trading partners) that have indicated interest in tax cooperation arrangements – the Cayman Islands aims in the following months to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.
Ireland, Japan, the Netherlands and South Africa now join eight other countries afforded tax information assistance to OECD standards, with a "unilateral mechanism, which does not require a bilateral treaty."
“The Cayman Islands took the proactive step of introducing the unilateral mechanism for the provision of information in tax matters, as a complement to our bilateral negotiation programme,” Cayman Islands Leader of Government Business, the Honourable Kurt Tibbetts said. “We recognised the need to increase the pace at which we could enter into tax information arrangements, while offering a phased approach to our negotiating partners under our bilateral programme in appropriate circumstances. We look forward to continuing this progressive approach.”
In combination, the arrangements noted above cover four of the seven G-7 states and 17 of the 30 OECD member states.
Based on its current negotiating programme – which reflects OECD countries (including significant trading partners) that have indicated interest in tax cooperation arrangements – the Cayman Islands aims in the following months to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.
Investor Confidence in the Hedge Fund Industry - Survey
Eighty per cent of hedge fund investors continue to believe that hedge funds can provide good, long-term returns, according to a recent survey conducted by IRC Conferences / Terrapinn, a leading global business media company and organiser of London's HEDGE 2009 congress. Only 20 per cent of investors said that recent global events have shaken their belief in the hedge fund industry.
The survey, which was conducted amongst 273 institutional investors, hedge fund managers and service providers from around the world, revealed that 39% of investors believe that the current depressed markets and heightened risk premia offer a great entry point for fresh investment. Unsurprisingly, the hedge funds themselves are even more optimistic, with 55% of hedge funds stating that the current environment offers exceptional opportunity.
Responses also showed that there was widespread agreement across the industry with regard to the reforms that are required, with one exception - the prickly issue of fees.
Investors, fund managers and service providers all agreed that the industry needs to have better transparency (95%, 97% and 97%) and stronger internal risk, compliance and audit functions (93%, 96% and 100%.) They also agreed on the necessity of having stronger self-regulation and statutory regulation.
While 43% of investors rated the issue of fees "very important" in reviving enthusiasm, only 14% of hedge funds did so. It is not simply lower fees that investors want, but fees which are better structured, to align more closely hedge fund managers' interests with those of investors.
While all categories saw better self-regulation as more important than statutory regulation, the difference between investors and hedge funds was again marked. Thirty two per cent of investors see statutory regulation as "very important," but only 13% of hedge funds believe it to be so.
Three key lessons were almost universally acknowledged in the respondents' feedback. Both investors and hedge funds acknowledged that independent administrators and custodians are essential (87% and 92 % respectively) and that a greater match is needed between hedge fund terms and liquidity (85% and 80%.) They also agreed that due diligence is more important than they realized (76% and 73%.)
The more sobering news for hedge funds is the suggestion that they may have to wait until 2010 for net inflows to the industry to restart. The majority of hedge funds expect net inflows to the hedge fund industry to commence in the second half of this year, but most investors do not expect this to happen before 2010.
Unsurprisingly, the hedge funds strongly believed that money entrusted to their care needs to stick around longer term. As a result, hedge funds are more enthusiastic than ever to attract capital from long-term, institutional investors such as pension funds.
Some of the hedge funds who responded to the survey said that they are implementing structural changes to make their product offering more attractive to investors. By far the most common response was that funds are looking at how they can improve their transparency. This answer figures at least twice as much as any other issue. The following list appears in order of number of citations:
Changes being considered or enacted by hedge funds
Greater transparency
Improved communication to investors, particularly with regard to return attribution analysis
Improved internal risk management processes
Amendments to fund terms regarding gates, redemption notices or offering daily liquidity
Focus on managed accounts
More dynamic strategies to control drawdowns / more focus on "absolute return"
Focus on quality of service providers e.g. administrators, custodian
Greater focus on investing in liquid assets
Reduction in fees / offering a variety of fee structures
Improving due diligence processes
New product offerings to meet changing requirements of investors
Lower leverage
Greater focus on "values"
The survey, which was conducted amongst 273 institutional investors, hedge fund managers and service providers from around the world, revealed that 39% of investors believe that the current depressed markets and heightened risk premia offer a great entry point for fresh investment. Unsurprisingly, the hedge funds themselves are even more optimistic, with 55% of hedge funds stating that the current environment offers exceptional opportunity.
Responses also showed that there was widespread agreement across the industry with regard to the reforms that are required, with one exception - the prickly issue of fees.
Investors, fund managers and service providers all agreed that the industry needs to have better transparency (95%, 97% and 97%) and stronger internal risk, compliance and audit functions (93%, 96% and 100%.) They also agreed on the necessity of having stronger self-regulation and statutory regulation.
While 43% of investors rated the issue of fees "very important" in reviving enthusiasm, only 14% of hedge funds did so. It is not simply lower fees that investors want, but fees which are better structured, to align more closely hedge fund managers' interests with those of investors.
While all categories saw better self-regulation as more important than statutory regulation, the difference between investors and hedge funds was again marked. Thirty two per cent of investors see statutory regulation as "very important," but only 13% of hedge funds believe it to be so.
Three key lessons were almost universally acknowledged in the respondents' feedback. Both investors and hedge funds acknowledged that independent administrators and custodians are essential (87% and 92 % respectively) and that a greater match is needed between hedge fund terms and liquidity (85% and 80%.) They also agreed that due diligence is more important than they realized (76% and 73%.)
The more sobering news for hedge funds is the suggestion that they may have to wait until 2010 for net inflows to the industry to restart. The majority of hedge funds expect net inflows to the hedge fund industry to commence in the second half of this year, but most investors do not expect this to happen before 2010.
Unsurprisingly, the hedge funds strongly believed that money entrusted to their care needs to stick around longer term. As a result, hedge funds are more enthusiastic than ever to attract capital from long-term, institutional investors such as pension funds.
Some of the hedge funds who responded to the survey said that they are implementing structural changes to make their product offering more attractive to investors. By far the most common response was that funds are looking at how they can improve their transparency. This answer figures at least twice as much as any other issue. The following list appears in order of number of citations:
Changes being considered or enacted by hedge funds
Greater transparency
Improved communication to investors, particularly with regard to return attribution analysis
Improved internal risk management processes
Amendments to fund terms regarding gates, redemption notices or offering daily liquidity
Focus on managed accounts
More dynamic strategies to control drawdowns / more focus on "absolute return"
Focus on quality of service providers e.g. administrators, custodian
Greater focus on investing in liquid assets
Reduction in fees / offering a variety of fee structures
Improving due diligence processes
New product offerings to meet changing requirements of investors
Lower leverage
Greater focus on "values"
27 Mar 2009
Institutional Investors Plan to Increase Hedge Fund Allocations in 2009
A study by State Street Corporation indicates that the turbulent financial markets have not caused major shifts in institutional asset allocations. Three quarters of institutional investors said they do not plan to modify portfolio allocations.
While the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months.
“Hedge funds have not been immune to the extremely volatile market environment,” said Gary Enos, executive vice president and head of relationship management and client strategy for State Street’s Alternative Investment Solutions team. “While alternative investments, including hedge funds, largely outperformed traditional investments in 2008, negative returns understandably disappointed. Although hedge fund allocations declined slightly over the past year, we anticipate growth will resume later in 2009, as institutional investors continue to focus on diversification and risk management.”
The results of State Street’s 2009 hedge fund study show a moderate decline in overall allocations to hedge funds, with institutions allocating more than five percent of their portfolio to hedge funds decreasing from two-thirds (68 percent) in 2007 to one half (51 percent) in 2008. Nevertheless, most institutions intend to either increase (49 percent) or maintain (39 percent) their allocation to hedge funds in the next year.
Another encouraging sign for alternatives is increased institutional interest in private equity funds. Over half of institutions (53 percent) have allocated more than five percent of their portfolio to private equity funds, and half intend to increase their allocation to private equity over the next 12 months.
Institutional investors also continue to emphasize transparency. Five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings.
While the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months.
“Hedge funds have not been immune to the extremely volatile market environment,” said Gary Enos, executive vice president and head of relationship management and client strategy for State Street’s Alternative Investment Solutions team. “While alternative investments, including hedge funds, largely outperformed traditional investments in 2008, negative returns understandably disappointed. Although hedge fund allocations declined slightly over the past year, we anticipate growth will resume later in 2009, as institutional investors continue to focus on diversification and risk management.”
The results of State Street’s 2009 hedge fund study show a moderate decline in overall allocations to hedge funds, with institutions allocating more than five percent of their portfolio to hedge funds decreasing from two-thirds (68 percent) in 2007 to one half (51 percent) in 2008. Nevertheless, most institutions intend to either increase (49 percent) or maintain (39 percent) their allocation to hedge funds in the next year.
Another encouraging sign for alternatives is increased institutional interest in private equity funds. Over half of institutions (53 percent) have allocated more than five percent of their portfolio to private equity funds, and half intend to increase their allocation to private equity over the next 12 months.
Institutional investors also continue to emphasize transparency. Five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings.
25 Mar 2009
New Legislation Proposed, Raising Hedge Fund Issues
Carried interest legislation is being considered at the federal, state and local level, raising significant local and international tax issues.
Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.
Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.
Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.
During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.
President Obama's Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.
Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.
Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.
Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.
During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.
President Obama's Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.
AIMA Supports New US Treasury Investment Program
Todd Groome, Chairman of the Alternative Investment Management Association (AIMA) said in a statement regarding the Public-Private Investment Program announced by Tim Geithner, "It shows that there is recognition among policy makers at the highest level that the hedge fund industry is part of the solution."
The Treasury's Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.
"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.
"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.
The Treasury's Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.
"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.
"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.
23 Mar 2009
"Hedge Fund Homeboys"
Press Release
Air Date: Monday, March 23, 2009
Time Slot: 10:02 PM-11:00 PM EST on ABC
Episode Title: (#103) "Hedge Fund Homeboys"
CASTLE AND BECKETT UNCOVER THE DARK SIDE OF PREP SCHOOL TEEN CULTURE WHEN A BODY TURNS UP IN CENTRAL PARK, ON ABC's "CASTLE"
- A once wealthy teenage boy whose family has fallen on hard times is found dead in a rowboat floating along the lake in Central Park. As Castle and Beckett try to piece together the events leading up to his death, his friends do everything in their power to thwart the investigation. As they unravel the truth from the lies, a story of betrayal and obsession emerges. Meanwhile, Castle debates whether he can leave Martha home alone while he chaperones Alexis' class trip to Washington, DC. Martha might be an aspiring "Life Coach," but that doesn't mean she's trustworthy, on "Castle," MONDAY, MARCH 23 (10:02-11:00 p.m. ET) on the ABC Television Network.
"Castle" stars Nathan Fillion as Richard Castle, Stana Katic as NYPD Detective Kate Beckett, Susan Sullivan as Martha Rodgers, Molly Quinn as Alexis Castle, Ruben Santiago-Hudson as NYPD Captain Roy Montgomery, Tamala Jones as Medical Examiner Lanie Parish, Jon Huertas as NYPD Detective Javier Esposito, and Seamus Dever as NYPD Detective Kevin Ryan.
Guest Cast: Jamie Chung as Romy Lee, Julia Nickson as Mrs. Lee, Nolan Gerard Funk as Brandon, Michelle Page as Amanda Kunal Sharma as Spencer.
"Hedge Fund Homeboys" was written by David Grae and directed by Rob Bowman.
"Hedge Fund Homeboys" is broadcast in 720 Progressive (720P), ABC's selected HDTV format, with 5.1 channel surround sound and Spanish subtitles via secondary closed captioning. A TV parental guideline will be assigned closer to airdate.
Air Date: Monday, March 23, 2009
Time Slot: 10:02 PM-11:00 PM EST on ABC
Episode Title: (#103) "Hedge Fund Homeboys"
CASTLE AND BECKETT UNCOVER THE DARK SIDE OF PREP SCHOOL TEEN CULTURE WHEN A BODY TURNS UP IN CENTRAL PARK, ON ABC's "CASTLE"
- A once wealthy teenage boy whose family has fallen on hard times is found dead in a rowboat floating along the lake in Central Park. As Castle and Beckett try to piece together the events leading up to his death, his friends do everything in their power to thwart the investigation. As they unravel the truth from the lies, a story of betrayal and obsession emerges. Meanwhile, Castle debates whether he can leave Martha home alone while he chaperones Alexis' class trip to Washington, DC. Martha might be an aspiring "Life Coach," but that doesn't mean she's trustworthy, on "Castle," MONDAY, MARCH 23 (10:02-11:00 p.m. ET) on the ABC Television Network.
"Castle" stars Nathan Fillion as Richard Castle, Stana Katic as NYPD Detective Kate Beckett, Susan Sullivan as Martha Rodgers, Molly Quinn as Alexis Castle, Ruben Santiago-Hudson as NYPD Captain Roy Montgomery, Tamala Jones as Medical Examiner Lanie Parish, Jon Huertas as NYPD Detective Javier Esposito, and Seamus Dever as NYPD Detective Kevin Ryan.
Guest Cast: Jamie Chung as Romy Lee, Julia Nickson as Mrs. Lee, Nolan Gerard Funk as Brandon, Michelle Page as Amanda Kunal Sharma as Spencer.
"Hedge Fund Homeboys" was written by David Grae and directed by Rob Bowman.
"Hedge Fund Homeboys" is broadcast in 720 Progressive (720P), ABC's selected HDTV format, with 5.1 channel surround sound and Spanish subtitles via secondary closed captioning. A TV parental guideline will be assigned closer to airdate.
20 Mar 2009
Febuary Hedge Fund Performance
Morningstar reported a sharp decline in credit and equity markets as the U.S. government announced its stimulus package and financial stability plan. February saw a huge sell-off in U.S. and European bank stocks caused by concerns of financial health and nationalization.
U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.
"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don't know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.
Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.
Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.
U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.
"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don't know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.
Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.
Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.
19 Mar 2009
Hedge Fund Manager Investcorp buys into L'azurde
West Palm Beach (HedgeCo.net) - Hedge fund and alternative investor, Investcorp, along with its consortium partners Eastgate Capital Group and The National Investor, announced the acquisition of a 70% stake in Saudi gold and jewelry makers, L'azurde.
L'azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor, employing over 2000 people, selling throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region.
Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp's Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L'azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally.
"Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp's unique business model." Nemir Kirdar, Executive Chairman & CEO of Investcorp, said, "Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership...to add value to L'azurde over the coming years."
L'azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor, employing over 2000 people, selling throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region.
Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp's Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L'azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally.
"Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp's unique business model." Nemir Kirdar, Executive Chairman & CEO of Investcorp, said, "Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership...to add value to L'azurde over the coming years."
18 Mar 2009
AIMA STATEMENT ON THE TURNER REVIEW
“We welcome the publication of the Turner Review, which is an impressive and comprehensive piece of work." Andrew Baker, Chief Executive of The Alternative Investment Management Association (AIMA), said, "It is about the banking system’s role in the current financial crisis and as such its principal focus is the banks, not the hedge fund industry. We are grateful to Lord Turner for his even-handed and measured approach and for not making hedge funds the scapegoat for this crisis."
"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.
We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.
Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.
We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”
AIMA has more than 1,200 corporate members worldwide, based in 43 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.
We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.
Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.
We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”
AIMA has more than 1,200 corporate members worldwide, based in 43 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
17 Mar 2009
European Commission Looking For Commentary From Hedge Funds
In an effort to makes major changes to the EU financial regulation services, the European Commission (EC) has launched 'Driving European Recovery', a consultation on major structural changes to European financial services and markets regulation.
The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.
The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.
The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.
The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.
The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.
Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."
The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.
The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.
The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.
The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.
The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.
Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."
16 Mar 2009
Kids Beating the Market While Hedge Funds Struggle
Despite the credit crunch, sixth formers at Sunningdale Preparatory School, near Ascot, Berkshire, have entered funds into a virtual trading competition... and their early efforts are beating the market. Far from being discouraged by the doom and gloom reported on a daily basis, their interest has been ignited.
William Brooks, Deputy Headmaster, is impressed. "The boys are enthused; they have opened accounts and are trading against each other and the staff. I recently showed some prospective parents around and they could not believe their eyes... two boys discussing what limit to place on their newly acquired Allied Irish stock."
In the past, schools would introduce pupils to share dealing by referring to price lists in the daily newspapers, and tallying results by hand. But the internet has brought realistic trading simulations that bring real time reporting, automated paper trails and full historical records, all at the click of a button.
Brooks continued, "We looked at several alternatives but chose Stockopedia as it enables us to research, discuss and trade all from the same website. Using the site allows the boys to better understand market timing without risking real money, while the online community has helped to generate trading ideas."
Before the markets resumed their recent plunge to new lows, the Sunningdale sixth formers traded a rally in banking stocks and managed to exit profitably. Overall, the Sunningdale funds have outperformed the FTSE benchmark by 8.1% over the last month. At the end of March, the 2009 Stockopedia Challenge officially launches and both the boys and the staff are well placed for the prizes on offer, including flights to visit Wall Street.
Edward Croft, Managing Director of Stockopedia, is pleasantly surprised by the results. "Sunningdale's performance to date has been impressive and one of their boys, Archie Bannister, 13, has been this week's top performer. While the FTSE 100 has dropped 15% recently, his fund has made positive gains - making up 10% in the last week alone... it's a very promising start." Croft is pleased that young people are using the site to learn to become more financially autonomous. "Recent scandals, like the Madoff affair, have shown that blindly trusting market professionals can be extremely dangerous - so it's reassuring to see schools encourage independent thinking and analysis in this area at such an early age".
The Headmaster, Tom Dawson, is "delighted that the boys are filling in some of their free time in this way. My only concern is that they are proving far better investors than I am!"
William Brooks, Deputy Headmaster, is impressed. "The boys are enthused; they have opened accounts and are trading against each other and the staff. I recently showed some prospective parents around and they could not believe their eyes... two boys discussing what limit to place on their newly acquired Allied Irish stock."
In the past, schools would introduce pupils to share dealing by referring to price lists in the daily newspapers, and tallying results by hand. But the internet has brought realistic trading simulations that bring real time reporting, automated paper trails and full historical records, all at the click of a button.
Brooks continued, "We looked at several alternatives but chose Stockopedia as it enables us to research, discuss and trade all from the same website. Using the site allows the boys to better understand market timing without risking real money, while the online community has helped to generate trading ideas."
Before the markets resumed their recent plunge to new lows, the Sunningdale sixth formers traded a rally in banking stocks and managed to exit profitably. Overall, the Sunningdale funds have outperformed the FTSE benchmark by 8.1% over the last month. At the end of March, the 2009 Stockopedia Challenge officially launches and both the boys and the staff are well placed for the prizes on offer, including flights to visit Wall Street.
Edward Croft, Managing Director of Stockopedia, is pleasantly surprised by the results. "Sunningdale's performance to date has been impressive and one of their boys, Archie Bannister, 13, has been this week's top performer. While the FTSE 100 has dropped 15% recently, his fund has made positive gains - making up 10% in the last week alone... it's a very promising start." Croft is pleased that young people are using the site to learn to become more financially autonomous. "Recent scandals, like the Madoff affair, have shown that blindly trusting market professionals can be extremely dangerous - so it's reassuring to see schools encourage independent thinking and analysis in this area at such an early age".
The Headmaster, Tom Dawson, is "delighted that the boys are filling in some of their free time in this way. My only concern is that they are proving far better investors than I am!"
12 Mar 2009
Madoff Linked Fund Manager Sells NY Condo
A hedge fund manager and his partner recently sold their NY condo in Midtown East/Turtle Bay for $1.049 million, according to the Manhattan Blockshopper.
David S. Upson III is the director of hedge fund research, managing director and partner at CTC Consulting, Inc., an investment consulting firm in New York City.
Although there were some links in a court filing to the Madoff hedge fund, CTC says that none of its present and past employees have ever been clients of the Madoff hedge fund, however, according to a statement this month, CTC did provide the performance data given to them by the Madoff funds upon request.
David S. Upson III is the director of hedge fund research, managing director and partner at CTC Consulting, Inc., an investment consulting firm in New York City.
Although there were some links in a court filing to the Madoff hedge fund, CTC says that none of its present and past employees have ever been clients of the Madoff hedge fund, however, according to a statement this month, CTC did provide the performance data given to them by the Madoff funds upon request.
Hedge Fund Manager Joins Water Reclamation Company
Long time hedge fund manager, Eric D. Pedersen has been appointed to the position of Chief Executive Officer and Chairman of the Board of Directors at fresh water reclamation company, STW Resources, Inc.
Pedersen has over 20 years of mergers and acquisitions and financing transaction experience, a significant portion of which has been in the water industry. Prior to joining STW, Pedersen co-managed The Water Fund, LP, a New York-based hedge fund that invested globally in water-related companies.
“We are delighted to bring someone with Eric’s skill set aboard,” Gene Brock, President of the Company, commented. “The depth of his experience in both the finance and water sectors is very complementary to our already strong management bench.”
Pedersen added, “The combination of STW’s oilfield and project management capability with GE’s robust technology creates a partnership that can provide truly unique solutions to our customers’ product water challenges. I am very excited to be part of this dedicated and capable team.”
STW’s first project will utilize technology developed by GE Water & Process Technologies to reclaim approximately 70% of the fresh water from otherwise unusable oil and natural gas hydraulic fracture flow-back water and salt water that is produced in conjunction with the production of oil and natural gas.
Pedersen has over 20 years of mergers and acquisitions and financing transaction experience, a significant portion of which has been in the water industry. Prior to joining STW, Pedersen co-managed The Water Fund, LP, a New York-based hedge fund that invested globally in water-related companies.
“We are delighted to bring someone with Eric’s skill set aboard,” Gene Brock, President of the Company, commented. “The depth of his experience in both the finance and water sectors is very complementary to our already strong management bench.”
Pedersen added, “The combination of STW’s oilfield and project management capability with GE’s robust technology creates a partnership that can provide truly unique solutions to our customers’ product water challenges. I am very excited to be part of this dedicated and capable team.”
STW’s first project will utilize technology developed by GE Water & Process Technologies to reclaim approximately 70% of the fresh water from otherwise unusable oil and natural gas hydraulic fracture flow-back water and salt water that is produced in conjunction with the production of oil and natural gas.
11 Mar 2009
February Sees Lower Hedge Fund Redemptions
There were fewer redemptions in February 2009,($11 billion) compared to January,($30 billion), according to preliminary reports from Eurekahedge, pointing towards the easing of redemption pressures for hedge funds in the future.
The Hedge Fund Index was down 0.5% in February suggesting another month of loss mitigation and strong relative outperformance – The S&P500 was down 11%.
Interestingly, Eurekahedge says, fund of funds managers (-0.2%), on average, have now outperformed hedge fund managers for the first two months of 2009 after 12 months of consecutive underperformance for 2008.
Latin American funds were the only ones to finish the month with decent gains (0.7%), as managers in the region were afforded opportunities with the weakening of most regional currencies against the US dollar, among other things during the month.
The Hedge Fund Index was down 0.5% in February suggesting another month of loss mitigation and strong relative outperformance – The S&P500 was down 11%.
Interestingly, Eurekahedge says, fund of funds managers (-0.2%), on average, have now outperformed hedge fund managers for the first two months of 2009 after 12 months of consecutive underperformance for 2008.
Latin American funds were the only ones to finish the month with decent gains (0.7%), as managers in the region were afforded opportunities with the weakening of most regional currencies against the US dollar, among other things during the month.
Connecticut To Raise Accredited Hedge Fund Investor Standard
The Banks Committee of the Connecticut General Assembly voted yesterday to pass a bill that will raise the minimum financial qualifications for hedge fund investors to $2.5 million and for institutional investors, $5 million.
If the bill, called "An Act Concerning Hedge Funds" is passed by the Connecticut General Assembly, it may become effective as early as October 1, 2009.
This marks a substantial increase above the minimum investor assets ($1 million) required under existing federal standards, making it harder for hedge fund managers in Connecticut to raise capital.
The Connecticut Bill was one of three bills introduced in mid-February to the legislature for consideration by the Banks Committee of the Connecticut General Assembly. Two other bills cover financial disclosure and licensing requirements, they up for vote in the near future.
If the bill, called "An Act Concerning Hedge Funds" is passed by the Connecticut General Assembly, it may become effective as early as October 1, 2009.
This marks a substantial increase above the minimum investor assets ($1 million) required under existing federal standards, making it harder for hedge fund managers in Connecticut to raise capital.
The Connecticut Bill was one of three bills introduced in mid-February to the legislature for consideration by the Banks Committee of the Connecticut General Assembly. Two other bills cover financial disclosure and licensing requirements, they up for vote in the near future.
10 Mar 2009
Survey Reports $1.64 Trillion In Hedge Fund Assets
The top 10 hedge fund adminstraators reported $1.64 trillion in hedge fund assets under administration (AuA) in the Q4 2008, according to HFN, with Citco Fund Services, State Street Alternative Investment Solutions and Goldman Sachs Administration Services taking the top three positions.
HFN also released early estimates for February hedge fund asset flows which indicate the outflow from the industry continued during the month, but at a much slower rate than prior months. Early estimates show hedge fund assets fell an additional 2.2% in February 2009 to $1.746 trillion compared to a reduction of 7.6% in January 09.
The drop was largely due to net investor redemptions and fund liquidations of $35.9 billion during the month and combined with a reduction due to performance losses of $3.53 billion. Early estimates have the HFN Hedge Fund Aggregate Average -0.61% for February, but this figure will likely go lower as more funds report.
Taking into account internal estimates of where month end performance will likely settle, February 2009 should go down as the 5th highest level of hedge fund outperformance over equity markets in the last twenty years.
The Q4 2008 HFN Administrator Survey contains information on hedge fund and fund of funds assets under administration (AuA) from 60 administrators. Results detail total reported AuA, regional concentration, growth rates and top ten lists for more than 20 criteria.
HFN also released early estimates for February hedge fund asset flows which indicate the outflow from the industry continued during the month, but at a much slower rate than prior months. Early estimates show hedge fund assets fell an additional 2.2% in February 2009 to $1.746 trillion compared to a reduction of 7.6% in January 09.
The drop was largely due to net investor redemptions and fund liquidations of $35.9 billion during the month and combined with a reduction due to performance losses of $3.53 billion. Early estimates have the HFN Hedge Fund Aggregate Average -0.61% for February, but this figure will likely go lower as more funds report.
Taking into account internal estimates of where month end performance will likely settle, February 2009 should go down as the 5th highest level of hedge fund outperformance over equity markets in the last twenty years.
The Q4 2008 HFN Administrator Survey contains information on hedge fund and fund of funds assets under administration (AuA) from 60 administrators. Results detail total reported AuA, regional concentration, growth rates and top ten lists for more than 20 criteria.
9 Mar 2009
SEC To Contact Hedge Fund Investors
At the MFA Legal, Compliance and Operations Seminar in New York last week, SEC staff described its examination and enforcement priorities for the foreseeable future with respect to hedge funds and investment advisers.
According to a letter obtained by HedgeCo, the SEC staff said that as part of their examination of hedge funds and investment advisers, the SEC intends to contact investors, verifying that the hedge fund/investment manager is providing the same statement information to both the client and SEC staff.
The concern here is that the manager might be providing one set of statements to the SEC for exam purposes and another set of statements to the clients that contain materially different account balances or performance information.
This aspect of the exam program may have significant investor relationship implications for fund managers. When questioned, the SEC staff members indicated that they may issue a press release stating that this aspect will be part of examinations going forward.
The SEC staff indicated that fund managers may run the risk of obstructing the examination by getting ahead of the process and communicating directly with investors ahead of SEC staff.
The SEC also warned investors about con-artists who may use the names of SEC employees to mislead, trick and conduct "emergency" examinations.
According to a letter obtained by HedgeCo, the SEC staff said that as part of their examination of hedge funds and investment advisers, the SEC intends to contact investors, verifying that the hedge fund/investment manager is providing the same statement information to both the client and SEC staff.
The concern here is that the manager might be providing one set of statements to the SEC for exam purposes and another set of statements to the clients that contain materially different account balances or performance information.
This aspect of the exam program may have significant investor relationship implications for fund managers. When questioned, the SEC staff members indicated that they may issue a press release stating that this aspect will be part of examinations going forward.
The SEC staff indicated that fund managers may run the risk of obstructing the examination by getting ahead of the process and communicating directly with investors ahead of SEC staff.
The SEC also warned investors about con-artists who may use the names of SEC employees to mislead, trick and conduct "emergency" examinations.
Hedge Fund Manager To Take Investors On Central Asia Investment Tour
Ansher Fund Management is planning an on-site tour of emerging investment opportunities in Uzbekistan and Kazakhstan, two representative markets across the Central Asian region.
Beginning in Tashkent, the capital of Uzbekistan and then to Almaty, the financial center of Kazakhstan, Ansher's investment team will deliver detailed presentations on the region's investment opportunities. The tour begins in Zurich on March 31st.
"During the visit, you will have a unique opportunity to gain a direct insight into political and business environment, as well as into potential lucrative investment opportunities of the Region." Ravshan Yunusov, Managing Director said, "You will have a chance to meet with the representatives to understand the legal and regulatory framework for the protection of foreign investments in these countries."
Ansher says they will assist with booking/flight/tickets/visas, see; www.ansherholding.com for more details.
"We strongly believe that as a result of this trip, you will be pleasantly surprised with the investment potential of the Region, and explore the new frontier markets that offer opportunities for both diversification and growth of your portfolio." Yunusov said, "Central Asia and the Caucasus is still expected to remain as the fastest growing Region of the world according to IMF. Accordingly, our funds have performed strongly in 2008 (+14.2%), and we still anticipate significant growth opportunities in the Region for 2009."
Beginning in Tashkent, the capital of Uzbekistan and then to Almaty, the financial center of Kazakhstan, Ansher's investment team will deliver detailed presentations on the region's investment opportunities. The tour begins in Zurich on March 31st.
"During the visit, you will have a unique opportunity to gain a direct insight into political and business environment, as well as into potential lucrative investment opportunities of the Region." Ravshan Yunusov, Managing Director said, "You will have a chance to meet with the representatives to understand the legal and regulatory framework for the protection of foreign investments in these countries."
Ansher says they will assist with booking/flight/tickets/visas, see; www.ansherholding.com for more details.
"We strongly believe that as a result of this trip, you will be pleasantly surprised with the investment potential of the Region, and explore the new frontier markets that offer opportunities for both diversification and growth of your portfolio." Yunusov said, "Central Asia and the Caucasus is still expected to remain as the fastest growing Region of the world according to IMF. Accordingly, our funds have performed strongly in 2008 (+14.2%), and we still anticipate significant growth opportunities in the Region for 2009."
2 Mar 2009
Hedge Fund Calculator Team Expansion
HedgeCo Networks announced the creation of a new Hedge Fund Calculator Professional Services team. The team consists of experienced graphic designers, hedge fund marketers and consultants, CAIAs and CFAs.
The HedgeCo Hedge Fund Calculator has been in use by HedgeCo.Net for over 7 years, creating tens of thousands of hedge fund performance reports. In the first ninety days after its inception, the HedgeCo Hedge Fund Calculator gained widespread recognition and attracted hundreds of hedge funds who generated thousands of analytical reports.
"The addition of our Professional Services team will make our offering incredibly compelling, especially for managers aiming to save time, cut costs and produce high quality performance reports for their investors and prospective investors," stated Aaron Wormus, Managing Director of HedgeCo Networks. "The combination of ground-breaking technology and relevant expertise enables us to create reports with a lead time of as little as 24 hours. Managers no longer need to spend countless hours and thousands of dollars on complicated software. We consult with each client individually to produce personalized reports at a fraction of the price of other solutions in the marketplace."
HedgeCo Networks LLC manages HedgeCo.Net along with a portfolio of nine other websites devoted to alternative investments. With over 25,000 active members, HedgeCo.Net offers a vast array of hedge fund services, including website design, consultation, and third-party marketing and seeding. The Company has consulted or helped to launch over 500 new hedge funds, both onshore and offshore. HedgeCo Networks was founded in 2001 by Evan Rapoport and Andrew Schneider.
The HedgeCo Hedge Fund Calculator has been in use by HedgeCo.Net for over 7 years, creating tens of thousands of hedge fund performance reports. In the first ninety days after its inception, the HedgeCo Hedge Fund Calculator gained widespread recognition and attracted hundreds of hedge funds who generated thousands of analytical reports.
"The addition of our Professional Services team will make our offering incredibly compelling, especially for managers aiming to save time, cut costs and produce high quality performance reports for their investors and prospective investors," stated Aaron Wormus, Managing Director of HedgeCo Networks. "The combination of ground-breaking technology and relevant expertise enables us to create reports with a lead time of as little as 24 hours. Managers no longer need to spend countless hours and thousands of dollars on complicated software. We consult with each client individually to produce personalized reports at a fraction of the price of other solutions in the marketplace."
HedgeCo Networks LLC manages HedgeCo.Net along with a portfolio of nine other websites devoted to alternative investments. With over 25,000 active members, HedgeCo.Net offers a vast array of hedge fund services, including website design, consultation, and third-party marketing and seeding. The Company has consulted or helped to launch over 500 new hedge funds, both onshore and offshore. HedgeCo Networks was founded in 2001 by Evan Rapoport and Andrew Schneider.
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