UPDATE Bahamas/UK Hedge Funds Settle With SEC on Late Trading Scheme

Najy N. Nasser, Chief Investment Officer of the Bahamas/UK based hedge funds, Headstart Advisers Limited (HAL) and Headstart Fund, has agreed with the SEC to pay $17.8 million in a settlement regarding a 2003 alleged late trading scheme.

Without admitting or denying the allegations, the civil settlement includes payments of $17 million by the defunct Headstart Fund Ltd (domiciled in the Bahamas), $200,000 by Headstart Advisers Ltd and $600,000 by Mr Najy Nasser , the Chief Investment Officer. This settlement will conclude the case brought by the SEC against Headstart Fund Ltd, Headstart Advisers Ltd and Mr Najy Nasser arising from Headstart’s historic market-timing strategy.

The Commission's Complaint alleged that the Bahamas hedge fund, Headstart, acting through its United Kingdom investment adviser, HAL, engaged in fraudulent late trading and deceptive market timing of U.S. mutual funds through accounts at U.S. broker-dealers. Headstart has since September 2003 focused its business on other successful strategies.

Nasser said in response to the settlement, “Headstart is very pleased to have reached a settlement. We responded to US concerns about market timing and immediately ceased this element of Headstart’s business in September 2003. We have since worked hard to build up Headstart’s funds using different strategies. As we equalled or bettered our overall returns against our benchmark, we are especially pleased with what we have achieved.

"We have superb long-term performance against both the market and our peer group and have some interesting plans to grow Headstart’s investment business,” he concluded.

Hedge Funds Accepted To London Stock Exchange's Specialist Fund Market

European hedge fund manager, NB Private Equity Partners (NBPE), and a new fund launched by Altus, 'Altus Resource Capital,' have been accepted by The London Stock Exchange into the The Specialist Fund Market (SFM).

As an EU Regulated Market, SFM is designed to offer access for specialist investment vehicles targeting institutional, professional and highly knowledgeable investors. It's admission standards offer sufficient flexibility for single strategy hedge funds, private equity funds and other alternative strategies and structures. The market is open to both UK and international issuers.

"We are delighted to welcome two new funds to the Specialist Fund Market today. Altus Resource Capital demonstrates that despite the wider economic climate, London's investors continue to be responsive to new investment opportunities, (Altus recently raised GBP26 million ($43 million) for the launch)." Tracey Pierce, Head of Equity Primary Markets at London Stock Exchange Group, said, "NB Private Equity Partners' decision to join highlights some of the London markets' other key strengths: the enhanced liquidity and increased investor profile that they offer to issuers on an ongoing basis."

"We are very pleased to launch Altus Resource Capital (ARC) on the Specialist Fund Market today." Marc Gordon, partner at Nimrod Capital LLP, placing agents for Altus Resource Capital, commented, "This is our second successful fundraising within 12 months on the London market. The Specialist Fund Market has provided the flexibility to bring the new fund to the attention of leading asset managers and to attract interest even in these difficult times."

Since the start of 2008, a number of specialist funds have taken advantage of new opportunities to access London-based investors through the London Stock Exchange's Main Market and Specialist Fund Market, including: Boussard and Gauvaudan Holdings, BH Global, Castle Alternative Invest, FRM Diversified Alpha, Marwyn Value, and MW Tops. They benefit from the deepest liquidity available to publicly quoted alternative investment vehicles.

Hedge Fund Veteran Selected for Fund of Funds Investment Committee

Roy H. Callahan has been selected as portfolio manager and member of the investment committee at alternative investment firm, Coast Asset Management, LLC
firm's , effective June 15.

"We are thrilled that Roy Callahan has agreed to rejoin our team," said David Smith, president of Coast. "Roy brings a wealth of knowledge and alternative investments expertise that will be invaluable as we continue to steer Coast through the challenges brought on by the global recession."

Callahan joins Coast from Stratos Advisers, a southern California-based hedge fund of funds manager. Previously, Callahan worked at Financial Risk Management (FRM) where his responsibilities included serving on the investment and portfolio management committees as well as training and mentoring FRM investment analyst groups. He spent six years from 1994-2000 at Santa Monica, CA-based Coast as director of research where he helped Coast founder David Smith develop and launch the firm's initial multi-manager investment strategies.

Hedge Fund Magazine Launch in September

Euromoney Institutional Investor is planning to launch a new magazine and online offering covering US and international hedge funds in September.

The company's hedge fund publishing assets include Institutional Investor's Alpha magazine and Absolute Return magazine, which is published by HedgeFund Intelligence, the world's leading information source on hedge funds. The new publication will be titled "AR".

"The new publication will include everything that Alpha and Absolute Return contained, but it will be a new magazine which will contain a lot of editorial that neither magazine does, including new surveys, rankings and high-powered web functionality," says Euromoney Institutional Investor chairman and Editor-in-chief Padraic Fallon.

"With the hedge fund sector under intense scrutiny from Washington, regulators and investors, this is an excellent time to launch a hedge fund publication," he says. "Building on the strengths of both Institutional Investor and HedgeFund Intelligence, we have the opportunity to produce the world's leading hedge fund title which will keep investors, managers, regulators and the whole hedge fund community informed on developments in the sector."

"Hedge fund performance has recovered strongly in 2009, after the sector's worst ever performance in 2008, and there are now significant opportunities," says Michelle Celarier, editor of Absolute Return. "The new magazine is an exciting development because it joins two prestigious monthly magazines that cover hedge funds to create a single authoritative voice. Our mission is to create the most insightful, entertaining and definitive content about the hedge fund industry, in both the printed magazine and online. We will offer readers information they cannot find elsewhere, including news and performance data on thousands of funds, along with in-depth analysis, research and profiles of the biggest hedge funds."

Advertising will be sold by Christine Cavolina, publisher of Institutional Investor, and the Institutional Investor sales team, led by Joy Desanto.

"AR will provide an unparalleled editorial environment for advertisers interested in the hedge fund industry," says Cavolina. "It presents the ideal opportunity for companies serving this audience to influence decision-makers and generate new business."

BTIG Expands International Capabilities With Japan Equity Team

Institutional brokerage and hedge fund services company BTIG LLC, announced the further expansion of its international capabilities with the addition of a three-person U.S. based live hours (8pm-2am EST) Japan team.

The U.S. based Japan team will initially consist of William Chandruang, Jeff Gallo, and David Schneider, all hired at the managing director level. Schneider will be based in Greenwich, and Gallo and Chandruang will be in Los Angeles. All three have covered the Japanese markets for the majority of their careers, and have worked in Japan, which gives them an edge in understanding the nuances of Japan’s equity market.

“William, Jeff and David bring a wealth of experience, long standing and deep rooted institutional relationships, and an in-depth knowledge of the Asian equity markets,” Steven Starker, Co-Founder of BTIG, said. “Providing our clients with seamless execution across the globe and around the clock has become increasingly important in today’s rapidly changing environment.”

Chandruang spent the last 15 years working in Japan most recently at UBS where he was a managing director and both co-head of client trading & execution and head of international sales trading. Before moving to Japan, Chandruang worked at Smith Barney in New York for 4 years.

Gallo joined BTIG after living and working in Tokyo for a total of 15 years. He most recently worked at Nikko Citigroup where he was a Managing Director and Co-Head of Japanese Sales Trading. Prior to that, he worked as a sales trader with Morgan Stanley Japan.

Schneider was previously with Merrill Lynch in Japan where he was in charge of the entire execution services platform, including trading, sales trading, program trading and electronic trading. Prior to that, he worked for Jardine Fleming in Hong Kong, Singapore and Manila.

WBC Expands, Hires Hedge Fund Specialist

Stephen Markowitz, most recently the Senior Vice President, Equity Derivative Sales for global inter-dealer broker Tullett Prebon, has joined hedge fund provider, WallachBeth Capital LLC (WBC) as a Managing Director of the firm.

“Having known and worked with Stephen for the better part of twenty-five years, and as the options markets have evolved, his decision to now play a senior role within our firm is a real coup." Michael Wallach, WBC’s co-founder and CEO, said, "His breadth of product knowledge, broking talents, and his deep, trusted relationships with institutional portfolio managers and hedge funds that are active in the option and ETF space will prove to be a great complement to the audience that we serve, and the services that we provide.”

WBC specializes in exchange-listed options and ETF’s, operating on a fully-disclosed, agency-only basis while serving the needs of institutional managers, premiere hedge funds, sell-side trading desks, and sophisticated professionals trading in the wide-spectrum of exchange-listed equity options, listed and OTC equities, ETF’s, and non-US equities. Member FINRA, SIPC, CBSX, ISE, ARCA, and New York Amex options.

Cayman Islands and Ireland Sign Tax Information Exchange Agreement

The Cayman Islands Government signed a Tax Information Exchange Agreement (TIEA) with Ireland at a ceremony held at the British Embassy in Berlin.

Signing the agreement on behalf of the Cayman Islands was the Leader of Government
Business/Premier Designate and Minister for Financial Services, the Hon. McKeeva Bush, OBE, JP.

“The Cayman Islands is pleased to sign this agreement today with Ireland, marking another important step towards our ongoing commitment to international cooperation and OECD standards for transparency and exchange of information on tax matters. This signing will commemorate the beginning of what I am sure will be a highly productive and mutually rewarding relationship between the Cayman Islands and Ireland,” Bush said.

He added, “Our newly formed ‘Negotiation Team’ has worked tirelessly to secure technical agreements quickly. Our signing last week of a Double Taxation Agreement with the UK together with today’s signing is a direct result of their commitment and hard work. We look forward to continuing these efforts and I am confident that we will be on the OECD’s white list very soon.”

The Cayman Islands delegation, which was led by Mr. Bush also included the Minister of District Administration, Works, and Gender Affairs the Hon. Julianna O’ Connor-Conolly, JP; Chief Secretary the Hon. George McCarthy, OBE, JP; Financial Secretary the Hon. Kenneth Jefferson, JP; Chief Officer for Ministry of Financial Services Carson Ebanks, OBE, JP; Senior Assistant Secretary Michelle Bahadur; Senior Political Assistant Richard Parchment; Cayman Islands Monetary Authority General Counsel/Deputy Managing Director Langston Sibblies and Paul Byles.

Signing on behalf of the Irish Government, Martin Mansergh, TD, Minister of State at the Irish Department of Finance said, “We are very pleased to be here to sign this TIEA with the Cayman Islands. This is concrete evidence of the significant progress that has been made in recent months. Ireland welcomes the commitment of the Cayman Islands to implement the OECD standards of transparency and exchange of information in tax matters and their willingness to enter into tax information exchange agreements. The signing of this agreement represents a new chapter in relations between Ireland and the Cayman Islands.”

The Cayman Islands now maintains ten bilateral tax information agreements with the following countries: United States, United Kingdom, Denmark, Faroe Islands, Finland, Greenland, Iceland, Ireland, Norway and Sweden.

Bull Path Converts Hedge Fund Into Long Short Mutal Fund

Bull Path Capital Management recently announced the conversion of one of its long-short hedge funds into a long-short equity mutual fund the 'Bull Path Long Short Fund' (BPFCX).

The newly launched mutual fund ranks #1 of 811 funds on total annualized returns in the Lipper Mid-Cap Universe for the 5 years ending March 31, 2009, may be a “perfect consideration as a core investment for many investors.” He believes the long-short category will increasingly capture investors’ attention because of its typically lower risk levels than long-only funds. BPFCX has also received a top Lipper Leader rating of 5 for capital preservation against all equity mutual funds (9,360 funds).

“Investors have been traumatized by the events of the past 18 months, including the sobering performance of many long-only, ‘buy and hold’ strategies, and wondering how and when they can reenter the market,” said Rob Kaimowitz, portfolio manager of the Fund and founder of Bull Path Capital Management. “We believe investors will be attracted to the performance characteristics of long-short funds which aim to capture the market’s upside while mitigating risk in a market sell-off.”

“Until recently, there have been few mutual funds focused on long-short, and we are one of the few tested strategies in the market today,” noted Kaimowitz. “We believe this strategy makes sense for both individual and institutional investors with a medium- to long-term view of the market.”

In addition, Kaimowitz says investors who may have previously considered long-short hedge funds should consider investing in this strategy through a mutual fund structure owing to such benefits as lower minimum investments, lower fees, full transparency and the assets being held in a trust bank.

“There has been increasing pressure on hedge funds to provide lower fees, greater liquidity and increased portfolio transparency,” noted Kaimowitz. “A mutual fund structure addresses these issues quite well.”

The Bull Path Long Short Fund adopts a strategy developed and run by Bull Path Capital Management since 2002. “One of the hallmarks of our strategy is our ability to reinvest our knowledge through our rigorous, concentrated fundamental analysis in establishing both long and short positions,” said Kaimowitz. “This ability serves us well as we seek to provide investors with consistent returns and high levels of alpha.”

The Bull Path Long Short Fund is available in A and C Class shares with a $1,000 minimum investment or a $500 minimum with participation in the automatic investment plan. The I share requires a minimum of $100,000 or a $50,000 minimum with participation in the automatic investment plan.

Renaissance Hedge Fund Launch

Quantum Global Financial Corp. has launched a multi strategy New Renaissance Fund with over 37% return for its first 11 months ended May 29, 2009.

The fund uses a systematic approach that employs a new technology. These are dynamically self adapting forecasting models. The algorithms have been in development for 18 years, tested for 7 years in simulation, and finally put into practice 11 months ago resulting in a substantial positive performance gap.

QGF achieved their 37% return with average leverage ratio of 1.25. For the same period, the CSFB Managed Futures Index was down 2.37%, Barclay Multi Strategy Hedge Fund index was down 13.89% and the S&P 500 was down 37.67%.

The fund focuses on delivering absolute performance throughout the economic cycle, transparency, liquidity and partnerships with firms that demonstrate
extraordinary ethical compliance and global sustainability.

Principles For Hedge Fund Regulation Welcomed By AIMA

Global hedge fund industry group, The Alternative Investment Management Association (AIMA), has welcomed the principles for hedge fund regulation published by the International Organization of Securities Commissions (IOSCO) today.

“We are very happy to welcome the publication of this report today because AIMA has already announced its support for several of the high level principles mentioned in it." Andrew Baker, AIMA CEO, said, “In our new policy platform of 24th February, we said that we supported global registration for managers and we are glad that IOSCO has also come out in favour of this.

“We also expressed our support for the reporting of systemically relevant information by managers of large hedge funds to their national regulators, and this is another one of IOSCO’s key principles.

“We are also delighted that IOSCO refers to the ‘development, implementation and convergence of industry good practices’ because AIMA has been extremely active in this area and is continuing a great deal of work on it with the other groups involved. We are following up on a G20 action point in this respect," he continued.

In a note of caution, however, Baker said, "We would stress that it is hedge fund managers, rather than the funds themselves, that should registered. It is also mentioned that hedge funds use derivatives for speculative purposes without stating that exchange-traded and over-the-counter derivatives are principally used by the relevant market participants for risk management purposes."

“Finally, we are concerned that these recommendations may lead regulators to seek quantity rather than quality of data. It is important that regulators have the expertise and resources to deal with the data they receive.”

AIMA has more than 1,100 corporate members worldwide, based in 40 countries, including hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators.

Execution LLC Opens New York Office

Execution LLC, an agency-only global broker dealer, today announced that it has opened a New York office as part of its long-term US growth plan.

Execution’s new office is located at 450 Park Avenue and will include space for US sales and trading, desk analysts, options and European sales. The New York office will allow for further growth in headcount, and will facilitate deeper relationships and exceptional service for many of the firm’s New York based clients.

“Having a New York presence will enable us to hire outstanding talent from New York, New Jersey and Long Island and will further enhance the level of service for both new and existing clients,” Gary Cunningham, CEO, Execution LLC said. “New York will complement our existing offices in Greenwich and San Francisco and was the natural next step for the firm.”

Daniel Fox, Partner of Execution, will oversee the NY office and will be joined by Jonathan Fairhurst, AnnaMarie O'Neill, Chief Market Strategist Rick Bensignor and Financial Desk Analyst Yousef Abassi. John Margolis, who recently joined Execution following a 20 year career in technology and trading most recently with Thomson Financial, will also be joining the team to build out an options capability.

Execution will maintain its Greenwich office and is in the process of opening a Boston office where the firm will service Boston based accounts for US, European and Asian equities. Execution has developed an edge operating in a velvet rope environment on a platform free of proprietary trading conflicts.

Execution LLC is the U.S. subsidiary of London based Execution Limited, a full-service agency broker providing clients with execution, sales, trading, research and corporate access, free from the conflicts inherent in proprietary trading and corporate broking. Execution services many of the world’s major investing institutions, including mutual funds, pension funds, insurance companies and hedge funds. Empowered by its technology and differentiated by its people, Execution provides access to the market's core liquidity providers through extensive personal relationships and expertise. Execution LLC is a member of NASD and SIPC.

Hedge Fund Man Investments Wins Again

The Banker Middle East Industry Awards 2009 has given Man Investments the 'Best Hedge Fund Company' award. Attended by H. E. Mr. Rasheed Mohammed Al Maraj, Governor of the Central Bank of Bahrain, the Banker Middle East Industry Awards gathered more than 350 government officials, regulators as well as banking and finance executives to recognise and award the best institutions operating in the Middle East in 24 different categories. Man Investments also won the hedge fund award in 2008.

"Winning the award for the second year in a row is an honour for us as it shows that other industry leaders recognise Man as a leader in developing the hedge fund industry in the Middle East." Patrick Merville, CEO of Man Investments Middle East, said.

Man Investments' first regional office in the world was opened in 1986, based in the Arab region. Since then, the company has established a robust base of institutional and retail clients. Man Investments is part of Man Group plc, one of the world's largest hedge fund providers.

"Banker Middle East Industry Awards are widely recognised as the benchmark of excellence and we are very pleased to have been the winner in this category since its inception," added Merville.

During the voting process, which started in April and closed early this month, nominees were elected from a shortlist pre-selected by the judging panel, which comprises international industry specialists from the major rating agencies, the region's financial centres and independent banking consultants who remain anonymous to ensure unbiased selections.

Viathon Capital Launches Credit Focused Opportunity Fund

Viathon Capital, LP has announced the launch of a new credit focused opportunity fund, the Whitewater Master Fund, LP, as of May 1, 2009. The launch has affiliated with Citigroup Alternative Investments LLC (CAI) as seed investor in this new fund.

The fund employs a fundamental, credit-intensive research process in order to identify long and short investment opportunities in both US and European markets.

"We have a multi-million dollar, best-in-class trading and risk management system that allows us to manage portfolio risk on a real time basis and seamlessly integrate with our prime brokers and independent administrator." Bob Becker and Rob Comizio, managing partners said, "In addition, we have the relationships, infrastructure and investment process in place to effectively execute our investment strategy."

"As managers of the Whitewater Master Fund, we are keenly aware of the current changes and challenges in our industry. As a result, we have instituted a number of key policies and initiatives specifically designed to service the needs of sophisticated investors in this new environment." they said.

The performance estimate for Whitewater Master Fund for the month of May 2009 was approximately +1%. Viathon Capital, LP has 60 years of combined market experience including four investment professionals and two trade support/back office personnel to manage the new fund.

Cogo Wolf Trimaran Liquidity FoHF Launch

Global hedge fund manager Cogo Wolf Asset Management launched the Cogo Wolf Trimaran Liquidity Fund, a highly liquid fund of hedge funds designed to help institutional and private investors navigate the current global investing storms.

Managed by Co-CIOs and Managing Partners Christopher R. Wolf and Giles Conway-Gordon and offering complete transparency, the Trimaran Liquidity Fund targets 16-18% net return with expected volatility of 6-8% without the use of leverage.

“The global financial markets are forever changed. The industry has experienced a kind of ‘perfect storm’ in recent years—the credit contraction, the housing contraction and the overall economic contraction,” stated Christopher R. Wolf. “Trimaran is the first fund of its kind, designed as a remedy for sophisticated institutional and private investors who are ready to redeploy capital but need new assurances to do so.”

The Trimaran Fund has been designed to provide Alpha with non-correlation and liability protection including: Ultra Liquidity (monthly liquidity, 10-day notice with no lock-up, no gate, no redemption penalties and complete transparency); Flexibility (all underlying investments are ultra liquid, permitting rapid, opportunistic responses to global volatility and market uncertainty); and Stability (diversification).

The “three distinct hulls” the Trimaran Fund invests in include:

* Managed Futures, Global Macro, CTAs and other ultra liquid strategies which have low/negative correlation to equity markets;
* ETFs enabling narrow and controlled directionality as a proxy for direct hedge fund investing;
* Debt-Related Instruments, notably mispriced credit opportunities offering attractive returns and gains.

“A forward-looking, global tactical asset allocation model will be necessary for investors to deliver profit in the new fund of hedge funds paradigm,” commented Giles Conway-Gordon. “Our top-down investment methodology, namely skating to where the puck is going to be, is paramount to nimbleness and adaptability. We are asset allocators first, talent scouts second.”

“It’s not enough to know what instruments one finds compelling; what’s mandatory is to know why you’re there in the first place. What macroeconomic trend does that investment capture? And if so, how effectively and what risks are associated with that decision? Risk management is more than optimization modeling, VAR and stress testing. It’s a holistic understanding of the environment in which these instruments are being used, the opportunity they’re designed to capture and the finesse necessary to know depth and duration – how long and how much does one hold? That’s the art and a talent we’ve honed over 25+ years,” Wolf concluded.

Cogo Wolf has been nominated by Alternative Investment News and Institutional Investor as “Emerging Manager of the Year” given its strong growth trajectory lead by the firm’s President and Partner, Rachel S.L. Minard, its 14-year history delivering 12% net CAR and having never lost an investor since its doors opened.

Congress Acts to Tame Prowling Vulture Funds

Friday, 19 June 2oo9, Press Release: Africa ActionToday advocacy organizations and debt relief campaigners welcome the reintroduction of the Stop Very Unscrupulous Loan Transfers from Underprivileged Countries to Rich, Exploitive Funds or “Stop VULTURE Funds” Act (H.R. 2932) This bill, introduced in the House of Representatives, is designed to protect developing nations from lawsuits by so-called Vulture Funds.

The Stop VULTURE Funds Act introduced by Rep. Maxine Waters (D-CA) would prevent U.S. companies from buying the debt of impoverished countries at cut-rate prices and then suing to collect exponential profits. The bill would limit the excessive profits that companies and hedge funds collect off the backs of the world’s poorest citizens by capping the interest amounts for which the companies could sue at six percent. The legislation also increases transparency of these funds, requiring full disclosure from any fund that pursues Vulture Fund activity through the U.S. courts.

Vulture Funds are private equity or hedge funds that purchase the defaulted debt of developing countries, many of whom are Heavily Indebted Poor Countries (HIPC), at reduced rates and then sue the debtor nation for greatly inflated sums. Through the seizure of assets, litigation and political pressure, they seek repayments that are far in excess of the amount that the fund paid for the debt.

Led by Rep. Waters, the new legislation builds on the momentum from similar legislation introduced in the House in August 2008. The bill is co-sponsored by Representatives Spencer Bachus (R-AL), John Conyers (D-NJ), Donald Payne (D-NJ), Gregory Meeks (D-NY), Gwen Moore (D-WI), Maurice Hinchey (D-NY), Barbara Lee (D-CA), Eleanor Holmes-Norton (D-DC), Jan Schakowsky (D-IL), Luis Gutierrex (D-IL) and Wasserman Schultz (D-FL).

A coalition of non-governmental organizations working to prevent vulture funds from taking advantage of poor countries praised Rep. Waters’ legislation. “We commend the leadership shown by U.S. congressional representatives. H.R. 2932 is a key step in protecting developing countries from Vulture Funds. Now the legislation needs support by the full House and to move forward for Senate review,” Nicole Lee, Executive Director of TransAfrica Forum says.

The burden of Vulture Funds is being felt throughout Africa. “This year the Democratic Republic of the Congo could accrue fines of up to $80,000 a week as a result of a vulture lawsuit,” said Gerald LeMelle, Executive Director of Africa Action. He added, “This would be a enormous barrier to the DRC’s efforts to reconstruct its social and economic infrastructure amid years of conflict.”

Neil Watkins, Executive Director of Jubilee USA Network, an alliance of 75 religious denominations, development agencies, and human rights groups noted, “Vulture Funds make their profits by deepening the suffering of millions of people in some of the poorest countries in the world. They are stealing the resources that should be invested in education, health and infrastructure improvement.”

Last May, some of the world’s major creditor governments publicly committed not to sell or transfer any of their debt claims on HIPC countries to creditors who do not intend to provide debt relief under HIPC initiative, safeguarding this debt from litigation by Vulture creditors. Many countries, however, continue to sell their debt claims on vulnerable countries.

For more information, see:

Vulture Funds Backgrounder JubileeUSA
Vulture Funds Glossary Africa Action
Vulture Funds Policy Brief JubileeUSA
Spotlight on Zambia Africa Action

Fund of Hedge Fund AS ll Beats S&P Through Crisis

I recently conducted an interview with Colleen Sorrentino, CIO, and Charles M. Wright, CFA, of FoHF's Advanced Strategies II, LP (AS II) as part of a manager interview to be featured on our HedgeCo.net Manager Database. I thought to publish some excerpts in advance.

On the topic of the FoHF's positive 5 year track record, Wright said, "Our goal is to achieve 75 to 80% in the bull market and we have met that through the history of the fund, beating the S&P 500 about 8.54% last year. Our 5 year track record Feb 2004-2009 beat the S&P 500 by 35%."

As a multi-strategy fund with $36 million under management, a 1.50% management fee and a minimum initial investment of $250,000, AS II recently celebrated its 5 year track record this February.

"We are not afraid of volatility and our edge is in our long-short policy, we don't use leverage as much as other funds." Sorrentino said, "AS II is a great fit for family offices, institution investors, foundations and high net worth individuals."

"Our strategy is combination of art and science," Sorrentino continued, "We put a lot of time into into our managers and their selection in order to generate maximum return. We are not a hot fund, moving from manager to manager, we do complete background checks at the start, following up with a focus on due diligence, meeting on site on an annual basis as well as with independent advisers."

AS II stays away from over-leveraged funds, with no leverage at the fund level. "We do not place money with hedge funds that invest a substantial portion of their assets in esoteric investments such as derivatives, structured investment vehicles, CDOs, or managers that utilize black box quantitative models. We have been managing funds of hedge fund portfolios since 1992. The Firm’s partners and employees maintain a substantial stake in AS II." the FoHF's website states.

AS II's parent company, Wall Street Access Advanced Strategies LLC (WSAAS), has been managing fund of hedge funds portfolios for over 15 years. WSAAS is also an affiliate of Wall Street Access, which is a New York Stock Exchange member. G&S Fund Services is Fund Administrator.

Global Multi-Strategy Hedge Fund Launch By Bullman

Bullman Investment Management (BIM), headed by Nick Bullman, has officialy launched the Bullman Global Fund, a global multi-strategy hedge fund with a minimum investment of $100,000.

"Since launch, the Bullman Global Fund has returned 0.76% compared with its benchmarks- the Tremont MS Index and MSCI World Index returns of -13.76% and -36.43% respectively over the same timeframe." Nick Bullman, Managing Partner at BIM said, "We believe there are times in the economic cycle when macro investments provide the best risk adjusted returns and liquidity. At other times, equity valuations become so compelling that they provide a better long term risk reward payoff. Our strategy is to run three distinct and separate portfolio modes. Stress Mode, Transition Mode and Benign Mode. These modes are triggered by objective external inputs. This approach allows us to control risk and preserve capital, and to search the globe for investments that meet our risk return objectives."

The fund’s objective is to seek long term capital appreciation in a broad array of quoted instruments, notably global equities, bonds, commodities and derivatives.
While the fund has been managing money since June 2008, marketing of the fund has been low key until now. With the appointment of Roger Mortimer (previously Vice President of Kotak Mahindra (UK) Ltd) to Head of Sales, the firm intends to raise assets from third party investors now that a one-year track record has been achieved.

Roger Mortimer, Head of Sales at BIM, said, "I am delighted to have joined BIM, which I believe has a sensibly conservative approach to investing in the current climate with the flexibility to transit through to a higher risk strategy, as and when true market fundamentals return. The fund is aimed at long term investors, with a focus on minimising draw-downs during times of high volatility, whilst maintaining long-term appreciation for the patient investor through a value-based approach. In conjunction with Bath University, BIM is constantly developing its own Investment Risk Profiling System, which I believe will deliver significant improvements on the standard VaR models currently in use."

BIM was founded in June 2008 by Nick Bullman, was formerly Chairman and Head of Risk at Investor Select Advisors, a global fund of hedge funds. In addition to Nick’s experience in the hedge fund space, over the past 26 years in the financial industry he has also worked at Scrimgeour Vickers, James Capel and Goldman Sachs in Equity Sales and syndication where he gained direct knowledge of all aspects of analysis with regard to global companies. Nick has seeded the Bullman Global Fund with a significant portion of his personal wealth.

Morgan Stanley Launches Enhanced Protection for Hedge Fund and Prime Brokerage Clients

Morgan Stanley is offering enhanced asset protection to its prime brokerage clients, announcing an expansion of its prime brokerage offering with the launch of new custodial services for long securities held by Prime Brokerage clients.

The custodial services will be provided directly by Morgan Stanley Trust National Association (MSTNA), a U.S national chartered trust company. MSTNA gives clients the option to hold their long securities with a Morgan Stanley subsidiary that is independent from Morgan Stanley's U.S. and U.K. broker dealers.

"Recent market events have increased the demand for solutions that mitigate counter-party risk for hedge funds," said Rich Portogallo, Head of Institutional Clients and Services at Morgan Stanley. "The launch of new custodial services from MSTNA underscores Morgan Stanley's commitment to providing hedge fund managers and investors with alternative asset protection solutions in addition to our best in class financing services and technology."

"We are excited to offer this new asset-protection platform to our clients," said Joe Davis, Managing Director in Morgan Stanley Prime Brokerage and President of the custody business of MSTNA. "We have created a platform that provides a seamless client experience across Prime Brokerage's and MSTNA's systems, and offers fully automated transfers, aggregated reporting and a single client service point of contact."

FBAR's Due For U.S. Investors in Offshore Hedge Funds

On June 12, three IRS personnel participated in a teleconference designed to address open questions regarding the Report of Foreign Bank and Financial Accounts (FBARs) for calendar year 2008 that must be filed by June 30. It was their position that an offshore hedge fund is a “foreign financial account” for FBAR purposes and that, therefore, every U.S. investor in an offshore hedge fund should file an FBAR, whether or not the fund has any offshore bank or securities accounts.

The FBAR needs to be filed by U.S. persons that have a financial interest in, or signature or other authority over, a foreign financial account or accounts if the aggregate value of the account(s) exceeds $10,000 at any time during the year. The instructions to the FBAR provide that foreign financial accounts include “any accounts in which the assets are held in a commingled fund, and the account owner holds an equity interest in the fund (including mutual funds).” In the teleconference, the IRS personnel took the position that offshore hedge funds are foreign financial accounts for FBAR purposes.

Based on the instructions to the FBAR and this insight from IRS personnel, until further guidance is issued by the IRS, we recommend that an FBAR should be filed by the following persons or entities with respect to offshore funds:

• Every U.S. investor, including U.S. tax-exempt entities, in an offshore hedge fund (this includes both stand-alone offshore hedge funds and the offshore feeder in master/feeder hedge fund structure)

• U.S. feeder funds that invest in offshore master funds, and any U.S. investor that owns more than 50% of the U.S. feeder

• Any direct U.S. investor in an offshore master fund

• Investment managers that have a financial interest (for example, through their carry) in any offshore hedge funds (whether stand-alone, feeder or master)

This requirement is in addition to FBAR requirements applicable to U.S. persons or entities that have a direct or indirect interest in an offshore bank, securities or securities derivatives account. Therefore, any U.S. person or entity (for example, a U.S. hedge fund) that has a financial interest in such foreign financial account or owns more than 50% of the equity of an entity that has a foreign financial account needs to file the FBAR. Similarly, anyone with signature or other similar authority over such foreign financial accounts needs to file the FBAR.

G8 Implements Lecce Framework

G8 Finance Ministers announced their endorsement of a global regulatory framework for financial institutions worldwide, "We agreed to create a coherent framework which builds on work done by the IMF, World Bank, OECD, FSB, FATF, and other international organizations, to strengthen the global market system." the G8 said in a statement on Saturday.

"To ensure effectiveness, we will make every effort to pursue maximum country participation and swift and resolute implementation. We have agreed on the objectives of a strategy, "the Lecce Framework", to create a comprehensive framework, building on existing initiatives, to identify and fill regulatory gaps and foster the broad international consensus needed for rapid implementation."

The Lecce Framework recognizes that there is a wide range of instruments, both existing and under development, which have a common thread related to propriety, integrity and transparency and classifies them into five categories: corporate governance, market integrity, financial regulation and supervision, tax cooperation, and transparency of macroeconomic policy and data.

Specific issues covered include, inter alia, executive compensation, regulation of systemically important institutions, credit rating agencies, accounting standards, the cross-border exchange of information, bribery, tax havens, non-cooperative jurisdictions, money laundering and the financing of terrorism, and the quality and dissemination of economic and financial data. International institutions and fora have already developed a significant body of work addressing a number of important issues in these areas, but, in many cases, the initiatives suffer from insufficient country participation and/or commitment, the G8 said.

Confluence Whitepaper Outlines Hedge Fund Reporting and Control Challenges

Financial administration automation specialist, Confluence, released a new whitepaper for hedge fund administration executives, entitled "Hedge Fund Reporting: The Change Imperative".

"Mandates from investors, regulators, and auditors are driving significant change in hedge fund back offices," said Kirk Botula, Executive Vice President and Chief Operating Officer of Confluence. "Each group is demanding new levels of due diligence, transparency, and disclosure that are driving never-before-seen hedge fund reporting requirements. Technology and automation can improve processes and offer the speed, control and flexibility needed in this new reporting environment."

A recent Rothstein Kass survey showed that 98% of hedge fund managers expect increased regulation of the hedge fund industry by the new administration—adding to burdens already imposed by FAS 157, FAS 161, and International Financial Reporting Standards.

The whitepaper also provides practical advice to help ensure that reporting processes are sufficient to meet these heightened demands. It offers best-practice recommendations and includes a "Sample Checklist" to help administrators evaluate their operations, whether they rely on outside service providers or their own internal back offices.

To obtain a free copy of "Hedge Fund Reporting: The Change Imperative," please visit www.confluence.com/hedgefundradicalchange.

Global Hedge Fund Summit: Date Change

Institutional Investor/Alpha Hedge announced today that their flagship conference, The Global Hedge Fund Summit, held each year in Bermuda, will take place May 2-4, 2010.

The Global Hedge Fund Summit, now entering its 16th year, has been traditionally held in the Fall, but will now take place each Spring in Bermuda. Past keynote speakers have included industry legends and leading economists including Alan Greenspan, Michael Bloomberg, Julian Robertson, Martin Feldstein and Alan Blinder.

The 2008 Global Hedge Fund Summit welcomed more than 80 investors to the island. With many of the conference’s most loyal investors requesting the date change, record investor turnout is predicted in 2010.

“We are excited about holding the conference next May – our investors originally requested we move the dates and we wanted to make sure we honored that request. Their presence is incredibly important to us and we are thrilled that they are fully on board to participate in this conference. It is also a beautiful time to be in Bermuda and safely away from the hurricane season.” said Lisa Yao, Program Director for Institutional Investor/Alpha Hedge Conferences.

As the Bermuda event will now take place each spring, the Institutional Investment conference traditionally held each spring in San Francisco, will now move to the fall. The next event in San Francisco will take place in September 2010.

Hedge Fund BlackRock Buys Barclays, $2.8 Billion In Commitments From Investors

BlackRock, Inc. announced the purchase agreement to acquire Barclays Global Investors, including its market-leading ETF platform, iShares, from Barclays PLC.

“We are incredibly excited about the potential to significantly expand the scale and scope of our work with investors throughout the world. The combination of active and passive investment products will be unsurpassed, and will enhance our ability to offer comprehensive solutions and tailored portfolios to institutional and retail clients,” said Laurence D. Fink, BlackRock Chairman and CEO. “People are at the heart of successful firms, and the depth of talent in BlackRock Global Investors will be tremendous. The thought leadership and intellectual capital of the combined firm ensure we will remain at the forefront of addressing key investment issues and trends that have emerged over the past decade and are now accelerating dramatically, including globalization of capital markets, a greater focus on asset allocation, multi-asset class solutions, fiduciary management, risk management and advisory services.”

The combination of BlackRock and BGI would bring together market leaders in active and index strategies to create the preeminent asset management firm operating under the name BlackRock Global Investors. The transaction would create an independent and fully integrated asset management firm with combined assets under management of over $2.7 trillion.

The firm’s products will include equities, fixed income, cash management and alternatives, and will offer clients diversified access to global markets through separate accounts, common trust funds, mutual funds, ETFs, hedge funds, and closed-end funds.

BlackRock has received commitments from a group of institutional investors to purchase 19.9 million shares at the closing of the transaction for a total of $2.8 billion.

Cayman Islands Monetary Authority Gains Full IOSCO Membership

The Cayman Islands Monetary Authority (CIMA) was formally admitted as the 189th member of the International Organization of Securities Commissions (IOSCO) at the meeting of the Presidents’ Committee at IOSCO’s 34th Annual Conference in Tel Aviv, Israel.

With the admittance, CIMA also officially becomes a party to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation, Cooperation and the Exchange of Information. CIMA signed the MMOU, which is the benchmark for international cooperation among securities regulators, on 24 March 2009.

"Some countries either do not allow investment vehicles from non-IOSCO member countries to be sold in their jurisdictions or will require greatly enhanced due diligence which makes it more difficult to do business with those jurisdictions." CIMA’s Deputy Managing Director, Mr. Langston Sibblies said, "IOSCO membership will remove these impediments and open up these markets for Cayman-domiciled securities providers. This is a development our private sector has looked forward to for a long time. It will be welcomed by the private sector."

IOSCO is the principal global standard setting body for the regulation of securities markets. Its objectives encompass cooperation and information exchange, standard setting and surveillance, and mutual assistance.

BTIG to Expand, Hires 4 High Yield Experts

Institutional brokerage and hedge fund services company BTIG LLC, announced the further expansion of its Global Fixed Income Group with four new hires.

The Global Fixed Income Group was launched in February of this year by Jon Bass, formerly of UBS, and John Purcell, formerly of Citigroup. The group focuses on sales and trading of credit products, which will cover the full credit spectrum from investment grade to distressed debt.

George Chalhoub has joined BTIG from Deutsche Bank where he ran the high yield proprietary portfolio on the high yield desk. Chalhoub spent 15 years in high yield research at Deutsche Bank, Merrill Lynch and Citigroup.

Mychal Harrison and Todd Sycoff have been hired as high yield traders in New York. Harrison joins BTIG from Barclays where he last traded high yield cash and credit default swaps. He began his career at Goldman Sachs in high yield syndicate before transitioning into high yield trading. Sycoff comes to BTIG from Bear Stearns where he was last on the buy side as the high yield portfolio manager in the asset management division. Prior to that, Sycoff spent 16 years on the trading desks of Bear Stearns and Merrill Lynch as the head high yield trader.

Chris LeVine comes to BTIG from UBS where he was an executive director in the Fixed Income Sales Group focusing on investment grade and high yield credit. He will be in fixed income sales in BTIG’s New York office. Prior to UBS, LeVine worked at MarketAxess, Trading Edge and started his career at Morgan Stanley after Graduating Cornell University.

“We have been focused on expanding the firm’s capabilities in fixed income over the past few months and are excited to have George, Mychal, Todd and Chris join the group,” Jon Bass, Co-Head of Global Fixed Income, said. “Their combined experience will greatly enhance the efforts of our new division.”

“We have been able to attract top talent with deep institutional relationships and respected reputations on the Street that will help us better serve our clients in the fixed income area,” John Purcell, Co-Head of Global Fixed Income, said. “During the coming weeks, we expect to announce additional hires in fixed income as part of our overall plan to grow the group to 60 people globally this year.”

The Global Fixed Income Group was launched in February of this year by Bass, formerly of UBS, and Purcell, formerly of Citigroup, who together bring 50 years of fixed income experience to the BTIG team. The group focuses on sales and trading of credit products, which will cover the full credit spectrum from investment grade to distressed debt.

BTIG serves nearly 1,000 institutional customers and offers services from four divisions: Institutional Trading, Prime Brokerage, Outsource Trading and Direct Market Access. BTIG has offices in New York, San Francisco, Dallas, Boston, Chicago, Los Angeles, Greenwich, Red Bank, Aspen and Orinda. The firm also has affiliates in London, Hong Kong and Sydney.

Hedge Fund Provider Appoints Risk Specialist as Senior Advisor

Risk management expert, Dr. Stuart Turnbull, has been appointed as senior advisor to independent hedge fund technology provider GlobeOp's Risk Services.

"Risk measurement, analytics and reporting are increasingly important to hedge funds and investors alike," said Tony Glickman, GlobeOp Financial Services head of Risk Services. "This presents GlobeOp with significant opportunities, as risk modeling is a core expertise and client service. Our clients can look forward to Stuart adding additional depth, creativity and pragmatism to the development of new GlobeOp risk models. They will also benefit from his expertise in transitioning theory to practical, efficient implementation."

Dr. Stuart M. Turnbull is the Bauer Chair Professor of Finance at the Bauer College of Business at the University of Houston, TX. He has authored more than 50 academic papers on financial economics, law and economics topics, as well as two books on derivatives. With Robert Jarrow he introduced the reduced form approach for pricing credit-risky assets. This approach was later extended to consider counterparty risk and credit rating transition matrices in risk management and pricing, and to the practical difficulties of credit default swaps valuation.

He currently serves as an associate editor of Mathematical Finance, the International Journal of Theoretical and Applied Finance and the Journal of Derivatives. Turnbull previously held executive positions in fixed income research at Lehman Brothers in New York and in risk management at the Canadian Imperial Bank of Commerce in Toronto, Ontario. He holds a Ph.D. in financial economics from the University of British Columbia, and an M.Sc. in statistics and operational research and a B.Sc. in physics from the Imperial College of Science and Technology in London, UK.

GlobeOp is listed on both the RiskTech 100 and FinTech 100 rankings of global risk and financial technology specialists.

SEC Outlines Securities Regulators Guidelines

SEC Chairman Mary Schapiro, speaking at the IOSCO 2009 Conference, said today that in light of the current economic crisis and in an attempt to restore confidence to investors, the US is currently examining how to best shape the future role that regulators as well as credit rating firms will play in the securities market.

“We need to constantly keep pace with the financial products and with the risks of how the products are packaged and sold,” she said. “Now is the time for securities regulators to prove ourselves and the capital markets around the world can flourish if we succeed.”

In her remarks, Schapiro listed the principles that should guide the decisions made by worldwide securities regulators, including protection of investors, ensuring that markets are always fair, efficient and transparent and protection of systemic risk. She also noted that corporations must address the issue of executive pay and said that the elimination of excessive compensation to executives will ultimately lead to long-term corporate health.

Schapiro’s remarks came as part of a panel discussion focused on improving the role of securities regulators in a changing global financial system. The panel was moderated by Mr. Hans Hoogervorst, Chairman, Authority for the Financial Markets, Netherlands and included Mr. Janichi Maruyama, Deputy Commissioner for International Affairs, Financial Services Agency , Japan ; Prof. John C. Coffee, Adolf A. Berle Professor of Law, Columbia University Law School and Mr. William J. Brodsky, Chairman, World Federation of Exchanges; Chairman and CEO, Chicago Board Options Exchange.

The conference was hosted in Tel Aviv by the Israel Securities Authority (ISA) and the Tel Aviv Stock Exchange (TASE).

Northern Trust Named Fund of Hedge Funds

Financial technology vendor youDevise Limited congratulated its client Northern Trust upon being awarded the Fund of Hedge Funds Administrator of the Year award at the inaugural HFMWeek Service Provider Awards, held recently in London.

Northern Trust is a leading, global administrator of FoHFs with approximately US$50 billion of hedge funds under administration at March 31, 2009. Northern Trust employs youDevise’s Hedge Fund Information Provider (HIP) online portfolio management system, which enables Northern Trust’s fund of hedge funds (FoHF) clients to track daily position information and other vital data.

“The award recognised Northern Trust for outperforming its peers during 2008-2009 and demonstrating financial progress, growth and genuine innovation,” said Richard Koppel, Managing Director of youDevise and an expert in FoHF technology who co-developed the HIP. “We are proud to see our client recognized for this achievement. Northern Trust was the first fund of hedge funds administrator to integrate our technology into its platform, and, in so doing, significantly advance its clients’ ability to access more timely and accurate management information, while, at the same time, eliminating the need for error prone spreadsheets to track positions.”

Mr. Koppel noted this is the second time over the last few years that clients have won major industry recognition due, in large part, to their deployment of youDevise technology. In 2006, Trade Ideas Limited (TIL) was named overall winner of the Innovation of the Year category in The Banker magazine's Technology Awards for TIL's trade idea platform, employing youDevise's Trade Idea Monitor (the TIM). Trade Ideas Limited is an industry consortium owned by Citigroup, Credit Suisse, Dresdner Kleinwort, and Merrill Lynch.

The TIM enables more than 300 institutional brokerage firms around the world to send long/short equity trading ideas to more than 100 hedge funds and traditional asset managers, which in turn use the TIM to determine payments for the top-performing ideas they receive. The TIM’s “ideabase” is the foundation of TIM Insight, a more useful short-to-mid term indicator of market direction than traditional consensus earnings estimates.

Hedge Fund Paulson & Co Buys $100 Million CB Richard Ellis Stock, $50 Million Offering Launch

Real estate services company, CB Richard Ellis Group, Inc. has reached an agreement to sell in a direct placement 13,440,860 shares of its Class A common stock for gross proceeds of approximately $100.0 million, to hedge fund manager Paulson & Co. Inc. on behalf of several of its investment funds and accounts it manages.

In addition, Ellis plans to sell Class A common stock, having an aggregate offering price of up to $50.0 million through J.P. Morgan.

Paulson Investment Company, Inc. is an investment banker for emerging companies nationwide and a full service brokerage firm engaged in the purchase and sales of securities from and to the public and for its own account and in investment banking activities. Paulson Investment Company, Inc. is a wholly owned subsidiary of Paulson Capital Corp., a publicly traded company since 1971, and trades on the Nasdaq Capital Market under the symbol "PLCC".

Ex Hedge Fund Trader Vs. Ex Wife, High Powered Hide and Seek

In a bizarre hedge fund story sent to me by a reader, an ex JP Morgan Director and ex trader for hedge funds Tudor and Brevan Howard has been traced by his ex wife's investigators to Singapore where he allegedly has done work for JP Morgan.

According to the Sydney Morning Herald, Simon Sywak, who now lives in a Sydney suburb, was caught on video working in Singapore for the investment bank. Sywak had gotten out of paying maintenance for his children in Britain by saying he was a trainee bus driver and so poor he was forced to live with his mother-in-law.

Sywak's ex wife, Helen Sywak, has started bankruptcy proceedings in Australia for $250,000 of court costs he failed to pay.

"If he doesn't pay this amount in the next few weeks, it will bankrupt him and he will have to drop his case suing Westpac Bank for $1.3 million and upwards." Helen said in a letter to the Editor.

Sywak is suing derivatives trader Westpac in Sydney in the Federal Court, arguing that it still owes him a $1.3 million sign-on bonus that it had promised him, however he never started work with the bank because he failed its probity checks, according to the Herald.

His side of the story has yet to surface.

AlternativeSoft Teams Up With Eurekahedge & Crédit Agricole Structured Asset Management

AlternativeSoft has forged agreements with Crédit Agricole Structured Asset Management (CASAM) and Eurekahedge to provide all trial users of AlternativeSoft with free trials of the CASAM CISDM and the Eurekahedge Global Hedge Funds databases.

“We're very pleased to build our relationship with AlternativeSoft in a way that will meaningfully strengthen Crédit Agricole Structured Asset Management's presence in the alternative investment software sector. We are happy to offer AlternativeSoft and their potential clients the CASAM Hedge database for their 15 day software trial" said Jeff Lopez, Deputy CEO of Credit Agricole Structured Asset Management Advisers LLC.

"AlternativeSoft offers hedge fund investors the ability to perform complex portfolio optimisations in an efficient manner. We are delighted to be able to offer to these investors our multiple Eurekahedge databases during their 15 days free software trial. Doing so will give the opportunity to experience the software and the breadth of our database at the same time." said Eurekahedge CEO Alexander Mearns.

“AlternativeSoft is a user friendly quantitative portfolio construction software which focuses on extreme negative events. Our potential clients will have access to 13’000 hedge funds and this for free during the 15 days software trial. The trial of our software becomes effortless. The user can essentially construct and optimise their portfolios within minutes of opening the software, even in the 15 days free software trial.” said Laurent Favre, CEO of AlternativeSoft.

AlternativeSoft offers analytical software solutions and is a Swiss registered company with offices in Zurich and London. It is a global company providing a platform for portfolio construction, hedge fund selection, tactical asset allocation and hedge fund replication dedicated to fund of funds, banks and institutional investors. Their software enables investors to analyse numerous hedge funds, funds of funds to help construct portfolios which minimise extreme negative returns.

Credit Suisse/Tremont Hedge Fund Index Estimated to Finish Up 3.61% In May

Hedge fund managers posted positive returns across all major strategies in May except for Managed Futures. Returns were driven by favorable investment conditions across equity, credit and commodities markets. India led the positive trend in Emerging Markets, with the Sensex index surging 17.3% within less than a minute of the announcement on May 18 that the Congress Party garnered a comfortable majority coalition in the general elections.

Industrial production numbers were up in many parts of Asia, with factories in Japan raising output by the largest monthly margin in nearly 60 years, and the Purchasing Manager’s Index (PMI) in China expanding for a third month to a seasonally adjusted 53.1 (a reading above 50 indicates an expansion). Some managers remained cautious, however, with the view that a switch from a government-led recovery to a consumer-led recovery may face hurdles such as the continuing rise of unemployment in many parts of the world, rising savings rates (particularly in the US), overhangs in vacant housing, as well as assorted weak macro data in Europe.

With spreads tightening and returns strong across the credit spectrum, relative value players such as Convertible Arbitrage and Fixed Income Arbitrage were among the best performers. With fixed income markets apparently unfazed by the General Motors bankruptcy, investment grade financials had the strongest performance, but investment grade industrials, utilities and high yield also had a solid month, as did leveraged loans.

Global Macro has continued to have the longest positive streak of all the strategies in the index for the 7th consecutive month, starting in November 2008. Managers found opportunities in currency trades, fixed income, commodities, as well as tactically trading equities. Managed Futures performance improved over April, but posted a fifth consecutive month of negative returns. Long/Short Equity Managers continued to have wide dispersions of returns, with some managers adding to their long exposures and tactically harvesting returns from the rallies, while others maintained their defensive positioning, citing an absence of fundamental drivers for a strong v-shaped recovery.

Interest Re-engaged in African and MENA Hedge Funds

International investors are coming back to the African and MENA region, hedge fund manager SilkInvest said in their latest equities update, "Few international investors are actually invested so far, however, it now looks like more investors are getting off the bench."

It was reported that roughly 40% of the volume of the Dubai stock exchange was on the back of international buyers, and after last week’s big advances in the MENA markets, the headlines in the local papers have the look & feel of optimism again, SilkInvest said.

Across the African continent, not all markets have gained back positive momentum. Nigeria has been one of the best performing markets lately, despite ending the week in negative numbers. Ghana and Kenya continue to struggle YTD, while South Africa, Mauritius, Egypt and Tunisia further added to their upside.

"We are happy to say that we have been well positioned in the right markets and sectors. More than ever is asset allocation and stock picking of key importance for successful investing in this region." Baldwin Berges, partner at SilkInvest, said. "There are still many undervalued opportunities at current low PE ratios which are unsustainably low both in the MENA and African regions. We therefore believe there is still considerable upside until the right valuation levels that reflect the solid earnings growth many companies enjoy have been reached."

BlackRock In Talks For Largest Global Hedge Fund Transaction On Record

BlackRock, Inc. confirmed that negotiations are ongoing with U.K.’s third-largest bank, Barclays Bank plc, about the potential purchase of Barclays Global Investors (BGI), including the iShares business.

“The discussions are not yet concluded and there are a number of significant open issues which could affect the nature and terms of any transaction,” Barclays said in a statement.

BlackRock's BGI buyout will break its own record in a hedge fund transaction, when in 2006 BlackRock took over Merrill Lynch's asset management business for $8.5 billion. The unconfirmed selling price is $12 billion to $13 billion. Other contenders for Barclays Global Investors include the Bank of New York Mellon and some Kuwaiti sovereign wealth funds, among others.

Hennessee Says Hedge Funds Post Best Month in 9 Years

“Hennessee Group research and discussions with hedge fund managers has lead us to believe that the 20 year secular bull market in bonds is over.” Charles Gradante, Co-Founder of hedge fund investor consultant, Hennessee Group LLC, said of the 9 year high point seen this month in hedge funds.

“We see a problem growing in the bond market. The Government is issuing more debt than it is buying back. This has to lead to rates increasing and equity PE ratios adjusting downward. Our contacts among hedge fund managers continue to buy gold and short Treasuries. However, Hennessee Group expects the Treasury and Fed to put a short squeeze on at an opportune time.”

The Hennessee Hedge Fund Index advanced +5.68% in May (+11.40% YTD), while the S&P 500 increased +5.31% (+1.76% YTD), the Dow Jones Industrial Average advanced +4.07% (-3.14% YTD), and the NASDAQ Composite Index advanced +3.32% (+12.52% YTD). Bonds also rose, as the Barclays Aggregate Bond Index advanced +0.73% (+1.33% YTD).

Managers have been maintaining a conservative investment strategy, which has caused them to lag in the recent market rally. In May, funds also benefited from long positions in energy and commodity-related positions, which performed strongly.

“With hedge funds up +5.68%, May was the best month for hedge funds since February 2000, when the index was up +6.83,” said Lee Hennessee , Managing Principal of Hennessee Group . “Gains were largely driven by arbitrage strategies. However, long/short equity managers, with reduced levels of exposure, also performed well, participating significantly in the market rally while maintaining hedges. With a market correction in the short term being a possibility, we feel that most hedge funds are positioned conservatively and will be able to quickly alter exposures to protect capital if the market experiences a correction.”

“May had the biggest one month run up in commodities in 35 years,” commented Charles Gradante. “It appears to us, from Hennessee Group research and manager conversations, to be speculative and led by commodity ETF demand, which exceeds "real" demand. Furthermore, margin requirements favor the speculators. Hedge funds are betting commodities will continue to rise with many long agriculture commodities, such as sugar and corn.”

Hedge Fund Prime Brokerage Provider Expands To Chicago

NorthPoint Trading Partners, LLC has opened a new office in Chicago, IL., with 12 year industry veteran, Michael Ferro, as head. Ferro has held positions at Genworth Financial, Knight Capital Markets, and X-Change Financial Access. He is experienced in both the trading and operations aspects of the buy and sell side, the company said.

“As we continue to expand our presence nationwide, we are very fortunate to have someone with Michael's talent and experience join our team,” says Douglas Nelson, Chief Executive Officer of NorthPoint Trading Partners, LLC. Atlanta based NorthPoint opened also opened an office in Connecticut earlier in the year.

NorthPoint Trading Partners, LLC is an institutional brokerage and fund services company working with small and medium sized hedge funds.

Bowne and HedgeOp Join Forces to Deliver Compliance Sopftware

Bowne & Co., Inc. has signed an alliance with HedgeOp Compliance to offer two new compliance solutions for hedge funds and other registered investment advisers.

The first of the hedge fund tools, 'Bowne ComplianceTrak', is an integrated compliance tracking, monitoring and reporting system specifically designed for hedge fund professionals, enabling both SEC-registered and unregistered hedge funds to build a solid foundation for their compliance programs and quickly identify potential compliance issues.

The second tool, 'Bowne Form SH Generator', is a tool for hedge funds meet new Securities and Exchange Commission (SEC) reporting requirements for short sales, reducing the amount of time spent on these tasks by 75% or more. "Bowne Form SH Generator is a huge time-saver for hedge funds and other institutional investment managers," said Bill Penders, President of Bowne. "It takes a three or four hour process, and completes it -- with great accuracy -- in a matter of seconds."

Bowne and HedgeOp Compliance, which entered into a strategic alliance in May, plan to enhance the capabilities of their compliance offerings for hedge funds and other registered investment advisers, and future versions will assist clients with other filing requirements.

MFA Commits to Reduce Systemic Risk in OTC's

Global alternative investment industry voice, The Managed Funds Association (MFA) announced that it is joining the major derivatives dealers (the Major Dealers) in presenting a letter to global industry regulators. The letter establishes new commitments addressing key concerns raised by global legislators such as the G20, European Commission and the U.S. Department of Treasury.

MFA first joined the Major Dealers in presenting a letter to global regulators detailing operational targets and other industry commitments in March 2008.

Today’s letter outlines a firm commitment towards strengthening the over-the-counter (OTC) derivatives infrastructure under the auspices of the OMG and its constituents and partners, including the newly formed Board Oversight Committee (IBOC) of the International Swaps and Derivatives Association (ISDA). MFA is dedicated to continuing its collaboration with global regulators, the Major Dealers, buy-side institutions and service providers to reduce risk and improve market infrastructure and practices across OTC derivatives and other financial products.

Richard H. Baker, MFA President and CEO, said, “ MFA , on behalf of the alternative investment industry, is committed to proactively developing and advancing these critical commitments for reducing counterparty and systemic risks and improving operational efficiency in OTC derivatives processing. MFA fully endorses the collaborative efforts with global regulators to support commercially viable centralized clearing platforms, to universally report all OTC derivatives trades and to promote sound business practices. MFA considers today’s letter to be an important step forward for OTC derivatives markets and looks forward to continuing our participation in the design of future steps.”

MFA and its co-signatories are committed to implementing changes to risk management, processing and disclosure that will significantly transform the risk profile of these important financial markets. The OTC derivatives markets provide important flexibility in terms of products and execution and will benefit from a strengthened infrastructure.

Commitments to reduce systemic risk in the OTC derivatives markets include:

Implementing data repositories for non-cleared transactions in the OTC derivatives markets to ensure appropriate transparency and disclosure, and to assist global supervisors with oversight and surveillance activities.

Clearing for OTC standardized derivative products.

Enabling customer access to clearing through either direct access as a clearing member or via indirect access, including the benefits of initial margin segregation and position portability.

Delivering robust collateral and margining process, including portfolio reconciliations, metrics on position and market value breaks, and appropriate dispute resolution mechanics.

Updating industry governance to be more inclusive of buy-side participants through collaborative partnerships among the Major Dealers, MFA and other trade associations.
Continuing to drive improvement in industry infrastructure, as well as engage and partner with supervisors, globally, to expand upon the substantial improvements that have developed since 2005.

MFA members are professionals in hedge funds, funds of funds and managed futures funds, as well as industry service providers. MFA is headquartered in Washington , D.C. , with an office in New York.

Hedge Fund Expert to Run ATC's Cayman Operations

Ali Mudeen has joined hedge fund provider ATC Group as managing director of its Cayman Islands operations.

Mudeen will oversee and build the firm’s Private Clients and Corporate Services practices in the region, as well as work closely at a group level with ATC’s hegde fund administration practice.

Mudeen brings over 20 years of international experience to ATC, having worked in the US, South America and the Caribbean in banking, legal and trust services. He joins ATC from Caledonian Global, where he was a director and shareholder and had overall responsibility for marketing and business and strategic development.

“Ali’s industry expertise and leadership make him an invaluable addition to the ATC executive team." Robert Govaerts, ATC’s chairman, said, "His broad knowledge base and commitment to client service will significantly enhance ATC’s leadership position in the industry.”

“ATC is an impressive financial services company with a clear vision for the future, having enjoyed strong growth even in these unprecedented economic conditions,” Mudeen said. “I am delighted to join a company which has such a strong focus on client services and on its people.”

Serving international business, private clients, capital markets and alternative investment funds, ATC was established in 1893. ATC employs over 350 professionals in 17 offices across Europe, the Caribbean and the Asia Pacific region.

StarInvest Acquires Hedge Fund Provider EXX

Stock transfer agency, StarInvest Group, Inc (STIV) has completed the acquisition of a privately held hedge fund provider EXX.COM.

“This acquisition will unleash the value of STIV management, and relationships in our effort to grow revenues and increase the value of our company for its shareholders. In line with our recent acquisition of My Transfer Agent, LLC (‘MTA’), EXX will offer a recurring revenue model by servicing brokerage firms, hedge funds, trading firms, or individuals on a single platform that interlinks all current trading systems and clearing houses thus yeilding the best execution services for all of its clients.”

EXX is a specialized in providing connectivity and software solutions to small and medium sized stock brokerage, arbitrage, investment banking firms, and hedge funds in major American markets. The company's main business is customizing proprietary platforms so from one program STP is enabled across all the financial networks.

Spice Finance and 3 Degrees Launches Singapore/India Special Situations Private Equity Fund

Spice Finance, the financial services arm of the $1.5 billion B. K. Modi Group, has entered into a first-of-its-kind strategic joint venture with Singapore-based 3 Degrees Asset Management to launch the Spice 3 Degrees Special Opportunities Fund.

Chaired by turnaround management specialist, Dr Divya Modi, Executive Director of Spice Finance, the fund will hold a first closing of $21 million comprised of commitments from Spice and 3 Degrees. A final closing will be held once third party commitments reach $100 million.

“Spice Finance will invest Rs. 500 crore ($100 million) in distressed assets and special situations, as well as other niche businesses such as remittances and over-the-counter exchanges," said Modi. "Our strategic alliance with 3 Degrees is the first significant step in our goal to achieve a $1 billion valuation for Spice Finance within the next few years,”

The new fund will invest in distressed assets and special situations spanning India and Southeast Asia. “Asia’s distressed asset market is highly inefficient, very large and growing rapidly,” said Moe Ibrahim, Founder of distressed specialist 3 Degrees. “With over $2 trillion in opportunities and only a handful of sophisticated players, the Asian distressed asset market epitomizes the inefficiencies we seek to exploit as a firm. Although the market is enormous, competition is negligible due to the relationship intensive nature of the opportunity set.”

The fund will target companies whose shareholders are struggling or where the debt holders are foreclosing. “We will focus on companies with excellent long-term growth prospects, but where short-term liquidity and management issues have caused the company to fail. Spice has a 30 years rich history of using technology and training in turning around troubled companies. We have the business acumen and resources to make companies successful,” said Modi.