30 Jun 2010
A FINRA panel found that Edward S. Brokaw was engaged in a pattern of trading designed deliberately to drive the value of MGRM stock down and, in turn, drive up the value of contingent value rights (CVRs) on that stock.
According to FINRA, Brokaw`s hedge fund client held approximately 18.5 million CVRs – nearly 30 percent of the 64.8 million MGRM CVRs outstanding. For every penny the final VWAP dropped below $2.90, the value of the hedge fund`s CVRs increased by $185,000.
If the maximum payout of $.88 per CVR were achieved, FINRA said, the hedge fund would receive approximately $16 million. Brokaw and his family owned 217,000 of the CVRs, with a potential maximum payout of $188,000.
Included in the evidence against Brokaw were tape recordings of his phone calls to his firm`s trading desk to place sell orders. In one phone call, Brokaw told a Deutsche Bank sales trader, “Take 50,000 MGRM at the market. Sell it down. Sell it as low as you want. Sell it hard, 50,000.”
FINRA also found that Brokaw violated a Deutsche Bank`s policy by only completing one “booking ticket” each day, each showing a single 100,000-share order to sell, each with a false notation that the order was given by the client directly to the trading desk rather than to Brokaw – thus circumventing automatic branch office compliance review of the orders.
Deutsche Bank first suspended, then terminated Brokaw based on his MGRM sales orders for the hedge fund.
18 Jun 2010
New York (HedgeCo.net) – London hedge fund SRM Global’s case against Countrywide Financial Corp, the mortgage lender acquired by Bank of America, was dismissed yesterday according to a Reuters article.
The hedge fund alleged that Countrywide was “flying blind” and had made misrepresentations and omissions, delaying disclosure of its problems in the U.S. housing market fall, Reuters said. The hedge fund said it lost nearly 90% of its value in 50 million shares of Countrywide common stock in 2008.
Manhattan federal court Judge Richard Berman said, “The hedge fund failed to plead facts showing a primary violation of the securities laws,” dismissing the lawsuit, which also identified Countrywide, Bank of America and former BOFA Chief Executive Officer Ken Lewis, former Countrywide Chief Executive Officer Angelo Mozilo, company President David Sambol and Executive Managing Director Eric Sieracki as defendants, the news source reported.
The three former Countrywide executives are also defendants in an SEC civil fraud lawsuit, Reuters said.
11 Jun 2010
The Fresh Air Fund is an independent, not-for-profit agency, which has so far provided free summer vacations to more than 1.7 million New York City children from low-income communities since 1877. Nearly 10,000 New York City children enjoy free Fresh Air Fund programs annually. In 2008, close to 5,000 children visited volunteer host families in suburbs and small town communities across 13 states from Virginia to Maine and Canada. 3,000 children also attended five Fresh Air camps on a 2,300-acre site in Fishkill, New York. The Fund’s year-round camping program serves an additional 2,000 young people each year.
"We also just received a tremendous offer by a very generous donor."Sara Wilson od www.freshair.org said, "Any gift given from now until the end of June will be matched dollar-for-dollar."
In 2009, The Fresh Air Fund's Volunteer Host Family program, called Friendly Town, gave close to 5,000 New York City boys and girls, ages six to 18, free summer experiences in the country and the suburbs. Volunteer host families shared their friendship and homes FOR up to two weeks or more in 13 Northeastern states from Virginia to Maine and Canada.
Silverstone runs equity long/short hedge funds that specialize in investments in the global automotive industry and related fields.
“We are pleased with the May result but we continue to look forwards." Saul Rubin, Founding Partner at Silverstone said, "Our intention continues to be to deliver good returns over the long run irrespective of the overall market conditions.”
Silverstone was founded in May 2004, and today manages investments in equity and equity linked products. The firm currently manages the Silverstone Fund and the Monza Fund. The flagship Silverstone Fund opened to outside investors in July 2004. Silverstone has throughout Q2 of 2010 continued to see strong international investor demand for its funds products, and the strong May numbers further reaffirms the unique advantages of the investment philosophy in the Silverstone Fund and the Monza Fund.
8 Jun 2010
This provision would increase the effective tax rate for fund managers with respect to the portion of their compensation they receive as a "carried interest". An earlier version of the bill had a Jan. 1, 2010 effective date which has now been moved to Jan. 1, 2011.
"As one of the revenue offsets for these extensions, the bill would generally prevent a portion of any income with respect to carried interests in investment partnerships held by service providers to such partnerships (“investment service partnership interests”) from being characterized as capital gains." Federal income taxation specialist at RK&O Kenneth E. Werner, said, "Instead, such portion (50% for tax years beginning before January 1, 2013 and 75% thereafter) would be treated as ordinary income."
The term ‘investment services partnership interest’ means any interest in a partnership which is held by any person if it was reasonably expected that such person (or any person related to such person) would provide a substantial quantity of any services in the nature of advising as to investing in, purchasing, or selling any specified asset, managing, acquiring, or disposing of any specified asset, arranging financing with respect to acquiring specified assets, or any activities in support of the foregoing.
The term “specified asset” means securities, real estate held for rental or investment, partnership interests, commodities, or options or derivative contracts with respect to any of the foregoing.
“May was the worst month of the year for hedge funds and the worst monthly drawdown since October 2008. However, hedge fund managers avoided significant losses and outperformed traditional benchmarks on a relative basis due to conservative exposures, hedging and short positions,” commented Charles Gradante , Co-Founder of Hennessee Group . “In May, we saw investors significantly de-risk portfolios as volatility increased. Given the negative headwinds that exist and potential global crises, hedge funds continue to operate with low gross exposure levels as they navigate an increasingly challenging investment environment.”
“Hedge funds’ defensive positioning prior to May helped limit losses and provided downside protection,” said Lee Hennessee, Managing Principal of Hennessee Group . “Downside protection is the primary benefit of the hedge fund asset class. In the current environment, where investors seem to be very skittish due to higher volatility and dramatic drawdowns, downside protection and hedges are extremely beneficial. We are seeing hedge funds garner continued interest by the investment community desiring lower drawdowns.”
7 Jun 2010
"Distressed debt" hedge funds such as Angelo, Gordon & Co. and Alden Global Capital and Oaktree Capital Management have been buying up cheap, delinquent debt, then taking it to Bankruptcy Court for a settlement that transforms the debt into a large share of company stock, the LA Times reported, with itself, Tribune Co., being one of the newspapers under siege along with KTLA-TV Channel 5 among others.
The hedge funds, such as Angelo, Gordon & Co, as well as JPMorgan will be major shareholders in both Tribune and Freedom The LA Times reported. People with knowledge of the the hedge funds' strategy, say that the hedge funds want quality, branded journalism that still draws advertisers and therefore is worth preserving.
"The hedge funds will have to remain patient if they want to reap what they've sown in newspapers," the LA Times quoted. "The funds probably don't even have a firm exit strategy in place, and it will take sure signs of an economic recovery to grease deals and liquidity events."
Analysts believe, the LA Times said, that the newspaper industry had gotten so beaten down during the crisis that they have become a bargain for hedge funds.
"All we did was provide huge amounts of liquidity." John Burbank from Passport Capital said regarding the massive deficits run up in an effort to stabilize the markets and economies, "The markets are as vulnerable to financial shocks and at least as highly leveraged than they were before the financial crisis. The Fed has more than doubled its balance sheet and will have to exit markets at some point or its legitimacy will be called into question".
Burbank added that a number of people have asked Passport to design funds comprised of macro trades that would help them hedge against systemic risks.
Jay Gould from Pillsbury also helped creating distaster insurance or “armageddon strategy” funds which work under the premise that U.S. will experience a very difficult time over the next several years, “including hyper-inflation, the abandonment of the U.S. dollar as the world’s reserve currency, further complications associated with our huge deficit spending, and a rush toward hard assets.”
The Roundtable discussion also includes:
• Overview of the latest products and research from funds and CTAs on intermarket correlations and quantitative trading
• A discussion on the impact the regulatory changes will have on the markets: How will mandating more OTC products to clear/trade on an exchange impact liquidity? What is more important in a derivatives contract - liquidity or flexibility?
• The democratization of alternatives: More funds using the 1940 Act format will be offering real CTA strategies with daily liquidity
• Running a hedge fund from the West Coast: Why this location counts and where West beats the East Coast.
The Roundtable was sponsored by the CME Group and the Opalesque 2010 Roundtable Series Sponsors Custom House Group and Taussig Capital. The following West Coast based experts participated:
• John Burbank, Managing Member and Chief Investment Officer, Passport Capital
• Jay Gould, Partner, Pillsbury
• Jeremy Evnine, President, Evnine & Associates, Inc.
• Matt Osborne, Executive Vice President & CIO, Altegris
• Ranjit Sufi, Manging Director, Nuveen
• Rishi Narang, Founding Principal, Telesis Capital
• Tina Lemieux, Managing Director of Hedge Fund and Broker Services, CME Group
• Tom Shanks, Founder and CEO, Hawksbill
Matthias Knab, founder of Opalesque and internationally recognized expert on hedge funds and alternatives, moderates the Opalesque Roundtables.
4 Jun 2010
The pastor, Douglas Alan Scott, was charged with taking part in a $12 million hedge fund scam, more than 400 investors were solicited from his parish for a fraudulent hedge fund, XL Capital Partners Inc.
The conviction was upheld in a 14-page, three-judge panel, who unanimously upheld the jury’s guilty verdict on charges of theft and securities fraud, the paper reported.
The appeal was held because the defense alleged flaws in the jury instruction, the evidence presented and in the prosecution's closing arguments. The panel dismissed the arguments, saying the errors were insignificant.
Scott is sentenced to 15 years probation and ordered to pay $1.4 million in restitution.
"I joined 100 Women in Hedge Funds in 2008 as a member because of its dedication to providing educational seminars, networking events and philanthropy work and now I look forward to contributing as a London Board member." Ms. Graham said "I have been very impressed with both the quality and creativity of the organisation's work and look forward to building on this success".
Ms. Graham is a Director of BT Pension Scheme Management Limited, the pensions advisory arm of the BT Pension Scheme, the largest in the UK. She joined BTPSM in 2004 to help establish a new team mandated to invest up to 5% of the BT Scheme directly into single manager hedge funds.
In 2007, she took responsibility for Manager Selection across the BT scheme before moving in 2009 to set up a new team tasked with managing Liability Risk. She has more than 15 years experience in capital markets and hedge funds both as an end buyer and structurer. She began her career at SG Warburg in 1994 and also worked at UBS and Progressive Alternative Investments before joining BTPSM. She was educated at Edinburgh University, where she was awarded an MA in Economics and Mathematics.
Ms. Graham is a member of the BTPSM Investment Committee, through which she is fully involved in all aspects of the scheme’s investments. She has a special interest in improving the treatment of investors in offshore vehicles and most recently has been heavily involved in lobbying for changes to the EU Alternatives Directive alongside other like-minded investors. She is a Trustee of the Hedge Fund Standards Board, a Director of a number of BTPSM offshore vehicles, is an occasional board member at the UNPRI, and was one of the Hedge Fund Journal’s “50 Leading Women in Hedge Funds”.
Ms. Graham is the seventh member of its London Board. She joins an already well established London board that includes London Board Chair - Effie Datson, Product Head of the dbSelect Platform for Deutsche Bank; London Board Vice Chair - Carole Philippe, Global General Counsel, Aviva Investors; Treasurer - Olivia Bernard, CFO, Massena Capital Partners; Philanthropy Board Champion - Kristen Weldon (Eshak), Managing Director, The Blackstone Group; Swiss Board Champion - Claire Smith, Research Analyst, Partner, Albourne Partners Limited, and Anne Popkin, Chair of the Board of 100WHF Association. The Board manages 2,000 members in London, and has extended its European reach to Paris, Geneva and Zurich. Amanda Pullinger serves as the organisation’s global Executive Director.
3 Jun 2010
"The Credit Suisse Liquid Alternative Beta Index (CSLAB) generated negative performance in May, returning -2.64% for the month, bringing year-to-date performance to +0.27%." Dr. Drachman said, "All four Liquid Alternative Beta (LAB) sector indices also posted negative performance in May, suggesting that hedge fund managers across different strategies suffered as a result of the month's increased market volatility. Despite negative returns, hedge funds appear to have outperformed global equity markets, as represented by the MSCI World Index, which lost -9.91% in May and is down 7.59% year-to-date."
LAB is a series of indices that seek to replicate the aggregate return profiles of alternative investment strategies using liquid, tradable instruments that are selected and weighted using an objective and transparent rules-based methodology. An algorithm determines the appropriate factors and weightings employed in seeking to replicate the returns of specific hedge fund strategies.
The Polish police arrested the Staten Island "hedge fund manager", who is wanted by the FBI for fraud and money laundering.
AP reports that the U.S. Commodity Futures Trading Commission alleges that Efrosman/Besser stole about $5 million from customers of two fraudulent hedge funds that he claimed to manage, Century Maxim Fund, Inc. and AJR Capital Inc.
The commission says that investors were shown fake financial statements for trades that never occurred and the fake earnings were used in the solicitation of new investors to his hedge funds.
2 Jun 2010
Nominees will be evaluated by their career accomplishments and professional expertise. Consideration will be given to their community/charitable involvement and special circumstances.
The 2010 40 Under 40 M&A Advisor Recognition Awards will be announced on July 26, 2010 at the inaugural Awards Gala.
Eligible candidates are invited to submit a nomination directly or be nominated by their firm, associates, friends or family. To qualify, nominees must be under 40 years of age as of July 25, 2010. An independent committee of M&A industry business leaders will judge all nominations and finalists will be invited to attend the Awards Gala in Los Angeles.
The Wall Street Journal reports that the MAT 3 Municipal Arbitrage Fund was "a risky investment that not only exposed investors to a 100% or more loss of principal, but was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds," according to lawyers.
FINRA said that the bank understated the hedge fund's risk to investors and awarded a 100% return on the investors' losses.
"We are disappointed and disagree with this decision as it is inconsistent with other panels, which have dismissed similar claims." Citigroup Spokesman Alex Samuelson said in an interview with WSJ. Citigroup also said the hedge funds were offered only to clients who knew about and could afford the risks.
1 Jun 2010
"Our latest hedge fund monitor enhancement helps fund managers running UCITS funds of hedge funds to monitor their compliance with restrictions on liquidity, concentration risk and exposure to underlying non-UCITS funds," said Ian Headon, senior product manager for alternative asset servicing at the $647.3 billion Northern Trust.
UCITS' are a set of European Union directives that allow collective investment schemes to operate throughout the European Union on the basis of a single authorisation from one member state. UCITS funds must operate within a strict regulatory framework that imposes standards on liquidity, concentration risk, transparency and other attributes.
"Northern Trust is committed to meeting the asset servicing needs of traditional and alternative investment managers, often with complex fund structures and multi-jurisdictional requirements," said Wilson Leech, head of Northern Trust's Global Fund Services business.
The Africa and Middle East Fund has a range of hedge fund and emerging market investors in Europe, Middle East and the US. Emma will also take on responsibility for the firm’s investor communications and client liaison.
“The return our Africa and the Middle East strategy has made in the last 18 months has, unsurprisingly, drawn a lot of attention from investors." Jamie Allsopp, the fund's investment manager, said, "Frontier markets are in relatively robust fiscal positions when compared to their OECD counterparts, and the investment community is generally underweight this enormous growth opportunity. With the confluence of our historic returns and our optimistic outlook for our region we feel that it is the right time to increase our capabilities in client services.”
Before joining Insparo, Emma spent two years at Man Investments as an institutional sales assistant before heading up Man’s UK consultant relationship management. Prior to joining Man, Emma was with recruitment consultancy Venn Group.