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14 Sept 2010

Book Review: Too Big To Fail

HedgeCo Blogs - I asked Andrew Ross Sorkin: "In hindsight, what is the most important lesson to be learned from the financial crisis?"

"It all comes back to one word: debt." Sorkin said, "We can blame the financial crisis on a lot of things -- misguided housing policy, too-low interest rates, global imbalances, lax regulation, bankers-gone-wild -- but in the end, it was a function of an over-leveraged system."

Andrew Sorkin, the award winning financial reporter for the New York Times, spent over five hundred hours interviewing high net worth individuals, advisers and officials in an effort to capture the full account of the Financial crisis in detail.

In his book: "Too Big To Fail - The inside story on how Wall Street and Washington fought to save the financial system - and themselves", Sorkin recounts the maelstrom that struck high finance in 2008 in story-like detail.

I can see why it has been on the bestseller list for over 40 weeks. Once revealed, it is hard to look away from the secret life of those in power. "Pay very much attention to the man behind the curtain."

Sorkin is also the editor and founder of Dealbook, an online daily financial report. He has won a Gerald Loeb Award, been named Young Global Leader by The World Economic Forum and has recently been added to The Directorship 100, which recognizes influential US corporate boardroom members.

6 Months Inside For Robert Moffat in Hedge Fund Insider Trading Ring

HedgeCo News - Former IBM vice president Robert Moffat was sentenced to six months in prison in the Rajaratnam/Chiesi hedge fund insider trading case, the Courthouse News Services reported this morning. Judge Deborah Batts additionally fined Moffat $50,000.

“White-collar crime is just as destructive to our social fabric as the crimes of drugs and violence,” the Judge said in handing down the sentence. Moffat’s conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000. His securities fraud count carries a maximum sentence of 20 years in prison and a fine of $5 million.

Moffat pleaded guilty in March to conspiracy and securities fraud stemming from his involvement in the largest US hedge fund insider trading case in history.

The court documents reveal that in September 2008, Moffat provided Chiesi with insider information in August to October 2008, relating to IBM and Lenovo Group Ltd.

Moffat confessed to providing the indider information to to Danielle Chiesi, Rajaratnam’s co-defendant. She worked for New Castle Partners, an equity hedge fund group affiliated with JPMorgan Chase & Co.
Chiesi, along with Sri Lankan billionaire Raj Rajaratnam, are scheduled for trial in 2011.

Moffat said he did not use the information to make money, but that he passed it along to Chiesi through “misplaced trust” and “a misguided desire to appear important and knowledgeable.” the Courthouse News Services said.

Hedge Fund Launch: Peakside Opens Real Estate Private Equity Firm

HedgeCo News - Peakside Capital and its affiliates are launching a new real estate private equity firm and concluding a transaction with Bank of America Merrill Lynch (“BofAML”) involving the following elements:

• the acquisition by Peakside of BofAML’s 100% indirect interest in the general partner of the Merrill Lynch European Real Estate Opportunity Fund L.P. (“MLEREOF”), which has a total of EUR 261 million ($335.6 million) of capital commitments;
• the replacement of an affiliate of BofAML with Peakside as the manager of MLEREOF;
• the acquisition by Peakside of BofAML’s interests in the general partner and investment manager of the Bosphorus Real Estate Fund I (“BREF”), which has a total of EUR 204 million ($262 million) of capital commitments; and
• the completion of a portfolio management agreement between Peakside and an affiliate of BofAML for Peakside to manage a portfolio of European real estate investments held directly or indirectly by BofAML affiliates.

The Fund portions of this transaction have been approved, with the requisite voting percentages, by the limited partners of both the MLEREOF and BREF funds. In connection with the transaction, MLEREOF will be renamed “Peakside Real Estate Fund I”. BofAML plans to maintain its limited partnership positions in both funds following the transaction.

“Peakside will launch as a mid-sized manager with a strong track record, an experienced team and the investment capacity needed to take advantage of the opportunities that are rapidly emerging in real estate in Europe." Roger Barris, Chairman of Peakside, said.

Peakside has been newly created by the former senior managers of the European team of the Real Estate Principal Investments group within BofAML, consisting of Roger Barris, Stefan Aumann, Boris Schran and Mark Fenchelle. The team was responsible for the management of the two real estate funds and the European BofAML portfolio, In addition to the senior managers, Peakside has employed 13 former members of the BofAML group and plans to hire an additional 4 persons, including Christoph Munte, formerly of Morgan Stanley, who will join as General Counsel and a member of the Peakside Management Committee.

Peakside has opened offices in the Cayman Islands, Switzerland, the United Kingdom, and Luxembourg. Peakside will provide investment advisory, deal origination and execution, asset management and fund management services in real estate across Europe, including CEE and Turkey, to qualified investor clients such as institutions and high-net-worth individuals. Going forward, Peakside plans to raise discretionary funds, but also plans to take non-discretionary investment mandates from investors.

“We considered many alternatives for these assets, and driven by our confidence in the Peakside team, we concluded that the best option, in our capacity as a limited partner in the funds and the owner of the proprietary assets, is to allow the Peakside team to continue to manage the funds and the legacy European real estate assets as an independent company.” Jim Forbes, BofAML Global Principal Investments executive, said.