Investors Allocated $30 Billion to Hedge Funds in Q2

HedgeCo News - Brighton House Associates (BHA) has released their quarterly report, which explores trends within the alternative investment industry during the second quarter.

Some highlights from the report include:

- The second quarter of 2011 was characterized by tumultuous global markets and uncertainty regarding the financial well-being of a number of euro-zone countries as well as the U.S. Still, investors remained interested in hedge funds and allocated $30 billion to the asset class during the quarter, a small decline from the $32 billion allocated in the first quarter. Despite lackluster returns and markets that proved challenging for hedge fund managers, funds saw strong investment inflows.

- Many investors who had been sitting on the sidelines became more active in the hedge fund space. In a conversation with BHA analysts, a wealth advisor investing on behalf of a large U.S. insurance firm noted that for the past three years, the firm had not been allocating to the hedge fund space. In the second quarter, however, the firm met with new managers, and it anticipates adding three or four global macro and CTA managers as well as two new long/short equity funds to its portfolio by the end of the year.

- Other investors increased their single-manager hedge fund exposure at the expense of their fund of hedge funds allocations. An insurance firm in Bermuda, which has traditionally invested in funds of hedge funds, confirmed that it is planning on investing solely in single-manager funds going forward. In fact, the firm plans on increasing its hedge fund allocation from its current $350 million to $800 million over the next two years. Still other investors were increasing their hedge fund exposure by employing firms to create customized funds of funds on their behalf, essentially designing a tailor-made hedge fund portfolio.

- In the private equity space investors were increasingly interested in sector-focused funds. While interest in funds with diversified sector exposure fell, investor demand grew for funds with exposure to the energy, technology, and clean-technology sectors. Compared with the first quarter of 2011, demand for energy, technology, and clean-technology focused funds grew by 53.6%, 33.1%, and 36.4% respectively.

BHA profiled just fewer than 1200 investor mandates across hedge funds, private equity, real estate, and related funds of funds through extensive one-on-one interviews with institutional investors around the globe.

Hedge funds and game theory

coming soon

Assets under management threshold raised

HedgeCo Blogs - A new order impacting all SEC registered investment advisers (and certain state registered investment advisers) that provide advisory services to hedge funds and/or separately managed accounts and receive performance-based compensation for such advisory services.

Effective September 19, 2011, the assets under management threshold is being raised from $750,000 to $1 million and the net worth threshold is being raised from $1.5 million to $2 million. In addition, an investor can no longer include the value of his or her primary residence in calculating whether he or she meets the $2 million net worth threshold.

More info from Sadis & Goldberg

Hedge Fund Convictions Over The Weekend

HedgeCo News - Over the weekend there were hedge fund fraud related convictions in the US, Australia and Germany. All have been sentenced to jail time.

US: Five employees for hedge fund manager A&O Resource Management Ltd were sentenced for their part in a $100 million fraud scheme.

“Brent Oncale (the founder) and his co-conspirators operated a sham investment company that turned fraud and deceit into a business model,” said Assistant Attorney General Breuer. “They stole millions from hundreds of unsuspecting investors, pocketing huge sums for themselves.”

Russell E. Mackert, 52, general counsel for A&O, was sentenced to 188 months in prison; Brent Oncale, 36, former owner and founder of A&O, was sentenced to 120 months in prison; David White, 41, the former president of A&O, was sentenced to 60 months in prison; Eric M. Kurz, 47, a wholesaler of A&O investment products, was sentenced to 60 months in prison; and Tomme Bromseth, 69, an A&O sales agent in the Richmond area, was sentenced to 36 months in prison.

Australia: A New South Wales Supreme Court has convicted Shawn Richard of Astarra Asset Management with fraud, insisting on up to 5 years of jail time, the sentencing is scheduled for the 12 August.

The Australian Securities and Investments Commission alleged that the hedge fund manager was placing investor monies in overseas hedge funds, in circumstances where he would personally receive a significant portion of the money.

“The monies Richard placed in the overseas hedge funds had been raised by the responsible entity of ASF, Trio Capital Limited (Trio).” The ASIC said, “Richard received in excess of $6.4 million in undisclosed payments.”

EU: Helmut Kiener, the founder of 345-million euro ($497 million) hedge fund K1 Group, was sentenced to 10 years and eight months in prison. The ”Mini Madoff” was found guilty of fraud, forgery and tax evasion by a court in Germany.

Also sentenced last week: Danielle Chiesi was sentenced to 30 months in federal prison for securities fraud.

New names in the Petters Ponzi: Frank Elroy Vennes, Jr., a business associate of and primary fundraiser for Thomas J. Petters was named in a superseding indictment last week, the indictment also charges James Nathan Fry, age 57, of Orono, Minnesota, with five counts of securities fraud, four counts of wire fraud, and three counts of making a false statement to the United States Securities and Exchange Commission during its investigation of investments in PCI by hedge funds under the management of Fry’s company, Arrowhead Capital Management.

S&P Awards SEB Fund of Hedge Funds "AA" Rating

Stockholm (HedgeFonder.nu)- SEB's True Market Neutral fund has become the first Nordic fund of hedge funds to receive an ”AA” rating by worldwide financial-market intelligence leader Standard & Poor (S&P).

"This is a stamp of approval for the fund, which has delivered stable returns for our customers regardless of the development in the stock market," Mikael Spångberg, lead manager at SEB's True Market Neutral fund, said.

The Sweden based wealth manager has total assets of SEK 2,118 billion and is represented in 21 countries with 17,000 employees.

S&P said of the the Swedish money manager, ”SEB deserves credit for its highly disciplined process, achieving the fund objective during periods in which the overwhelming majority of funds of hedge funds have fallen short. For example, the fund returned 3 per cent in 2008, and has continued to provide positive returns every year."

The fund, which is targeting institutional investors, aims to provide an annualised return of 3-4 percentage points above the risk free rate and to deviate no more than 5 percentage points from the target and have no correlation to stock markets.

In addition, S&P's has also rated SEB's hedge funds Dynamic Manger Alpha and Asset Selection funds "AA".