The recent drop in oil prices has raised market speculation that hedge funds might be taking large losses in oil position investments. A lot like the big natural gas bet that sank the multi-billion dollar Amaranth fund in 2006.
Oil prices stayed under $56 on Friday after an almost 9% drop over the past two days to its lowest close in 18 months. Investors are worried about growing U.S. fuel stocks and mild weather. The hefty losses in oil as well as in other commodities also may have been triggered by funds switching into other assets, it was reported in the Scotsman.
"Weather is certainly a key driver of sentiment, but what has been set in motion is a far more general demand pessimism for the year ahead," said Barclays Capital in the Scotsman.com. "This has produced a market that is more sensitive than usual to any producer hedging, and which is inclined to attempt to break sharply lower."
A top Iranian oil official said they were hoping to keep markets balanced until the 12-member group meets on March 15, but OPEC was keeping an eye on hedge fund activity in the markets, "We have to see whether the funds overreact... If that's the case, we may have to consider meeting (before March)," said Iran's OPEC Governor Hossein Kazempour Ardebili.
5 Jan 2007
Office Space
Massachusetts Secretary of State William F. Galvin is investigating whether leased office space and other services that investment bank UBS provides to hedge funds have created a conflict of interest that could hurt investors, Galvin's spokesman said in an announcement.
It was reported that UBS and other investment banks lease space to young hedge fund traders in various cities, hoping they may become larger clients eventually. The arrangement could amount to a conflict of interest, Brian McNiff, Galvin's spokesman, said in his announcement, comparing it to "soft dollar" payments. These drew criticism when they were commonly paid by mutual funds in the 1990s, because the services often benefit managers more than shareholders who cover their costs.
The investigation is focused on whether the hedge funds are paying higher trading fees to the banks to compensate them for the office space, and failing to disclose the expense to investors. "He's looking at potential violations of securities laws, and a conflict of interest would be one of those," McNiff said.
Galvin's probe was disclosed in stories in The New York Times and The Boston Globe on Tuesday. McNiff told the press he was aware only of Galvin's interest in UBS, which leases space to hedge fund traders in a downtown Boston office tower. The space comes with receptionists, espresso machines and consultants to manage information systems, the Times said.
McNiff said the investigation into what he called "hedge fund hotels" was at a preliminary stage, and it was too early to say whether the probe might lead to enforcement actions.
It was reported that UBS and other investment banks lease space to young hedge fund traders in various cities, hoping they may become larger clients eventually. The arrangement could amount to a conflict of interest, Brian McNiff, Galvin's spokesman, said in his announcement, comparing it to "soft dollar" payments. These drew criticism when they were commonly paid by mutual funds in the 1990s, because the services often benefit managers more than shareholders who cover their costs.
The investigation is focused on whether the hedge funds are paying higher trading fees to the banks to compensate them for the office space, and failing to disclose the expense to investors. "He's looking at potential violations of securities laws, and a conflict of interest would be one of those," McNiff said.
Galvin's probe was disclosed in stories in The New York Times and The Boston Globe on Tuesday. McNiff told the press he was aware only of Galvin's interest in UBS, which leases space to hedge fund traders in a downtown Boston office tower. The space comes with receptionists, espresso machines and consultants to manage information systems, the Times said.
McNiff said the investigation into what he called "hedge fund hotels" was at a preliminary stage, and it was too early to say whether the probe might lead to enforcement actions.
3 Jan 2007
Hedge Fund Provider Announces Stong Growth With New Wall Street Technology
Hedge fund provider LiquidPoint LLC, announced that it has far exceeded 2006 performance projections, ncluding huge increases in both options transaction volume and number of end-users.
Anthony Saliba, CEO of LiquidPoint stated, “LiquidPoint’s monthly contract volume in December was up over 100% compared to the same time frame last year. Our 2006 volume was 78% greater than last year. With the onset of penny markets, we have every reason to expect this trend to continue in 2007.”
LiquidPoint’s technology affiliate, First Traders Analytical Solutions (FTAS), delivered several high-impact enhancements in 2006. Among the new features delivered, the focus was on specific work flow efficiencies for Wall Street firms. Daniel Rooney, LiquidPoint’s Director of Sales, said,” Our user community increased in 2006 as we substantially increased our presence on the trading floor at key Wall Street firms.”
First Traders provides software products and services for the electronic options trading marketplace to Wall Street firms, executing brokerage firms, hedge funds, proprietary trading firms, the retail trading community and the U.S. options exchanges.
LiquidPoint’s client base includes hedge funds, institutions, prime brokers and their customers and other professional options traders. The HEAT™ System is also available through select prime brokers.
“These recent enhancements are satisfying a strong demand within this expanding industry, contributing to our firm’s growth. As the exchanges race to differentiate themselves. LiquidPoint and FTAS are working to ensure their customers have all they need to take advantage of industry changes and new opportunities.” Mr. Rooney said in a statement.
Anthony Saliba, CEO of LiquidPoint stated, “LiquidPoint’s monthly contract volume in December was up over 100% compared to the same time frame last year. Our 2006 volume was 78% greater than last year. With the onset of penny markets, we have every reason to expect this trend to continue in 2007.”
LiquidPoint’s technology affiliate, First Traders Analytical Solutions (FTAS), delivered several high-impact enhancements in 2006. Among the new features delivered, the focus was on specific work flow efficiencies for Wall Street firms. Daniel Rooney, LiquidPoint’s Director of Sales, said,” Our user community increased in 2006 as we substantially increased our presence on the trading floor at key Wall Street firms.”
First Traders provides software products and services for the electronic options trading marketplace to Wall Street firms, executing brokerage firms, hedge funds, proprietary trading firms, the retail trading community and the U.S. options exchanges.
LiquidPoint’s client base includes hedge funds, institutions, prime brokers and their customers and other professional options traders. The HEAT™ System is also available through select prime brokers.
“These recent enhancements are satisfying a strong demand within this expanding industry, contributing to our firm’s growth. As the exchanges race to differentiate themselves. LiquidPoint and FTAS are working to ensure their customers have all they need to take advantage of industry changes and new opportunities.” Mr. Rooney said in a statement.
Man Investments Supports Hedge Fund World Middle East Awards
Man Investments is supporting this year's Hedge Funds World Middle East Awards. Man said, "We believe that they will play a critical role in identifying the future stars of the region's hedge fund industry."
Awards will be made in six categories, including for the year's best hedge fund distributor and the most innovative project. The awards are being held as part of the Hedge Funds World Middle East conference, which runs from 5-8 March 2007 in Dubai.
The winners and finalists will receive their well deserved recognition and accolade at the Hedge Funds Awards ceremony and gala dinner at 19:00 – March 6th at The Events Arena, The Jumeirah Beach Hotel, Dubai. The deadline to enter the awards is the 12th of January.
For more information on the event see, http://www.hedgefundsworld.com/2007/awardsme/
Awards will be made in six categories, including for the year's best hedge fund distributor and the most innovative project. The awards are being held as part of the Hedge Funds World Middle East conference, which runs from 5-8 March 2007 in Dubai.
The winners and finalists will receive their well deserved recognition and accolade at the Hedge Funds Awards ceremony and gala dinner at 19:00 – March 6th at The Events Arena, The Jumeirah Beach Hotel, Dubai. The deadline to enter the awards is the 12th of January.
For more information on the event see, http://www.hedgefundsworld.com/2007/awardsme/
Predictions for Hedge Funds in the New Year
"A hedge-fund manager will buy Aston Martin." That's the forecast according to Bloomberg columnist Matthew Lynn. Pretty bold, but you never know, he also says that "farming will become a great way (for hedge funds) to get rich"
"High oil prices are causing a surge of interest in alternative energy, with ethanol leading the way. Making fuel from corn or other grains, however, means digging up a lot of fields....It has been more than a century since farmland was the basis for a financial aristocracy, but every asset comes back into its own if you just wait long enough. JPMorgan Chase & Co. already rates corn among the best investments for 2007.... Expect to hear the hedge-fund manager beside you in the bar boasting about how he has just snapped up 1 million acres in Ukraine."
And about the Aston Martin, he had this to say, "Ford Motor Co. has already put its world-beating luxury-car unit Aston Martin up for sale. The hedge funds are awash with money and have been snapping up all sorts of interesting companies. London-based RAB Capital Plc, for example, just took control of the A1 Grand Prix motor-racing business....London's loaded hedgehogs love to drive around in their shiny new Astons. What better synergies could there be than owning the company that makes them? You can sell it to the investors as a great deal and have fun messing around in the factory at the same time."
"High oil prices are causing a surge of interest in alternative energy, with ethanol leading the way. Making fuel from corn or other grains, however, means digging up a lot of fields....It has been more than a century since farmland was the basis for a financial aristocracy, but every asset comes back into its own if you just wait long enough. JPMorgan Chase & Co. already rates corn among the best investments for 2007.... Expect to hear the hedge-fund manager beside you in the bar boasting about how he has just snapped up 1 million acres in Ukraine."
And about the Aston Martin, he had this to say, "Ford Motor Co. has already put its world-beating luxury-car unit Aston Martin up for sale. The hedge funds are awash with money and have been snapping up all sorts of interesting companies. London-based RAB Capital Plc, for example, just took control of the A1 Grand Prix motor-racing business....London's loaded hedgehogs love to drive around in their shiny new Astons. What better synergies could there be than owning the company that makes them? You can sell it to the investors as a great deal and have fun messing around in the factory at the same time."
Activist Hedge Fund calls for sale Of Sunpower.
Activist hedge fund Chapman Capital LLC announced that it has notified the Board of Directors of Cypress Semiconductor Corporation of its recommendation that Cypress reorganize via a split-off and subsequent going-private LBO transaction.
A letter from Robert L. Chapman, Jr., Managing Member of Chapman Capital, has been sent to Cypress's full Board of Directors, accused the company of under performing and called for the launch of a large-scale "corporate reorganization" that would involve splitting from Sunpower Corp, in which Cypress has held a major stake insince 2002.
The letter, calling for the sale of SunPower, says "Our long term investment in Cypress was made following passive participation in over a dozen recent conference calls and presentations, on top of countless inquiries to semiconductor and solar cell industry experts. In fact, it is our view that Cypress may be experiencing a slight, short-term order shortfall in line with others in its industry, a condition with which we are comfortable given our long term perspective."
The letter, signed by Chapman Capital's managing member Robert Chapman, Jr., claimed that since it owns 1.5 million common shares in Cypress, its financial interest the company now exceeds CEO Thurman J. Rodgers' own, Chapman cited what he called the "needlessly protracted undervaluation placed by the market on Cypress's core semiconductor operations" as fueling the hedge fund's call for a corporate reorganization that would separate Cypress' core semiconductor operations from its controlling stake in SunPower.
Regarding Chapman Capital's growing concerns regarding relatively immaterial Cypress share ownership by its Board of Directors, Mr. Chapman stated further, "Cypress's core semiconductor business, which Mr. Rodgers founded nearly 25 years ago, deserves a much higher valuation than what it was ascribed the day Mr. Rodgers took it public two decades ago. Mr. Rodgers has stated publicly, 'you and I are going to make as much money as fast as we can on this.' Cypress's Board of Directors, despite their insignificant percentage ownership of Cypress, should expect that we are going to hold Mr. Rodgers to this promise."
Chapman Capital L.L.C. is a Los Angeles, CA based hedge fund focusing on takeover and turnaround investing. The firm currently manages over $300 million as the registered investment advisor to Chap-Cap Partners II Master Fund, Ltd. and Chap-Cap Activist Partners Master Fund, Ltd., the combined owners of approximately 1% of Cypress Semiconductor Corporation's common shares.
A letter from Robert L. Chapman, Jr., Managing Member of Chapman Capital, has been sent to Cypress's full Board of Directors, accused the company of under performing and called for the launch of a large-scale "corporate reorganization" that would involve splitting from Sunpower Corp, in which Cypress has held a major stake insince 2002.
The letter, calling for the sale of SunPower, says "Our long term investment in Cypress was made following passive participation in over a dozen recent conference calls and presentations, on top of countless inquiries to semiconductor and solar cell industry experts. In fact, it is our view that Cypress may be experiencing a slight, short-term order shortfall in line with others in its industry, a condition with which we are comfortable given our long term perspective."
The letter, signed by Chapman Capital's managing member Robert Chapman, Jr., claimed that since it owns 1.5 million common shares in Cypress, its financial interest the company now exceeds CEO Thurman J. Rodgers' own, Chapman cited what he called the "needlessly protracted undervaluation placed by the market on Cypress's core semiconductor operations" as fueling the hedge fund's call for a corporate reorganization that would separate Cypress' core semiconductor operations from its controlling stake in SunPower.
Regarding Chapman Capital's growing concerns regarding relatively immaterial Cypress share ownership by its Board of Directors, Mr. Chapman stated further, "Cypress's core semiconductor business, which Mr. Rodgers founded nearly 25 years ago, deserves a much higher valuation than what it was ascribed the day Mr. Rodgers took it public two decades ago. Mr. Rodgers has stated publicly, 'you and I are going to make as much money as fast as we can on this.' Cypress's Board of Directors, despite their insignificant percentage ownership of Cypress, should expect that we are going to hold Mr. Rodgers to this promise."
Chapman Capital L.L.C. is a Los Angeles, CA based hedge fund focusing on takeover and turnaround investing. The firm currently manages over $300 million as the registered investment advisor to Chap-Cap Partners II Master Fund, Ltd. and Chap-Cap Activist Partners Master Fund, Ltd., the combined owners of approximately 1% of Cypress Semiconductor Corporation's common shares.
Hedge Funds Voted Down
US hedge funds Ramius Capital Group and Moon Capital Management voted with a 47.6% share to remove the directors of South Korean online game developer Gravity Co. Ltd.
Gravity's other shareholders however, rejected the proposal to remove Chief Executive Il Young Ryu and Seung Taik Baik, the company's chief operating officer.
A spokesman for the hedge funds said that the majority of "disinterested" shareholders voted to remove the executives. "These results demonstrate that Gravity's minority shareholders clearly and overwhelmingly demand the immediate removal of Mr. Ryu and Mr. Baik as directors," Mark Mitchell, Ramius Capital's executive managing director, said in a statement.
The hedge funds had cited "consistent detrimental actions against shareholders by the executives and the board through various related-party transactions with companies that clearly have conflicts of interest with the company." The hedge funds also questioned the executives' decision to acquire another gaming company, Emile Chronicle Online, without seeking an independent valuation.
In a statement from Gravity, the management "urges the two hedge funds, Ramius and Moon, to offer constructive criticism and positive encouragement as responsible shareholders."
Gravity's other shareholders however, rejected the proposal to remove Chief Executive Il Young Ryu and Seung Taik Baik, the company's chief operating officer.
A spokesman for the hedge funds said that the majority of "disinterested" shareholders voted to remove the executives. "These results demonstrate that Gravity's minority shareholders clearly and overwhelmingly demand the immediate removal of Mr. Ryu and Mr. Baik as directors," Mark Mitchell, Ramius Capital's executive managing director, said in a statement.
The hedge funds had cited "consistent detrimental actions against shareholders by the executives and the board through various related-party transactions with companies that clearly have conflicts of interest with the company." The hedge funds also questioned the executives' decision to acquire another gaming company, Emile Chronicle Online, without seeking an independent valuation.
In a statement from Gravity, the management "urges the two hedge funds, Ramius and Moon, to offer constructive criticism and positive encouragement as responsible shareholders."
27 Dec 2006
Hegde Fund Funded Exco Doubles Oil Reserves
Exco Resources Inc. announced an agreement to buy producing oil and gas properties in Jackson Parish, Louisiana from Anadarko Petroleum Corp. for $1.6 billion, almost doubling its oil and gas reserves. The total acreage is approximately 66,000 net acres.
Exco's largest shareholder is legendary oilman and billionaire hedge fund manager T. Boone Pickens, who with his two hedge funds, owns 12.5% of Exco's outstanding shares. Pickens is also on the board of directors and this purchase is the largest of six announced this year by Exco.
Exco is the culmination of several acquisitions made in the last few years by Pickens and Exco CEO, Doug Miller. Pickens, 77, started Mesa Petroleum with $2500 in 1956, growing it into one of the world's leading independent oil and gas producers. He is also the founder and chairman emeritus of Clean Energy Fuels, the nation's largest supplier of natural gas to the transportation sector.
The fields are tapped by about 350 wells, and 96% of the proved reserves on the properties are in production, Exco said. The fields have proved reserves equivalent to about 466 billion cubic feet of gas of which 446 is producing today, Exco said. The acquisition also includes gathering systems, compression and treating plants.
Exco will use cash generated by the new fields to accelerate drilling on more than $2-billion of properties acquired since the public offering. The purchase of the Anadarko fields, expected to close in March, will be financed with a new revolving credit facility and a bridge loan from banks, Exco said in a separate statement.
Exco's largest shareholder is legendary oilman and billionaire hedge fund manager T. Boone Pickens, who with his two hedge funds, owns 12.5% of Exco's outstanding shares. Pickens is also on the board of directors and this purchase is the largest of six announced this year by Exco.
Exco is the culmination of several acquisitions made in the last few years by Pickens and Exco CEO, Doug Miller. Pickens, 77, started Mesa Petroleum with $2500 in 1956, growing it into one of the world's leading independent oil and gas producers. He is also the founder and chairman emeritus of Clean Energy Fuels, the nation's largest supplier of natural gas to the transportation sector.
The fields are tapped by about 350 wells, and 96% of the proved reserves on the properties are in production, Exco said. The fields have proved reserves equivalent to about 466 billion cubic feet of gas of which 446 is producing today, Exco said. The acquisition also includes gathering systems, compression and treating plants.
Exco will use cash generated by the new fields to accelerate drilling on more than $2-billion of properties acquired since the public offering. The purchase of the Anadarko fields, expected to close in March, will be financed with a new revolving credit facility and a bridge loan from banks, Exco said in a separate statement.
Wine and Hedge Funds
Aside from the hedge fund millionaires investing in the land rich wine making lifestyle, a new trend is now being seen among hedge fund investors in the buying of premium wines. Merryl Lynch noted the surge in wine investment in their 2003 World Wealth Report, which found that the rich were devoting 13% of their assets to so-called alternative investments. The category also included art, hedge funds, and foreign exchange.
Peter Meltzer, author of the recently published "Keys to the Cellar: Strategies and Secrets of Wine Collecting," said in an interview with Reuters that six magnums of Domaine de la Romanee-Conti sold earlier this year for $170,375. "There has been a phenomenal growth in the collection of premium wines," said Peter Meltzer, the caretaker of the Wine Spectator index, a gauge of the most frequently sold premium wines, mostly Bordeaux and Burgundies. A single bottle of Chateau Latour 1955 sold with commission for $28,440.
Wall Street wine mavens interested in purchasing a Burgundy vineyard or expanding their investments, have the opportunity to invest in the some 105 million bottles of chardonnay white wines and 75 million bottles of pinot noir reds produced annually. There are about 4,000 “domaines” and 59 types of soil beneath the Cote d’Or’s 50-kilometer (31-mile) stretch.
It seems however, that buying a bottle of the stuff is less risky than trying to go for buying the vinyard “Owning a domaine is a venture capitalist’s dream, high in risk and if the weather is good and you’re really lucky, you might make a 4 percent return. But owning a domaine is the greatest lifestyle imaginable.” Says Wasserman, a vinyard owner in his own right.
It takes three years after the first harvest for the wine to be ready for market,” says Wasserman, who has been a Burgundy wine trader for 40 of his 62 years. “You’re not making a cent for three years, and then your buyers must wait a minimum of three to four years after that before they can drink it. Perfection wouldn’t appear until the wine is six to eight years old…..The land will cost you $6 million, and that will produce 90 casks of
Peter Meltzer, author of the recently published "Keys to the Cellar: Strategies and Secrets of Wine Collecting," said in an interview with Reuters that six magnums of Domaine de la Romanee-Conti sold earlier this year for $170,375. "There has been a phenomenal growth in the collection of premium wines," said Peter Meltzer, the caretaker of the Wine Spectator index, a gauge of the most frequently sold premium wines, mostly Bordeaux and Burgundies. A single bottle of Chateau Latour 1955 sold with commission for $28,440.
Wall Street wine mavens interested in purchasing a Burgundy vineyard or expanding their investments, have the opportunity to invest in the some 105 million bottles of chardonnay white wines and 75 million bottles of pinot noir reds produced annually. There are about 4,000 “domaines” and 59 types of soil beneath the Cote d’Or’s 50-kilometer (31-mile) stretch.
It seems however, that buying a bottle of the stuff is less risky than trying to go for buying the vinyard “Owning a domaine is a venture capitalist’s dream, high in risk and if the weather is good and you’re really lucky, you might make a 4 percent return. But owning a domaine is the greatest lifestyle imaginable.” Says Wasserman, a vinyard owner in his own right.
It takes three years after the first harvest for the wine to be ready for market,” says Wasserman, who has been a Burgundy wine trader for 40 of his 62 years. “You’re not making a cent for three years, and then your buyers must wait a minimum of three to four years after that before they can drink it. Perfection wouldn’t appear until the wine is six to eight years old…..The land will cost you $6 million, and that will produce 90 casks of
26 Dec 2006
Higher Standards may be Welcomed by Hedge Funds
State Attorney General Richard Blumenthal, one of the nation's most outspoken advocates for increased hedge fund regulation has repeatedly urged regulators and legislators to consider raising the accredited investor standard.
Some hedge funds have now also expressed support for the proposal by the Securities and Exchange Commission that would shrink the pool of eligible hedge fund investors.
The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify. The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement.
"Raising net worth requirements is a critically significant first step toward helping protect vulnerable investors in the higher risk world of hedge fund investment," Blumenthal said in a statement.
"Especially in areas like Connecticut, increasing real estate values have escalated the retailization of hedge funds -- and entitled and exposed exponentially growing masses of middle class investors to hedge funds," Blumenthal said.
Industry insiders agree. "The change is long overdue," said the head of a Connecticut-based multibillion-dollar fund of funds, who declined to give his name because of company policy.
"It's totally appropriate that the SEC should be updating the standard, which has not increased for inflation for many, many years," the fund manager said. The new rule would have "virtually no impact" on the industry in terms of the amount of assets being pumped into hedge funds, he said.
Victor Zimmermann Jr., managing partner of the Stamford office of Curtis, Mallet-Prevost, Colt & Mosle LLC, a law firm with many hedge fund clients, agreed that the impact would not be extreme. "The industry has changed quite a bit in the last five or 10 years," he said. "It is much more dominated by institutional money, rather than individuals."
Even hedge fund startups, which historically sought out wealthy individuals for seed money, are now turning to large banks as initial seed investors, Zimmermann said. "It is just fewer and fewer funds relying on individual investors," he said.
Zimmermann said hedge funds probably won't oppose the SEC rule, recognizing that it wouldn't have much impact on the industry and at the same time might satisfy some state regulators such as Blumenthal who have been clamoring for more oversight.
Some hedge funds have now also expressed support for the proposal by the Securities and Exchange Commission that would shrink the pool of eligible hedge fund investors.
The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify. The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement.
"Raising net worth requirements is a critically significant first step toward helping protect vulnerable investors in the higher risk world of hedge fund investment," Blumenthal said in a statement.
"Especially in areas like Connecticut, increasing real estate values have escalated the retailization of hedge funds -- and entitled and exposed exponentially growing masses of middle class investors to hedge funds," Blumenthal said.
Industry insiders agree. "The change is long overdue," said the head of a Connecticut-based multibillion-dollar fund of funds, who declined to give his name because of company policy.
"It's totally appropriate that the SEC should be updating the standard, which has not increased for inflation for many, many years," the fund manager said. The new rule would have "virtually no impact" on the industry in terms of the amount of assets being pumped into hedge funds, he said.
Victor Zimmermann Jr., managing partner of the Stamford office of Curtis, Mallet-Prevost, Colt & Mosle LLC, a law firm with many hedge fund clients, agreed that the impact would not be extreme. "The industry has changed quite a bit in the last five or 10 years," he said. "It is much more dominated by institutional money, rather than individuals."
Even hedge fund startups, which historically sought out wealthy individuals for seed money, are now turning to large banks as initial seed investors, Zimmermann said. "It is just fewer and fewer funds relying on individual investors," he said.
Zimmermann said hedge funds probably won't oppose the SEC rule, recognizing that it wouldn't have much impact on the industry and at the same time might satisfy some state regulators such as Blumenthal who have been clamoring for more oversight.
New Laws Create Investment Opportunities in Russia
Sberbank, Russia's central bank, says that in 2006 48 Russian banks were fully owned by foreigners, and the total share of non-residents in Russian banks stood at 12.92%.
According to a report by Reuters, the lower house of Russian parliament has just made it easier for foreigners to gain exposure to the booming sector by passing legislation that would put foreign and domestic investors on an equal footing when buying shares in Russian banks, also making it easier for Russian banks to go public.
The new rules would oblige residents and non-residents to inform regulators if they purchase more than a 1% stake in a Russian bank and seek permission to build a stake of more than 20%, according to the report by Reuters.
After approval by the upper chamber of parliament and signed into law by President Vladimir Putin, the amendments should pave the way for a $7.6 billion additional share issue by Russia's largest bank, state-owned Sberbank, as well as a $4 billion initial public offering by domestic rival VTB.
"These amendments will clearly facilitate secondary trading and be positive for all banking stocks traded in Russia," Alfa Bank analysts said in a research note, suggesting the new law will have a positive effect on Russian banks going public.
According to a report by Reuters, the lower house of Russian parliament has just made it easier for foreigners to gain exposure to the booming sector by passing legislation that would put foreign and domestic investors on an equal footing when buying shares in Russian banks, also making it easier for Russian banks to go public.
The new rules would oblige residents and non-residents to inform regulators if they purchase more than a 1% stake in a Russian bank and seek permission to build a stake of more than 20%, according to the report by Reuters.
After approval by the upper chamber of parliament and signed into law by President Vladimir Putin, the amendments should pave the way for a $7.6 billion additional share issue by Russia's largest bank, state-owned Sberbank, as well as a $4 billion initial public offering by domestic rival VTB.
"These amendments will clearly facilitate secondary trading and be positive for all banking stocks traded in Russia," Alfa Bank analysts said in a research note, suggesting the new law will have a positive effect on Russian banks going public.
Citigroup buys Morgan Stanley Fund
Citigroup has agreed to buy wealth manager fund Quilter from rival Morgan Stanley as it seeks to expand in the UK. The acquisition places Citigroup among the top 10 wealth managers in the UK, the bank said in an e-mail.
Quilter, which manages $11 billion, will become part of the bank's global wealth-management division in Europe, run by Marianne Hay, Citigroup said.
Quilter has more than 18,000 clients and 300 employees in 10 offices in Britain, Ireland and the Channel Islands. The fund manages assets worth more than 5.6 billion pounds, has 18,000 clients and employs 300 staff, said the companies, which did not disclose details of the transaction such as the price paid by the bank.
"With strategic investments geared especially for Brazil, India and greater China, Quilter is an important step in establishing a meaningful presence in the UK, with an excellent platform to support the further growth of our Private Bank and international Smith Barney businesses," said Todd Thomson, Chairman and CEO of Citigroup Global Wealth Management, in the Citigroup statement. The bank said it plans to fuse Quilter into its CWA unit.
Quilter, which manages $11 billion, will become part of the bank's global wealth-management division in Europe, run by Marianne Hay, Citigroup said.
Quilter has more than 18,000 clients and 300 employees in 10 offices in Britain, Ireland and the Channel Islands. The fund manages assets worth more than 5.6 billion pounds, has 18,000 clients and employs 300 staff, said the companies, which did not disclose details of the transaction such as the price paid by the bank.
"With strategic investments geared especially for Brazil, India and greater China, Quilter is an important step in establishing a meaningful presence in the UK, with an excellent platform to support the further growth of our Private Bank and international Smith Barney businesses," said Todd Thomson, Chairman and CEO of Citigroup Global Wealth Management, in the Citigroup statement. The bank said it plans to fuse Quilter into its CWA unit.
Goldman Sachs names New Hedge Fund Manager
Goldman Sachs has named the new head of their alternative investments asset-management units as Marc Spilker, he will be overseeing hedge funds and private equity.
Goldman named Spilker, 42, to replace George Walker, who left in May to run the funds unit at Lehman Brothers. Spilker will report to Eric Schwartz and Peter Kraus, co-heads of Goldman Sachs Asset Management.
Spilker is a 16-year veteran of the investment bank, he was co-head of U.S. equituies trading and global head of volatility trading. He previously headed currency options and Japanese fixed-income.
Goldman named Spilker, 42, to replace George Walker, who left in May to run the funds unit at Lehman Brothers. Spilker will report to Eric Schwartz and Peter Kraus, co-heads of Goldman Sachs Asset Management.
Spilker is a 16-year veteran of the investment bank, he was co-head of U.S. equituies trading and global head of volatility trading. He previously headed currency options and Japanese fixed-income.
Asia's $100 Million Bonuses
Some traders in Tokyo and London are rumoured to be in the $100 million bonus club. The "giant" bonuses at Morgan Stanley and the $40 million John Mack took home has started rumors inside Wall Street about who might be in the running to get $100 million checks this year.
Several members of the $100 million club are in Goldman Sachs Asian offices. Morgan Sze, a head trader in Goldman's principal strategies group based in Hong Kong, is mentioned by several sources as a possible member of the club according to the New York Post. Sze's counterpart in London, Pierre-Henri Flamand is also rumored to be receiving a $100 million bonus.
Raanan Agus, who is the New York-based head of Goldman's principal strategies hedge fund group makes bets using nearly $10 billion of the firm's capital, could get $70 million. "Apparently, a $100 million payout isn't as uncommon as some originally thought," said one Goldman source in the Post.
Goldman CEO Lloyd Blankfein is likely to get about $50 million, while co-presidents Gary Cohn and Jon Winkelried are expected to receive between $40 million and $45 million, sources said. Goldman bonuses make up between 80% and 90% of the traders and bankers annual salaries.
Word of the nine-figure bonuses came as Goldman named Marc Spilker to oversee its money management unit's alternative investments operation, which includes private equity and hedge funds.
Several members of the $100 million club are in Goldman Sachs Asian offices. Morgan Sze, a head trader in Goldman's principal strategies group based in Hong Kong, is mentioned by several sources as a possible member of the club according to the New York Post. Sze's counterpart in London, Pierre-Henri Flamand is also rumored to be receiving a $100 million bonus.
Raanan Agus, who is the New York-based head of Goldman's principal strategies hedge fund group makes bets using nearly $10 billion of the firm's capital, could get $70 million. "Apparently, a $100 million payout isn't as uncommon as some originally thought," said one Goldman source in the Post.
Goldman CEO Lloyd Blankfein is likely to get about $50 million, while co-presidents Gary Cohn and Jon Winkelried are expected to receive between $40 million and $45 million, sources said. Goldman bonuses make up between 80% and 90% of the traders and bankers annual salaries.
Word of the nine-figure bonuses came as Goldman named Marc Spilker to oversee its money management unit's alternative investments operation, which includes private equity and hedge funds.
16 Dec 2006
SEC Votes on new Hedge Fund Rules
The Securities and Exchange Commission has voted to propose several new rules to provide additional protection to investors in hedge funds and other pooled investment vehicles.
The proposing release, which has not yet been published on the SEC's website, will need to explain why there is more risk associated with hedge funds than, for example, raising money to start a coffee kiosk or a pet rock distribution organization. Investors and hedge fund managers may decide that the explanation is insufficient and decide to challenge the SEC's authority to make this distinction.
In an email to the company's clients, HedgeCo lawyer Jay Gould describes one of the proposals being discussed as the reinstatement of the Anti Fraud Provision under the Investment Advisers Act of 1940. This proposal would make it a fraudulent, deceptive, or manipulative act, for an investment adviser to a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool.
The other one being the application to hedge funds of the Amendment to Private Offering rules under the Securities Act of 1933. This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The proposed definition would include any person who meets either the net worth test or income test, or owns at least $2.5 million in investments.
The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws. Comments are due 60 days after publication in the Federal Register.
The proposing release, which has not yet been published on the SEC's website, will need to explain why there is more risk associated with hedge funds than, for example, raising money to start a coffee kiosk or a pet rock distribution organization. Investors and hedge fund managers may decide that the explanation is insufficient and decide to challenge the SEC's authority to make this distinction.
In an email to the company's clients, HedgeCo lawyer Jay Gould describes one of the proposals being discussed as the reinstatement of the Anti Fraud Provision under the Investment Advisers Act of 1940. This proposal would make it a fraudulent, deceptive, or manipulative act, for an investment adviser to a pooled investment vehicle to make false or misleading statements or to otherwise defraud investors or prospective investors in that pool.
The other one being the application to hedge funds of the Amendment to Private Offering rules under the Securities Act of 1933. This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The proposed definition would include any person who meets either the net worth test or income test, or owns at least $2.5 million in investments.
The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws. Comments are due 60 days after publication in the Federal Register.
Germany to Determine if Hedge Funds are a "Systemic Risk"
Germany's Deputy Finance Minister Thomas Mirow held a briefing with reporters on Germany's upcoming presidency of the Group of Eight in 2007, the G8 are the top 8 major industrialized countries, and Mirow plans to examine next year whether hedge funds pose systemic risks.
Mirow said hedge funds were "insufficiently transparent" and the industry had already seen one big hedge fund fail although with few market repercussions. He said industrial nations would try and coordinate efforts to reduce risks posed from hedge funds by promoting more transparency but not necessarily through regulations.
He said, "All over the world, people who are in charge of the stability of the international financial system are dealing with the problem,....There is a sufficient amount of experts saying we should have a closer look at it so to prevent a possible crisis," he added.
"What we would like to know is are there systemic risks, yes or no, and if so, what could we do to deal with it in a reasonable manner," he said.
Mirow's comment came as the U.S. Securities and Exchange Commission prepared to vote on a proposal on Wednesday to raise the limit investors can invest in hedge funds to $2.5 million from $1 million set in 1982.
The SEC's proposed rule, if adopted, would shut the door on a lot of the just-barely wealthy who have been piling into hedge funds lately, although one market analyst said it would likely not affect larger funds with big clients.
U.S. Treasury Secretary Henry Paulson has also weighed in on the issue on December 8 and said it was important to make sure hedge fund liquidity and borrowing were closely monitored, but said they were making a helpful contribution to financial markets.
Mirow said hedge funds were "insufficiently transparent" and the industry had already seen one big hedge fund fail although with few market repercussions. He said industrial nations would try and coordinate efforts to reduce risks posed from hedge funds by promoting more transparency but not necessarily through regulations.
He said, "All over the world, people who are in charge of the stability of the international financial system are dealing with the problem,....There is a sufficient amount of experts saying we should have a closer look at it so to prevent a possible crisis," he added.
"What we would like to know is are there systemic risks, yes or no, and if so, what could we do to deal with it in a reasonable manner," he said.
Mirow's comment came as the U.S. Securities and Exchange Commission prepared to vote on a proposal on Wednesday to raise the limit investors can invest in hedge funds to $2.5 million from $1 million set in 1982.
The SEC's proposed rule, if adopted, would shut the door on a lot of the just-barely wealthy who have been piling into hedge funds lately, although one market analyst said it would likely not affect larger funds with big clients.
U.S. Treasury Secretary Henry Paulson has also weighed in on the issue on December 8 and said it was important to make sure hedge fund liquidity and borrowing were closely monitored, but said they were making a helpful contribution to financial markets.
Morgan Stanley Gives Record Bonuses
Controversial "Mack the Knife" CEO, John Mack was recently cleared by the SEC after investigations into accusations of hedge fund insider trading. Now he has received a record bonus of $40 million as chief executive officer of Morgan Stanley.
Mack, son of Lebanese immigrants, was given $36.2 million in stock, and about $4 million in options to buy Morgan Stanley shares, the company said in a filing with the U.S. Securities and Exchange Commission. The firm also granted more than $57 million in bonuses for seven other top executives.
The bonus is 44% more than Morgan Stanley gave him last year, the previous record was the $38.3 million bonus Henry Paulson received in 2005 as CEO of Goldman Sachs Group Inc. Shares of Morgan Stanley, the second-biggest U.S. securities firm by market value, are having their best year since 2003 after Mack put the firm on course for record earnings.
Mack, who's also Morgan Stanley's chairman, received the 2006 bonus in stock and options, according to the filing. Last year, Mack declined the $28 million bonus he was offered because he had worked at Morgan Stanley for only five months. He accepted a pro-rata payout of $11.5 million in stock and also received a $337,534 salary.
Since Mack joined, Morgan Stanley has fired more than 1,000 under performing brokers, made acquisitions to bolster the firms energy, fixed-income and hedge fund businesses and created new incentives to keep top-producing employees. Morgan Stanley has surpassed analysts' profit estimates by at least 20% for the past four quarters.
Mack, son of Lebanese immigrants, was given $36.2 million in stock, and about $4 million in options to buy Morgan Stanley shares, the company said in a filing with the U.S. Securities and Exchange Commission. The firm also granted more than $57 million in bonuses for seven other top executives.
The bonus is 44% more than Morgan Stanley gave him last year, the previous record was the $38.3 million bonus Henry Paulson received in 2005 as CEO of Goldman Sachs Group Inc. Shares of Morgan Stanley, the second-biggest U.S. securities firm by market value, are having their best year since 2003 after Mack put the firm on course for record earnings.
Mack, who's also Morgan Stanley's chairman, received the 2006 bonus in stock and options, according to the filing. Last year, Mack declined the $28 million bonus he was offered because he had worked at Morgan Stanley for only five months. He accepted a pro-rata payout of $11.5 million in stock and also received a $337,534 salary.
Since Mack joined, Morgan Stanley has fired more than 1,000 under performing brokers, made acquisitions to bolster the firms energy, fixed-income and hedge fund businesses and created new incentives to keep top-producing employees. Morgan Stanley has surpassed analysts' profit estimates by at least 20% for the past four quarters.
14 Dec 2006
Ritchie sells Hedge Fund to Refund Investors
Ritchie Capital Management Ltd. has "decided to terminate the restructuring and effect an orderly disposition of the assets,'' of its flagship hedge fund, the Multistrategy Global Fund.
After consulting with investors, an email was sent to Ritchie's clients revealing their negotiations with an undisclosed buyer for the assets of the hedge fund, and the plan to return the cash to investors. Ritchie Capital has been struggling the past two years with returns that were below average, the fund suffered last year from losing energy bets.
Thane Ritchie, the founder of the company, had previously planned to refund 80% of clients' money over the next 2 1/2 years and keep the fund open for at least three years. The fund, which invests in everything from bonds to energy, lost more than 2% through August from the start of 2005. That compared with an average gain of 14% for competing funds, according to data compiled by Hedge Fund Research Inc. in Chicago.
The sale does not include the mostly private-equity investments that the firm separated into a so-called side pocket last year. Those holdings accounted for about 20% of the fund. The deal would be structured so that Ritchie Capital will continue to manage the assets, Doug Rothschild, the firm's chief administrative officer, said in an interview with Bloomberg. Based in Geneva, Illinois, Richie capital oversees about $2.8 billion including borrowed money.
After consulting with investors, an email was sent to Ritchie's clients revealing their negotiations with an undisclosed buyer for the assets of the hedge fund, and the plan to return the cash to investors. Ritchie Capital has been struggling the past two years with returns that were below average, the fund suffered last year from losing energy bets.
Thane Ritchie, the founder of the company, had previously planned to refund 80% of clients' money over the next 2 1/2 years and keep the fund open for at least three years. The fund, which invests in everything from bonds to energy, lost more than 2% through August from the start of 2005. That compared with an average gain of 14% for competing funds, according to data compiled by Hedge Fund Research Inc. in Chicago.
The sale does not include the mostly private-equity investments that the firm separated into a so-called side pocket last year. Those holdings accounted for about 20% of the fund. The deal would be structured so that Ritchie Capital will continue to manage the assets, Doug Rothschild, the firm's chief administrative officer, said in an interview with Bloomberg. Based in Geneva, Illinois, Richie capital oversees about $2.8 billion including borrowed money.
12 Dec 2006
Hedge Fund Averages Up this year
An index of managers compiled by Hedge Fund Research climbed 2.45% in November, leaving it up 11.69% this year. Five of the six hedge-fund strategy indexes run by Dow Jones also rose last month.
Hedge funds also outperformed the benchmark Standard & Poor's 500 stock market index in November for the first time since May as managers benefited from a falling U.S. dollar, sliding bond yields and a rebound in energy prices.
Managers tracked by Hedgefund.net returned 2.18% on average last month, compared to 1.65% for the S&P 500, leaving them up 10.65% so far this year.
A rebound in energy prices also helped hedge funds focused on that sector. Energy funds tracked by Hedge Fund Research gained 4.41% in November, leaving them up 16.59% so far this year.
Hedge funds also outperformed the benchmark Standard & Poor's 500 stock market index in November for the first time since May as managers benefited from a falling U.S. dollar, sliding bond yields and a rebound in energy prices.
Managers tracked by Hedgefund.net returned 2.18% on average last month, compared to 1.65% for the S&P 500, leaving them up 10.65% so far this year.
A rebound in energy prices also helped hedge funds focused on that sector. Energy funds tracked by Hedge Fund Research gained 4.41% in November, leaving them up 16.59% so far this year.
Hedge Funds and the Middle East
The Middle East accounted for 8%, or $28.9bn, of the global hedge fund market last year. According to a new Bank of New York study, hedge funds will draw a forecast $140.3bn in investments from the Middle East by 2010, accounting for 15% invested globally. Institutional investors provide 40% of the global market, which will increase to 65% by 2010, the study said.
The report by the Bank of New York and Casey, Quirk and Associates LLC, entitled “Institutional Demand for Hedge Funds 2: A Global Perspective”, also estimates that by 2010 nearly 25% of institutional investors will have investments in hedge funds, up from 15% today. It estimates institutional investors will account for more than 50% of flows into hedge funds through 2010 compared to 30% today.
The forecast demand for hedge funds is set to triple to $1 trillion by 2010, up from $360 billion today, as investors continue to embrace alternative investments, the report shows.
The report by the Bank of New York and Casey, Quirk and Associates LLC, entitled “Institutional Demand for Hedge Funds 2: A Global Perspective”, also estimates that by 2010 nearly 25% of institutional investors will have investments in hedge funds, up from 15% today. It estimates institutional investors will account for more than 50% of flows into hedge funds through 2010 compared to 30% today.
The forecast demand for hedge funds is set to triple to $1 trillion by 2010, up from $360 billion today, as investors continue to embrace alternative investments, the report shows.
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