U.S. District Judge Kenneth Ryskamp in West Palm Beach ruled that John Kim, 38, head portfolio manager of collapsed West Palm Beach hedge fund firm KL Group, was in contempt of court for allegedly defying an asset freeze by spending money that is to be returned to investors.
Ryskamp cited Kim's use of $384,658 from the sale of a home in South Korea, and $110,000 from selling his wife's Mercedes and his Porsche 911. Investigators say the hedge fund took in more than $200 million from about 230 investors from 1999 to February 2005, when SEC examiners raided KL's luxurious offices overlooking Palm Beach.
KL Group closed March 1 after the SEC and FBI spent two days examining the firm's offices at the Esperante building in downtown West Palm Beach. An investigation by the SEC and court-appointed receiver Guy Lewis, a former U.S. Attorney for South Florida, indicates a shortfall of at least $200 million and perhaps as much as $300 million in KL Group's six hedge funds.
SEC records do not show any Florida hedge fund failures with losses larger than KL Group. An undetermined number of South Floridians were among the investors in the KL funds.
29 Nov 2006
Hedge Funds and Artificial Intelligence
Investment firms have increasingly begun exploring mathematics to it fullest, as arbitrage opportunities disappear so quickly now, neural networks have emerged that can consider thousands of scenarios at once.
Ray Kurzweil, an inventor and new hedge fund manager, said at a conference sponsored earlier this month by the Capital Group Companies, "Artificial intelligence is becoming so deeply integrated into our economic ecostructure that some day computers will exceed human intelligence......Machines can observe billions of market transactions to see patterns we could never see."
Microsoft executive and chairman of the Nasdaq stock market, Michael Brown, is an investor in Kurzweil's new hedge fund, FatKat, and Bill Gates once described him as "the best person I know at predicting the future of artificial intelligence."
Complicated stock-picking methods are nothing new. For decades, Wall Street firms and hedge funds like D.E. Shaw have snapped up people with math and engineering doctorates, the so-called quants, and assigned them to find hidden market patterns. When these analysts discover subtle relationships, like similarities in the price movements of Microsoft and IBM, investors seek profits by buying one stock and selling the other when their prices diverge, betting that historical patterns will eventually push them back into synchronicity.
"Five years ago it would have taken $500,000 and 12 people to do what today takes a few computers and co-workers," said Louis Morgan, managing director of HG Trading, a three-person hedge fund in Wisconsin. "I'm executing 1,500 to 2,000 trades a day and monitoring 1,500 pairs of stocks. My software can automatically execute a trade within 20 milliseconds - five times faster than it would take for my finger to hit the buy button."
Orhan Karaali, a computer scientist and director at the $1.7 billion hedge fund Advanced Investment Partners said "A machine that can generate complicated rules a person would never have thought of, and that can learn from past mistakes is a powerful tool."
The Apama Algorithmic Trading Platform has made it possible for day traders to build complicated trading algorithms almost as easily as they drag an icon across a digital desktop. Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million.
Ray Kurzweil, an inventor and new hedge fund manager, said at a conference sponsored earlier this month by the Capital Group Companies, "Artificial intelligence is becoming so deeply integrated into our economic ecostructure that some day computers will exceed human intelligence......Machines can observe billions of market transactions to see patterns we could never see."
Microsoft executive and chairman of the Nasdaq stock market, Michael Brown, is an investor in Kurzweil's new hedge fund, FatKat, and Bill Gates once described him as "the best person I know at predicting the future of artificial intelligence."
Complicated stock-picking methods are nothing new. For decades, Wall Street firms and hedge funds like D.E. Shaw have snapped up people with math and engineering doctorates, the so-called quants, and assigned them to find hidden market patterns. When these analysts discover subtle relationships, like similarities in the price movements of Microsoft and IBM, investors seek profits by buying one stock and selling the other when their prices diverge, betting that historical patterns will eventually push them back into synchronicity.
"Five years ago it would have taken $500,000 and 12 people to do what today takes a few computers and co-workers," said Louis Morgan, managing director of HG Trading, a three-person hedge fund in Wisconsin. "I'm executing 1,500 to 2,000 trades a day and monitoring 1,500 pairs of stocks. My software can automatically execute a trade within 20 milliseconds - five times faster than it would take for my finger to hit the buy button."
Orhan Karaali, a computer scientist and director at the $1.7 billion hedge fund Advanced Investment Partners said "A machine that can generate complicated rules a person would never have thought of, and that can learn from past mistakes is a powerful tool."
The Apama Algorithmic Trading Platform has made it possible for day traders to build complicated trading algorithms almost as easily as they drag an icon across a digital desktop. Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million.
28 Nov 2006
Hedge Funds and Film Companies
Hedge fund managers are beginning to see film financing as a high return sector that is on the rise, the global audio visual sector is expected to be worth $1.3 trillion by 2008 and is not correlated to returns in the stock, bond or commodities markets.
Hedge fund investors are developing a trend of financing film producers with a proven record of success directly. In dealing with the producer, the investors avoid the expensive and time consuming hassle of working through a major studio production agency.
Mark DiSalle, CEO of BioPassword, now has plans to launch his own hedge fund, Colosseum pictures. BioPassword is an Issaquah company that has developed software to protect computer passwords based on how users type. DiSalle bought the BioPassword technology for $500,000 in a bankruptcy sale three years ago, he said its roots can be traced to Morse code operators in World War II who figured out how to determine message senders based upon tapping patterns. BioPassword has already acquired over $25 million in venture capital and strategic investments.
Some major studios are also actively looking to outside financing sources to back independently produced films. Outside financing reduces the studio’s risk, reduces the amount of cash they have tied up in projects, and still allows them to obtain product for distribution in their existing pipeline.
Other hedge funds investing in film include Mark Cuban, entrepreneur and owner of the Dallas Mavericks, and eBay founder Jeff Skoll, each have a fledgling film company. Billionaire Phillip Anschutz is financing big budget films, David Sacks, a founder of PayPal, financed "Thank You for Smoking," for $7.5 million, and it has worldwide gross of over $27 million. Bob Yari, who made millions in real estate development, is backing the production of numerous films. Bill Pohlad, a multi-millionaire whose family owns the Minnesota Timberwolves, made "Brokeback Mountain" for $14 million and it has grossed $184 million worldwide. A recent $220 million deal with an individual producer included investors such as J.P. Morgan, D.E. Shaw, and GE Capital. George Soros also bought the DreamWorks library in a deal that valued the 59 film library portfolio at $900 million, later releasing all of them.
Hedge fund investors are developing a trend of financing film producers with a proven record of success directly. In dealing with the producer, the investors avoid the expensive and time consuming hassle of working through a major studio production agency.
Mark DiSalle, CEO of BioPassword, now has plans to launch his own hedge fund, Colosseum pictures. BioPassword is an Issaquah company that has developed software to protect computer passwords based on how users type. DiSalle bought the BioPassword technology for $500,000 in a bankruptcy sale three years ago, he said its roots can be traced to Morse code operators in World War II who figured out how to determine message senders based upon tapping patterns. BioPassword has already acquired over $25 million in venture capital and strategic investments.
Some major studios are also actively looking to outside financing sources to back independently produced films. Outside financing reduces the studio’s risk, reduces the amount of cash they have tied up in projects, and still allows them to obtain product for distribution in their existing pipeline.
Other hedge funds investing in film include Mark Cuban, entrepreneur and owner of the Dallas Mavericks, and eBay founder Jeff Skoll, each have a fledgling film company. Billionaire Phillip Anschutz is financing big budget films, David Sacks, a founder of PayPal, financed "Thank You for Smoking," for $7.5 million, and it has worldwide gross of over $27 million. Bob Yari, who made millions in real estate development, is backing the production of numerous films. Bill Pohlad, a multi-millionaire whose family owns the Minnesota Timberwolves, made "Brokeback Mountain" for $14 million and it has grossed $184 million worldwide. A recent $220 million deal with an individual producer included investors such as J.P. Morgan, D.E. Shaw, and GE Capital. George Soros also bought the DreamWorks library in a deal that valued the 59 film library portfolio at $900 million, later releasing all of them.
27 Nov 2006
Investec-Rowland-Blackfish Hedge Fund
The Rowland family and Investec have both invested $20m in Blackfish-Investec Resources Special Sitaution Fund and plan to raise a further $250m from other institutions and high net worth families. The fund plans to buy or sell underlying commodities to hedge equity investments. The pair have teamed up after the big success in revamping Western Goldfields earlier this year.
The two companies, having pooled their skills, expertise and resources plan to establish an event driven special situations hedge fund with a long strategic bias and opportunistic shorting. The fund will in the main target undervalued companies in the natural resources sector as well as seek to profit from shorting overvalued situations or use short positions as a hedge.
The financial and infrastructural support will be carried out by Investec Bank, contributing seed capital, personnel, systems and marketing support. The hedge fund offers a differentiated deal flow, and an investment philosophy to achieve returns throughout the commodity cycle.
The hedge fund is to be led by Martyn Konig and George Rogers, the Fund Advisors are supported by the Commodities and Resource Finance team of Investec, Blackfish Capital Managements Natural Resource team and the Fund's Advisory Panel.
The two companies, having pooled their skills, expertise and resources plan to establish an event driven special situations hedge fund with a long strategic bias and opportunistic shorting. The fund will in the main target undervalued companies in the natural resources sector as well as seek to profit from shorting overvalued situations or use short positions as a hedge.
The financial and infrastructural support will be carried out by Investec Bank, contributing seed capital, personnel, systems and marketing support. The hedge fund offers a differentiated deal flow, and an investment philosophy to achieve returns throughout the commodity cycle.
The hedge fund is to be led by Martyn Konig and George Rogers, the Fund Advisors are supported by the Commodities and Resource Finance team of Investec, Blackfish Capital Managements Natural Resource team and the Fund's Advisory Panel.
Update-Ashburton Launches Chindia Fund
The Jersey based asset management firm Ashburton has launched a new fund which invests in both China and India, the Chindia Equity Fund plans to provide access to proven expertise in these rapidly-expanding economies.
Economic forecasts expect China to grow at a rate of 8% to 10% a year, while a growth rate of 8% per year is projected for India, combined, these two countries will be the second largest economic power in the next 15 years worth approximately US$16trillion, according to Ashburton.
The Chindia Equity fund, managed by Jonathan Schiessl has a minimum investment of £10,000. An initial fee of 5% is charged as well as a 1.75% annual management fee. Schissel has had responsibility for the Asia-Pacific region for the past six years at Asbhurton.
Schiessl said: “This growth will be primarily driven by demographics as the working population of both countries is expected to increase by 250m by 2020. Furthermore, reliance on growth from exports is decreasing in both China and India, and consumer demand is growing exponentially as a result of an expanding generation with much higher aspirations. Combined, these two countries will be the second largest economic power in the next 15 years and the opportunities this offers to investors is tremendous."
The Ashburton Chindia Equity Fund is open for investment from 10 November 2006 and launching on 1 December 2006, which allows clients to invest in these fast growing regions. Ashburton has successfully obtained the all important Foreign Institutional Investor (FII) status in India and established links in China that enable the fund to directly access these markets.
Economic forecasts expect China to grow at a rate of 8% to 10% a year, while a growth rate of 8% per year is projected for India, combined, these two countries will be the second largest economic power in the next 15 years worth approximately US$16trillion, according to Ashburton.
The Chindia Equity fund, managed by Jonathan Schiessl has a minimum investment of £10,000. An initial fee of 5% is charged as well as a 1.75% annual management fee. Schissel has had responsibility for the Asia-Pacific region for the past six years at Asbhurton.
Schiessl said: “This growth will be primarily driven by demographics as the working population of both countries is expected to increase by 250m by 2020. Furthermore, reliance on growth from exports is decreasing in both China and India, and consumer demand is growing exponentially as a result of an expanding generation with much higher aspirations. Combined, these two countries will be the second largest economic power in the next 15 years and the opportunities this offers to investors is tremendous."
The Ashburton Chindia Equity Fund is open for investment from 10 November 2006 and launching on 1 December 2006, which allows clients to invest in these fast growing regions. Ashburton has successfully obtained the all important Foreign Institutional Investor (FII) status in India and established links in China that enable the fund to directly access these markets.
24 Nov 2006
India as Asia's top Performer
India's benchmark BSE index is up nearly 45% this year, making it Asia-Pacific's best performer. It rose 42 percent in 2005, 13 percent in 2004 and 73 percent in 2003 as investors poured money into stocks to ride the rapid expansion of Asia's fourth-largest economy.
Indian software, banking and infrastructure-related stocks were still attractive investments, but the runaway rises of recent years can no longer be expected, the head of fund management at HSBC Asset Management (India) said. Mihir Vora, who oversees of 33 billion rupees of equity investments, said on Tuesday his funds were underweight on stocks in the commodities, energy and personal care sectors.
"Returns still will resemble corporate profitability growth of 15-20% compounded for next few years,...We have gone up very significantly in a short period of time," he said, adding other risks included a renewed rise in oil prices, interest rates and a change in sentiment on emerging markets.
State-run banks looked good value and, in a time of rapid growth in credit demand, their extensive branch networks were an advantage in raising term deposits that could be lent out.
"Their valuations are amongst the cheapest in the sector and the market. They are undervalued and the volatility in earnings has gone," Vora said.
Government and private investment to upgrade infrastructure could ensure steady earnings growth for companies in the engineering and construction sectors, and demand for outsourcing of software services would continue to be robust, he said.
Indian software, banking and infrastructure-related stocks were still attractive investments, but the runaway rises of recent years can no longer be expected, the head of fund management at HSBC Asset Management (India) said. Mihir Vora, who oversees of 33 billion rupees of equity investments, said on Tuesday his funds were underweight on stocks in the commodities, energy and personal care sectors.
"Returns still will resemble corporate profitability growth of 15-20% compounded for next few years,...We have gone up very significantly in a short period of time," he said, adding other risks included a renewed rise in oil prices, interest rates and a change in sentiment on emerging markets.
State-run banks looked good value and, in a time of rapid growth in credit demand, their extensive branch networks were an advantage in raising term deposits that could be lent out.
"Their valuations are amongst the cheapest in the sector and the market. They are undervalued and the volatility in earnings has gone," Vora said.
Government and private investment to upgrade infrastructure could ensure steady earnings growth for companies in the engineering and construction sectors, and demand for outsourcing of software services would continue to be robust, he said.
23 Nov 2006
Hedge Fund Blogger Celebrities
Tyler Cowen, an economics professor at the George Mason University started a blog three years ago with colleague Alex Tabarrok. The blog, called Marginal Revolution, has had more than 6 million visitors, Cowen has become an economics celebrity. Since he began writing about economics and hedge funds in "understandable language", people are approaching him on the street and, "I'm invited to give a speech or something at least once a week," Cowen said.
The readers find commentary about regulating hedge funds combined with a section featuring odd inventions such as a fan that attaches to chopsticks and cools noodles as they're being eaten? The postings are injecting life into the field often called the dismal science.
He isn't the only economist who has found an audience on the Web. Nobel laureate Gary S. Becker and former Harvard President Lawrence H. Summers are among those who have set up blogs, which are typically part lecture, part journal and part college seminar, with reader participation expected. Becker started a blog two years ago with federal appeals court judge Richard A. Posner.
Gregory Mankiw, a Harvard lecturer and former chairman of President Bush's Council of Economic Advisors, started a blog in the spring to supplement his lectures for the popular course "Social Analysis 10: Principles of Economics." He had been getting queries from students who weren't enrolled in the class and thought the blog was the best way to make information accessible to all. He quickly had 5,000 readers a day.
Econo-fans are responding, Becker figures, because the blogs put important pocketbook issues into understandable language. Whereas former Federal Reserve Chairman Alan Greenspan had "Greenspeak" — the carefully convoluted jargon whose comprehensibility rivaled that of Klingon — the blogs connect economics to daily life.
"Most people are afraid of economics. It seems so technical," Becker said. "But what is surprising is that if you put economics in a simple enough phrase, people are very much interested in it." Most of the economists say their readers aren't students. Cowen describes his fans as "high IQ, possibly nerdy, looking for kicks or for something different."
The readers find commentary about regulating hedge funds combined with a section featuring odd inventions such as a fan that attaches to chopsticks and cools noodles as they're being eaten? The postings are injecting life into the field often called the dismal science.
He isn't the only economist who has found an audience on the Web. Nobel laureate Gary S. Becker and former Harvard President Lawrence H. Summers are among those who have set up blogs, which are typically part lecture, part journal and part college seminar, with reader participation expected. Becker started a blog two years ago with federal appeals court judge Richard A. Posner.
Gregory Mankiw, a Harvard lecturer and former chairman of President Bush's Council of Economic Advisors, started a blog in the spring to supplement his lectures for the popular course "Social Analysis 10: Principles of Economics." He had been getting queries from students who weren't enrolled in the class and thought the blog was the best way to make information accessible to all. He quickly had 5,000 readers a day.
Econo-fans are responding, Becker figures, because the blogs put important pocketbook issues into understandable language. Whereas former Federal Reserve Chairman Alan Greenspan had "Greenspeak" — the carefully convoluted jargon whose comprehensibility rivaled that of Klingon — the blogs connect economics to daily life.
"Most people are afraid of economics. It seems so technical," Becker said. "But what is surprising is that if you put economics in a simple enough phrase, people are very much interested in it." Most of the economists say their readers aren't students. Cowen describes his fans as "high IQ, possibly nerdy, looking for kicks or for something different."
Hedge Fund Regulator Opposes Over-regulation
Hedge fund regulator and Edinburgh's top financial services commissioner Charlie McCreevy said in a statement Tuesday that Europe’s hedge fund managers may shift operations from the continent to less-regulated jurisdictions if the European Union started regulating the investments designed for wealthy clients and institutions.
This is why the 25-nation group made a decision last week to leave scrutiny of the funds at a country level. “If we went too far we could drive the industry out of Europe,” McCreevy said. Hedge funds have attracted attention from regulators and politicians concerned that their growing influence in financial markets may hurt investors.
Earlier this month, International Financial Services London said European managers oversee $401 billion of hedge fund assets under management, about $317 billion of that is managed in London. Criticism of hedge funds in Germany followed a campaign by some managers to oust Deutsche Boerse executives. “There are some people who are philosophically opposed to hedge funds and who would like to have them regulated out of existence,” McCreevy said.
US Senate Finance Committee chairman Charles Grassley requested more scrutiny of the $1.3 trillion industry after the collapse of Amaranth Advisors in September. The Financial Services Authority in the UK said earlier this year it was probing whether the funds treated customers fairly and whether they accurately valued their assets. Former German chancellor Gerhard Schroeder last year sought unified international rules for hedge funds after ordering a three-ministry probe into the funds.
The SEC is probing potential insider trading by hedge funds, while US Treasury Secretary Henry Paulson said on Tuesday his department would “continually assess their actions and impact on the market.”
Amaranth’s collapse was the biggest since Long-Term Capital Management’s 1998 demise. In Europe, rules that can help limit the effects of a fund’s collapse are already in existence, McCreevy said.
This is why the 25-nation group made a decision last week to leave scrutiny of the funds at a country level. “If we went too far we could drive the industry out of Europe,” McCreevy said. Hedge funds have attracted attention from regulators and politicians concerned that their growing influence in financial markets may hurt investors.
Earlier this month, International Financial Services London said European managers oversee $401 billion of hedge fund assets under management, about $317 billion of that is managed in London. Criticism of hedge funds in Germany followed a campaign by some managers to oust Deutsche Boerse executives. “There are some people who are philosophically opposed to hedge funds and who would like to have them regulated out of existence,” McCreevy said.
US Senate Finance Committee chairman Charles Grassley requested more scrutiny of the $1.3 trillion industry after the collapse of Amaranth Advisors in September. The Financial Services Authority in the UK said earlier this year it was probing whether the funds treated customers fairly and whether they accurately valued their assets. Former German chancellor Gerhard Schroeder last year sought unified international rules for hedge funds after ordering a three-ministry probe into the funds.
The SEC is probing potential insider trading by hedge funds, while US Treasury Secretary Henry Paulson said on Tuesday his department would “continually assess their actions and impact on the market.”
Amaranth’s collapse was the biggest since Long-Term Capital Management’s 1998 demise. In Europe, rules that can help limit the effects of a fund’s collapse are already in existence, McCreevy said.
22 Nov 2006
Hedge Fund buys 4 million shares in Pogo Producing
Activist hedge fund Third Point LLC, said in a statement on Tuesday that the company has acquired a 7.2% stake of U.S. oil and gas producer Pogo Producing Co.
In a filing with the Securities and Exchange Commission, the hedge fund said it also bought options to purchase 200,000 additional shares in addition to the 4 million shares of Pogo common stock.
Third Point, which has about $4 billion in assets under management, holds stakes in several publicly traded companies. The hedge fund is New York based and is known for taking activist positions. The fund, run by Chief Investment Officer Danies Loeb, has frequently been a loud critic of the companies in which it invests.
In the filing with the SEC, Third Point said it believes Pogo "represents an attractive investment." The fund also said it "may suggest or take a position with respect to potential changes in the operations, strategy, management or capital structure of such companies as a means of enhancing shareholder value."
Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 4,800,000 gross leasehold acres in major oil and gas provinces in North America, 6,354,000 acres in New Zealand and 1,480,000 acres in Vietnam. Pogo common stock is listed on the New York Stock Exchange under the symbol “PPP.”
In a filing with the Securities and Exchange Commission, the hedge fund said it also bought options to purchase 200,000 additional shares in addition to the 4 million shares of Pogo common stock.
Third Point, which has about $4 billion in assets under management, holds stakes in several publicly traded companies. The hedge fund is New York based and is known for taking activist positions. The fund, run by Chief Investment Officer Danies Loeb, has frequently been a loud critic of the companies in which it invests.
In the filing with the SEC, Third Point said it believes Pogo "represents an attractive investment." The fund also said it "may suggest or take a position with respect to potential changes in the operations, strategy, management or capital structure of such companies as a means of enhancing shareholder value."
Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 4,800,000 gross leasehold acres in major oil and gas provinces in North America, 6,354,000 acres in New Zealand and 1,480,000 acres in Vietnam. Pogo common stock is listed on the New York Stock Exchange under the symbol “PPP.”
21 Nov 2006
Rare Coin Dealer faces 18 years
The guilty party in the 2005 loss of up to $13 million in a rare-coin fund managed by Maumee coin dealer Thomas W. Noe, has played out with Noe receiving the maximum sentence for his involvement in the scandal.
Judge Thomas J. Osowik sentenced Noe to 18 years in prison for for stealing state money from the Ohio Bureau Compensation fund. The judge also has scheduled a hearing to determine what restitution Noe must pay. Prosecutors are seeking at least $13.7 million, the amount they say Noe stole from the coin funds. Osowik also fined Noe $139,000, plus the nearly $3 million cost of the investigation.
Noe began stealing and spending state money seven years ago in order to buy yachts, positions on state boards, a multimillion dollar house in the Florida Keys and other luxuries in order to present himself as having a "bottomless cup of wealth and luxury", while managing the $50 million rare-coin investment for the state.
Osowik also ordered that Noe begin serving the state sentence after he finishes a 27-month prison term on an unrelated federal conviction for illegally funneling $45,400 to President Bush’s reelection campaign. Ohio Democrats used the scandals Noe sparked to help reclaim the governor’s office and other statewide posts in the Nov. 7 election. "Tom Noe violated the public trust by using $50 million as his own ATM, living a lavish lifestyle at the expense of real people whose lives depended on agency monies."
The loss of up to $13 million in the rare-coin fund managed by the Maumee coin dealer was made public on the heels of the unrelated MDL Capital loss of $215 million from what was a $355 million investment. The hedge fund founded by Aliquippa entrepreneur Mark D. Lay, also lost $215 million last year in a case involving the activities of the Ohio Bureau of Workers’ Compensation investment fund.
MDL Capital also manages $500 million for the Pennsylvania State Workers Insurance Fund, and $91 million of the nearly $27 billion portfolio of the Pennsylvania State Employees Retirement System. MDL Capital is one of 13 fixed-income portfolio managers. Since it started in December 2000, the annualized return on its portfolio has been 4.5 percent.
Judge Thomas J. Osowik sentenced Noe to 18 years in prison for for stealing state money from the Ohio Bureau Compensation fund. The judge also has scheduled a hearing to determine what restitution Noe must pay. Prosecutors are seeking at least $13.7 million, the amount they say Noe stole from the coin funds. Osowik also fined Noe $139,000, plus the nearly $3 million cost of the investigation.
Noe began stealing and spending state money seven years ago in order to buy yachts, positions on state boards, a multimillion dollar house in the Florida Keys and other luxuries in order to present himself as having a "bottomless cup of wealth and luxury", while managing the $50 million rare-coin investment for the state.
Osowik also ordered that Noe begin serving the state sentence after he finishes a 27-month prison term on an unrelated federal conviction for illegally funneling $45,400 to President Bush’s reelection campaign. Ohio Democrats used the scandals Noe sparked to help reclaim the governor’s office and other statewide posts in the Nov. 7 election. "Tom Noe violated the public trust by using $50 million as his own ATM, living a lavish lifestyle at the expense of real people whose lives depended on agency monies."
The loss of up to $13 million in the rare-coin fund managed by the Maumee coin dealer was made public on the heels of the unrelated MDL Capital loss of $215 million from what was a $355 million investment. The hedge fund founded by Aliquippa entrepreneur Mark D. Lay, also lost $215 million last year in a case involving the activities of the Ohio Bureau of Workers’ Compensation investment fund.
MDL Capital also manages $500 million for the Pennsylvania State Workers Insurance Fund, and $91 million of the nearly $27 billion portfolio of the Pennsylvania State Employees Retirement System. MDL Capital is one of 13 fixed-income portfolio managers. Since it started in December 2000, the annualized return on its portfolio has been 4.5 percent.
Hedge Fund Investment possibilities in India, Pakistan and China
Emerging markets are again catching the eye of more foreign firms as an investment destination.
Morgan Stanley sees India's FDI rising to $10 billion, or 1 percent of GDP by 2008, with the flows mostly targeting low capital services and manufacturing for the domestic market, rather than factories for exports like many in China.
Since the start of 2002, the Pakistan market has risen 741%, topping the 297% gain for India's Sensex. Still, Pakistan stocks only trade at about 10.6 times forecast profits, while Indian stocks trade at 20 times earnings. Pakistan, one of the world's hottest emerging markets despite current instability, has an economy that grew by 6.6% in the financial year that ended in June, a rate that the government expects will rise to 7% this year. Liberal rules on foreign investment are luring overseas players, with foreign investors pouring $307 million into the market since July 1.
Pakistan's biggest listed firm, Oil and Gas Development Co., is planning the the $1.4 billion sale of global depository receipts (GDRs) and local shares in December. Money from the Middle East, and increasingly Singapore and elsewhere in East Asia, has been helping drive growth, with infrastructure, energy, financial services and makers of consumer goods such as motorcycles seen as attractive plays.
Last month, MCB Bank raised $150 million in a London GDR issue. Earlier this month, Pakistan Mobile Communications (Pvt.) (Mobilink) attracted nearly $4 billion in orders for its $250 million bond, the country's first corporate offshore bond issue.
The Karachi 100 index is up 12 percent this year on daily turnover that exceeds $400 million, making it more active than markets such as Thailand, Indonesia, and Malaysia.
In China the government wants foreign money to help with an estimated $350 billion worth of projects to build an efficient road network, expand ports and address a woeful power deficit. Michael J. Cannon-Brookes, vice president of business development for China and India at IBM, said to Reuters in Bejing; "In manufacturing you need infrastructure to run your plants, get your goods to market and bring in supplies. That's clearly a strong selling point for China."
Morgan Stanley sees India's FDI rising to $10 billion, or 1 percent of GDP by 2008, with the flows mostly targeting low capital services and manufacturing for the domestic market, rather than factories for exports like many in China.
Since the start of 2002, the Pakistan market has risen 741%, topping the 297% gain for India's Sensex. Still, Pakistan stocks only trade at about 10.6 times forecast profits, while Indian stocks trade at 20 times earnings. Pakistan, one of the world's hottest emerging markets despite current instability, has an economy that grew by 6.6% in the financial year that ended in June, a rate that the government expects will rise to 7% this year. Liberal rules on foreign investment are luring overseas players, with foreign investors pouring $307 million into the market since July 1.
Pakistan's biggest listed firm, Oil and Gas Development Co., is planning the the $1.4 billion sale of global depository receipts (GDRs) and local shares in December. Money from the Middle East, and increasingly Singapore and elsewhere in East Asia, has been helping drive growth, with infrastructure, energy, financial services and makers of consumer goods such as motorcycles seen as attractive plays.
Last month, MCB Bank raised $150 million in a London GDR issue. Earlier this month, Pakistan Mobile Communications (Pvt.) (Mobilink) attracted nearly $4 billion in orders for its $250 million bond, the country's first corporate offshore bond issue.
The Karachi 100 index is up 12 percent this year on daily turnover that exceeds $400 million, making it more active than markets such as Thailand, Indonesia, and Malaysia.
In China the government wants foreign money to help with an estimated $350 billion worth of projects to build an efficient road network, expand ports and address a woeful power deficit. Michael J. Cannon-Brookes, vice president of business development for China and India at IBM, said to Reuters in Bejing; "In manufacturing you need infrastructure to run your plants, get your goods to market and bring in supplies. That's clearly a strong selling point for China."
Hedge Fund Mergers show Substantial Profits
Atticus, a New York-based hedge fund that manages more than $12 billion has been having talks with Freeport-McMoRan Copper & Gold Inc. Freeport has already undertaken the world's biggest mining takeover, valued at about $26 billion when the mining company acquired hedge-fund Phelps Dodge Corp.
Phelps Dodge Corp manager Timothy R. Barakett saw his investment jump by about $517 million, capping a 13-month campaign to find a buyer for the mining company and get more of its cash. Shares of Phelps Dodge are trading at below Freeport's offer price, which may mean investors don't expect a higher bid, analysts said.
Atticus Capital is the largest Phelps Dodge shareholder, with about a 10% stake.
Barakett had been seeking a buyer for the copper producer since he opposed a proposal by Phelps Dodge CEO J. Steven Whisler to acquire two Canadian nickel producers for $40 billion. Before that, Barakett successfully pushed for the company to give more of its $2.5 billion cash pile to investors, after a rally in metals prices sent profit to a record.
"Some of their efforts have done shareholders of Phelps Dodge a great service," said John Rosenberg, who helps manage $900 million including Phelps Dodge shares at Geneve Capital Group in Stamford, Conn. "There's a place in the market for activism."
According to financial research firm Dealogic, the value of global mergers and acquisitions for 2006 reached a record $3.368 trillion, beating the previous high set in 2000 of $3.332 trillion. Private equity firms such as hedge funds accounted for 22% of total global M&A volume in the first nine months of the year, hitting a new record of $570.1 billion in deals.
Phelps Dodge Corp manager Timothy R. Barakett saw his investment jump by about $517 million, capping a 13-month campaign to find a buyer for the mining company and get more of its cash. Shares of Phelps Dodge are trading at below Freeport's offer price, which may mean investors don't expect a higher bid, analysts said.
Atticus Capital is the largest Phelps Dodge shareholder, with about a 10% stake.
Barakett had been seeking a buyer for the copper producer since he opposed a proposal by Phelps Dodge CEO J. Steven Whisler to acquire two Canadian nickel producers for $40 billion. Before that, Barakett successfully pushed for the company to give more of its $2.5 billion cash pile to investors, after a rally in metals prices sent profit to a record.
"Some of their efforts have done shareholders of Phelps Dodge a great service," said John Rosenberg, who helps manage $900 million including Phelps Dodge shares at Geneve Capital Group in Stamford, Conn. "There's a place in the market for activism."
According to financial research firm Dealogic, the value of global mergers and acquisitions for 2006 reached a record $3.368 trillion, beating the previous high set in 2000 of $3.332 trillion. Private equity firms such as hedge funds accounted for 22% of total global M&A volume in the first nine months of the year, hitting a new record of $570.1 billion in deals.
20 Nov 2006
Investcorp to offer Global Depositary Reciepts
Investcorp, one of the leading institutional investors in hedge funds with approximately $9.8 billion under management has said their bank has decided to proceed with an offer of ordinary shares in the form of Global Depositary Receipts (GDRs).
The new GDRs application for admittance for trading on the London Stock Exchange will be listed under the ticker symbol IVC.
Nemir A. Kirdar, Investcorp’s president and chief executive officer, said: “This offering and our GDR listing on London’s main market will help us scale our platform to capture the accelerating growth in alternative investments in the Gulf, while also further enhancing our international presence through improved brand awareness.”
The program offers clients a selection of funds of hedge funds with varying risk/return profiles. These are invested across different strategies through approximately 40 hedge fund managers. Investcorp launched the world’s first collateralized debt structure backed by hedge funds.
Investcorp specializes in four lines of business, hedge funds, private equity and venture capital in North America and Western Europe and real estate in the United States. Its investment products are offered to institutional and individual clients, primarily in the Persian Gulf.
Investcorp also plans to expand existing product lines in the fiscal year 2007 by launching a private equity fund targeted at North American and European institutional investors, and a real estate fund dedicated to mezzanine investments.
40% of Investcorp is owned by more than half of its total staff. A further 40% is owned by a group of the Firm’s most prominent clients, some of whom are also Directors of the Firm. The balance of the stock is held by public shareholders through Investcorp’s listing on the Bahrain Stock Exchange.
The new GDRs application for admittance for trading on the London Stock Exchange will be listed under the ticker symbol IVC.
Nemir A. Kirdar, Investcorp’s president and chief executive officer, said: “This offering and our GDR listing on London’s main market will help us scale our platform to capture the accelerating growth in alternative investments in the Gulf, while also further enhancing our international presence through improved brand awareness.”
The program offers clients a selection of funds of hedge funds with varying risk/return profiles. These are invested across different strategies through approximately 40 hedge fund managers. Investcorp launched the world’s first collateralized debt structure backed by hedge funds.
Investcorp specializes in four lines of business, hedge funds, private equity and venture capital in North America and Western Europe and real estate in the United States. Its investment products are offered to institutional and individual clients, primarily in the Persian Gulf.
Investcorp also plans to expand existing product lines in the fiscal year 2007 by launching a private equity fund targeted at North American and European institutional investors, and a real estate fund dedicated to mezzanine investments.
40% of Investcorp is owned by more than half of its total staff. A further 40% is owned by a group of the Firm’s most prominent clients, some of whom are also Directors of the Firm. The balance of the stock is held by public shareholders through Investcorp’s listing on the Bahrain Stock Exchange.
17 Nov 2006
Sears as a Hedge Fund?
The prominent investor, Edward Lampert, who runs his own hedge fund in Greenwich, Conn., and is chairman of Hoffman Estates-based Sears, has has turned the largest U.S. department-store chain into an investment vehicle.
Cash holdings have doubled in the past year, and Lampert says he’s looking for acquisitions, perhaps outside of retailing. The investors in Sears Holdings Corp. are getting their payoff even as sales are falling. In the reported third quarter profit, more than half, $101 million of $196 million, came from investments as sales fell. Sears warned in its most recent earnings report, “These investments are highly concentrated and involve substantial risks.”
“At the end of the day, what you’re going to have is a publicly traded hedge fund” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm.
Lampert has proved adept at investing the company’s cash in financial assets. Sears had $2.1 billion in cash on hand at the end of the third quarter ended Oct. 28, almost double the $1.2 billion from a year earlier and down from $4.4 billion at the end of January.
Investors flocked to Sears after Lampert acquired the Hoffman Estates, Illinois-based chain for $12.3 billion in March 2005, combining it with his Kmart Holding Corp. Anticipating cost cuts and sell-offs of weaker stores, they sent shares up 35 percent between March 24, 2005, the day shareholders approved the merger, and Nov. 15.
Hedge funds and private equity funds are attracting billions of dollars from private investors giving them unimaginable financial strength in order to make friendly acquisitions. In some cases they use these funds to position themselves, even in a hostile manner, commanding significant stakes in large companies where they perceive the management is not doing a good enough job and that value can be extracted by using shareholders’ rights to push for changes in management.
Cash holdings have doubled in the past year, and Lampert says he’s looking for acquisitions, perhaps outside of retailing. The investors in Sears Holdings Corp. are getting their payoff even as sales are falling. In the reported third quarter profit, more than half, $101 million of $196 million, came from investments as sales fell. Sears warned in its most recent earnings report, “These investments are highly concentrated and involve substantial risks.”
“At the end of the day, what you’re going to have is a publicly traded hedge fund” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm.
Lampert has proved adept at investing the company’s cash in financial assets. Sears had $2.1 billion in cash on hand at the end of the third quarter ended Oct. 28, almost double the $1.2 billion from a year earlier and down from $4.4 billion at the end of January.
Investors flocked to Sears after Lampert acquired the Hoffman Estates, Illinois-based chain for $12.3 billion in March 2005, combining it with his Kmart Holding Corp. Anticipating cost cuts and sell-offs of weaker stores, they sent shares up 35 percent between March 24, 2005, the day shareholders approved the merger, and Nov. 15.
Hedge funds and private equity funds are attracting billions of dollars from private investors giving them unimaginable financial strength in order to make friendly acquisitions. In some cases they use these funds to position themselves, even in a hostile manner, commanding significant stakes in large companies where they perceive the management is not doing a good enough job and that value can be extracted by using shareholders’ rights to push for changes in management.
Hedge Funds Sued by Attorney General
State Attorney General Eliot Spitzer sued Samaritan Asset Management Services Inc, their advisors, Johnson Capital Management Inc, and Edward Owens, a principal at the hedge fund.
The company allegedly engaged in a fraudulent mutual fund market-timing scheme. The defendants secretly “piggy-backed” their trades on the investment accounts of retirement plans. The suit claims that the market timing trades hurt long-term investors and the suit seeks restitution and an order to stop them from carrying out improper trades.
Last month Spitzer also sued the mutual fund manager J. & W. Seligman for the same practice, contending that it owes investors $80 million in compensation for improper market-timing trades. In July, Waddell & Reed Financial Inc., one of the nation’s oldest mutual fund management companies, agreed to pay $50 million to settle Spitzer’s investigation into improper trading.
That was the 19th settlement for Spitzer since he began the mutual fund investigation in 2003. Investors have received $3.4 billion in restitution under the settlements, Spitzer said.
Market timing involves rapid in-and-out trades that can disadvantage ordinary shareholders by diluting the value of their shares. It’s not illegal but it’s prohibited by many funds, as any standard that favors one investor at the expense of another tends to undermine the credibility of the industry.
The company allegedly engaged in a fraudulent mutual fund market-timing scheme. The defendants secretly “piggy-backed” their trades on the investment accounts of retirement plans. The suit claims that the market timing trades hurt long-term investors and the suit seeks restitution and an order to stop them from carrying out improper trades.
Last month Spitzer also sued the mutual fund manager J. & W. Seligman for the same practice, contending that it owes investors $80 million in compensation for improper market-timing trades. In July, Waddell & Reed Financial Inc., one of the nation’s oldest mutual fund management companies, agreed to pay $50 million to settle Spitzer’s investigation into improper trading.
That was the 19th settlement for Spitzer since he began the mutual fund investigation in 2003. Investors have received $3.4 billion in restitution under the settlements, Spitzer said.
Market timing involves rapid in-and-out trades that can disadvantage ordinary shareholders by diluting the value of their shares. It’s not illegal but it’s prohibited by many funds, as any standard that favors one investor at the expense of another tends to undermine the credibility of the industry.
16 Nov 2006
New Frontiers of Risk: The 360° Hedge Fund study
According to a report by the Bank of New York, pension plans and nonprofit organizations worldwide are attracted to hedge funds because of the losses that pension plans suffered in the equity bear market after 2000.
The study, “New Frontiers of Risk: The 360° Risk Manager for Pensions and Nonprofits,” found that while market risk remains the foremost concern for plan sponsors, managers are now spending close to 40% of their risk-related time on operational and political considerations, an increase of nearly 20% from five years ago, and about 80% indicate they will increase the time spent on operational risk over the next five years.
The report predicts that by 2010, institutions will put half of the assets directly into a hedge fund and the other half through a fund-of-fund platform. As institutional clients become more confident about investing in the $1.7 trillion hedge fund industry, these clients will increasingly demand that fund-of-hedge-fund companies give tailor-made advice and consultancy service in order to justify their fees.
The Bank of New York and Casey, Quirk & Associates report predicted that institutional investors like pension plans and insurance firms will hold more than $1 trillion of assets in hedge funds by 2010, up from $360 billion now.
According to the study, several factors are influencing the popularity of hedge funds, including the widespread under funding of pension funds. More than half of the participants categorized their funds as “under-funded”.
“The study shows that investors increasingly recognize the non traditional risk factors associated with the global investment landscape. The challenge for all organizations will be embracing this new 360° view and taking the formal steps necessary for eliminating, transferring or managing critical risks,” said Debra Baker, managing director and head of Global Risk Services for The Bank of New York.
The study found that plan sponsors such as hedge funds can ably evaluate fund-wide allocation decisions, broadly monitor market risks, and tap new asset classes with more security and knowledge than ever before. Working together, hedge funds and industry providers are developing advanced analytics and reporting required to quantify risk level and focus on interventions.
Results were compiled from surveys of more than 75 representatives from leading pension institutions and nonprofit organizations from around the world. It is the latest in a series of studies conducted by The Bank of New York, including ones on institutional demand for hedge funds.
The study, “New Frontiers of Risk: The 360° Risk Manager for Pensions and Nonprofits,” found that while market risk remains the foremost concern for plan sponsors, managers are now spending close to 40% of their risk-related time on operational and political considerations, an increase of nearly 20% from five years ago, and about 80% indicate they will increase the time spent on operational risk over the next five years.
The report predicts that by 2010, institutions will put half of the assets directly into a hedge fund and the other half through a fund-of-fund platform. As institutional clients become more confident about investing in the $1.7 trillion hedge fund industry, these clients will increasingly demand that fund-of-hedge-fund companies give tailor-made advice and consultancy service in order to justify their fees.
The Bank of New York and Casey, Quirk & Associates report predicted that institutional investors like pension plans and insurance firms will hold more than $1 trillion of assets in hedge funds by 2010, up from $360 billion now.
According to the study, several factors are influencing the popularity of hedge funds, including the widespread under funding of pension funds. More than half of the participants categorized their funds as “under-funded”.
“The study shows that investors increasingly recognize the non traditional risk factors associated with the global investment landscape. The challenge for all organizations will be embracing this new 360° view and taking the formal steps necessary for eliminating, transferring or managing critical risks,” said Debra Baker, managing director and head of Global Risk Services for The Bank of New York.
The study found that plan sponsors such as hedge funds can ably evaluate fund-wide allocation decisions, broadly monitor market risks, and tap new asset classes with more security and knowledge than ever before. Working together, hedge funds and industry providers are developing advanced analytics and reporting required to quantify risk level and focus on interventions.
Results were compiled from surveys of more than 75 representatives from leading pension institutions and nonprofit organizations from around the world. It is the latest in a series of studies conducted by The Bank of New York, including ones on institutional demand for hedge funds.
15 Nov 2006
Hedge Fund commitee Object to Dura's Bankruptcy Filing
Hedge funds with large holdings in Dura Automotive Systems Inc.’s $1.7 billion debt are protesting the auto parts maker’s plan to finance its bankruptcy, saying the deal threatens to jeopardize their rights.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
US Hedge Fund to parner with Investcorp
Bahrain-based Investcorp has formed an alliance with US hedge fund manager Silverback Asset Management, a convertible arbitrage-focused hedge fund in Chapel Hill, N.C.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
10 Nov 2006
Man Group Gains Higher than Forecast
Overall gains at Man Group, the world’s largest listed hedge fund, were higher than the company forecast. Sales for the six-month period came in at $10.6 billion, compared with the $10.4 billion forecast in September.
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Women in Hedge Funds
Pomegranate Capital, in a international study by CEO Susan Solovay, found that there are 250 female hedge fund managers worldwide, and wants to open the first fund to invest in hedge funds solely run by women.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
9 Nov 2006
Hedge Funds and Elections
Democrats have said they will differ from Republicans by being tougher watchdogs of corporate wrongdoing and government spending, recomending heightened scrutiny of sectors such as hedge funds, pharmaceuticals and defense spending.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
8 Nov 2006
Indian company Expanding through Hedge Fund Investments
Optical networking vendor Tejas Networks India Ltd. has plans to further expand its operations outside India and into Southeast Asia.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
Average Hedge Fund Returns fall Short
According to the recently released data by Hedge Fund Research Inc., hedge funds returned a global average of 1.98% in October, but managers still failed to keep pace with gains by the Standard & Poor’s 500 index and average returns fell short.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Hedge Funds in Hollywood
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
26 Oct 2006
MPs warned against Over-regulation of Hedge Funds
MPs warned against Over-regulation of Hedge Funds
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
Investors dissatisfied with Fund of Hedge Fund Results
According to Mercer Investment Consulting, a global survey has revealed that despite growing interest in hedge funds, less than a quarter of the pension schemes that invest in them are satisfied with their investment returns.
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
25 Oct 2006
Indian Stock Prices Rising
India is at the top of the BSE index in emerging markets with a 30-share benchmark. The country’s trading has recovered from a steep sell off earlier this year to hit a record high last week of 12,994.45.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Hedge Funds to Finance Football Club
Sam Hammam quit his post as Cardiff chairman and has been replaced by Peter Ridsdale as the club prepares for a huge new investment strategy. The identities of the new investors are still unknown, but in a statement Hamman revealed that they are looking to hedge funds to manage Cardiff’s £24m debt in exchange for equity in the club.
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
Hedge Fund wants Board Seat
Hedge fund Basswood Capital Management, a New York hedge fund with about $2 billion in assets under managements, is asking for a boad seat with WCI Communities Inc., due to the company’s “extreme underperformance”.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
24 Oct 2006
Hedge Funds see Record Results
Hedge Fund Research(HFR) reported this week that hedge funds took $44.5 billion in the third quarter this year, almost as much as the $46.9 billion invested in the whole of 2005.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
Two banks set up Hedge Funds
Eastern Europe
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Senator Alarmed by lack of Hedge Fund Transparency
U.S. Senate Finance Committee Chairman Charles Grassley said in a letter to federal agency heads that he plans to look into risks posed by hedge funds to pension funds.
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
19 Oct 2006
German Comapny Moves to Restructure with London Hedge Funds
A group of hedge funds based in London have been restructuring an agreement with Schefenacker, a German vehicle parts company with whom they have investments.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
Hedge Funds Involved in Scania/MAN Takeover
The Frankfurter Allgemeine Sonntagszeitung reported that several large hedge funds are buying shares in MAN AG and Scania. Not saying who these hedge funds are, the Frankfurter reports they may now have over 15% of Scania shares. The newspaper also said that hedge funds own a significantly smaller amount of MAN’s shares, without giving a specific percentage.
These numbers may play a role in the decisions made with the 18.7 pct stake in Scania owned by that Volkswagen AG, which is comparable to the hedge fund shares. VW said it would only offer that holding to MAN if the latter’s bid draws commitments from holders of at least 71.3% of Scania’s shares.
Truck maker Scania AB, however is fighting the $12.9 billion bid from rival MAN AG, saying they would pay extra dividend on their shares this year. This special dividend, worth a total of $949 million, makes it more attractive for shareholders to hold on to Scania shares and may force MAN to increase its bid for a second time, analysts say.
Volkswagen, the largest shareholder of both MAN and Scania, wants the two companies to treat the deal as a merger rather than a takeover, asking MAN and Scania to negotiate following MAN’s $10.3bn hostile bid for Scania.
These numbers may play a role in the decisions made with the 18.7 pct stake in Scania owned by that Volkswagen AG, which is comparable to the hedge fund shares. VW said it would only offer that holding to MAN if the latter’s bid draws commitments from holders of at least 71.3% of Scania’s shares.
Truck maker Scania AB, however is fighting the $12.9 billion bid from rival MAN AG, saying they would pay extra dividend on their shares this year. This special dividend, worth a total of $949 million, makes it more attractive for shareholders to hold on to Scania shares and may force MAN to increase its bid for a second time, analysts say.
Volkswagen, the largest shareholder of both MAN and Scania, wants the two companies to treat the deal as a merger rather than a takeover, asking MAN and Scania to negotiate following MAN’s $10.3bn hostile bid for Scania.
Attorney General Creates Hedge Fund Task Force
Connecticut’s attorney general, Richard Blumenthal, is taking a special interest in the “regulatory void” surrounding hedge funds. After the spectacular faliure of the Amaranth Advisors $6 billion hedge fund last month, Blumenthal has used his position to start a task force on hedge funds, although at the moment it’s only an informal group.
Connecticut is home to an estimated $250 billion of the $1.2 trillion under management in hedge funds, according to Chicago’s Hedge Fund Research. Blumenthal says us he’s still in the early stages of studying the issue and would prefer leave it to the federal government rather than taking action himself. “I don’t want to disadvantage Connecticut hedge funds” by imposing excessively burdensome rules, he claims, but “The facts about mammoth losses by Amaranth offer additional powerful and compelling evidence about the need to reform disclosure and oversight requirements.”
It is unclear how hedge fund abuse would play as a political issue as Blumenthal considers running for higher office, but the Wall Street Journal reported last week that 23 of 41 economists surveyed said they think hedge funds need more regulatory oversight. More than once in the past Blumenthal has made statements that suggest he looks at business failure and investing losses as a criminal act.
Connecticut is home to an estimated $250 billion of the $1.2 trillion under management in hedge funds, according to Chicago’s Hedge Fund Research. Blumenthal says us he’s still in the early stages of studying the issue and would prefer leave it to the federal government rather than taking action himself. “I don’t want to disadvantage Connecticut hedge funds” by imposing excessively burdensome rules, he claims, but “The facts about mammoth losses by Amaranth offer additional powerful and compelling evidence about the need to reform disclosure and oversight requirements.”
It is unclear how hedge fund abuse would play as a political issue as Blumenthal considers running for higher office, but the Wall Street Journal reported last week that 23 of 41 economists surveyed said they think hedge funds need more regulatory oversight. More than once in the past Blumenthal has made statements that suggest he looks at business failure and investing losses as a criminal act.
16 Oct 2006
RMF Team creates Four Funds of Funds
A new hedge fund run by former RMF-Man Investment analysts is being set up and named after its Swiss latitude, 47 Degrees North Capital Management in Pfaeffikon, Switzerland, the hedge fund also plans on offices in New York.
47 Degrees North Capital is launching four new funds of funds, including one this year. This alternative investment firm will be backed by Jim Kelly, former Moore Capital Management co founder and president of Third Point Capital. The team of partners are Bruno Wicki, Raphael Blunschi and Claude Porret. Kelly plans to invest in the fund wth his own money as well as investments from other hedge fund managers.
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When with RMF/Man Investments, this alternative team specialized in researching and developing hedge fund strategies, such as CAT bonds, electricity trading or insurance securities. Wicki, Blunschi and Porret were involved in the launch of the RMF Commodity Fund, which has grown to $2 billion and has yielded a 20% annual rate of return.
47 Degrees North New Generation Fund will offer investors access to emerging managers with a track record of between a few months and two or three years. This fund will target returns of 12% with 5% to 7% volatility.
The 47 Degrees N Seeding Fund will invest in start-up hedge funds, this fund aims for annual returns of 15% over a five-year cycle with volatility of 6% to 8%.
The 47 Degrees N Commodity Fund will use the expertise of the team in selecting commodity managers and invest in hedge funds using both directional and non-directional strategies across commodity markets.
Finally, the 47 Degrees N Innovation Fund will invest in hedge funds trading in innovative markets, such as emissions rights or weather derivatives as well as exotic products, including insurance-linked securities or financing and lending.
47 Degrees North Capital is launching four new funds of funds, including one this year. This alternative investment firm will be backed by Jim Kelly, former Moore Capital Management co founder and president of Third Point Capital. The team of partners are Bruno Wicki, Raphael Blunschi and Claude Porret. Kelly plans to invest in the fund wth his own money as well as investments from other hedge fund managers.
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When with RMF/Man Investments, this alternative team specialized in researching and developing hedge fund strategies, such as CAT bonds, electricity trading or insurance securities. Wicki, Blunschi and Porret were involved in the launch of the RMF Commodity Fund, which has grown to $2 billion and has yielded a 20% annual rate of return.
47 Degrees North New Generation Fund will offer investors access to emerging managers with a track record of between a few months and two or three years. This fund will target returns of 12% with 5% to 7% volatility.
The 47 Degrees N Seeding Fund will invest in start-up hedge funds, this fund aims for annual returns of 15% over a five-year cycle with volatility of 6% to 8%.
The 47 Degrees N Commodity Fund will use the expertise of the team in selecting commodity managers and invest in hedge funds using both directional and non-directional strategies across commodity markets.
Finally, the 47 Degrees N Innovation Fund will invest in hedge funds trading in innovative markets, such as emissions rights or weather derivatives as well as exotic products, including insurance-linked securities or financing and lending.
Hedge Fund Billionaire Couple donate $19 Million to the Arts
Kenneth C. Griffin, president and CEO of Citadel Investment Group, one of the world’s largest hedge funds and his wife Anne Dias Griffin, founder of hedge fund Aragon Global Management, donated $19 million to the Art Institute of Chicago late last week.
James Cuno, president of the Institute said the wing will be named the “Kenneth and Anne Griffin Court.” The Modern Wing’s central court, scheduled to open in 2009, is expected to cost $260 million.
The Griffins have collections of modern art, and have been known to loan them out to museums and exhibitions.
Citadel Investment Group is a $12 billion Chicago-based hedge fund. The alternative investment firm is known for its daily trading volume, which amounts to 1 to 2% of daily trading activity in New York and Tokyo. Citadel was founded by Kenneth Griffin in 1990.
Anne Dias Griffin is managing partner and founder of the firm Aragon Global Management, a long/short hedge fund focusing on global equities.
James Cuno, president of the Institute said the wing will be named the “Kenneth and Anne Griffin Court.” The Modern Wing’s central court, scheduled to open in 2009, is expected to cost $260 million.
The Griffins have collections of modern art, and have been known to loan them out to museums and exhibitions.
Citadel Investment Group is a $12 billion Chicago-based hedge fund. The alternative investment firm is known for its daily trading volume, which amounts to 1 to 2% of daily trading activity in New York and Tokyo. Citadel was founded by Kenneth Griffin in 1990.
Anne Dias Griffin is managing partner and founder of the firm Aragon Global Management, a long/short hedge fund focusing on global equities.
Hedge Funds accused of Securities Violation
Hedge fund managers Michael A. Roth and Brian J. Stark have had a complaint lodged aganst them by Multi Fineline Electronix (M-Flex) with the United States District Court.
The complaint alleges that the Stark hedge fund filings are misleading to their stockholders and that the hedge fund failed to disclose their 32,075,000 shares of M-Flex securities. The complaint asks that the hedge funds be required to amend their filings stateing the nature of their investment and wants an injunction keeping them from voting their shares in favor of the offer.
The complaint also alleges that the Stark hedge funds have been short selling their stock, causing a negative effect on the value of M-Flex stock.
Other hedge funds and management companies controlled by these individuals, including Stark Master Fund Ltd., Stark Asia Master Fund Ltd., Stark Onshore Master Holdings, LLC, Stark Offshore Managements, LLC, and Stark Asia Management, LLC., have also been accused of planning to profit at the expense of the company and its shareholders.
According to the filing with the U.S. Securities and Exchange Commission (SEC), the Stark hedge funds own approximately 4.5 million shares of M-Flex stock, representing approximately 18.4% of M-Flex’s outstanding shares of common stock, and approximately 48% of the shares held by non-affiliated stockholders.
According to Phil Harding, M-Flex’s chairman and chief executive officer, the company believes that the Stark hedge funds have little or no interest in the company’s current business operations and strategies nor in the long term well being of M-Flex.
The complaint alleges that the Stark hedge fund filings are misleading to their stockholders and that the hedge fund failed to disclose their 32,075,000 shares of M-Flex securities. The complaint asks that the hedge funds be required to amend their filings stateing the nature of their investment and wants an injunction keeping them from voting their shares in favor of the offer.
The complaint also alleges that the Stark hedge funds have been short selling their stock, causing a negative effect on the value of M-Flex stock.
Other hedge funds and management companies controlled by these individuals, including Stark Master Fund Ltd., Stark Asia Master Fund Ltd., Stark Onshore Master Holdings, LLC, Stark Offshore Managements, LLC, and Stark Asia Management, LLC., have also been accused of planning to profit at the expense of the company and its shareholders.
According to the filing with the U.S. Securities and Exchange Commission (SEC), the Stark hedge funds own approximately 4.5 million shares of M-Flex stock, representing approximately 18.4% of M-Flex’s outstanding shares of common stock, and approximately 48% of the shares held by non-affiliated stockholders.
According to Phil Harding, M-Flex’s chairman and chief executive officer, the company believes that the Stark hedge funds have little or no interest in the company’s current business operations and strategies nor in the long term well being of M-Flex.
13 Oct 2006
YouTube Sale Boosts Hedge Fund Stock
When Google made its biggest deal ever in buying YouTube for $1.65bn, it boosted hedge fund Sequoia Capital’s performance again with about $495 million in Google stock. Sequoia has also invested in Apple Computer, Cisco, eBay and Yahoo, having again proved their slogan as, “Entrepreneurs Behind the Entrepreneurs.”
Sequoia was the only hedge fund to publicly back YouTube, although hedge fund Artis Capital Management also holds an undisclosed amount invested in the firm. Launched in January 2002, Artis Capital Management currently manages $1bn of assets, investing primarily in public companies in the emerging technologies field.
Founded in a Californian garage, YouTube has become one of the most visited sites online, gathering 100 million video views every day, it could now be looking at collecting anywhere between $500m-$700m.
Most of Sequoia Capital’s investors are educational institutions or philanthropies. According to their website, Sequoia says; “We like being involved with companies when they are composed of less than a handful of people. We like being the very first investors.”
Sequoia was the only hedge fund to publicly back YouTube, although hedge fund Artis Capital Management also holds an undisclosed amount invested in the firm. Launched in January 2002, Artis Capital Management currently manages $1bn of assets, investing primarily in public companies in the emerging technologies field.
Founded in a Californian garage, YouTube has become one of the most visited sites online, gathering 100 million video views every day, it could now be looking at collecting anywhere between $500m-$700m.
Most of Sequoia Capital’s investors are educational institutions or philanthropies. According to their website, Sequoia says; “We like being involved with companies when they are composed of less than a handful of people. We like being the very first investors.”
12 Oct 2006
Activist Hedge Fund reports 5% Ownership of Applebees
Breeden Capital Management LLC, the activist hedge fund of former Securities and Exchange Commission Chairman Richard Breeden, reported that it owns 3.9 million shares, or 5.24% of Applebee’s International Inc.’s common stock.
In a filing with the Securities and Exchange Commission, Breeden Capital said that it had bought the shares due to their undervalued price listings, not to retain control. The purchase price for the shares was $77.7 million.
Breeden Capital said it had spoken with Applebee’s CEO Dave Goebel and recommended to Applebee’s CEO Dave Goebel, that the company should refranchise and modify executive compensation practices to increase shareholder value.
Between Sept. 18 and Sept. 29, Breeden Capital bought about 740,000 shares of Applebee’s stock for about $22 a share, or a total of $16.3 million, the filing said.
Breeden Capital Management is registered as an investment adviser to Breeden Partners LP as well as Breeden Partners Ltd., a private fund organized as an exempted company under the laws of the Cayman Islands, according to filings with the SEC.
In a filing with the Securities and Exchange Commission, Breeden Capital said that it had bought the shares due to their undervalued price listings, not to retain control. The purchase price for the shares was $77.7 million.
Breeden Capital said it had spoken with Applebee’s CEO Dave Goebel and recommended to Applebee’s CEO Dave Goebel, that the company should refranchise and modify executive compensation practices to increase shareholder value.
Between Sept. 18 and Sept. 29, Breeden Capital bought about 740,000 shares of Applebee’s stock for about $22 a share, or a total of $16.3 million, the filing said.
Breeden Capital Management is registered as an investment adviser to Breeden Partners LP as well as Breeden Partners Ltd., a private fund organized as an exempted company under the laws of the Cayman Islands, according to filings with the SEC.
GLG Fund Manager to set up Geneva Hedge Fund
The former manager of GLG Partners, worth $16 billion and Europe’s biggest hedge fund, is starting up a new fund. The hedge fund, based in Geneva, is likely to start trading next year, after the expiration of a noncompete agreement with GLG.
He is in the process of recruiting around 25 staff, and has so far chosen around 12. The new asset management firm is said to be worth about $2 billion.
Hedge fund manager Philippe Jabre was fined 750,000 pounds by the FSA earlier this year, making it the largest ever on an individual. The charge was insider trading on a convertible bond sale for Japan’s Sumitomo Mitsui Financial Group.
Because the offshore entity is legally separate from the U.K. hedge fund, Jabre had previously argued that the FSA had no jurisdiction in Japan, but the Financial Services and Markets Tribunal said in a ruling it was satisfied the FSA did have jurisdiction because the bonds were also traded in London and ultimately controlled by the U.K. hedge fund.
Assets in U.K. hedge funds have nearly quadrupled, to $128.9 billion at the end of the second quarter from $33.1 billion in 2000, according to Hedge Fund Research Inc., a Chicago-based firm that compiles data on hedge funds. That is nearly 11 percent of the $1.2 trillion invested in hedge funds world-wide, according to HFR.
He is in the process of recruiting around 25 staff, and has so far chosen around 12. The new asset management firm is said to be worth about $2 billion.
Hedge fund manager Philippe Jabre was fined 750,000 pounds by the FSA earlier this year, making it the largest ever on an individual. The charge was insider trading on a convertible bond sale for Japan’s Sumitomo Mitsui Financial Group.
Because the offshore entity is legally separate from the U.K. hedge fund, Jabre had previously argued that the FSA had no jurisdiction in Japan, but the Financial Services and Markets Tribunal said in a ruling it was satisfied the FSA did have jurisdiction because the bonds were also traded in London and ultimately controlled by the U.K. hedge fund.
Assets in U.K. hedge funds have nearly quadrupled, to $128.9 billion at the end of the second quarter from $33.1 billion in 2000, according to Hedge Fund Research Inc., a Chicago-based firm that compiles data on hedge funds. That is nearly 11 percent of the $1.2 trillion invested in hedge funds world-wide, according to HFR.
10 Oct 2006
Andrew Cuomo Investment of Campaign Money in Supporter's Hedge Fund
Andrew M. Cuomo, Democratic candidate for attorney general, put $750,000 of his campaign treasury into a hedge fund directed by one of his largest financial backers. Two years later, the investment showed a return of nearly 20 percent, according to the New York Times.
In the case of Mr. Cuomo’s campaign, Rachel Leon, executive director of Common Cause New York, an organization that monitors campaign finance, said that the hedge fund investment was troubling, given that hedge funds are run privately, pick and choose their investors, and can be run by political supporters who benefit financially from the campaign’s investment. “It raises multiple questions on multiple levels,” she said.
Most campaigns are focused on their short term needs, keeping their money in conservative vehicles like savings accounts.
Government watchdogs say that because of the unregulated nature of hedge funds, it may be a good to ask whether a high return reflects a smart bet or simply a campaign supporter’s efforts to evade contribution limits by padding the return of a favored campaign account.
In an interview with the New York Times, Fred Wertheimer, president of Democracy 21, said “There’s no way to know what’s going on with a hedge fund,....The candidate knows, and the hedge fund manager knows, but the public doesn’t.” Democracy 21 is a Washington based nonpartisan group that works to reduce the influence of money in politics.
Wendy Katz, a spokeswoman for the campaign, wrote in an e-mail message to The New York Times, “The rationale for investing campaign funds in a hedge fund is the same rationale employed by nonprofits, universities (for example, Harvard and Columbia), state and city public pension funds and charitable foundations for investing in hedge funds, which is to grow the asset and maximize returns.” The spokeswoman also said that the investment did not represent any potential conflict of interest.
In the case of Mr. Cuomo’s campaign, Rachel Leon, executive director of Common Cause New York, an organization that monitors campaign finance, said that the hedge fund investment was troubling, given that hedge funds are run privately, pick and choose their investors, and can be run by political supporters who benefit financially from the campaign’s investment. “It raises multiple questions on multiple levels,” she said.
Most campaigns are focused on their short term needs, keeping their money in conservative vehicles like savings accounts.
Government watchdogs say that because of the unregulated nature of hedge funds, it may be a good to ask whether a high return reflects a smart bet or simply a campaign supporter’s efforts to evade contribution limits by padding the return of a favored campaign account.
In an interview with the New York Times, Fred Wertheimer, president of Democracy 21, said “There’s no way to know what’s going on with a hedge fund,....The candidate knows, and the hedge fund manager knows, but the public doesn’t.” Democracy 21 is a Washington based nonpartisan group that works to reduce the influence of money in politics.
Wendy Katz, a spokeswoman for the campaign, wrote in an e-mail message to The New York Times, “The rationale for investing campaign funds in a hedge fund is the same rationale employed by nonprofits, universities (for example, Harvard and Columbia), state and city public pension funds and charitable foundations for investing in hedge funds, which is to grow the asset and maximize returns.” The spokeswoman also said that the investment did not represent any potential conflict of interest.
9 Oct 2006
Hedge Fund causes Rand Slide
The South African rand seems to be the world’s worst performing currency this year. According to an article by Bloomberg, an expanding trade deficit and the 12% gold drop since May have pummeled the rand, which has lost 19% against the dollar in 2006.
John Taylor, chairman of New York based hedge fund FX Concepts Inc., which manages $12 billion in currency assets, said; “There are plenty of reasons why South Africa ought to have a weaker currency,”One of the hedge fund’s portfolios, the Global Currencies Fund, has half of its assets wagered against the rand. “We have to feel pretty strongly, as we do, if we have as big a bet with such a volatile currency.”
Trading in rand futures on the Chicago Mercantile Exchange more than tripled in the past four months. The rand is a favorite in the foreign exchange market because it fluctuates against the dollar more than any of the other 16 most actively traded currencies, according to data compiled by Bloomberg.
The rand fell 0.7 percent last week to 7.82 to the dollar, the weakest since June 2003. It is headed for the worst annual performance since tumbling 37 percent in 2001, when the central bank stepped up enforcement of rules limiting international investors’ trading.
South African Reserve Bank Governor Tito Mboweni said last week that the currency was falling in an “orderly fashion,” a signal policy makers won’t seek to stem the slide.
“Exchange rate developments are expected to be positive for export growth,” which “will not be a bad thing,” Mboweni said at a conference in Johannesburg on Oct. 5. A weaker rand also contributes to risks for inflation, he said. The central bank will raise its key rate half a percentage point to 8.5 percent when policy makers meet Oct. 12, according to the median forecast of 16 economists surveyed by Bloomberg News.
Kimon Boyiatjis, who heads Trident Capital, a Cape Town based hedge fund with about $400 million in assets, says he’s been investing in “rand hedge” stocks, because he anticipates the rand will reach 8.25 per dollar this year. “It’s definitely been working for us,” he said.
John Taylor, chairman of New York based hedge fund FX Concepts Inc., which manages $12 billion in currency assets, said; “There are plenty of reasons why South Africa ought to have a weaker currency,”One of the hedge fund’s portfolios, the Global Currencies Fund, has half of its assets wagered against the rand. “We have to feel pretty strongly, as we do, if we have as big a bet with such a volatile currency.”
Trading in rand futures on the Chicago Mercantile Exchange more than tripled in the past four months. The rand is a favorite in the foreign exchange market because it fluctuates against the dollar more than any of the other 16 most actively traded currencies, according to data compiled by Bloomberg.
The rand fell 0.7 percent last week to 7.82 to the dollar, the weakest since June 2003. It is headed for the worst annual performance since tumbling 37 percent in 2001, when the central bank stepped up enforcement of rules limiting international investors’ trading.
South African Reserve Bank Governor Tito Mboweni said last week that the currency was falling in an “orderly fashion,” a signal policy makers won’t seek to stem the slide.
“Exchange rate developments are expected to be positive for export growth,” which “will not be a bad thing,” Mboweni said at a conference in Johannesburg on Oct. 5. A weaker rand also contributes to risks for inflation, he said. The central bank will raise its key rate half a percentage point to 8.5 percent when policy makers meet Oct. 12, according to the median forecast of 16 economists surveyed by Bloomberg News.
Kimon Boyiatjis, who heads Trident Capital, a Cape Town based hedge fund with about $400 million in assets, says he’s been investing in “rand hedge” stocks, because he anticipates the rand will reach 8.25 per dollar this year. “It’s definitely been working for us,” he said.
6 Oct 2006
Hedge Fund Whitebox Challenges Late Filing Company
Business process outsourcer Affiliated Computer Services (ACS), missed its extended filing date for its fiscal year ended June 30, 2006. Which was the time period allowed under Securities and Exchange Commission rules for an issuer to be deemed to have filed in a timely manner.
Hedge fund Whitebox Advisors LLC, is claiming that when the company defaulted on the terms of its bonds by not filing its annual reports on time, ACS should be required to to immediately repay nearly $260 million to its bondholders. That dollar figure was disclosed in a formal filing by ACS on Wednesday, but the company has previously said it was in a dispute over whether it was in default.
The company’s stock options grant practices have been under scrutiny by a team of outside counsellors, which is reviewing grants from 1994 to the present and related disclosures. ACS also said it that it has received an amendment from lenders under its March 2006 credit facility with respect to some covenants, including the requirement that the company deliver audited financial statements within 90 days of its fiscal year end.
Minneapolis-based Whitebox Advisors LLC said in a letter sent to ACS on Sept. 29 that the failure to file the annual report on time “due to an ongoing internal investigation over how the company granted stock options# triggered a condition in some of the company’s debt agreements that required the debts to be repaid immediately, rather than in 2015.
ACS said in the filing on Wednesday that it does not believe that it is in default, and therefore early repayment is not required. ACS filed a lawsuit with U.S. District Court, seeking a formal ruling on whether it in fact is in default.
Shares of ACS rose 47 cents to $52.47 in recent after-hours trade.
Whitebox claims on its website that it “is a trading firm not an investment firm. We continuously search for relatively short-term inefficient market behavior (arbitrage opportunities) to capture, with the expectation that most will bear fruit in less then a year.”
Hedge fund Whitebox Advisors LLC, is claiming that when the company defaulted on the terms of its bonds by not filing its annual reports on time, ACS should be required to to immediately repay nearly $260 million to its bondholders. That dollar figure was disclosed in a formal filing by ACS on Wednesday, but the company has previously said it was in a dispute over whether it was in default.
The company’s stock options grant practices have been under scrutiny by a team of outside counsellors, which is reviewing grants from 1994 to the present and related disclosures. ACS also said it that it has received an amendment from lenders under its March 2006 credit facility with respect to some covenants, including the requirement that the company deliver audited financial statements within 90 days of its fiscal year end.
Minneapolis-based Whitebox Advisors LLC said in a letter sent to ACS on Sept. 29 that the failure to file the annual report on time “due to an ongoing internal investigation over how the company granted stock options# triggered a condition in some of the company’s debt agreements that required the debts to be repaid immediately, rather than in 2015.
ACS said in the filing on Wednesday that it does not believe that it is in default, and therefore early repayment is not required. ACS filed a lawsuit with U.S. District Court, seeking a formal ruling on whether it in fact is in default.
Shares of ACS rose 47 cents to $52.47 in recent after-hours trade.
Whitebox claims on its website that it “is a trading firm not an investment firm. We continuously search for relatively short-term inefficient market behavior (arbitrage opportunities) to capture, with the expectation that most will bear fruit in less then a year.”
5 Oct 2006
Hedge Funds Launches vs Closures
Since January 2005, a total of 2,622 new hedge funds have been launched, according to a report by Hedge Fund Research Inc., released on wednesday. But figures also show that 1,071 hedge funds have shut in the past two years, as competition has squeezed profits.
Even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired, two funds set up by Hans van Hoof, the former Europe chief of Soros Fund Management and another fund run by Thierry Serero, a former manager at Fidelity Investments’ Fidelity Europe mutual fund. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say.
In just the past few weeks, Amaranth Advisors LLC lost $6 billion, and Narragansett Management LP in New York said it will return $800 million to investors, two European based hedge funds recently have told investors they are shutting down one or all of their funds, also the Vega Select Opportunities fund, which manages about $1.4 billion, lost about 11.5% of its value in September.
The fund closures, which stem from a variety of reasons, underscore a numbing fact about the hedge fund business: Even though new hedge funds seem to be popping up every day, almost half as many funds have been closing their doors since 2005.
About 300 hedge funds manage more than $1 billion each and represent roughly 90 percent of the assets in the industry today. “In the older days, raising $100 million was great,” says Richard Portogallo, head of U.S. stocks at Morgan Stanley. “Now it is not going to be good enough.”
HFR said a record $42.1 billion was added in the second quarter after $24 billion flowed in during the first quarter.
Hedge Fund Research Inc. is a firm specializing in the aggregation, dissemination and analysis of alternative investment information. The company produces HFR Database, the industry’s most widely used commercial database of hedge fund performance, as well as other research products for the alternative investment industry.
Even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired, two funds set up by Hans van Hoof, the former Europe chief of Soros Fund Management and another fund run by Thierry Serero, a former manager at Fidelity Investments’ Fidelity Europe mutual fund. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say.
In just the past few weeks, Amaranth Advisors LLC lost $6 billion, and Narragansett Management LP in New York said it will return $800 million to investors, two European based hedge funds recently have told investors they are shutting down one or all of their funds, also the Vega Select Opportunities fund, which manages about $1.4 billion, lost about 11.5% of its value in September.
The fund closures, which stem from a variety of reasons, underscore a numbing fact about the hedge fund business: Even though new hedge funds seem to be popping up every day, almost half as many funds have been closing their doors since 2005.
About 300 hedge funds manage more than $1 billion each and represent roughly 90 percent of the assets in the industry today. “In the older days, raising $100 million was great,” says Richard Portogallo, head of U.S. stocks at Morgan Stanley. “Now it is not going to be good enough.”
HFR said a record $42.1 billion was added in the second quarter after $24 billion flowed in during the first quarter.
Hedge Fund Research Inc. is a firm specializing in the aggregation, dissemination and analysis of alternative investment information. The company produces HFR Database, the industry’s most widely used commercial database of hedge fund performance, as well as other research products for the alternative investment industry.
Hedge Funds and Australia
UBS hosted a Melbourne conference last week, attended by hedge funds FrontPoint Partners, Highbridge, Och-Ziff Capital Management, Pequot Capital and York Capital.
Finance Minister Nick Minchin said at the conference. “We have a very strong financial services industry,....and hedge funds add an extra dimension to that industry…..The critical thing with all investments is that people understand the risks….In terms of the investment marketplace, hedge funds have a critical role to play.”
In a report published in The Australian, Robert Clow writes, “Given the immense amounts of money that hedge funds have been able to raise and invest in the US and Europe, it is not surprising that they have mostly concentrated on those markets until now. But hedge funds now have so much money to put to work and the developed markets are so well-mined that they have turned increasingly to the Asia Pacific region.”
Hedge funds Fortress Investments and Tudor Investments already have Australian operations running. But more often the foreign firms parachute in, taking positions remotely from their external offices. One attraction in the market for merger is 45% of Australian takeover deals attract increased bids, according to the presentation at the UBS conference, compared with 5 to 10% of US deals.
The Australian industry manages $35 billion in hedge fund investment, according to a study compiled earlier this year by Axiss Australia. Another study completed in April by the University of NSW forecast that Australian investors would increase their hedge fund investment by 41% over the next 2 to 5 years.
Finance Minister Nick Minchin said at the conference. “We have a very strong financial services industry,....and hedge funds add an extra dimension to that industry…..The critical thing with all investments is that people understand the risks….In terms of the investment marketplace, hedge funds have a critical role to play.”
In a report published in The Australian, Robert Clow writes, “Given the immense amounts of money that hedge funds have been able to raise and invest in the US and Europe, it is not surprising that they have mostly concentrated on those markets until now. But hedge funds now have so much money to put to work and the developed markets are so well-mined that they have turned increasingly to the Asia Pacific region.”
Hedge funds Fortress Investments and Tudor Investments already have Australian operations running. But more often the foreign firms parachute in, taking positions remotely from their external offices. One attraction in the market for merger is 45% of Australian takeover deals attract increased bids, according to the presentation at the UBS conference, compared with 5 to 10% of US deals.
The Australian industry manages $35 billion in hedge fund investment, according to a study compiled earlier this year by Axiss Australia. Another study completed in April by the University of NSW forecast that Australian investors would increase their hedge fund investment by 41% over the next 2 to 5 years.
4 Oct 2006
Morgan Stanley offers Hedge Fund Options as Incentive to Employees
Morgan Stanley, the largest securities firm in the world market, has offered its staff millions of dollars in incentives to keep and retain new employees, as Lehman Brothers and Goldman Sachs present tough competition and pay 10 to 20% more
Under the new incentive structure, employees who earn at least $500,000 will be able to invest part of their annual bonus in Morgan Stanley funds of hedge funds and private equity funds.
Morgan Stanley will also lend qualified employees $2 for every $1 invested in the funds. The loans are forgivable if the investments decline to the point where employees would have no equity remaining after paying the money back.
Employees can begin taking part in the scheme starting with bonuses to be paid later this year. Anyone who leaves before three years forfeits the investments and any gains.
Morgan Stanley will offer low-interest loans so employees can triple the size of their investments in hedge funds and buyout funds. The new pay scheme comes after executives Vikam Pandit, John Havens and Guru Ramakrishnan left to launch their own hedge fund and merger bankers Joseph Perella and Terry Meguid departed to start a boutique bank.
Under the new incentive structure, employees who earn at least $500,000 will be able to invest part of their annual bonus in Morgan Stanley funds of hedge funds and private equity funds.
Morgan Stanley will also lend qualified employees $2 for every $1 invested in the funds. The loans are forgivable if the investments decline to the point where employees would have no equity remaining after paying the money back.
Employees can begin taking part in the scheme starting with bonuses to be paid later this year. Anyone who leaves before three years forfeits the investments and any gains.
Morgan Stanley will offer low-interest loans so employees can triple the size of their investments in hedge funds and buyout funds. The new pay scheme comes after executives Vikam Pandit, John Havens and Guru Ramakrishnan left to launch their own hedge fund and merger bankers Joseph Perella and Terry Meguid departed to start a boutique bank.
3 Oct 2006
Hedge Funds Care Gala
Hedge Funds Care Cayman will be hosting its second annual black tie dinner, Open Your Heart to the Children Benefit, at the Ritz Carlton on 16 November.
Hedge Funds Care (HFC), established in 1998, is a group of hedge fund money managers, investors, prime brokers, attorneys, accountants, and information providers. Funds are raised through annual Open Your Heart to the Children Benefits in New York, San Francisco, Chicago, Atlanta, Boston, Denver, Toronto, London and the Cayman Islands. To date they have raised almost $18 million dollars and awarded more than 250 grants to organisations and professionals committed to protecting children from abuse and neglect.
Guests will be entertained with a colourful performance by modern circus artists Cirque Le Masque, involving acrobatic dancing and special effects. Last November, the inaugural benefit dinner raised a net total of $143,000 for the Cayman charity.
Other upcoming events are being held in New York on October 4th in Tenjune; Chicago, October 5th, at the Carnivale; London on October 12th, at the Cafe de Paris; and in Atlanta, October 20th at the Georgia Aquarium. For more information see; http://www.hedgefundscare.org/events/
Hedge Funds Care provide training for community members such as teachers, social workers, hospital/medical staff, lawyers, judges, and religious leaders on recognition of abuse and reporting of abuse, as well as prevention services to at-risk children and families, treatment for children who have been abused, training to enhance awareness and understanding of abuse and neglect for children, parents and community members, research on best practices in child welfare and legal advocacy to children in crisis among other things.
These funds are put to work locally through the following institutions: Children and Youth Services Foundation, National Council of Voluntary Organisations, Cayman Islands Crisis Centre, the Department of Children and Family Services and the National Gallery.
Glen Wigney, Chairman of HFCC, commented: “It is incredible to see not only these worthy projects in action with the money raised from Hedge Funds Care, but to see the organisations who had previously worked remotely, now working together. It is encouraging to see this development and, it has sparked our desire to raise even more money this year for future programmes.”
Hedge Funds Care (HFC), established in 1998, is a group of hedge fund money managers, investors, prime brokers, attorneys, accountants, and information providers. Funds are raised through annual Open Your Heart to the Children Benefits in New York, San Francisco, Chicago, Atlanta, Boston, Denver, Toronto, London and the Cayman Islands. To date they have raised almost $18 million dollars and awarded more than 250 grants to organisations and professionals committed to protecting children from abuse and neglect.
Guests will be entertained with a colourful performance by modern circus artists Cirque Le Masque, involving acrobatic dancing and special effects. Last November, the inaugural benefit dinner raised a net total of $143,000 for the Cayman charity.
Other upcoming events are being held in New York on October 4th in Tenjune; Chicago, October 5th, at the Carnivale; London on October 12th, at the Cafe de Paris; and in Atlanta, October 20th at the Georgia Aquarium. For more information see; http://www.hedgefundscare.org/events/
Hedge Funds Care provide training for community members such as teachers, social workers, hospital/medical staff, lawyers, judges, and religious leaders on recognition of abuse and reporting of abuse, as well as prevention services to at-risk children and families, treatment for children who have been abused, training to enhance awareness and understanding of abuse and neglect for children, parents and community members, research on best practices in child welfare and legal advocacy to children in crisis among other things.
These funds are put to work locally through the following institutions: Children and Youth Services Foundation, National Council of Voluntary Organisations, Cayman Islands Crisis Centre, the Department of Children and Family Services and the National Gallery.
Glen Wigney, Chairman of HFCC, commented: “It is incredible to see not only these worthy projects in action with the money raised from Hedge Funds Care, but to see the organisations who had previously worked remotely, now working together. It is encouraging to see this development and, it has sparked our desire to raise even more money this year for future programmes.”
House Debates Hedge Fund Regulation
According to the SEC, hedge funds represent 5% of all US assets under management, and about 30% of all US equity trading volume. So concern over hedge fund oversight and regulation is on the agenda of the US House of Representatives. Lawmakers debated a bill on the the floor last Thursday, requiring a White House body to come up with recommendations on hedge fund disclosure requirements.
Hedge fund regulation has remained a priority since a US court in July overturned a SEC rule requiring hedge fund managers to register with the regulator. The bill would require the President’s Working Group to study the growth of pension funds investing in hedge funds and “whether hedge fund investors are able to protect themselves adequately from risk associated with their investments”.
The current light regulation enables the funds to raise and deploy capital very quickly and to use very sophisticated financial strategies. Today there are more than 8,000 such funds with more than $1 trillion of capital under management.
The bill debated by the Presidents Working Group, was seen likely to pass in a “voice vote” on the House floor, was tabled by congressman Mike Castle, a Delaware Republican. The President’s Working Group is made up of the heads of the Treasury, the SEC and the Commodity Futures Trading Commission, the US futures industry regulator and other agencies.
Timothy Geithner, president of the New York Fed, said supervision of core banks and investment banks had encouraged the transfer of risk to unregulated institutions such as hedge funds.
However, hedge funds are not as “unregulated,” as they seem. The anti-fraud provisions of the 1933 and 1934 acts apply to the activities of the funds and state laws against investor fraud apply as well. Banking laws also restrict the activities of hedge fund lenders.
The SEC has also set new registration requirements to take effect in February of 2006, in effect narrowing the traditional exemption under the Investment Advisors Act of 1940, they will require funds to register their name and location, the professional history of the funds’ managers, and a brief statement of the funds’ investment strategy. The SEC will have the option of auditing the accounts of selected funds.
Hedge fund regulation has remained a priority since a US court in July overturned a SEC rule requiring hedge fund managers to register with the regulator. The bill would require the President’s Working Group to study the growth of pension funds investing in hedge funds and “whether hedge fund investors are able to protect themselves adequately from risk associated with their investments”.
The current light regulation enables the funds to raise and deploy capital very quickly and to use very sophisticated financial strategies. Today there are more than 8,000 such funds with more than $1 trillion of capital under management.
The bill debated by the Presidents Working Group, was seen likely to pass in a “voice vote” on the House floor, was tabled by congressman Mike Castle, a Delaware Republican. The President’s Working Group is made up of the heads of the Treasury, the SEC and the Commodity Futures Trading Commission, the US futures industry regulator and other agencies.
Timothy Geithner, president of the New York Fed, said supervision of core banks and investment banks had encouraged the transfer of risk to unregulated institutions such as hedge funds.
However, hedge funds are not as “unregulated,” as they seem. The anti-fraud provisions of the 1933 and 1934 acts apply to the activities of the funds and state laws against investor fraud apply as well. Banking laws also restrict the activities of hedge fund lenders.
The SEC has also set new registration requirements to take effect in February of 2006, in effect narrowing the traditional exemption under the Investment Advisors Act of 1940, they will require funds to register their name and location, the professional history of the funds’ managers, and a brief statement of the funds’ investment strategy. The SEC will have the option of auditing the accounts of selected funds.
2 Oct 2006
Hedge Fund Amaranth forwarned by NYMEX
Hedge fund Amaranth Advisers made a disastrous bet on natural gas prices that produced losses of $4 to $6 billion, once among the nation’s largest and hottest hedge funds, the hedge fund scrambled in an effort last week “aggressively reducing” their natural gas positions, the hedge fund said in a letter to investors.
Amarath did have due warning though; according to sources, the New York Mercantile Exchange warned the hedge fund a month before its extreme losses that its natural gas bets were too big.
U.S. lawmakers say Amaranth’s loss is the biggest ever by a hedge fund and is a good example a problem they are facing. Lawmakers complained that speculators were raising energy prices and avoiding oversight with trades that were not conducted on exchanges.
Amaranth, based in Greenwich, Connecticut, with $7.5bn under management, has warned investors that its main funds are down 35% or more this year. Nicholas Maounis, Amaranth’s founder, said in a letter to investors,
“We are in discussions with our prime brokers and are working to protect our investors while meeting the obligations of our creditors,”
Traders said Amaranth could cause some volatility by moving quickly to liquidate holdings to meet margin calls and possible investor redemptions. Amaranth, which employs more than 115 traders, analysts and fund managers, describes itself as a multi strategy hedge fund which invests in a “highly disciplined, risk controlled manner.”
Amarath did have due warning though; according to sources, the New York Mercantile Exchange warned the hedge fund a month before its extreme losses that its natural gas bets were too big.
U.S. lawmakers say Amaranth’s loss is the biggest ever by a hedge fund and is a good example a problem they are facing. Lawmakers complained that speculators were raising energy prices and avoiding oversight with trades that were not conducted on exchanges.
Amaranth, based in Greenwich, Connecticut, with $7.5bn under management, has warned investors that its main funds are down 35% or more this year. Nicholas Maounis, Amaranth’s founder, said in a letter to investors,
“We are in discussions with our prime brokers and are working to protect our investors while meeting the obligations of our creditors,”
Traders said Amaranth could cause some volatility by moving quickly to liquidate holdings to meet margin calls and possible investor redemptions. Amaranth, which employs more than 115 traders, analysts and fund managers, describes itself as a multi strategy hedge fund which invests in a “highly disciplined, risk controlled manner.”
Sears and Controversial Hedge Fund Managers
Sears and Controversial Hedge Fund Managers
Sears Holdings Corp, headed by hedge fund billionaire Edward Lampert, is trying to offer a controversial $908-million privatization bid for its subsidiary Sears Canada Inc.
Sears is planning “seek leave to appeal” the Ontario court decision that blocked the offer. Sears Holdings Corp. has also extended until Oct. 31 its $802 million offer to buy the 46 percent of Sears Canada Inc. it doesn’t already own, leaving the door open to more extensions.
Last month the Ontario Securities Commission found the Chicago based retailer violated provincial securities law by failing to disclose support agreements with the Bank of Nova Scotia and the Royal Bank of Canada.
Edward Lampert, is set to become chairman of the combined companies, Kmart and Sears. As Kmart’s chairman, he owns nearly 53 percent of its stock through his ESL Investments hedge fund. He is also the largest shareholder in Sears. ESL holds a 15 percent stake in the retailer.
Besides stakes in Kmart and Sears, Lampert’s fund also owns large positions in car dealer AutoNation and auto parts retailer AutoZone. He has built a reputation as a one of Wall Street’s most successful and renowned hedge fund managers.
Early last year he was kidnapped at gunpoint from a parking garage at ESL’s Greenwich, Conn., offices. Four captors held him for ransom, keeping him bound and blindfolded for some 30 hours before he negotiated his own release.
Sears Holdings Corp, headed by hedge fund billionaire Edward Lampert, is trying to offer a controversial $908-million privatization bid for its subsidiary Sears Canada Inc.
Sears is planning “seek leave to appeal” the Ontario court decision that blocked the offer. Sears Holdings Corp. has also extended until Oct. 31 its $802 million offer to buy the 46 percent of Sears Canada Inc. it doesn’t already own, leaving the door open to more extensions.
Last month the Ontario Securities Commission found the Chicago based retailer violated provincial securities law by failing to disclose support agreements with the Bank of Nova Scotia and the Royal Bank of Canada.
Edward Lampert, is set to become chairman of the combined companies, Kmart and Sears. As Kmart’s chairman, he owns nearly 53 percent of its stock through his ESL Investments hedge fund. He is also the largest shareholder in Sears. ESL holds a 15 percent stake in the retailer.
Besides stakes in Kmart and Sears, Lampert’s fund also owns large positions in car dealer AutoNation and auto parts retailer AutoZone. He has built a reputation as a one of Wall Street’s most successful and renowned hedge fund managers.
Early last year he was kidnapped at gunpoint from a parking garage at ESL’s Greenwich, Conn., offices. Four captors held him for ransom, keeping him bound and blindfolded for some 30 hours before he negotiated his own release.
China's Banking Chairman warns of Hedge Fund risks.
At the end of April 2006, there were altogether over 28,000 banking institutions in Mainland China. The total assets of the banking industry registered nearly RMB40 trillion, accounting for more than 90 per cent of the total financial assets in the Mainland.
In 2005, 72 foreign banks from 21 countries have established 254 operational entities in the Mainland. Their total assets amounted to $88 billion. In addition, hedge funds and non banking financial institutions, including finance companies affiliated to enterprise groups, trust & investment companies and financial leasing companies are now organizing business re-engineering by actively drawing experiences from their counterparts in Hong Kong.
In short, the Mainland banking industry as a whole has been moving forward on the right track.
But China’s banking regulatory head said steps are being taken to regulate the increasingly powerful $1.2 trillion hedge fund industry,
“Regulators in all countries should strengthen the monitoring of hedge funds and be on alert against any counterparty and liquidity risks they introduce,” Liu Mingkang, head of China Banking Regulatory Commission, said in a statement.
The notice followed meetings that Liu held with his counterparts from Singapore, Italy, Germany, Thailand and Hong Kong from September 16 to 26. Liu suggested that regulators should exchange information about hedge funds promptly to make sure their trading does not cause regional or global economic instability.
Liu noted the increasing activity of hedge funds in Asian countries including China, India, Singapore, Hong Kong and Thailand.
His suggestion comes days after U.S. hedge fund Amaranth Advisors disclosed the biggest hedge fund loss ever, about $6 billion, on wrong-way natural gas market trades.
In 2005, 72 foreign banks from 21 countries have established 254 operational entities in the Mainland. Their total assets amounted to $88 billion. In addition, hedge funds and non banking financial institutions, including finance companies affiliated to enterprise groups, trust & investment companies and financial leasing companies are now organizing business re-engineering by actively drawing experiences from their counterparts in Hong Kong.
In short, the Mainland banking industry as a whole has been moving forward on the right track.
But China’s banking regulatory head said steps are being taken to regulate the increasingly powerful $1.2 trillion hedge fund industry,
“Regulators in all countries should strengthen the monitoring of hedge funds and be on alert against any counterparty and liquidity risks they introduce,” Liu Mingkang, head of China Banking Regulatory Commission, said in a statement.
The notice followed meetings that Liu held with his counterparts from Singapore, Italy, Germany, Thailand and Hong Kong from September 16 to 26. Liu suggested that regulators should exchange information about hedge funds promptly to make sure their trading does not cause regional or global economic instability.
Liu noted the increasing activity of hedge funds in Asian countries including China, India, Singapore, Hong Kong and Thailand.
His suggestion comes days after U.S. hedge fund Amaranth Advisors disclosed the biggest hedge fund loss ever, about $6 billion, on wrong-way natural gas market trades.
SEC worried about Hedge Funds
In an article by Marketwatch it was reported that Securities and Exchange Commission enforcement director Linda Thomsen, told a Senate panel that insider trading by hedge funds is “an area of significant concern” to the SEC and to lawmakers.
In the prepared testimony to the Senate Judiciary Committee, Thomsen told the panel the SEC has brought five insider-trading cases this fiscal year involving hedge funds, out of 44 total insider trading cases.
The SEC is developing new ways to monitor hedge funds following a court’s voiding of its authority to register hedge fund advisers.
The enforcement director recently said the agency is going to focus on how hedge funds and broker-dealers interact, and that broker-dealers should report insider trading by the funds.
Federal securities regulators are planning to meet with organizations like the NASD and the New York Stock Exchange to discuss ways to possibly beef up their joint fight against insider-trading, the Securities and Exchange Commission official said.
In the prepared testimony to the Senate Judiciary Committee, Thomsen told the panel the SEC has brought five insider-trading cases this fiscal year involving hedge funds, out of 44 total insider trading cases.
The SEC is developing new ways to monitor hedge funds following a court’s voiding of its authority to register hedge fund advisers.
The enforcement director recently said the agency is going to focus on how hedge funds and broker-dealers interact, and that broker-dealers should report insider trading by the funds.
Federal securities regulators are planning to meet with organizations like the NASD and the New York Stock Exchange to discuss ways to possibly beef up their joint fight against insider-trading, the Securities and Exchange Commission official said.
Ex-Hedge Fund manager pleads Not Guilty
The Securities and Exchange Commission filed a complaint against Hilary L. Shane in the United States District Court for New York this May, alleging that Shane committed insider trading and registration violations by short selling 122,900 shares of Compudyne in October 2001, prior to the public announcement, but the ex-hedge fund manager has plead not guilty to the charges of insider trading.
Shane, 39, former hedge fund manager at First New York Securities, appeared in U.S. District Court in Manhattan and was released on her own recognizance. She has been charged with five counts of securities fraud and each count holds a maximum sentence of 20 years.
According to the press release, it is stated that usually in a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price and the company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public.
But the Commission’s complaint alleges that on Oct. 8, 2001, the hedge fund manager agreed to purchase shares in the PIPE offering for her personal account and for one of the hedge fund accounts she managed. Shane agreed both orally and in writing to keep the information confidential. The following morning, before the public announcement, Shane began short selling CompuDyne securities in both her personal account and the hedge fund’s account. Shane continued short selling CompuDyne shares, selling the same number of shares, covering all the short sales with the shares obtained in the offering making substantial profits for both accounts.
The total illegal profit from the exchange was $315,000 and the hearing on the criminal charges before Judge Naomi Reice Buchwald is scheduled for Oct. 10. She has also been permanently barred from associating with any NASD registered firm and will pay more than $1.45 million to settle NASD and Securities and Exchange Commission (SEC)
Shane, 39, former hedge fund manager at First New York Securities, appeared in U.S. District Court in Manhattan and was released on her own recognizance. She has been charged with five counts of securities fraud and each count holds a maximum sentence of 20 years.
According to the press release, it is stated that usually in a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price and the company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public.
But the Commission’s complaint alleges that on Oct. 8, 2001, the hedge fund manager agreed to purchase shares in the PIPE offering for her personal account and for one of the hedge fund accounts she managed. Shane agreed both orally and in writing to keep the information confidential. The following morning, before the public announcement, Shane began short selling CompuDyne securities in both her personal account and the hedge fund’s account. Shane continued short selling CompuDyne shares, selling the same number of shares, covering all the short sales with the shares obtained in the offering making substantial profits for both accounts.
The total illegal profit from the exchange was $315,000 and the hearing on the criminal charges before Judge Naomi Reice Buchwald is scheduled for Oct. 10. She has also been permanently barred from associating with any NASD registered firm and will pay more than $1.45 million to settle NASD and Securities and Exchange Commission (SEC)
28 Sept 2006
Hedge Funds and Wine
Robert Lyster, co-founder of hedge fund Lyster Watson Management Inc. has found a new investment for his hedge fund millions, the land rich, cash poor, winemaking lifestyle.
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.
The draw for wannabe wine landowners is investing in the legacy of 2,000 years of Cote d’Or winemaking that goes back to Roman times, but the lure of being part of that legacy can can be a fatal attraction, according to a Bloomberg report.
“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 approximately 25,000 bottles of wine.”
Wasserman says it would cost an additional $4 million to revamp the domaine and keep it running for three years with workers, equipment and a new winemaker.
Wholesale, the wine would fetch between 15 euros and 30 euros a bottle, the price more dependent on media hype than quality. On the shelf, the wine would probably retail for $50 to $55 a bottle.
“Your first sale on a $10 million investment at best would net less than $500,000 after three years,....And you’re not going to sell all 25,000 bottles.”
As founding partner of his hedge fund Robert C. Lyster conducts in depth research on the strategies and results of more than 2,400 hedge funds representing all investment styles, hedge funds are not only more complex, but because they are also influenced by market factors in different ways than traditional investments, hedge fund analysis calls for specialization and focus. Lyster Watson has focused exclusively on hedge funds for the last 13 years.
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.
The draw for wannabe wine landowners is investing in the legacy of 2,000 years of Cote d’Or winemaking that goes back to Roman times, but the lure of being part of that legacy can can be a fatal attraction, according to a Bloomberg report.
“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 approximately 25,000 bottles of wine.”
Wasserman says it would cost an additional $4 million to revamp the domaine and keep it running for three years with workers, equipment and a new winemaker.
Wholesale, the wine would fetch between 15 euros and 30 euros a bottle, the price more dependent on media hype than quality. On the shelf, the wine would probably retail for $50 to $55 a bottle.
“Your first sale on a $10 million investment at best would net less than $500,000 after three years,....And you’re not going to sell all 25,000 bottles.”
As founding partner of his hedge fund Robert C. Lyster conducts in depth research on the strategies and results of more than 2,400 hedge funds representing all investment styles, hedge funds are not only more complex, but because they are also influenced by market factors in different ways than traditional investments, hedge fund analysis calls for specialization and focus. Lyster Watson has focused exclusively on hedge funds for the last 13 years.
26 Sept 2006
Hedge Funds Cash out on Good weather
So far this year hurricanes are few and far between, but the intensity of last years storms caused hedge funds to bet billions of dollars on reinsurance.
The hedge funds that put these billion dollar bets on another Hurricane Katrina not hitting the U.S. coastline now have high expectations due to the forecasters prediction of a a mild hurricane season. There could be massive returns on their investment in CAT bonds.
A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy. If a big enough storm hits, the investors could lose everything.
Hedge funds “will have made a bomb”, according to one reinsurance broker. But it is difficult to calculate precisely the returns that hedge funds will make from reinsurance, given that most catastrophe bonds will have been bought and sold in private transactions.
Hedge funds piled into the reinsurance market after last year’s record hurricane season, which inflicted huge losses on the global insurance and reinsurance industries. Sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year. Cat bonds emerged after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
The hedge funds that put these billion dollar bets on another Hurricane Katrina not hitting the U.S. coastline now have high expectations due to the forecasters prediction of a a mild hurricane season. There could be massive returns on their investment in CAT bonds.
A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy. If a big enough storm hits, the investors could lose everything.
Hedge funds “will have made a bomb”, according to one reinsurance broker. But it is difficult to calculate precisely the returns that hedge funds will make from reinsurance, given that most catastrophe bonds will have been bought and sold in private transactions.
Hedge funds piled into the reinsurance market after last year’s record hurricane season, which inflicted huge losses on the global insurance and reinsurance industries. Sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year. Cat bonds emerged after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
25 Sept 2006
Oil Slump and Hedge funds
Traders said today that the precious metals market is under pressure because of a sharp drop in oil in the recent past. Prices fell more than 3% this week, taking it almost $17 below a record-high of $78.40 in July. Oil prices then spiked on Sept 20, bringing US light crude up 10 cents at $61.76.
Some traders speculate that the volatile surges may be linked to billion dollar losses at prominent hedge funds. “As the market seems to fear that further hedge funds could liquidate long positions, we expect energy prices to test even lower levels during the next days,” Dresdner Kleinwort said in a daily market report. Dresdner Kleinwort is the investment bank of Dresdner Bank AG and a member of Allianz, headquartered in London and Frankfurt
US crude stocks were forecast to fall 1.6 million barrels, which would still leave them in the upper end of the average range for this time of the year, a Reuters poll showed. Gasoline stocks were expected to rise by 100,000 barrels.
Private US weather forecaster AccuWeather said on Sept 19 it expected colder than normal temperatures in the US Northeast, home to 80% of US heating oil demand, and in the Midwest, where gas is the home heating fuel of choice.
Some Opec ministers have signalled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The Opec basket stood at $58.67 on Sept 18.
Some traders speculate that the volatile surges may be linked to billion dollar losses at prominent hedge funds. “As the market seems to fear that further hedge funds could liquidate long positions, we expect energy prices to test even lower levels during the next days,” Dresdner Kleinwort said in a daily market report. Dresdner Kleinwort is the investment bank of Dresdner Bank AG and a member of Allianz, headquartered in London and Frankfurt
US crude stocks were forecast to fall 1.6 million barrels, which would still leave them in the upper end of the average range for this time of the year, a Reuters poll showed. Gasoline stocks were expected to rise by 100,000 barrels.
Private US weather forecaster AccuWeather said on Sept 19 it expected colder than normal temperatures in the US Northeast, home to 80% of US heating oil demand, and in the Midwest, where gas is the home heating fuel of choice.
Some Opec ministers have signalled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The Opec basket stood at $58.67 on Sept 18.
Harvard Hedge Fund hits 29 billion
The Harvard University investment arm, Harvard Management Co., manages the largest education based endowment in the world. Harvard has a long record of success in beating the market, but this years $29.2 billion rate of returns falls slightly from last years high. Big gains in commodities and foreign stocks were among the endowment’s investment highlights.
Harvard’s hedge fund endowment grew $3.3 billion during the fiscal year ending June 30, reaching an all time high of $29.2 billion, returning 16.7% on its investments.
Harvard Management said its most recent annual performance was particularly strong in emerging markets, included gains of 37.8% in emerging market stocks, which includes industrializing economies such as India, China, Russia, and Brazil.
The report also showed gains of 26.7% in commodities, 26.5% in more developed foreign stock markets, and 22.7% in real estate. It earned 22.7 percent in private equity investments and 15 percent in hedge funds categorized as “absolute return and special situations.”
El Erian, the new head at the Harvard hedge fund, since Jack R. Meyer left in September, said that investors are copying Harvard’s endowment strategies. “The minute something becomes attractive in terms of showing that it results in consistent returns, a lot of people want to do it,” he said.
Harvard’s hedge fund endowment grew $3.3 billion during the fiscal year ending June 30, reaching an all time high of $29.2 billion, returning 16.7% on its investments.
Harvard Management said its most recent annual performance was particularly strong in emerging markets, included gains of 37.8% in emerging market stocks, which includes industrializing economies such as India, China, Russia, and Brazil.
The report also showed gains of 26.7% in commodities, 26.5% in more developed foreign stock markets, and 22.7% in real estate. It earned 22.7 percent in private equity investments and 15 percent in hedge funds categorized as “absolute return and special situations.”
El Erian, the new head at the Harvard hedge fund, since Jack R. Meyer left in September, said that investors are copying Harvard’s endowment strategies. “The minute something becomes attractive in terms of showing that it results in consistent returns, a lot of people want to do it,” he said.
20 Sept 2006
Congressman calls for Hedge Fund Study
Mike Castle, a congressman from Delaware and president of the republican main street partnership, introduced a bill last week requiring regulators to study and make recommendations about hedge funds, Castle’s office said Monday. The study should focus on disclosure of information, the congressman said.
Mike Castle serves on the House Financial Services Committee, which has jurisdiction over banking with the securities and insurance industries. Among Castle’s other priorities are immigration reform, stem cell research and deficit reduction.
“Transparency in our financial system is important for market discipline and investor confidence,” Castle said. Castle’s bill comes as a hedge fund based in Greenwich, Conneticut, Amaranth Advisors LLC is reportedly shutting down and returning investors’ money following heavy losses on natural gas investments. In June, a U.S. court overturned an SEC rule requiring hedge fund advisers to register with the agency.
Mike Castle serves on the House Financial Services Committee, which has jurisdiction over banking with the securities and insurance industries. Among Castle’s other priorities are immigration reform, stem cell research and deficit reduction.
“Transparency in our financial system is important for market discipline and investor confidence,” Castle said. Castle’s bill comes as a hedge fund based in Greenwich, Conneticut, Amaranth Advisors LLC is reportedly shutting down and returning investors’ money following heavy losses on natural gas investments. In June, a U.S. court overturned an SEC rule requiring hedge fund advisers to register with the agency.
Deutsche Bank to open Japan Hedge Fund
Hedge funds are seeking opportunities in Japan after the recent cut backs in corporate debt has improved the chances of companies increasing dividends and buying back shares.
There are about 220 Japan-focused hedge funds overseeing a total of $35 billion assets, up from 100 funds managing $6 billion of investments in 2002, according to Eurekahedge, a Singapore-based research company.
Ed Rogers, who ran Deutsche Bank AG’s Japan hedge fund brokerage unit until May, is raising $500 million to give U.S. money managers access to some of his former clients in the world’s second-largest economy.
In an ivterview with Bloomberg press, he said, “It’s a great time for this product since Japan is finally emerging from a 14-year economic slump.” Rogers set up Rogers Investment Advisors this year in Tokyo and is advising Wolver Hill Asset Management Ltd., a New York-based company, to raise $500 million within a year, mostly from U.S. investors. Rogers also said Wolver Hill also plans to start an Asia-focused fund of funds that may raise another $500 million by February, he said.
Wolver Hill Japan Multi-strategy Fund will be the first fund of hedge funds located in Japan that’s open to investors in the U.S., Rogers said. The Wolver Hill fund will invest in 10 to 20 local hedge funds.
The fund will put half of its assets into equities, including short positions in which investors sell borrowed stock in the anticipation they can buy it back at a lower price. The rest will be committed to strategies that profit from price differences of related corporate securities, or so-called arbitrage funds.
Hedge funds in Japan have faced more difficult conditions this year. The Eurekahedge Japan Hedge Fund Index, which tracks 123 funds, fell 4.18 percent in the eight months through August, preliminary data show. The Eurekahedge Asian Hedge Fund Index is up 5.35 percent. The Nikkei 225 Stock Average, which gained 41.5 percent in 2005, has slipped 1.5 percent this year.
There are about 220 Japan-focused hedge funds overseeing a total of $35 billion assets, up from 100 funds managing $6 billion of investments in 2002, according to Eurekahedge, a Singapore-based research company.
Ed Rogers, who ran Deutsche Bank AG’s Japan hedge fund brokerage unit until May, is raising $500 million to give U.S. money managers access to some of his former clients in the world’s second-largest economy.
In an ivterview with Bloomberg press, he said, “It’s a great time for this product since Japan is finally emerging from a 14-year economic slump.” Rogers set up Rogers Investment Advisors this year in Tokyo and is advising Wolver Hill Asset Management Ltd., a New York-based company, to raise $500 million within a year, mostly from U.S. investors. Rogers also said Wolver Hill also plans to start an Asia-focused fund of funds that may raise another $500 million by February, he said.
Wolver Hill Japan Multi-strategy Fund will be the first fund of hedge funds located in Japan that’s open to investors in the U.S., Rogers said. The Wolver Hill fund will invest in 10 to 20 local hedge funds.
The fund will put half of its assets into equities, including short positions in which investors sell borrowed stock in the anticipation they can buy it back at a lower price. The rest will be committed to strategies that profit from price differences of related corporate securities, or so-called arbitrage funds.
Hedge funds in Japan have faced more difficult conditions this year. The Eurekahedge Japan Hedge Fund Index, which tracks 123 funds, fell 4.18 percent in the eight months through August, preliminary data show. The Eurekahedge Asian Hedge Fund Index is up 5.35 percent. The Nikkei 225 Stock Average, which gained 41.5 percent in 2005, has slipped 1.5 percent this year.
Hedge Fund suspect in Stock Manipulation Investigation
Hedge fund Aeneas, and it’s founder Thomas Grossman, are under scrutiny in Malaysia as the Securities Commission is probing allegations of stock manipulation.
The $400 million hedge fund firm specializes in long-short emerging markets strategies. The “investigations relating to the manipulation of certain shares are ongoing and individuals acquainted with the facts of the cases have been called in to assist,” a Securities Commission spokeswoman told Dow Jones Newswires.
Hedge fund Aeneas Capital Management L.P. suffered big losses that reportedly followed investments in Malaysian shares such as smart card maker Iris Corp., poultry producer Farm’s Best Bhd., and Internet related systems provider Mobif Bhd. According to Bursa filings from early 2006, Aeneas bought and sold substantial amounts of shares in these companies.
The official, speaking on condition of anonymity, declined to say if the commission is working with the U.S. Securities and Exchange Commission in its probe.
The $400 million hedge fund firm specializes in long-short emerging markets strategies. The “investigations relating to the manipulation of certain shares are ongoing and individuals acquainted with the facts of the cases have been called in to assist,” a Securities Commission spokeswoman told Dow Jones Newswires.
Hedge fund Aeneas Capital Management L.P. suffered big losses that reportedly followed investments in Malaysian shares such as smart card maker Iris Corp., poultry producer Farm’s Best Bhd., and Internet related systems provider Mobif Bhd. According to Bursa filings from early 2006, Aeneas bought and sold substantial amounts of shares in these companies.
The official, speaking on condition of anonymity, declined to say if the commission is working with the U.S. Securities and Exchange Commission in its probe.
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