Hedge Funds To Oust "Grand Theft Auto" CEO

Shares in the makers of the video game "Grand Theft Auto", Take-Two shot up nearly 8%, from $1.34, to $18.95 yesterday. The increase came immediately after investors including Steven Cohen's SAC Capital Advisors LLC and David Shaw's D.E. Shaw & Co., both hedge fund managers, announced the plan to remove the embattled video-game designer's CEO in a regulatory filing.

A group of high-profile hedge funds that collectively control about 46% of Take-Two Interactive Software has launched a proxy battle to "review the employment status" of CEO Paul Eibeler and CFO Karl Winters.

In addition to the management changes, the hedge fund group also is seeking to appoint a total of six board members. They plan to present their nominees at Take-Two's March 23 board meeting. The slate includes media honcho Strauss Zelnick, Benjamin Feder, Jon Moses, Michael Dornemann and Michael James Sheresky.

"Management has sort of lost the faith of the investor community,'' said Todd Mitchell, a Kaufman Brothers LP analyst in New York, in an interview. "A shake up would be a positive thing,'' said Mitchell. The investor group began forming in early February after veteran activist Carl Icahn floated the idea of agitating for change. At one point in 2006, he had 2.8 million shares.

Take-Two also remains the subject of a criminal investigation by the New York district attorney’s office regarding stock options backdating and possibly broader issues. The S.E.C. also has started an informal investigation into the video game company.

Hedge Fund N.I.R. Group Scores Highest %Increase

As combined assets at the largest U.S. hedge funds finally crossed the trillion-dollar mark, some are doing better than others. According to the bi-annual hedge fund survey by industry publication, Absolute Return, N.Y.-based NIR Group scored the biggest increase in raw percentages, a 789% increase.

The firm, run by Corey Ribotsky, manages a handful of Roslyn, N.Y. hedge funds with $630 million under management and approximately $622 million in PIPEinvestments.

Ribotsky also launched a credit opportunities fund last year. Under his direction, the firm raised more than $3 billion for the fund, expanding to $3.62 billion from $407 the previous year earlier, a 789% increase.

Ribotsky, 36, is the Managing Member of N.I.R. Group, LLC, a boutique investment management firm. Mr. Ribotsky has been investing in public companies since 1992. Prior to becoming a member of N.I.R., Mr. Ribotsky was a member of the investment management firm, The Rainmaker Group, LLC located in Red Bank, New Jersey.

The N.I.R. Group has offices in Roslyn, New York. Both R&C Advisors, LLC and R&C Investors, LLC are based in New York.

Hedge Funds Driving Bank Stocks Up 50%

Hedge funds have acquired around 7% in Landesbank Berlin, the hedge funds hope to profit following the sales process, as the new majority stakeholder will be obliged to make minority shareholders a buyout offer, a report said.

The unnamed hedge funds are positioned to profit from the sale regardless of who buys the bank and their acquisitions have pushed the price up more than 50% to €7.57 in the past six months. The price values the bank at €7.6bn ($10bn), far more than its €4bn to €5bn price-tag.

The city state must sell its 81% stake in Landesbank Berlin by the end of this year to conform with EU directives. The sale is being closely watched in the financial sector because Landesbank Berlin owns Berliner Sparkasse and therefore represents the first real opportunity for private banks to enter the previously protected public savings bank sector.

"The free-float is firmly in the hands of hedge funds by now," said one adviser to a potential bidder, who declined to be named.

However, the small free-float, and the lack of liquidity has deterred hedge funds from taking big stakes while political risk has prevented the shares rising higher, according to one hedge fund adviser.

Hedge Fund Citadel Buys Bankrupt Company

Citadel Investment Group has topped Credit Suisse in an auction, agreeing to pay about $180 million for bankrupt ResMAE Mortgage Corp.

Citadel, a $13.4 billion Chicago-based hedge fund, said they will allow ResMAE, the bankrupt subprime mortgage lender, to work as an autonimous unit and allow founders Jack Mayesh and Ed Resendez to stay in control of the company. Subprime loans are offered to borrowers with spotty credit and lower incomes, the sector has descended into crisis as interest rates climbed from record lows.

ResMAE filed for bankruptcy in February, the firm said in the filing that it planned to sell most of its assets to Credit Suisse. However, hedge fund Citadel offered to pay $22.4 million, a break-up fee of up to $1.5 million plus ResMAE loans for 98.5% of their face value, or roughly $160 million.

U.S. Bankruptcy Judge Kevin Carey in Wilmington, Delaware, approved the sale on Monday afternoon, "Our financial support of ResMAE during this reorganization will allow one of the industry's leaders to remain appropriately capitalized to meet the needs of this very important market," Citadel's Ken Griffin said in a statement.

Other hedge funds are also expanding into this area, in July, hedge fund Fortress Investment Group LLC paid $554.3 million for the subprime lending arm of Dallas-based homebuilder Centex Corp. Then in December, Fortress also bought Champion Mortgage's loan- underwriting business from KeyCorp.

Since its founding as a $4.6 million convertible arbitrage fund in 1990, Citadel has grown into a sophisticated alternative investment institution. The hedge fund has seven main areas of focus including equities, fixed income and energy trading.

Survey Shows US Hedge Funds to Hold $1,200 Billion In Assets

The biannual survey of US hedge funds shows that 241 firms, each managing more than $1bn, held a combined total of nearly $1,200bn as of January 1.

According to a new survey conducted by Absolute Return magazine, money continued to flow steadily into alternative investments last year, causing the combined assets of the largest US hedge funds to climb well above the $1,000bn mark.

That is about $215bn more than the top 218 firms were managing this past summer and $347bn more than the top 207 firms were running at the beginning of last year. The huge increases last year came in spite of hedge fund closures, including that of $9.1bn Amaranth Advisors, which erased $35bn from the market.

The biggest new launch of last year, Convexity Capital Management, joined the top-60 US hedge funds in its first year, making it the most successful hedge fund launch in history, raising $6.3bn.

The top 20 firms, which held $258bn last January, now manage nearly $386bn. There are now 29 firms that run more than $10bn, up from 16 last year, and well ahead of the 12 that managed such large huge sums in July 2005.

In the number one spot JPMorgan unseated Goldman Sachs as the world's largest manager of hedge fund assets, with $34bn under management.

Hedge Fund Manager Merger Creates the World's No 2 Visitor Attraction Company

Some of the biggest brand names in the global theme park market today announced a partnership of two rapidly growing businesses, The Tussauds Group and Merlin Entertainments Group, making them the world's second biggest attractions operator after Disney.

Merlin Entertainments Group is known for theme parks such as Legoland, Sealife and several others. The company is controlled by hedge fund manager Blackstone Group.

On the merger with Merlin, international investment company Dubai International Capital LLC said, "Tussauds and Merlin are very complementary businesses and there is an obvious commercial logic in bringing them together."

The Tussauds Group is controlled by Dubai International which is known for its $1.23 billion acquisition of Travelodge, its $1 billion stake in DaimlerChrysler, and the $1.2 billion acquisition of Doncasters Group.

The Blackstone Group has raised a total of more then $67 billion for hedge fund and alternative investments since its formation. The group is currently investing its fifth general private equity fund with commitments of $15.6 billion. Other private equity investments in the leisure sector have included Universal Studios in Orlando, and Six Flags Theme Park.

High Fees Reduce the Attractiveness of Hedge Funds

A recent study on the effect of the fees that hedge funds charge, “Portfolio Efficiency With Performance Fees,” was conducted by Mark Kritzman, president and chief executive of Windham Capital Management, a Boston-based money management firm.

Mr. Kritzman’s study shows that hedge funds’ high fees make it unlikely that investors will improve their long-term performance by putting money into hedge funds. Focusing on the standard fee arrangement in the industry, known as “2 and 20″, which is to charge 2% of assets under management and 20% of profits above a predetermined benchmark, Mr Kritzman found that the combined impact of such fees is so high as to greatly reduce the attractiveness of hedge funds.

In an interview with the New York Times, Mr Kritzman said the fees’ effect on the portfolio was so sizable because of the “asymmetry penalty” resulting from the 20% cut of profits that the hedge funds earn. The funds do not share in investor losses, but they reap a large share of the profits.

The study was similarly disparaging about funds of hedge funds, saying he found it difficult to justify any allocation to funds of hedge funds, because they earn fees above and beyond those earned by the hedge funds in which they invest, typically 1% of funds under management and 10% of profits above a benchmark. The bottom line, Mr. Kritzman told the New York Times, is this: “Because of fees, the optimal allocation to a group of hedge funds is a lot lower than you might think it should be.”

Disclosure Ruling Has Hedge Funds Retreating

Judge Allan Gropper of the U.S. Bankruptcy Court in New York this week ordered a group of hedge funds that were demanding the formation of a shareholders committee to disclose all of their holdings in the airline, when they were purchased and for how much.

Soon after the disclosure ruling the hedge fund shareholders withdrew their motion to have a say in the payment deals after the Northwest Airline Corp reorganization. Hedge funds are known for their fiercely guarded trading secrets and so far have succeeded in resisting regulation.

The shareholder group led by Owl Creek hedge fund has said it holds a total of 30% of Northwest's stock and about $164.7 million in claims. Northwest said shareholders will receive nothing and existing shares will be canceled upon the carrier’s exit from bankruptcy.

Gropper's ruling would enforce Bankruptcy Rule 2019, which says parties in a Chapter 11 case acting as a group must disclose certain information about their holdings. The decision requires the 13 investment funds on the official committee to make public information about trading patterns, holdings and pricing, which hedge funds have labored for decades to keep secret.

Citigroup Exec Quits to Launch Hong Kong Hedge Fund

Ajay Kapur, a top Citigroup executive is leaving the firm to found his own hedge fund, according to reports.

Kapur is returning to Hong Kong, where he has residency rights, to set up a hedge fund called First Horse Capital with Niall MacLeod and two other members of Kapur's team that also left Citigroup. Kapur's new fund will invest in equities globally.

Kapur said the results of investment models that he and his team had devised were "pretty good." and that, "I just thought that one should eat one's own cooking,"Kapur said from London. The fund is based in Hong Kong in order to get information from China, India, Japan, "you need to be closer and on the ground." he said.

Asian hedge funds returned 16.1% last year, compared to the 11.5% gains of their counterparts in North America and 11.35% in Europe, according to indexes run by Eurekahedge, a company in Singapore that tracks the industry.

Kapur has followed a well-worn path from investment banking to hedge funds, other Wall Street advisers have also joined Asia-based hedge funds and buyout firms. In January, the chairman of J.P. Morgan Asia Pacific, Ralph Parks, joinedOaktree Capital Management, a Los Angeles hedge fund with more than $33 billion in assets.

First Horse Capital, named for the Indian cavalry regiment Kapur's father served in, will invest in stocks worldwide. Kapur declined to say how much money he's raised for First Horse Capital.

Hedge Fund News: Heads of US Hedge Fund Study Group Warn Against Over Regulation

Hedge Fund News: Heads of US Hedge Fund Study Group Warn Against Over Regulation

Hedge Fund Shareholders Withdraw from Northwest Deal

Hedge fund shareholders withdrew their motion to have a say in the payment deals after the Northwest Airline Corp reorganization, surprising U.S. Bankruptcy Judge Allan Gropper. The hedge fund committee claims that Jugde Gropper has not allowed an investigation into whether Northwest plans to merge with Delta.

The temporary committee of hedge fund investors tried to subpoena rival airlines that may have held merger talks with Northwest, in a effort to prove that it is worth more than it claims. Northwest said shareholders will receive nothing and existing shares will be canceled upon the carrier’s exit from bankruptcy.

The shareholder group led by the Owl Creek hedge fund has been fighting Northwest’s claims that there won’t be enough cash to pay the shareholders after the bankruptcy reorganization.

Northwest Airlines said it had a net loss of $349 million for January. Revenue was $892 million, the carrier said in a filing with U.S. Bankruptcy Court in New York.

Northwest Airlines said that it expected to be worth roughly $7 billion when it emerged from bankruptcy later this year and that it would pay unsecured creditors roughly three-quarters of what they were owed.

Ritchie to Sell Flagship Hedge Fund

Ritchie Capital Management Ltd has been struggling for two years now with below-average returns and the word is out that the company plans to sell its flagship hedge fund to equal partners in the venture, Reservoir Capital Group and Coller Capital.

Ritchie Capital, which oversees about $2.8 billion including borrowed money, will liquidate its Multistrategy Global Fund and return cash to investors. The company told investors that the Ritchie Capital Management flagship multi-strategy hedge fund had about $730 million in assets in mid-2006.

Richie is negotiating to sell the flagship hedge fund's assets to Reservoir, the $3 billion hedge fund investor, and Coller, which manages about $3.5 billion, in a deal that could be worth more than $1 billion. According to the deal with Coller, the current chief executive, Thane Ritchie, may continue to manage the fund after the sale.

Chicago-based Ritchie, a diversified hedge fund group that faced an extended period of under performance and investor demands for capital returns, has been in exclusive talks with Reservoir and Coller for several months to buy the flagship fund, sources have said.

Hedge Funds Looking For Direct Access to MTS

Following reports that hedge funds such as Citadel and Vega are trying to gain direct access to the pan-European bond exchange network MTS, the European Primary Dealers Association (EPDA) reported that it has not yet decided whether to allow third parties to access its platform, but the group has reportedly set up a committee to consider admitting hedge funds as members.

They do warn however, that third party participation in the electronic markets could undermine the current structure and introduce greater risks.

MTS is an abbreviation for Mercato dei Titoli di Stato, which translates to "Market for Government Bonds". The technology of the Italian based MTS platform is the Telematico system, a sophisticated electronic platform specifically designed for the trading of fixed income instruments. It replaces the expensive and often time-consuming process of trading over-the-counter.

According to a recent FT report, these moves are showing how powerful the hedge fund industry is becoming and also highlights the dispute over the current structure of the euro-zone government bond markets.

In a discussion paper circulated Tuesday, the EPDA said, "While issuers have influence over their primary dealerships, primary dealers may not be in a position to exercise control over third parties,.............They would be squeezed between the commercial pressure of their prime brokerage business and the inability to regulate the activity of third parties trading in the primary dealers' name. Lack of control could give rise to potential misbehavior by rogue traders."

Hedge Fund Mega-Investor Expands To U.S.

In a effort to strengthen its presence in the United States, BNP Paribas Securities Services announced that it has expanded its hedge fund administration operations to include services within the United States. BNP Paribas has EUR 570 billion ($754.8 billion)in assets invested in over 4,480 hedge funds worldwide and EUR 3.43 trillion ($4.54 trillion) in assets under management.

Located in King of Prussia, Pennsylvania, the hedge fund administration team is headed by Andrew Dougherty, Chief Operating Officer for fund administration in the United States.

BNP Paribas has recently enhanced its global portfolio by expanding its hedge fund administration businesses in Spain, Italy and France. From its offices in 18 countries, BNP Paribas works closely with its clients to provide comprehensive middle and back-office solutions to hedge funds and fund of hedge funds firms worldwide, including Asia and emerging markets.

Frederic Perard, Head of Global Fund Services at BNP Paribas Securities Services commented: "Our fully-integrated client services and operations team, which specializes in master-feeder structures, partnership accounting and high-volume trading portfolios, delivers added-value services to our clients. Our service offering is well-positioned to serve middle-market managers across various locations who seek an independent administrator to handle their multiple prime brokerage relationships."

BNP Paribas Securities Services is a leading securities services provider to the world's financial institutions, with a local presence in all key European markets as well as in the US and Australasia. With 4,200 staff in 18 countries, BNP Paribas Securities Services has over 700 clients, including 8 of the world's top 10 investment managers, and a global custody network covering 90 markets.

DaimlerChrysler Wary Of Possible Hedge Fund Takeover

DaimlerChrysler announced this month it was considering all options for Chrysler, including a split, but without Chrysler, the Daimler group could be more of a takeover target for hedge funds.

According to CNN Money, the likelihood of an unsolicited approach, such as a hedge fund takeover, was still low but had gone up to 20% from 10%.

One person familiar with the situation said Chief Financial Officer Bodo Uebber had routinely played down suggestions that hedge funds could team up to buy DaimlerChrysler because he felt such a wolf pack would be unable to agree on strategy and goals.

"But should it come to pass that Chrysler is split off from Daimler, then Daimler would be an interesting target," the source said. A complete split-up of the cars, trucks and vans businesses would then be "a real danger."

DaimlerChrysler declined comment on prospects for being acquired if it divests Chrysler but has said in the past the best defense against takeovers was good financial performance. The company has a market capitalization of $79 billion.

Hedge Funds World Conference in Dubai

The 8th annual Hedge Funds World Middle East Conference is being held at the Madinat Jumeirah in Dubai. Sponsored by Man investments, the event will play host to some of the biggest names in the alternative asset industry, reflecting growing regional demand for these products.

Some of the key topics include; New business in emerging markets, such as Asia, India and Latin America, the future of hedge funds and manager selection, fund selection and best practice portfolio construction.

The event provides specialist workshops, and there will be 50 leading speakers. The Hedge Funds World Middle East 2007 website boasts an 8 year track record, intensively researched to deliver in-depth insight into the hedge fund universe and the latest trends and investment styles.

To attend; http://www.terrapinn.com/2007/hfwme/

British Rail Pension Fund Plans to Invest One Billion In Hedge Funds

Railpen, one of the largest pension funds in Britain with £18 billion ($35.3 billion) in assets under management is planning to move at least £540 million ($1 billion) into hedge funds this year.

Chris Hitchen, Railpen chief executive, said they are planning on having £1.4 billion ($2.7 billion) invested in hedge funds by December, increasing their exposure from 5% to 8%.

“We have been divesting our equity portfolio to buy other asset classes, such as private equity, property, hedge funds and infrastructure,” Mr Hitchen said. “We went into infrastructure assets last year, but they’re somewhat overheated, so we’re trying to make sure we don’t put all our money in at the same time.”

According to the Times Online, a recent NAPF survey indicated that 11% of pension funds had invested in hedge funds by the end of 2006, up from 8% the previous year. There were also rises in the amount of money that pension funds invested in property, private equity and venture capital as part of a wider move out of equities in 2006.

He said that despite concerns about the stability of the hedge fund industry, the funds could provide returns that were more stable than equities.

Hedge Funds Charged With Fraud

A Washington hedge fund manager has been charged with defrauding Maryland investors of $9 million by soliciting money for his hedge funds, LaJon Corp, LaJon Capital Management, LaJon Capital Advisors and LaJon Capital Fund.

Attorney General Douglas F. Gansler froze the assets of Williams's hedge funds, saying that John H. Williams of Upper Marlboro violated eight civil statutes of state security laws.

Williams lured investors with free lunch seminars and hid losses with fake statements, the state attorney general's office said. Williams became involved in the scheme after meeting a Canadian hedge fund trader, Stephen Chesnowitz, in an Internet chat room, according to a court filing by Gansler's office.

According to The Washington Post, the two traders sent out mass mailings advertising a free "gourmet meal" and the opportunity to "earn excellent returns with a guarantee against market risk." More than 150 people, mainly from Montgomery and Prince George's counties, attended the seminars and gave Williams a total of $9 million. He transferred the money to Chesnowitz's hedge funds in Canada and the Cayman Islands.

Investors could log onto a Web site to check how the hedge funds were doing, and online statements showed that their investments were profitable. But that was not true. On April 28, 2006, alone, the hedge fund piled up $626,380 in losses, the filing said. Williams, "knowing the money was gone . . . continued to take fees" based on phantom returns, the court filing said. In total, Williams paid himself $586,000 for managing the investments.

Maryland officials said they are trying to figure out how much Williams lost in his trades and whether there is anything left to return to investors. Most of the money has been transferred out of the country to Chesnowitz's firms.

Fund of Hedge Funds Launches Trust

Fund of hedge funds manager, Gottex Fund Management, announced that they intend to launch a publicly listed closed-ended investment company, Gottex Market Neutral Trust, which will be listed on London’s main market.

All proceeds from a placing and offer for subscription, net of working capital requirements, will be invested in a portfolio of underlying hedge funds, it added. No numbers were provided.

The company's initial investment rationale, methodology and portfolio management will be consistent with that of Gottex Market Neutral Fund, a conservative open ended fund of hedge funds that seeks consistent returns with a low correlation to the major stock and bond market, it has been managed by GFM since 1999.

JPMorgan Cazenove is the group’s financial adviser, book runner and sponsor.

Activist Hedge Fund Wants Dutch Bank To Sell Assets

The Children's Investment Fund Management, a $3.8 billion hedge fund launched in 2003, announced in a letter to Dutch bank ABN AMRO that they believe the bank is undervalued and should sell some of its assets, merge with another bank, or even sell off the whole business.

TCI Fund Management takes its name from the money it donates to children's charities. The hedge fund, which said it owns more than 1% of ABN AMRO, asked shareholders to vote on its proposals at a shareholder meeting scheduled for April 26.

In 2005 TCI was part of a group of activist investors who criticized Deutsche Börse for its $2.5 billion bid for the London Stock Exchange, eventually causing Werner Seifert, the chief executive to resign. It turns out TCI, which owned 8% of Deutsche Börse, actively recruited some powerful partners, including Atticus Capital, Merrill Lynch, and Fidelity Investments, in order to facilitate the move.

In a letter first published by Reuters, the hedge fund said, "We believe that this strategy would not only create significant shareholder value but also would best serve all the stakeholders who otherwise would suffer over the long term from the structurally declining competitive position ofABN AMRO,......In 2006 they again committed to cut costs and they have so far failed to deliver," the hedge fund said.

TCI was founded by money manager Christopher Hohn, a 39-year-old graduate of Southampton University. It is said that Mr Hohn set up the hedge fund so that half of TCI's annual assets go to charity as a way of motivating himself.

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Senator Obama Targets Hedge Funds and Offshore Investors

Senator Barack Obama has backed legislation that would require hedge funds to require their offshore clients to establish anti-money laundering programs in the same way as other US financial institutions, under regulations to be issued by the Treasury Department.

It is not immediately clear whether the move will increase the transparency of US-owned assets in offshore accounts, but the legislation is being set up with the hopes of curbing tax evasion. The US has in the past years signed tax information exchange agreements with Aruba, the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and the Isle of Man.

Obama has joined senators Carl Levin and Norm Coleman in introducing legislation aimed at stopping offshore tax haven and tax shelter abuses. Says Obama: "This is a basic issue of fairness and integrity. We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren't disadvantaged."

They believe the loss to the Treasury from offshore tax evasion could amount to $100 billion a year. They say abusive tax shelters add tens of billions of dollars more.

"This bill provides a powerful set of new tools to clamp down on offshore tax and tax shelter abuses. None of these offshore schemes would work without the secrecy that prevents US agencies from enforcing our laws. Our bill offers innovative ways to combat offshore secrecy." Levin says.

The bill would strengthen detection of offshore activities by requiring US financial institutions that open accounts for foreign entities controlled by US clients, open accounts or establish entities in offshore secrecy jurisdictions for US clients to report such actions to the IRS.

Major Hedge Fund Shareholder Proposes Restructuring of Trust

Hedge fund Carrousel Capital has submitted proposals for a restructuring or merger of the Gartmore European investment trust, of which Carrousel owns 28.03% and is its largest shareholder.

Bruno Sangle-Ferriere, founder of British-based Carrousel, said he would make an announcement to the Stock Exchange on Friday or early next week.

Carrousel Capital said in informal talks with Gartmore that the hedge fund aims to buy into undervalued closed-end funds, restructuring it into an umbrella fund which could offer a range of investment mandates and which could take over or merge with other funds.

Gartmore Chairman Rodney Dennis said on Thursday. "We have had a couple of meetings (with Carrousel), but we've been unable to get a clear idea of what's being proposed,"

Over the past five years Gartmore European's net asset value has risen 72%, compared with a 51% return from the FTSE World Europe excluding UK index. "Performance has been very good, it's on a very tight discount, the manager is highly regarded and shareholders are happy. It is a bit mysterious that there is even an issue around Gartmore European," Dennis said.

Gartmore Chairman John von Spreckelsen and director Bruno Merki retired in September. The trust said at the time that the changes were due to corporate governance pressures and not the result of shareholder pressure.

Hedge Fund Investcorp to Sell Off Investment Company

It was announced today in a press release by Eurazeo that global hedge fund manager Investcorp has finalized a deal to sell APCOA, the leading pan-European manager of parking services, for an enterprise value of €885 million (1.16+ billion dollars), to Eurazeo. The closing of the transaction, subject to the relevant competition authority approval, should take place during the second quarter of 2007.

APCOA has operations in 13 countries, primarily Germany, Great Britain and Scandinavia. In 2006 APCOA had sales of €489 million ($642.5 million), up 7% on 2005.

Thilo Sautter, head of the German private equity practice at Investcorp: “We are delighted with the sale of APCOA to Eurazeo, after having led the successful transformation of APCOA to the leading European car park operator. Eurazeo is an excellent shareholder for APCOA and will provide APCOA with the necessary resources to continue the international expansion and support the growth strategy initiated under Investcorp’s stewardship.”

Peter Fischer, CEO of APCOA, said: “Over the past three years we have, together with Investcorp, developed and implemented a successful strategy to become the leading European car park operator....Our portfolio is well suited for selective bolt-on acquisitions and our network will benefit from expansion into new markets.”

With more than €6 billion in diversified assets and a market capitalisation of €5.8 billion, Eurazeo is one of the leading listed European investment companies. Eurazeo is a majority or key shareholder in companies such as Europcar, Rexel, B&B Hôtels and ANF. Eurazeo also holds significant stakes in Danone, Véolia and Air Liquide.

Investcorp is a leading provider and manager of alternative investment products. It has offices in New York, London and Bahrain. Investcorp has five lines of business: private equity, hedge funds, real estate, venture capital and Gulf growth capital. Founded in 1982, Investcorp has grown to become one of the largest and most diverse alternative investment managers in terms of both product offerings and geography. It currently has over $10 billion in invested assets under management.

Heads of US Hedge Fund Study Group Warn Against Over Regulation

Ben Bernanke, chairman of the US federal reserve, has warned against over regulation of the hedge fund industry. Bernanke said that U.S. authorities must take care not to stifle financial innovation by over-regulating the derivatives and hedge fund industries.

"I would be very reluctant to get involved in heavy-handed, direct regulation of hedge funds," Bernanke told the Senate Banking Committee in response to a question during semi-annual testimony on monetary policy.

"One of their key characteristics is that they are very nimble," Bernanke said. "That is good for the economy, because they help create liquidity in markets, they help to spread risks around more broadly, and a regulatory regime that inhibited that flexibility and nimbleness would eliminate a lot of the economic benefits."

U.S Treasury Secretary Henry Paulson called for market discipline, rather than government regulation, to address risks of the rising global hedge fund business at the G7 meeting. "Market discipline, focusing on risk management of regulated counter parties, is the most effective way to address potential systemic risk concerns."

Paulson and Bernanke work together as heads of the President's Working Group on Financial Markets, working with the Securities and Exchange Commission and the Commodities Futures Trading Commission to study the hedge fund industry. "The group continues to assess developments in markets, disclosure and counterpart risk management," Paulson said.

Paulson also said he's convinced "hedge funds provide considerable benefits to financial markets and our economies," but they also can present potential challenges and risks.

"It is in the U.S. interest to promote a thriving, competitive global hedge fund industry that facilitates price discovery and promotes liquidity in financial markets, while maintaining investor protection and promoting financial stability," Paulson said.

Hedge Fund Survey Shows Established Names Have More Chance of Success

The Absolute Return New Funds Survey for 2006, published in the February issue of Absolute Return magazine, shows that new hedge fund launches in the U.S. slowed for the second year in a row. Last year, the 86 largest hedge fund launches raised $31 billion, down from $34 billion raised by 82 funds during 2005 and $40 billion by 81 funds in 2004.

Most of the launches were in the first six months of the year. But after the equity market meltdown last spring and summer hammered hedge funds, and Amaranth Advisors went bust last fall, raising money got harder for new funds.

Only 29 funds raising at least $50 million - the minimum required to be included in the survey - launched during the second half of the year. These funds raised a mere $6.2 billion, or 20% of the total.

For the year, six new funds raised more than $1 billion. The biggest launch of the year, Convexity Capital, set a new record in terms of assets for its $6.3 billion fund launch last February. Convexity was founded by Jack Meyer, the former Harvard University endowment money manager superstar.

The second largest launch in 2006 was Old Lane Management’s Old Lane fund launched in April with $3.7 billion. It finished the year with roughly the same amount. The giant multistrategy fund’s founders include Vikram Pandit, John Havens and Guru Ramakrishnan - a high-profile trio from Morgan Stanley.

A closer look at the alpha-pack points to two ongoing themes: Billion-dollar megalaunches are alive and well - but only for the right pedigree. Seven of the top ten launches were new funds by established players, more evidence that the big, established names will continue to get bigger.

The trend for larger megalaunches in the past few years is likely to continue if institutional investors - pensions and endowments more so than funds of funds - continue to wade into hedge funds.

G7 Meeting Calls for Closer Monitoring of Hedge Funds

The two-day G7 meeting in Essen concluded with a call for the monitoring of hedge funds worldwide and urged talks with the industry. They said energy efficiency and diversification, particularly renewable forms, remains an economic priority. They also reiterated concerns about volatility in foreign exchange markets.

The G7 is comprised of official representatives from Britain, Canada, France, Germany, Italy, Japan, and the United States. The group released their conclusion that the world's major developed economies show solid growth, but foreign exchange fluctuations, the rising power of hedge funds and dwindling energy supplies are a concern.

"We are confident that the implications of these developments will be recognized by market participants and will be incorporated into their assessment of risks," the statement said, which was released after the G-7 participants ended their two-day meeting.

"Given the strong growth of the hedge fund industry and the instruments they trade, we need to be vigilant," the statement added, also saying that the group will talk with the private sector and hedge fund operators and would ask the Financial Stability Forum to update its 2000 report on hedge funds.

Investcorp Launches Early Stage Fund for Hedge Fund Investors

Investcorp, the global asset manager specializing in alternative investments with a $5 billion hedge fund program, has announced the launch of the Investcorp Early Stage Fund.

Early stage funds are typically set up by experienced money managers who have recently left other hedge funds or investment banks, or by managers who have existing hedge funds and are launching a new vehicle to focus on different strategies.

The initial portfolio will be composed of approximately 15-20 managers with targeted returns of 12-14% with annualized volatility of 5-7% over the medium term. The fund offers quarterly liquidity with a one-year lock up period.

Deepak Gurnani, Managing Director and co-head of the Investcorp Hedge Funds program said: "The Early Stage Fund is a unique investment opportunity which provides access to promising early stage funds, while minimizing the potential issues investors face in investing with such funds. Investors will have the benefit of immediate diversification, with quarterly liquidity and an anticipated attractive return and volatility relationship over the medium term."

Since 1996, Investcorp has invested with more than 50 hedge funds within the first 12 months of their launch and now manage approximately $1 billion in early stage investments.

SEC slammed over hedge fund 'wealth' test

Everyone, from politicians to the press, both here and abroad, has been shrieking in increasing apocalyptic terms about the myriad dangers that big, bad hedge funds pose to poor, small investors. Why not protect those poor, small non-accredited and presumably unnatural people from themselves? Heh, here are some answers from those "unnatural people"



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F&C To Launch Global Hedge Fund

F&C Asset Management announced on Monday that they are launching a global diversified fixed income hedge fund, called the F&C Tourmaline fund.

The hedge fund is to be run by a team of three, Sanjay Joshi, Rabbani Wahhab and Mario Nicolaou, and quantitative analyst Shilen Shah. They hired the team of fixed income hedge fund managers from London & Capital.

Last month F&C had announced their interest in expanding their hedge fund presence, saying they had plans to increase their investments in hedge funds.

"This is an important development for F&C Alternative Investments and a mark of F&C's ambition to grow our hedge fund presence. We will continue to actively look for further opportunities," Fernando Ribeiro, head of investments, said in a note.

At the end of last month shares in F&C fell heavily after the firm said it would rebase its 2007 dividend to allow increased investment in higher-margin new products.

F&C Management Ltd is a European investment house quoted on the London Stock Exchange with €154.6 billion (over $200 billion) under management and offices throughout Europe.

Hedge Fund Head Ordered to Pay Back $20 Million

The SEC released the details of the fines U.S. District Court Judge Charles Pannell ordered against hedge fund manager Kirk Wright yesterday. Pannell ordered nearly $20 million in fines and penalties for defrauding investors through his hedge fund, International Management Associates LLC.

The judge entered a default judgment against Wright ordering the repayment of $17 million, interest of $2.7 million and an imposed a civil penalty of $120,000, the SEC said in the statement.

Wright's hedge fund came under scrutiny eventually for it's unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager.

From 1997 through early 2006, Wright raised as much as $185 million from 500 investors through a "fraudulent scheme" involving seven hedge funds that he managed through IMA, the SEC said in a lawsuit filed a year ago.

Wright was also spending too much for his funds, it was noted, a lavish wedding reception, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, concerts, a Bentley, a Jaguar, an Aston Martin, a BMW, and a Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.The firm also sent out quarterly statements misrepresenting the amount of money in those funds and their performance.

Wright was arrested in May on mail-fraud charges, He's in an Atlanta detention center awaiting a criminal trial related to the 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars.

Original story; Fake Hedge Funds Cost Investors Millions

Hedge Funds & Oil Predictions

OilandGasStockNews.com, an investor and industry news portal released the oil and gas trends predicted for hedge funds this year.

In the ‘Insiders Corner" Michael Brush said "Investors had big bets on energy stocks, but now that crude oil has fallen 9% this year and 30% since last summer, hedge funds are heading for the exits. Is there any end in sight?"

Predicting the cold weather trends that have set in, the Insiders Corner also reminded investors of other factors, besides the weather, that support higher energy prices including “Tensions in the Middle East”, but the eerily warm weather in much of the U.S. is about to "turn on a dime," predicts AccuWeather.com forecaster Joe Bastardi.

Michael Brush, author of “Lessons From the Front Line”, is an award winning financial writer that writes a weekly market column for MSN Money as well as the ‘Insiders Corner’ for InvestorIdeas.com Mr. Brush has also covered business and investing for the New York Times, Money magazine and the Economist Group.

As far as where oil is currently trading, Eden Energy Corporation President and CEO Don Sharpe comments, “We expect oil prices to strengthen throughout the remainder of the year as geopolitical risks reemerge due to actions in Nigeria, Iran and other volatile parts of the oil producing world."

OilandGasStockNews.com is a global investor and industry research portal for the oil and gas sector.

Hedge Fund Makes Over $83 Million Off YouTube Sale

The numbers are in, Google revealed in a filing with the Securities and Exchange Commission just how much the hedge fund investors, founders and early employees of YouTube made when it was bought by Google for $1.65 billion last year.

Artis Capital Management, a San Francisco hedge fund was co-investor with Sequoia Capital, the venture capitalists that took a chance with the tiny YouTube project. Artis and several other hedge funds affiliated with them were listed as having received 176,621 shares, valued at $83 million.

Sequoia Capital invested close to $11.5 million in You Tube, is now listed as owning 941,027 shares, which are valued at more than $442 million. The filing also lists Sequoia Capital XI Principals Fund owning 102,376 shares, valued at more than $48 million, and Sequoia Technology Partners XI with 29,724 shares, valued at nearly $14 million. A total of $504 million.

The company's three founders also made extraordinary amounts, YouTube's chief executive Chad Hurley received shares worth more than $345 million. Another founder, Steven Chen, received shares worth more than $326 million. The third founder of YouTube, Jawed Karim, who left the company early on to pursue a graduate degree in computer science, received more than $64 million in shares. Some of these shares have been deposited in trusts for the young founders.

SEC Examines Hedge Fund Tip-Offs

The Securities and Exchange Commission is investigating whether hedge funds are being tipped off about buy and sell orders placed by mutual funds.

The Federal regulators that are conducting the probe, have asked approximately 10 major Wall Street banks for trading information from the last two weeks of September 2006, at the close of the third quarter.

It's become difficult for hedge fund managers to make money without access to sensitive information, so the SEC examiners will try to determine whether big buy and sell orders placed with the banks by mutual funds in that period triggered any suspicious front-running activity in those same stocks by hedge fund managers or other traders.

Lori Richards, director of the SEC's Office of Compliance, Inspections and Examinations, confirmed that her office was looking into the matter. "We're always concerned about information leakage in the market which could harm investors," she said.

Details of the investigation first appeared Tuesday in the New York Times, which said that the SEC request for information had gone out in mid-January.

Kennedy Closes Deal With Hedge Fund for 119 Hurricane Struck Homes

Trinity Development Partners along with equity partner Stillwater Capital Partners, a NY-based hedge fund, closed a $23.3 million deal with private lender Kennedy Funding for a waterfront real estate purchase in West Palm Beach, Florida.

The loan comes after back-to-back Hurricanes Frances and Jeanne pounded the area relentlessly in 2004, and Hurricane Wilma added further damage in 2005, turning the 30-story dream community into a nightmare of a business deal for the 119 homes involved.

The hedge fund partners cosed the $23.3 million deal with Kennedy Funding of Hackensack, NJ, borrowing the funds for a complete renovation. Jeffrey Wolfer, President and Co-CEO of Kennedy Funding said, "With this many unique and unusual circumstances, a loan like this wouldn't meet the criteria of traditional lenders.......That's why it's called situational lending-we consider each situation individually and evaluate it as such.

Stillwater Capital Partners is a provider of alternative investment services with over $600 million in assets under management. The hedge fund performs independent research that provides the potential for clients to preserve and grow their capital using a risk-controlled approach to investing.
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Ethically Minded Investments & Hedge Funds

Growing concerns over issues such as global warming have meant that more investors are looking for an ethically minded fund, especially one that makes a profit.

An innovator in ethical investing is Charlie Thomas, head of Jupiter Asset Management, a Citywire AAA-rated hedge fund. Thomas has defied skeptics by proving environmentally friendly investing can produce strong returns in what was a relatively muted year for global fund managers.

Last year the average hedge fund manager return was 8.1%, way below the average gain of 26.5 percent in 2005. However, Thomas' hedge fund Jupiter, returned 27.8% on the Jupiter Ecology fund last year, bringing the hedge fund's assets under management to around $436 million.

Thomas, who has been a member of Jupiter's socially responsible investment team since 2000, has a background steeped in environmentally responsible behaviour. Prior to joining Jupiter, he worked for BP as an environmental policy adviser and also worked on the United Nations environmental programme.

He told Citywire: "I look for opportunistic companies which are addressing environmental change." Especially productive was his investment in the organic market, he said, "it is gaining momentum as more and more people want organic, high quality products." He screens stocks on six green investment themes: clean energy, sustainable living, green transport, waste management, environmental services and water management.

Thomas recently told Citywire he was heartened by news the European Commission wants to make its recent proposals on energy security and climate change, including a proposal to cut CO2 emissions by a least 20 percent, legally binding in 2020.

While this isn’t the usual criterion on which most investors make decisions, according to Standard and Poor’s, this ethically minded hedge fund has made a bid-to-bid return of 82.87% against the sector average of 48.88% over the three years to 2006.

German Finance Minister Takes A Closer Look at Hedge Funds

German Finance Minister Peer Steinbrueck will push for more oversight of hedge funds at this week's G7 meeting in Essen, Germany. In particular, Steinbrueck wants banks to disclose to regulators how much money they lend to the hedge funds, it was reported by Spiegel magazine.

Germany would like greater control over the highly speculative funds in the interests of the international financial system, and has promised to make this a priority of its G8 presidency. Germany is at the core of the euro single currency zone and the European Central Bank is building a huge new headquarters in Frankfurt.

Major German corporations have adeptly ridden the wave of globalization and exports continue to soar even during 2006 with the euro hitting near-record highs against the dollar.

Steinbrueck has been a Social Democrat for more than 35 years, he began his political career in the federal Ministry of Construction in 1974, and has since been riding high as finance minister, having presided over a cut in Germany's budget deficit to bring it in line with the eurozone's strict fiscal target for the first time since 2001.

Former Head of Hedge Fund Faces 20 Years For Fraud

John H. Whittier, the former head of Idaho hedge-fund company Wood River Capital Management LLC has been indicted on criminal charges that he engaged in a securities fraud scheme that allegedly cost investors $88 million. The SEC originally filed civil charges against Whittier and WRC back in October 2005. Whittier could serve as much as 20 years on each count.

Whittier has been charged with securities fraud, failure to disclose a beneficial interest in 5% or more in a publicly traded security and two counts of failing to disclose a beneficial interest of 10% or more in a publicly traded security.

Prosecutors alleged Thursday that Whittier, from fall 2004 to September 2005, schemed to defraud investors in the company's U.S.-based Wood River Partners LP and Cayman Islands-based Wood River Partners Offshore Ltd. hedge funds by acquiring beneficial ownership of more than 70% of the common stock of EndWave without disclosing that ownership as required by the SEC.

The government said Whittier also accumulated beneficial ownership for the Wood River U.S. fund and other managed accounts of more than 20% of the common stock of New Jersey digital media and publishing company MediaBay Inc. without disclosing that ownership as required by the SEC.

Prosecutors alleged that Whittier falsely represented to investors that the funds had a broad investment strategy and no investment would ever constitute more than 10% of their holdings, he also falsely represented to investors that the U.S. fund was audited by outside auditors.

Ex Morgn Stanley Employee Pleads Guilty In Hedge Fund Conspiracy

Ira S. Chilowitz, former employee of the brokerage firm Morgan Stanley & Co has pleaded guilty to four counts relating to the theft of information regarding hedge funds, conspiracy, transportation of stolen property, theft of trade secrets, and unauthorized computer access. He faces a total maximum sentence of 26 years' imprisonment and a maximum fine of $850,000.

Chilowitz was charged with conspiracy and unauthorized computer access, according to a criminal complaint unsealed in July of last year.

Federal prosecutors charged Ira Chilowitz with stealing the confidential pricing information from Morgan Stanley’s hedge fund prime brokerage group and passing it on to a “co-conspirator’’ at a midtown company that provides advisory services to hedge funds.

From about December 2005 until about February 2006, Chilowitz conspired with another individual, who was a former Morgan Stanley client service representative, to misappropriate the Client Rate List and to transmit it, via e-mail to his partner. Morgan Stanley provides financial and administrative services to numerous hedge funds and the data in the Client Rate List is not generally known to the public and is valuable to competitors of Morgan.

Chilowitz admitted in court during his guilty plea that he took the confidential and proprietary information from Morgan Stanley because it would potentially assist him in generating business for a consulting firm they had planned to launch.

Hedge Fund Care Award Gala

Speaker Nancy Pelosi is to be Special Guest at the 9th Annual Hedge Funds Care New York Open Your Heart to the Children Benefit. The Hedge Funds Care Award for Caring will also be awarded this year at the gala event at the Marriott Marquis Hotel in New York. The benefit is taking place on February 8th, 2007.

Pelosi, long a champion of children's rights, will be joined by two devoted advocates for the rights of abused, neglected and at-risk children: Michael Vranos, Founder and Chief Executive Officer of Ellington with assets under management of over $21.7 billion. Mr. Vranos was cited by Global Finance magazine as one of the world's 600 most powerful people in finance, and Shari Shink, Founder and Executive Director of the Rocky Mountain Children's Law Center.

The flagship event will be chaired by Mitchell Lieberman of Goldman Sachs and Michael Tannenbaum of Tannenbaum Helpern Syracuse & Hirschtritt LLP. The three individuals being honored represent the very ideals Hedge Funds Care was created to serve. Each has displayed a commitment to the rights of children and families through their work in government, philanthropy and children services.

For more information on the hedge fund event visit; http://www.hedgefundscare.org/2007/ninth-annual-northeast-open-your-heart-to-the-children-benefit/

MARHedge Holds Hedge Fund Conference In San Francisco and Switzerland

MARHedge is holding the 13th Annual Institutional Investment Conference, April 15–17 in San Francisco. The conference is designed to assist investors in exploring hedge fund strategies that can be employed to meet their investment objectives. MARHedge boasts a highly interactive agenda, including focused panels and workshops, that thoroughly examines the expanded role for hedge fund vehicles in institutional portfolios.

The majority of the speakers are investors and investment consultants, who will offer practical and implementable information and suggest ways to help protect capital, increase diversification of the portfolio and generate alpha.

MARHedge/Institutional Investor plans to delve deeply into the practical issues of using hedge funds and funds of hedge funds to meet investment objectives by accessing new talent and new opportunities. Some of the key players in the hedge fund industry will be attending, according to a statement, and there will be time for interaction with colleagues and peers during cocktail receptions and dinners throughout San Francisco.

MARHedge is also presenting the Institutional Investor 12th Annual European Conference On Alternative Investments on February 5 - 7, 2007 at the Hotel President Wilson in Geneva, Switzerland.

Man Investments Announces Fund Launch

Hedge fund Man Investments announced the launch of a new fund in the Man MGS Access Series 2 Ltd.

The fund will be offered in two bond classes, both targeting a moderate level of 8-10% annualised volatility. The USD bonds will aim for annualised returns of 13-16% and EUR bonds will target annualised returns of 11-14%.1 Investors will also benefit from a capital guarantee from Citibank, N.A., London Branch2, and a profit lock-in feature3.

Only managers that are highly-rated by Man Global Strategies (‘MGS’), a core investment manager of Man Investments, will be considered for inclusion in the portfolio, comprised of about 15 hedge funds. MGS has negotiated favourable terms with these managers, several of which are closed to new investors. These terms include increased levels of reporting, the flexibility to adjust the amount of money invested with the manager.

“The quality of the managers in the Access portfolio and the high level of transparency that we have into their daily operations gives us the confidence to offer such a concentrated and dynamic portfolio,” said Antoine Massad, Chief Executive of Man Investments Middle East. “This has allowed the structuring experts at MGS to develop a product that offers the potential for strong capital growth and diversification with the security of a capital guarantee.”

Man MGS Access Series 2 Ltd will be open for investment from 29 January 2007 to 12 March 2007. The minimum subscription being $50,000, with the maturity date being 31 May, 2019.

Man also announced a new hedge fund product, Man-IP 220 Plus Series, Series 3 was launched earlier this year, and raised over US$ 430 million, a new record for Man's guaranteed products. Series 4 aims to generate strong profits for hedge funds in falling as well as rising markets, performing independently of stocks and bonds.

Hedge Funds Examine Airline Merger

Delta Air Lines is planning a reorganization of its business plan, including a possible merger that is said would improve service, but is being scrutinized by hedge fund shareholders.

US Airways has offered to buy Delta in an $8.4 billion bid, and Delta has the option to sell before Feb. 7th when the U.S. Bankruptcy Court for the Southern District of New York holds a hearing on Delta’s disclosure statement.

The group of unsecured creditors that are questioning the merger is made up largely of hedge funds holding billions of dollars in claims. The hedge fund team said in a statement that they "look forward to analyzing carefully and discussing with Delta the proposed plan and the assumptions upon which it is based however..... it expects Delta to consider alternatives to its proposed stand alone chapter 11 plan to ensure that creditor recoveries are maximized."

The Unofficial Committee of Unsecured Claimholders includes 18 hedge funds and investment management companies that hold $2.35 billion worth of creditors’ claims against Delta and its subsidiaries. The hedge fund team was formed in Dec 06 and is represented by Paul, Weiss, Rifkind, Wharton & Garrison.

On Jan. 10, the hedge fund group called on Delta to allow US Airways to postpone the Feb. 7 disclosure hearing so that the proposal could be fully evaluated. Other creditors, such as those on the unofficial committee, could pressure larger creditors to force Delta's hand. If approved, the statement will be submitted to a vote of all creditors.

SEC Reviews New Hedge Fund Rules

The Managed Funds Association, the main lobbying group for hedge funds, has urged regulators to increase the minimum investment for hedge funds as an alternative to tighter oversight. The proposed new rules are now up for review before the SEC.

This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify.

The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement. The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws.

Christopher Cox, the current SEC chairman, said in December that the SEC's proposed rules "do a much better job of assuring that individuals investing in private funds are likely to have the knowledge and the sophistication that's necessary."

The Bank of New York Tops $100 Billion in Hedge Fund Assets

The Bank of New York has surpassed the $100 billion mark in hedge fund assets under administration, reflecting rapid growth in the bank's focus on hedge funds, funds of hedge funds, multi-strategy hedge funds, and European- based hedge funds.

In the last five years the Bank has grown hedge fund assets under administration from $16 billion to $100 billion and last year posted a 41% increase in assets under administration. The Bank has also experienced significant growth in the average fund size and number of hedge fund structures serviced as part of a strategic focus on building long-term relationships with the leading industry funds.

"We have posted consistently strong organic growth in our hedge fund administration business by customizing our core operational and technology expertise to meet the unique needs of the industry," said Brian Ruane, executive vice president at The Bank of New York. "With institutional demand for hedge funds expected to triple by 2010, we are uniquely positioned to serve this burgeoning industry through hedge fund administration and a variety of other securities services."

Global institutional demand for hedge funds will increase from $360 billion currently to more than $1 trillion by 2010, according to a recent study of leading institutional investors, investment consultants and hedge funds by The Bank of New York and Casey, Quirk & Associates LLC. Retirement plans globally will account for the vast majority of asset flows.

In addition to hedge fund administration, the Bank offers accounting, cash management, collateral management, custody, trust, asset management and private banking services to the hedge fund industry.

The Bank of New York Company, Inc. has a global array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide.

Silver Creek Hedge Fund Hires New Director

Silver Creek Capital Management LLC, a leading manager of funds of hedge funds with approximately $6.5 billion in assets under management, today announced that Steven H. Bloom, founder and Managing Partner of Sagamore Hill Capital Management LP, has joined the firm as Senior Managing Director.

In this role, Mr. Bloom will oversee Silver Creek’s Early Advantage Fund, a multi-manager fund that invests in emerging hedge fund managers, and will assist with all aspects of the firm’s investment process. Based in Silver Creek’s New York office, Mr. Bloom will also be a senior member of the firm’s investment committee.

“We are very excited to bring someone of Steve’s caliber on to our investment team,” said Eric E. Dillon, co-Founder and Managing Member of Silver Creek. “We look forward to leveraging Steve’s deep industry knowledge and broad experience to identify uniquely promising emerging hedge fund managers.”

Mr. Bloom has extensive experience in hedge fund management. He was the founder and CEO of Sagamore Hill Capital Management LP, previously a multi-billion dollar multi-strategy global hedge fund, where he was the head portfolio manager, responsible for overall fund management and the development of numerous fundamental and arbitrage investment strategies.

Silver Creek is a fund of hedge funds management firm with offices in Seattle and New York, whose team has been managing funds since 1994. Silver Creek manages a variety of multi-manager investment products designed to deliver superior, risk-adjusted, absolute returns.

Hedge Fund Sentiment Survey Shows Technology as Best Investment

VanthedgePoint Group Inc. announced the results of its second annual Emerging Hedge Fund Manager Sentiment Survey.

When asked where to invest in the U.S. stock market, hedge fund managers said that Technology (41.0%), Financial Services (31.2%), Consumer Goods (26.2%), Food & Beverage (21.3%) and Defense (21.3%) will be the best performing sectors in 2007.

57.4% of emerging hedge fund managers indicated they are largely "neutral" on the U.S. economy for 2007. Approximately one-third are "bullish" on the economy and U.S. equities. They believe a continued "Real state market slowdown" (29.5%) and "inflation" (21.3%) will play the biggest role in how the U.S. economy will fare this year.

Over half of all respondents manage hedge funds with less than $10 million in assets under management, while over 85% currently manage less than $100 million. In addition, emerging hedge fund managers indicated that the most difficult aspect of running a hedge fund business is "raising capital/marketing".

In 2006, the Emerging Hedge Fund Manager Sentiment Survey results turned out to be quite accurate. Last year, respondents predicted increasing energy costs and a real estate market slowdown, both of which slowed the U.S. economy in 2006. They correctly predicted that Technology, Raw Materials, Financial Services and Defense would be among the top performing sectors in the U.S., and they narrowly missed the mark by indicating China would be the best performing international market.

VanthedgePoint Group, Inc. is an integrated financial services holding company focused on delivering products and services to emerging hedge funds. VanthedgePoint offers customers a comprehensive solution that includes U.S. and international equities, options and futures execution along with equity finance and operations outsourcing.

Hedge Fund Officials

A new trend is being seen in Washington is of some former high-ranking officials that have been reported to be testing the hedge fund waters. Former chairman of the Securities and Exchange Commission, Richard Breeden, is now a hedge-fund manager, complete with $500 million under management, a Cayman Islands registry, and an office in hedge-fund capital Greenwich, Conn. According to an article in the New York Times, he "has no investing experience." but, "Mr. Breeden is now perhaps the most senior former government official ever to run a hedge fund."

Clinton Secretary of State Madeleine Albright, also of no investing experience, launched the emerging-markets hedge fund Albright Capital Management, with $329 million in seed money from a Dutch pension.

In October, mammoth hedge fund/private-equity firm DE Shaw appointed Clinton Treasury Secretary Lawrence Summers as a part-time managing director, and Cerebus Capital, another mammoth hedge-fund/private-equity firm, named departing Bush Treasury Secretary John Snow as chairman. As more big institutional investors such as pension funds allocate capital to hedge funds, we should expect more such career switches.

Emerging Market Hedge Funds are in Full Swing Studies Show.

Hedge funds that specialize in emerging markets rose 20.49% in 2006, according to new data, and mergers and acquisitions in emerging markets reached a record value of $635.4 billion in 2006 via 10,995 deals, according to data company Dealogic. China was the busiest emerging market with deals worth $104.3 billion, an increase of 69% on 2005. Russia and South Korea followed with $98.5 billion and $42.3 billion worth of deals respectively.

The MSCI Emerging Markets index rose 29.2% last year, Oliver Schupp, president of the index said in a statement, "Record highs in global markets and mergers and acquisition activity along with a stronger than expected earnings season, a pause in the continual increasing of interest rates by the Federal Reserve, high energy prices and volatility fluctuations were positive contributors to hedge fund performance in 2006."

The average emerging market fund beat out all other individual hedge fund strategies, according to numbers published by New York-based Credit Suisse's Credit Suisse/Tremont Hedge Fund Index. Hedge Fund Research Inc. said the average hedge fund gained 12.99%.

Amarid Hedge Fund Launches New Movie Making Fund

Simon Fawcett, chief executive of hedge fund Aramid Capital Partners, announced that they are spearheading the launch of The Aramid Entertainment Fund, a hedge fund with a strategy of financing independent British films.

Aramid was formed with three other film finance experts, namely Tim Levy of the UK's future films, David Molner from Los Angeles firm Screen Capital and Thomas Adamek from Stonehenge Capital.

The hedge fund team has in the past financed films including "Kill Bill 2", "The Queen", "Girl with a Pearl Earring", and "Bend it Like Beckham". According to the Times Online, the new Aramid Entertainment Fund is planning on backing Manolete, a biopic of Spain’s most famous bullfighter. The hedge fund, which was launched last October, expects the film to premiere at the Cannes Film Festival in May.

Aramid is expected to raise well above the £150 million originally targeted by the end of this year, as hedge fund interest in film financing picks up speed in Britain. Experts are saying that hedge funds are increasingly interested in asset-backed lending, such as film and television financing, because it offers an opportunity to diversify their investments.

The hedge fund works by offering “bridge finance” to UK producers, the hedge fund offers credit to film companies based on the tax rebates that they will receive when the film is complete. Under a new tax scheme to encourage film-making in Britain, producers can gain tax credits depending on how much of a film is produced in the UK. It does take time to receive the benefit in cash, however, which is where the hedge fund intends to come in and provide finance to bridge the gap.

A more common tax-based method of financing is for investors to lend money to finance films, then offset the cost of making the film against their personal tax liabilities. Aramid demands a minimum investment of $50,000 and targets a 20% yearly return for investors.

Hedge Fund RCB Indexes Up

RBC Capital Markets reported that for the month of December 2006 the RBC Hedge 250 Index had a net return of 1.41%. Bringing the year-to-date return of the Index to 10.64%. These returns are estimated and will be finalized by the middle of next month. The return for November 2006 has been finalized at 1.60%.

The RBC Hedge 250 Index is an investable benchmark of the performance of the hedge fund industry. The Index operates in accordance with a unique construction methodology. Comprised of more than 250 actual hedge funds, the RBC Hedge 250 Index is positioned as the industry's most diversified and representative investable index. The Universe on which the Index is based currently consists of 5,635 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $1.159 trillion.

Since its inception on July 1, 2005 through the end of November 2006, the RBC Hedge 250 Index has had an annualized net return of 10.76%. In comparison, over the same period, other investable indices have averaged 7.43% while non-investable indices have averaged 12.63%, according to information reported by the sponsors of RCB.

Executive To Leave Position 2 Years After Hedge Fund Buyout

Cerberus Capital Management LP, the New York-based $16 billion hedge fund, announced that executive chairwoman Vanessa Castagna will leave her position Feb. 1, Rick Leto, president and chief merchandising officer for Mervyns, will take over day-to-day management of the 172-store chain. The hedge fund bought Mervyns from the Target Corp. in 2004.

"Vanessa's leadership was instrumental to Mervyns' successful transition as an independent company," Leto said in a statement. "We thank her for her commitment to the company and many contributions and wish her well in her future endeavors." The Mervyns announcement did not offer details about Castagna's plans. She came to Mervyns after leading a similar turnaround at a much larger retailer, JCPenney.

Castagna is credited with reviving Mervyns at a time when many retail analysts predicted its demise. Target, the highly successful discount retailer, was blamed for neglecting Mervyns and Marshall Field's, the upscale Chicago-based department store that was bought by the Federated Department Stores Inc and converted into Macy's.

Cerberus is a privately owned hedge fund, run by 45-year-old financier Steven Feinberg. Former Vice President Dan Quayle has been a prominent Cerberus spokesperson and runs one of its international units.

Founded in 1992, Cerberus invests primarily in companies which are near bankruptcy and hopes to make the businesses it acquires profitable. The company has bought out many businesses over the past several years and now includes sizable investments in sportswear, paper products, military services, real estate, energy, retail, glass making, transportation, and building products.

Hedge Fund Doubles Turnover by $229 Million

RAB Capital, the $5 billion hedge fund, doubled its turnover for the year to at least $229 million, while pre-tax profit soared 95% and assets under management went up to $5.18bn.

Assets under management as at 31 December 2006 jumped 98% from $2.62bn a year earlier “After an excellent opening four months, trading in 2006 became more challenging during the summer period, but conditions improved significantly in the fourth quarter,” the hedge fund said.

Net asset inflows were strong in the first half and there was a revival in the final quarter which included a long term allocation of $200m by Mittal family trusts to RAB Special Situations.

“The near-doubling of assets under management over the course of 2006, further successful investment performance and an even stronger balance sheet, give us an excellent base from which to advance in the year ahead,” said chief executive Philip Richards.

“2007 offers RAB Capital new opportunities, and management will focus both on organic growth and on those opportunities that add to our strong existing line-up,” added executive chairman Michael Alen-Buckley.

Hedge Fund Defends Winning Strategy

Multimillionaire hedge fund co-founder, Paul Marshall, defended his hedge fund Marshal Wace and its controversial strategy, which relies on investment ideas supplied by City stockbrokers, he said in an interview with the Times.

Marshal doesn't believe that his system, called Tops, would encourage market abuse. The hedge fund, which manages only about $11 bn but it is thought to trade a greater volume of European equities than any other fund, is reputed to pay out £250 million in commission each year to equity salesmen to ensure that it is in the best position to make the most of a good investment opportunity.

Mr Marshall said: “Our audit trail and compliance procedures act as a very strong deterrent to anyone who even considers entering unauthorised information into the Tops system.” Tops was the attraction of MW Tops, a listed hedge fund that Marshall Wace floated last month in Amsterdam.

The Tops methodology goes to the heart of the firm’s success. It has also raised the eyebrows of regulators, although the Financial Services Authority recently gave the practice a cautious nod of approval, despite fears that the system might encourage people in investment banks to pass on recommendations based on inside information.

Hegde Fund Offers to Buy Out Near-Bankrupt Company

The hedge fund Farallon Capital Management, which owns 11% of shares in The Mills Corp., proposed pumping $499 million into the mall developer to help ease the company's heavy debt and avoid putting it up for sale at a depressed price.

The hedge fund said in a Securities and Exchange Commission filing that the recapitalization would buy Mills time to "move from a triage mode into a recovery mode." Farallon said Mills requested the proposal.

The hedge fund offered to buy Mills shares at $20 and set a Friday deadline for the two sides to agree on the proposal. The extra money would give Mills a cash infusion to cover some of its debt, which Mills warned last week could drive it into bankruptcy.

Hegde fund Farallon also said it could keep Mills from having to sell itself out of desperation to cover its debts. "Any sale today would almost certainly be at a discount in order to compensate the buyer for abnormal conditions," Farallon wrote in a letter accompanying the SEC filing.

Those abnormal conditions include widespread accounting problems that have forced Mills to delay several SEC filings and restate earnings dating to 2001. Mills said last week that an internal review uncovered extensive accounting errors, some the result of possible wrongdoing by company officials.

The company also warned that it is struggling to repay the $1 billion remaining on a loan it took out from Goldman Sachs Mortgage Co. last year to help it stay afloat. That loan is due at the end of March.

Chief Exec and Vice President Quit after Hedge Fund Takeover

Catalyst Paper Corporation announced that it has accepted the resignations of its two executives Russell J. Horner, president and chief executive officer, and Ralph Leverton, vice-president, finance and chief financial officer.

The announcement of the departures follow the company's partial takeover by an American hedge fund, Third Avenue Management LLC. Last October, Third Avenue acquired approximately 18% of Catalyst's common shares for $128.7 million cash, raising its stake to about 38%.

This purchase invalidated an agreement between Horner and the company limiting change of control to 25%.

An executive search is underway to identify their successors and both executives have agreed to remain with the company to the end of the next annual meeting of shareholders to assist in the transition. “We appreciate their loyalty, dedication and willingness to facilitate a smooth transition as the board completes its selection of new executives who will build on the fundamental strengths of the business.” Catalyst said in a press release.

Horner has been with Catalyst and its predecessor companies for more than 30 years. He will receive pension benefits of almost 5 million. Leverton, who has been with the company for seven years will take a $1.6-million payment.

"The stock was drifting lower and lower," said an investor, "Here was an investor from the U.S. with a good track record taking an interest in Catalyst. They obviously weren't doing this without a plan as to how to turn the company's fortunes around.

"I wouldn't be surprised if Third Avenue had a management team or a number of individuals that they shortlisted for key executive positions before they started investing in the company. If your hockey team isn't doing well, you replace the coach."

On the TSX on Monday, Catalyst's stock closed at $4.15, up 1%, before the changes were announced. When Third Avenue completed its bid to gain 38% of Catalyst in October, the stock was trading at $3.30. "The stock has come up some 25 per cent," said the trader "So if you were a shareholder at that time, you are definitely going to support Third Avenue because now the share price is going in the right direction.

Alternative Investment Survey Shows Hedge Funds Will Continue to Grow

Deutsche Bank announced the results of its Fifth Annual Alternative Investment Survey, which was conducted during the second half of 2006. Over 1000 representatives from almost 700 institutions responded to the $1.4 trillion industry survey.

"Despite a series of setbacks and scares in 2006, survey respondents feel the hedge fund industry will continue to grow modestly in 2007," said John Dyment, Global Head of the Hedge Fund Capital Group at Deutsche Bank. "Investors indicated that they are keeping the market and industry events of 2006 in perspective and using risk management as key factor in selecting hedge fund managers."

According to investors, hedge funds that invest in China are going to see a huge jump in assets; Deutsche Bank predicts inflows of more than 38% of current investment levels to these funds. Emerging Asia is predicted to be the top performing region for the second year in a row. Pensions, government organizations, endowments and foundations are particularly interested in this region, with more than half of these respondents indicating that they will increase their exposure to the region.

The survey included banks, hedge funds, corporations, insurance companies, consultants, family offices, high net worth individuals, wealth management companies, funds of funds, pensions, government organizations, endowments and foundations.

Deutsche Bank is one of the largest financial institutions in the world with approximately Euro 972 billion in assets and 63,751 employees in 74 countries worldwide.

Canadian Hedge Fund Regulation

The Canadian Securities Administrators is working to improve its regulatory framework for hedge funds.

According to a staff notice summary (81-316 Hedge Funds), the CSA conducted a review in response to increased retail interest in hedge funds. The review was done through a combination of compliance reviews of fund managers and advisers, disclosure reviews and industry consultations.

Based on the review, the CSA determined that while an appropriate securities regulatory framework exists for hedge funds in Canada, certain areas can be improved. "Regulators in Canada recognize the increased popularity of hedge funds among retail investors," said Jean St-Gelais, Chair of the CSA and President & Chief Executive Officer of the Autorité des marchés financiers (Québec). "While we feel the necessary regulatory framework is in place, it is important to continually examine the framework against new products in our evolving markets."

The CSA, the council of the securities regulators of Canada's provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.

Shariah Capital Finds Islamic Hedge Fund Niche

Hedge fund Shariah Capital is looking for strategic partners in the Middle East among the local banks with international funds, and major investment institutions and high net worth individuals. “Hedge funds are all about diversification” they say.

But wealthy Muslim investors in the Gulf Arab region and Asia have traditionally frowned on hedge funds because they adopt strategies that are considered forbidden by Shariah. Shariah being Islamic law.

So several fund managers have been trying to develop Shariah compliant strategies that will emulate the strong returns of hedge funds and tap some of the estimated $750bn in Islamic assets parked equity and property related funds. The oil-rich Persian Gulf region has close to a trillion dollars of liquidity.

The ideal ‘fund of caution’ for the Arabian investor is an Islamic hedge fund of funds, argues Eric Meyer, President and CEO of US based Shariah Capital who visited Dubai for the Islamic Funds World Conference to promote what is believed to be the first Shariah compliant fund of hedge funds. “Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. This is one reason for their strength. It is true that borrowing by hedge funds improves return in a bull market but this will also magnify losses in a downturn.” Meyer said.

The firm spent the past six years working with Islamic scholars, as well as Western financial and legal experts, to develop risk management tools that enable observant Islamic investors to participate in the alternative investment world. The hedge fund developed the software to screen thousands of publicly-traded companies for Shariah compliance in seconds in 52 securities markets around the world.

Meyer's firm initially sought the fatwas to launch its own Shariah-compliant fund of funds. Now, the division of Meyer Fund Management LLC has expanded its business strategy. It is making its investment vehicles available to other alternative investment managers who want to create their own Shariah-compliant funds to attract investors in the Middle East and Asia.

Amiri, a UK-based Islamic investment manager with a partner in Bahrain, also believes it has found a Sharia compliant way to emulate one of the conventional hedge fund strategies short selling. He plans to launch a global long short equity hedge fund in 2007 that it says will comply with Shariah.

A conventional short is forbidden by Shariah because it requires a hedge fund to sell something it does not own, while pay out interest to brokers, considered usury in Islam. The $1.3tn global hedge fund industry plans to develop a viable $50bn Islamic niche market in the next three years, according to sources.

London Hedge Fund Launch

Brevan Howard, the hedge fund manager, is planning to raise up to £1bn through the first hedge fund listed on the main London market, investing the proceeds in the four-year-old manager’s flagship global fund

BH has rapidly risen to be one of London’s biggest hedge fund managers, the fund manages $11bn, mainly used for macroeconomic bets. BH is planning the new fund to run a similar strategy to MW TOPS, which was listed in Amsterdam by Marshall Wace, a rival British hedge fund group, in December.

The Financial Services Authority (FSA) is in the process of relaxing rules to allow single-strategy hedge funds to float in London. The move will be a coup for the London Stock Exchange after it lost out to its European rivals last year because of its ban on listed specialist hedge funds.

Marshall Wace’s listing on Euronext Amsterdam last month was the largest ever for a single fund, raising €1.5 billion for MW TOPS. It came after Sir Andrew Large, the former Deputy Governor of the Bank of England and its chairman, attacked the FSA’s restrictions as anachronistic.

Single-strategy hedge funds, as distinct from funds of hedge funds, had been banned from full listings in London because they were not sufficiently diversified and because of restrictions on short-selling.

BH was set up in 2002 by Alan Howard, Credit Suisse’s former head of interest-rate derivatives trading. Since then, its main global fund has returned 10.2 per cent a year with low volatility.

Hedge Fund Picks SEI as Partner in Outsourcing

Rock Ridge Advisors has selected SEI to provide a operational outsourcing solutions for its hedge funds. SEI was selected in a competitive evaluation process among some of the most notable providers in the industry. The company's combination of deep industry expertise, advanced capabilities, robust infrastructure, and innovative technology were pointed to as key differentiators in the selection process.

"To be a successful investor in today's evolving markets we recognize the need to implement an efficient and innovative investment process with solid operational expertise," said Woody Jay, Rock Ridge's Co-managing Partner. The deal points to an industry trend as investors continue to push hedge funds to seek out larger institutional partners amid increased competition and regulatory scrutiny.

"As the hedge fund sector becomes more competitive and investor driven, the selection of an outsourcing partner becomes even more critical," said John Alshefski, head of Business Development for SEI's Investment Manager Services division. "We're seeing hedge fund clients looking for larger institutional partners with broad capabilities, resources and credibility. We're excited to partner with Rock Ridge Advisors as they look to grow their funds and provide new levels of service to their investors."


Rock Ridge Advisors is a Greenwich, CT.-based hedge fund managed by Woody Jay and Brian Pennington. Rock Ridge Advisors launched the Rock Ridge Funds eighteen months ago with $75 million in assets, and is growing rapidly, currently managing approximately $300 million for institutional clients.

Hedge Funds asked to Bid on Ameriquest

Ameriquest has had talks with several hedge funds recently, including Ellington Capital Management, a large Old Greenwich, Conn.-based hedge fund, to see if there would be any interest in bidding on their company.

News of the possible sale was first reported by trade publication Asset Securitization Report. The New York Post reported that a source familiar with the hedge fund said J.P. Morgan bankers representing Ameriquest asked the fund if it was interested, fund executives haven't decided if they want to proceed and receive an offering circular.

Ellington's strategy relies on their ability to identify and purchase undervalued securities. They manage around $4.5 billion, with over $3 billion dedicated to mortgage bonds. Ellington’s Managing Directors are also investors in its strategies, with over $50 million of their capital invested alongside its clients’ capital. One of the hedge fund's specialties is hedging what Wall Street terms "mortgage credit risk" or the risk that homeowners with less than stellar credit profiles - which is Ameriquest's customer base - might default or fall behind on their payments.

According to rival hedge fund managers, selling the privately held Ameriquest to Ellington is a good idea, "Ellington has hundreds of millions of dollars in sub-prime paper on their books, they have good risk management and they have the cash. If [Ameriquest] is cheap enough, why not?," said one rival hedge fund manager. This rival noted that Ameriquest's $295 million settlement with regulators last year over predatory lending abuses removed a significant barrier for a possible buyer.

Hedge Fund Managers Indicted for Fraud

The managers of KL Group in West Palm Beach, Fla. were indicted yesterday, accused of orchestrating an extensive fraud that raised more than $194 million from at least 250 investors.

KL operated many hedge funds until March 2, 2005, when the SEC filed an emergency civil action to halt the massive fraud by the group of Palm Beach, Florida based hedge funds, their principals, their unregistered investment advisers, and an affiliated registered broker-dealer. The three, Won Sok Lee, Yung Bae Kim and his brother Jung Bae Kim, are accused of promoting the KL hedge funds as successful, when, in fact, some of the funds suffered losses every quarter of their existence.

From 1999 to 2005, KL claimed to have raised at least $81 million from investors nationwide, boasting annualized returns of 125 to 150, and KL sent false account statements to investors showing similar gains. According to the complaint, the hedge funds were suffering tremendous trading losses and only about $11 million remains of the more than $81 million that investors put into the hedge funds.


The collapse of the KL Group was the subject of an article in The New York Times in August 2005 that detailed how the three principals used their expensively furnished West Palm Beach office and high-tech trading floor to lure some of Palm Beach’s elite to invest in the funds. Prosecutors say that some money was also siphoned off for the personal use of the three principals.

The scheme was further carried out, court filings say, by paying a handful of early investors with money from new investors and using counterfeit documents to report investment returns falsely to mislead lawyers and accountants as well as investors.

According to The New York Times, John Kim, who faces 35 counts of various criminal charges, including conspiracy to commit wire fraud, mail fraud and conspiracy to commit money laundering, pleaded not guilty yesterday in Federal District Court in West Palm Beach. Calls to lawyers for Mr. Kim were not returned. The other two individuals remain fugitives and are believed to be living outside of the country, according to an individual briefed on the case.

HFN Reports 2006 as Good Year for Hedge Funds

Early estimates from HFN Hedge Fund Aggregate Average shows plus 1.36% in December and finished 2006 at almost plus 12%. Although trailing the S&P 500 TR's +15.80%, 2006 was the best year for hedge funds since 2003 when they returned an average of just over plus 21%.

Since 2001, the HFN Aggregate Average has increased by over 11% while the S&P 500 has a yearly return of 2.94%, HFN reports an equal weighted average of all single manager hedge funds and CTA/managed futures products in the HedgeFund.net database, the HedgeFund.net database consists of over 7,000 current hedge funds and fund of funds.

Emerging markets were the place to be in 2006. Despite a turbulent summer, EM funds outperformed every other hedge fund strategy. The HFN Emerging Markets Average was +2.84% in December and finished 2006 +21.72%. The year ended strong for most emerging markets with the noticeable exception being Thailand where the implementation of capital controls, though only lasting one day, caused the country's equity market to finish down over 8% in December.

The energy sector ended a volatile year on a soft note. The HFN Energy Sector Average was flat in December, -0.01%, and +12.23% for 2006, but returns are more impressive taking into account that while crude oil prices were an average of 16.5% higher throughout the year, natural gas prices were an average of 22.5% lower compared to 2005.

Equity related strategies were prime beneficiaries of global market trends and other strategies which had notable years were distressed and convertible arbitrage funds.

US and Europe Conduct Joint Probe into Hedge Fund Lending

US and European regulators are conducting a joint probe into banks and securities firms to see if they are setting careful limits when lending to hedge funds.

Officials want to know how much margin banks require hedge funds to provide up front to obtain loans and cover potential losses. They're hoping to avoid the kind of turmoil that engulfed financial markets when Long-Term Capital Management LP's losses forced the Fed to organize a rescue in 1998.

The SEC, the Federal Reserve Bank of New York and the UK Financial Services Authority last month met with top lenders to the hedge-fund industry asking about the amount of collateral required by prime brokers for loans. Officials from Germany, and Switzerland are also taking part. strict enough limits on loans to hedge funds.

“We are doing work on credit-risk management with the SEC,” David Cliffe, a spokesman for the FSA, said. “It's looking at the prime brokers in relation to the hedge funds.'' The Swiss Banking Commission in Bern has worked with British, US and German authorities on the issue.

ExPirate's Launch new Hedge Fund

Two former analysts and a portfolio manager from activist hedge fund Pirate capital have joined a new hedge fund started by another ex-Pirate colleague. Andrew Stotland, a former marketer at Tom Hudson’s Pirate Capital, formed FrontFour Capital Group and launched the event-driven fund at the beginning of the month.

Zachary George and David Lorber, former analysts at Pirate, and Carl Klein, the firm’s former fixed income portfolio manager, have now joined FrontFour Capital Management. The new hedge fund is expected to launch in the coming months. Its seed investment came from Weston-Atlas Partners, a joint venture between London-based alternative asset management firm Atlas capital Group and Weston Capital.

“New York-based FrontFour employs an event-driven strategy, investing across the capital structure, pairing fundamental analysis with the identification of specific catalysts,” Stotland said. He left Pirate Capital in August. He was responsible for raising the majority of the firms assets. George, Lorber and Klein were part of a group of staff members that left Pirate in September. They departed just as Pirate saw its performance fall below its historically high returns and the firm closed its funds to new investors so that it could control its overall growth. They are now principals at the new hedge fund.

Stotland was the last of the four marketers from Pirate to find a new venture after departing the firm last summer. Miguel Triay went to New York-based Argonaut Capital Management, which runs global macro funds. Kerry Baldwin went to Brian Lippey’s Connecticut-based Trigram Capital Management, which runs an Asia fund. Meanwhile, Gregory Teitel went to Florida-based fund of hedge funds Crystal Advisors.

RFA Introduces new Hedge Fund Protection Product

Richard Fleischman & Associates (RFA), the leader in IT solutions for the hedge fund community, today announced the general availability of the eHarbor file and e-mail data backup/restore solution for hedge funds.

"The best way for a hedge fund to protect itself from disaster is to prevent it from happening in the first place. No organization is immune from lost data and the staggering costs in both time and resources involved rebuilding databases and trading history," says Richard Fleischman, president of RFA. "eHarbor is an enterprise-quality storage solution available at an affordable price. This scalable storage solution grows with hedge funds and never becomes out-dated. eHarbor was designed to provide secure, off-site storage with unlimited backup and restore capability which helps clients save money on their IT investment while protecting their most valuable asset - their data."

RFA was stablished in 1990 and headquartered in New York City, Richard Fleischman & Associates currently serves more than 400 hedge funds globally, RFA maintains a world-class data center in Westchester, NY, providing fully equipped office and trading desk space, disaster recovery and business continuity services.

Hedge Fund Manager Hired by L&G

Legal & General, the UK pension fund worth £218 billion, has appointed former hedge fund executive Ian King as head of L&G's active European equities. He was involved in 2006 in establishing KDR Europe, a European equity hedge fund, according to Reuters.

King will hold the post beginning from the end of January, the strategy is to revive its European active equity team after staff exits last year. His move to Legal & General Investment Management bucks a recent trend of managers at traditional asset management firms moving into the fast-growing hedge fund arena.

In a statement L&G said, "His (King's) immediate task will be to rebuild the active European equity team with the intention that the European equity portfolios are returned to active management by the mid-year." Before his work at KDR, L&G said, King worked at American Express Asset Management International for more than 10 years.

Legal & General is one of Britain's top 50 FTSE companies, with over 5.4 million customers L&G employs over 8,800 staff. The company has operations in the USA, France, the Netherlands and Germany, as well as the UK.