Offshore Law Pioneers Expand to Brazil

Cayman Islands law firm Conyers Dill & Pearman now has the official approval and licensing permission for a São Paulo partnership by the the Brazilian Bar Association.

As the only offshore firm to have an office in Brazil, the São Paulo practice will initially focus on investment funds, public company listings and holding company incorporations, providing clients with direct access to the key jurisdictions of the Cayman Islands, British Virgin Islands, Bermuda and Mauritius.

The São Paulo launch solidifies Conyers’ presence in the fast-growing BRIC markets. In March 2008, the firm became the first and only offshore firm to have an office in Russia with the launch of its Moscow office. In October 2008, Conyers established a presence in Mauritius, a preferred jurisdiction for structuring investments in India, and added the provision of Mauritius legal advice to its roster of jurisdictions to service the Indian, Middle Eastern and African markets.

"Even in this challenging economic climate, the prospects for leading Brazilian businesses in global commerce are immense." Conyers Chairman John Collis commented, "The firm’s entry into Brazil and the other major BRIC (Brazil, Russia, India, and China) markets is part of our strategy to provide responsive advice to our clients in the world’s key financial centres and reinforces our strength as a leader in the market for offshore legal services."

Established in 1928, Conyers now has over 550 staff and 150 lawyers specialising in the financial laws of Anguilla, Bermuda, British Virgin Islands, Cayman and Mauritius Islands, Dubai, Hong Kong, London, Moscow, Singapore and now São Paulo.

Meridian Fund Advisers Launch With Hedge Fund Specialist as Head

Hedge fund manager Meridian Global Fund Services Group has launched a hedge fund consulting affiliate team with Joyce E. Heinzerling as head.

The affiliate, Meridian Fund Advisers LLC, will provide hedge fund regulatory and corporate governance best practices advice to hedge funds both within and outside of the Meridian Global client base. In this capacity, Heinzerling will work side by side with her extensive network of leaders in the hedge fund legal and accounting fields.

“As President of Meridian Fund Advisers, Ms. Heinzerling will lead the development and delivery of our new hedge fund consulting affiliate, and help bring us to a position of distinction in the hedge fund administration industry in terms of a value add for our clients," said Randy Troy, President of Meridian Fund Services (USA) LLC.

"Meridian Fund Advisers essentially has been established to broaden and strengthen our dedication to clients in an effort to provide the highest level of client service in light of the increasingly complex issues that now arise in the hedge fund industry resulting from the heightened regulatory environment and exposure to litigation," Mr. Troy added.

Heinzerling joins Meridian Fund Advisers after serving nine years as General Counsel, CCO and Head of Operational Due Diligence at Archery Capital LLC, an investment adviser to emerging manager funds of funds. Prior to joining Archery Capital, Ms Heinzerling spent fourteen years in private practice advising hedge funds, venture capital funds, private equity funds, and mutual funds, as Asset Management Counsel at Shearman & Sterling and, before that, Kramer Levin Naftalis.

Singapore's Senior Minister to Host IFSB Summit

The 6th Annual Summit of the Islamic Financial Services Board (IFSB), is being held this year in Singapore under the patronage of Singapore's Senior Minister, Goh Chok Tong, it is themed The Future of Islamic Financial Services.

The annual IFSB Summit is the flagship event for the IFSB, and has traditionally attracted a select group of high-profile Islamic financial services industry stakeholders from across the globe. IFSB Secretary-General, Rifaat Ahmed Abdel Karim said "This 6th Summit is the first IFSB Summit to actually be held in East Asia."

26 regulators and senior personalities from international organisations, including the US, UK, EU, as well as the MENA and Asian regions, have confirmed chairing and speaking in the Summit.

The main objective of the Summit is to underline the role of the various stakeholders towards developing a robust future for Islamic financial services industry. It will be held on 7th – 8th May 2009.

Goldman Sachs Raise $5.5 Billion For Private Equity Fund

Goldman Sachs Asset Management announced today that it has raised its fifth dedicated private equity secondaries fund, GS Vintage Fund V, with approximately $5.5 billion in capital commitments.

GS Vintage Fund V will focus primarily on acquiring portfolios of private equity assets, including limited partnership interests in private equity funds, as well as providing unique liquidity and capital solutions to both limited partners and general partners around the world.

The GS Vintage Funds evaluate opportunities ranging from $1 million to over $1 billion in size, across all private equity strategies and geographies. As one of the largest investors in the secondary market for private equity, the GS Vintage Funds draw on Goldman Sachs' global sourcing network, due diligence capabilities, risk management expertise, and extensive private equity relationships.

GS Vintage Fund V is the latest fund raised by the Alternative Investments & Manager Selection (AIMS) Group of Goldman Sachs Asset Management. With more than 200 professionals worldwide, the AIMS Group provides investors diversified and customized portfolio solutions, across traditional long-only managers, hedge funds, and private equity funds around the world. To date, the private equity strategies of the AIMS Group represent more than $32 billion of capital commitments across private equity fund-of-funds, secondary market funds and co-investment vehicles.

Goldman Sachs Asset Management is the asset management arm of The Goldman Sachs Group, Inc. (NYSE: GS), which manages $779 billion as of November 28, 2008. Goldman Sachs Asset Management has been providing discretionary investment advisory services since 1989 and has investment professionals in all major financial centers around the world. The company offers investment strategies across a broad range of asset classes to institutional and individual clients globally. Founded in 1869, Goldman Sachs is a leading global financial services firm providing investment banking, securities and investment management services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.

CPIC Responds to SEC’s Proposed Curbs on Short-Selling

James Chanos, Chairman of the Coalition of Private Investment Companies, said in response to the SEC's five proposed rules put forward to curb short-selling, "Rebuilding investor confidence should be the primary objective of any new regulatory effort and it is not clear that today's proposals will meet that simple goal."

The SEC voted unanimously to seek public comments on all of the proposed rules intended to limit short-sales.

"Skeptics, independent research and critical analysis must continue to play a vibrant role for our markets to grow sustainably and with integrity." Chanos continued, "Short selling is integral to improving the efficiency of markets and enhancing market quality through narrower spreads, deeper liquidity, less volatility, and greater price discovery.

"In recent years, short-sellers have publicly warned the marketplace about the dangers at AIG, Lehman Brothers, and Enron, as well as sounding the alarm over the credit ratings agencies, non-bank subprime lenders, and credit insurers. Proposals to inhibit short-selling have the effect of limiting this vital market-based antidote to corporate fraud and speculative bubbles, and must be carefully weighed against the clear harm that comes from ill-conceived government intervention in basic market functions,” Chanos concluded.

CPIC is a coalition of private investment companies whose members and associates are diverse in both size and investment strategies.

Bank of NY Unit Expands Hedge Fund Consulting Services

Pershing LLC has expanded their business consulting services by including a hedge fund start-up simulator tool and a new guidebook to assist hedge fund managers with the launch of new funds. Pershing is a subsidiary of The Bank of New York Mellon Corporation BK.

Pershing Prime Services' Hedge Fund Start-Up Simulator was developed in collaboration with Moss Adams LLP. It provides hedge fund managers with detailed information about the infrastructure and financial workings of a hedge fund, especially during its first 18 months of operation, including the launch.

Pershing Prime Services' new guidebook entitled, A Guide to Establishing a Hedge Fund, was created in conjunction with The Bank of New York Mellon and offers an introduction to a number of critical criteria, as well as a framework for making informed business decisions.

Pershing and The Bank of New York Mellon leveraged a wide network of industry specialists to develop the guidebook, including Moss Adams, Eze Castle Integration, Inc., Stark & Stark Attorneys At Law and Sasserath & Zoraian LLP, as well as its in-house experts.

Hedge Funds Increase 1.37% In March

March was a challenging month for hedge funds, which entered the month with tight net exposures, according to research by hedge fund consultant Hennessee LLC.

Technology and healthcare/biotech were bright spots for managers, as these sectors were relative outperformers. While the strong equity rally did cause short squeezes, most hedge fund managers expect short portfolios to generate profits in the near term.

The Hennessee Hedge Fund Index advanced +1.37% in March (+1.09% YTD), while the S&P 500 advanced +8.54% (-11.67% YTD).

“Most funds were caught with tight net exposures and were unable to participate in the rally," Charles Gradante, Co-Founder of Hennessee Group said, "Managers were also hurt as the sectors they have been heavily short, such as financials, consumer discretionary and materials, were the sectors that rallied the strongest.”

“Despite the underperformance in March relative to the equity benchmarks, hedge funds are still outperforming for the year,” said Lee Hennessee , Managing Principal of Hennessee Group. “We expect that we will continue to see volatility throughout the year.”

SEC Halts Canada/China Hedge Fund Fraud

The Securities and Exchange Commission filed a restraining order yesterday to halt an on-going multi-million dollar Ponzi scheme. The SEC says that Defendant, Toronto hedge fund manager Weizhen Tang, orchestrated the fraud through an overseas hedge fund and a Texas-based investment adviser.

U.S. District Judge Jane Boyle granted a temporary restraining order, asset freeze, and other emergency relief against the Defendants, including the appointment of a receiver to take control of assets belonging to the Investment Adviser and two Relief Defendants — WinWin Capital Partners, LP, and Bluejay Investment, LLC, d/b/a Vintage International Investment, LLC.

The fraud began as early as 2004, and through the hedge fund Tang raised between $50 million and $75 million from more than 200 investors. According to the SEC complaint, Weizhen Tang (the self-described “Chinese Warren Buffet”) recently admitted to investors that the hedge fund operated as a Ponzi scheme since at least 2006.

Tang specifically targeted members of the Chinese-American community and solicited U.S. investors to directly and indirectly invest in the hedge fund, according to the SEC.

In addition to the emergency relief granted by the Court, the SEC wants permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties against the Defendants.

Hedge Funds Available In Sweden For The First Time

The Swedish state pension platform, PPM, is including Salus Alpha funds in their premium pension portfolio with immediate effect. The Salus Alpha funds that were chosen are UCITS III compliant, and meet the strict requirements regarding transparency, daily liquidity and adequate administration procedures set up for the Premium Pension Authority.

By launching the first UCITS III fund that tracks a hedge fund index in September 2007, Salus Alpha paved the way for hedge funds as an optimal portfolio component for retirement investment, by adding multi-manager alternative investment products, the returns can be increased while decreasing the risk.

The Swedish pension system is divided in three parts; income pension, guaranteed pension and premium pension. For the premium pension the pension saver has a number of funds to choose from. Every pension saver can decide in which fund and what amount of money he wants to invest. At the moment the Premium Pension Authority’s fund holdings of 5.8 million pension savers are valued at a total of 27.5 Billion Euro ($36.7 billion).

By including these funds in the portfolio the Swedish Premium Pension Authority confirmed the market leadership of Salus Alpha in the regulated alternative investment sector.

Strong Performance In First Six Months For ACP Fund

London hedge fund manager ACP Partners, which is soon to merge with TriAlpha Investment Advisors, said that their long/short eguity strategy fund, ACP Financial Opportunities, has beaten its benchmark by over 65% in its first six months.

Since the fund launch on 1 September 2008 through 28 February 2009, the new fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9%. Its benchmark, the S&P 1200 Global Financials, returned -60.7% over the same period, and the HFRI Equity Hedge Index -22.2%.

"Financials account for around 20% of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors." Stephen Greene, partner and CIO of the ACP’s Multi Manager business, said, "Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value."

"The key to achieving positive returns has been portfolio construction. The portfolio was specifically structured to benefit from the expected market volatility as we placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation. Unusually, our fund was one of only a very few fund of funds to be market neutral over this period of turmoil." Greene concluded.

As examples, the portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises. The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition. Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.

The fund has a minimim investment of $1,000,000 (or equivalent) with quarterly redemptions, and a managment fee of 1% and performance fee of 10%.

Hedge Fund Manager Silk Invest Launches Two Equity Funds

FSA regulated asset manager, Silk Invest Ltd, successfully launched the African Lions Fund and the Arab Falcons Fund, which helped the hedge fund manager achieve its goals in becoming a specialist in Arab and African equities.

The Luxembourg domiciled African Lions fund and Arab Falcons fund went live on 27th March with an NAV of Euro 100 ($135.2). The portfolio managers, based in London, Cairo, Casablanca and Johannesburg, plan to build up the portfolio up cautiously, taking advantage of liquidity opportunities.

"Raising assets in these markets proved extremely challenging," Zin Bekkali, CEO of Silk Invest said, "Ultimately, the strength of our investment proposition, and the valuation of the markets we specialise, convinced investors to support the launch."

African and Arab markets account for 4% of worldwide market capitalization and this is projected to increase as the region is set to further grow its share of the world’s GDP.

Baldwin Berges, director of business development, observed that “the funds should grow in size fairly rapidly. Investors understand well our proposition and we have built a pitch book in excess of Euro 500 million ($676.2 million). Many of these investors have committed to invest in our funds, once the fund is up and running.”

Daniel Broby, the Chief Investment Officer of Silk Invest says that the launch “is perfectly timed from an investor perspective. There is now immense opportunity in frontier markets of the dramatic declines caused by the credit crisis.”

Stark Opens NY Hedge Fund Hotel

"The bright side of an economic downturn is that business people are branching out on their own," said Adam Stark, president of Stark Business Solutions. "We have made it seamless for enterprising individuals to establish new businesses without significant expense and with very little risk. We are looking forward to helping grow the business community in Scarsdale."

Customized trading floors have been installed to accommodate hedge funds and trading operations along with mahogany furnishings. SBS operates three other executive suites in Westchester: White Plains, Mount Kisco and Harrison. More than 100 people attended the opening event.

Hedge Fund Manager Capitalises On Mispriced Asian Performing Debt

Singapore hedge fund manager, 3 Degrees Asset Management, is launching ADF Prime Ltd, a credit opportunities fund that will invest primarily in the performing debt obligations of Asian companies that have been mispriced as a result of the Global Financial Crisis.

3 Degrees also manages the award winning Asian Debt Fund, an Asian distressed debt fund that has been active since 2004.

In Asia, debt prices have corrected far more sharply than in the US and Europe. This is driven by technical factors, the fund manager says, as Asian investment banks unwind their portfolios, global hedge funds close their Asian operations, and capital is generally pulled from the region.

The new fund will capitalize on the systemic inefficiencies endemic to Asian credit markets. Due to the limited number of players, and the highly relationship‐driven nature of Asian markets, inefficiencies are being exaggerated by the global financial crisis.

Targeting quality companies that either have, or can generate, enough cash flow to repay maturing debt without dependence on capital markets, the fund seeks annual, unlevered net returns in excess of 25%.

3 Degrees has received numerous awards, including “Best Asian Distressed Debt Fund”
and “Best Singapore Hedge Fund”. In 2007, Moe Ibrahim, the founder, was selected as
One of 20 Rising Stars of Hedge Funds by Institutional Investor. ADF Prime will be co‐managed by Moe Ibrahim and Jeff Tolk.

ADF Prime is also available to institutional investors and ultra high net worth individuals via the Firm’s Managed Accounts platform.

Hedge Fund Shareholders Seek Legal action

A former hedge fund shareholder of Canadian securities company, Capital Units of Oil Sands Split Trust, is taking legal action regarding the Trust's Special Annual Retraction that occurred in December, 2008.

The hedge fund said it would take the complaint to the Ontario Superior Court of Justice for, among other things, the timing of the payout and reimbursment of the money owed.

Sentry Select said in a statement that the legal action is without merit and, if the application is brought, it will be vigorously defended.

The Economist to Launch London Theme Park

As part of a strategy designed to broaden the revenue base, leverage content over new platforms and promote The Economist brand to a young and dynamic audience, The Economist Group is delighted to announce the development of a public-entertainment facility that combines the magic of a theme park with the excitement of macroeconomics.

After six months of negotiations with the British government, The Economist Group can confirm that Econoland will be built on a former industrial estate in East London, close to the beating heart of the City and thus to a large potential market of financial-sector employees.

Thanks to issues relating to its previous use, the site has been acquired at an advantageous price. Most of the toxic wastes have been cleared and levels of carcinogens appear to have returned to normal. High unemployment in the area will only increase the facility's attractions, as former City workers seek to recapture some of the excitement they enjoyed in their professional life. Heavy investment in security and a landscaped moat and electric fence will neutralise any potential threat from the growing anarchist presence.

Among the thrilling experiences Econoland will offer are:

The currency high-roller: Float like a butterfly with the euro and drop like a stone with the pound!
Chamber of horrors: Tremble at the wailing of distressed debt!
Fiscal fantasyland: Watch the economy shrivel before your very eyes as you struggle to stop growth falling!
Bankrupt Britain: Pit your wits against the government as you try to sink sterling and bring the country to its knees!
The severe contest: Try your strength against a bear market!

Econoland will appeal to the kid in everyone, although children themselves will not be admitted. The park will open on April 1st.

Explore a clickable map of The Economist's new theme park

Hedge Funds Size/Performance, Crisis Analysis

West Palm Beach (HedgeCo.net) - A recent paper by AlternativeSoft regarding the influence of hedge fund size and strategy during the recent crisis, showed that that from July to December 2008, large and medium hedge funds outperformed their smaller peers in terms of returns; also large hedge funds outperformed smaller hedge funds in term of Sharpe ratio.

The study was done using the AlternativeSoft software platform, enabling the group to quickly run statistics on individual funds, as well as on a group of hedge funds.

Looking at CTA strategies, Equity Long-Short, Macro and Multi-Strategies, AlternativeSoft found that from July to December 2008, medium sized hedge funds using CTA, Equity Long-Short and Multi-Strategy performed the best; however the large sized funds had the best Sharpe Ratio. This indicates that the medium sized hedge funds were exposing themselves to slightly more risk (assuming risk is defined with volatility only). In Macro, the large funds had higher returns and larger Sharpe ratio than smaller funds.

In conclusion, the analysis found that the larger funds performed better than their smaller peers, occurring because larger funds were able to better manage risk than smaller funds. In addition, the larger funds had more experience as shown below with a longer track record history. So experience matters when crash comes.

The average track record for a hedge fund is:
Small, 66 months
Medium, 78 months
Large, 91 months
Super Large, 139 months

A basic strategy investing in the 10 Super Large hedge funds mixed with large hedge funds ($500m), would have easily outperformed the hedge fund indices and other smaller hedge funds, in term of returns and Sharpe ratio during 2008.

Hedge funds with assets over $10 million and funds of hedge funds were not included in the study. December 2008 data were not available for all funds. In the ‘Super-large’ group, two hedge funds had large returns, which may skew the results. AlternativeSoft intentionally does not use statistical measures like R-squared, t-statistics or Granger causality in order to keep the paper readable.

Tax Information Assistance In Cayman Islands Extended to 20 Countries

The Cayman Islands Government today announced that it will provide access to comprehensive tax information assistance to 20 countries, including the majority of Cayman’s major trading partners.

Ireland, Japan, the Netherlands and South Africa now join eight other countries afforded tax information assistance to OECD standards, with a "unilateral mechanism, which does not require a bilateral treaty."

“The Cayman Islands took the proactive step of introducing the unilateral mechanism for the provision of information in tax matters, as a complement to our bilateral negotiation programme,” Cayman Islands Leader of Government Business, the Honourable Kurt Tibbetts said. “We recognised the need to increase the pace at which we could enter into tax information arrangements, while offering a phased approach to our negotiating partners under our bilateral programme in appropriate circumstances. We look forward to continuing this progressive approach.”

In combination, the arrangements noted above cover four of the seven G-7 states and 17 of the 30 OECD member states.

Based on its current negotiating programme – which reflects OECD countries (including significant trading partners) that have indicated interest in tax cooperation arrangements – the Cayman Islands aims in the following months to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.

Investor Confidence in the Hedge Fund Industry - Survey

Eighty per cent of hedge fund investors continue to believe that hedge funds can provide good, long-term returns, according to a recent survey conducted by IRC Conferences / Terrapinn, a leading global business media company and organiser of London's HEDGE 2009 congress. Only 20 per cent of investors said that recent global events have shaken their belief in the hedge fund industry.

The survey, which was conducted amongst 273 institutional investors, hedge fund managers and service providers from around the world, revealed that 39% of investors believe that the current depressed markets and heightened risk premia offer a great entry point for fresh investment. Unsurprisingly, the hedge funds themselves are even more optimistic, with 55% of hedge funds stating that the current environment offers exceptional opportunity.

Responses also showed that there was widespread agreement across the industry with regard to the reforms that are required, with one exception - the prickly issue of fees.

Investors, fund managers and service providers all agreed that the industry needs to have better transparency (95%, 97% and 97%) and stronger internal risk, compliance and audit functions (93%, 96% and 100%.) They also agreed on the necessity of having stronger self-regulation and statutory regulation.

While 43% of investors rated the issue of fees "very important" in reviving enthusiasm, only 14% of hedge funds did so. It is not simply lower fees that investors want, but fees which are better structured, to align more closely hedge fund managers' interests with those of investors.

While all categories saw better self-regulation as more important than statutory regulation, the difference between investors and hedge funds was again marked. Thirty two per cent of investors see statutory regulation as "very important," but only 13% of hedge funds believe it to be so.

Three key lessons were almost universally acknowledged in the respondents' feedback. Both investors and hedge funds acknowledged that independent administrators and custodians are essential (87% and 92 % respectively) and that a greater match is needed between hedge fund terms and liquidity (85% and 80%.) They also agreed that due diligence is more important than they realized (76% and 73%.)

The more sobering news for hedge funds is the suggestion that they may have to wait until 2010 for net inflows to the industry to restart. The majority of hedge funds expect net inflows to the hedge fund industry to commence in the second half of this year, but most investors do not expect this to happen before 2010.

Unsurprisingly, the hedge funds strongly believed that money entrusted to their care needs to stick around longer term. As a result, hedge funds are more enthusiastic than ever to attract capital from long-term, institutional investors such as pension funds.

Some of the hedge funds who responded to the survey said that they are implementing structural changes to make their product offering more attractive to investors. By far the most common response was that funds are looking at how they can improve their transparency. This answer figures at least twice as much as any other issue. The following list appears in order of number of citations:

Changes being considered or enacted by hedge funds
Greater transparency
Improved communication to investors, particularly with regard to return attribution analysis
Improved internal risk management processes
Amendments to fund terms regarding gates, redemption notices or offering daily liquidity
Focus on managed accounts
More dynamic strategies to control drawdowns / more focus on "absolute return"
Focus on quality of service providers e.g. administrators, custodian
Greater focus on investing in liquid assets
Reduction in fees / offering a variety of fee structures
Improving due diligence processes
New product offerings to meet changing requirements of investors
Lower leverage
Greater focus on "values"

Institutional Investors Plan to Increase Hedge Fund Allocations in 2009

A study by State Street Corporation indicates that the turbulent financial markets have not caused major shifts in institutional asset allocations. Three quarters of institutional investors said they do not plan to modify portfolio allocations.

While the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months.

“Hedge funds have not been immune to the extremely volatile market environment,” said Gary Enos, executive vice president and head of relationship management and client strategy for State Street’s Alternative Investment Solutions team. “While alternative investments, including hedge funds, largely outperformed traditional investments in 2008, negative returns understandably disappointed. Although hedge fund allocations declined slightly over the past year, we anticipate growth will resume later in 2009, as institutional investors continue to focus on diversification and risk management.”

The results of State Street’s 2009 hedge fund study show a moderate decline in overall allocations to hedge funds, with institutions allocating more than five percent of their portfolio to hedge funds decreasing from two-thirds (68 percent) in 2007 to one half (51 percent) in 2008. Nevertheless, most institutions intend to either increase (49 percent) or maintain (39 percent) their allocation to hedge funds in the next year.

Another encouraging sign for alternatives is increased institutional interest in private equity funds. Over half of institutions (53 percent) have allocated more than five percent of their portfolio to private equity funds, and half intend to increase their allocation to private equity over the next 12 months.

Institutional investors also continue to emphasize transparency. Five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings.

New Legislation Proposed, Raising Hedge Fund Issues

Carried interest legislation is being considered at the federal, state and local level, raising significant local and international tax issues.

Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.

Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.

Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.

During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.

President Obama's Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.

900th post

Soon up to 1000!
Do I get an award?
Heh, heh...

AIMA Supports New US Treasury Investment Program

Todd Groome, Chairman of the Alternative Investment Management Association (AIMA) said in a statement regarding the Public-Private Investment Program announced by Tim Geithner, "It shows that there is recognition among policy makers at the highest level that the hedge fund industry is part of the solution."

The Treasury's Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.

"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.

"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.

"Hedge Fund Homeboys"

Press Release
Air Date: Monday, March 23, 2009
Time Slot: 10:02 PM-11:00 PM EST on ABC
Episode Title: (#103) "Hedge Fund Homeboys"

CASTLE AND BECKETT UNCOVER THE DARK SIDE OF PREP SCHOOL TEEN CULTURE WHEN A BODY TURNS UP IN CENTRAL PARK, ON ABC's "CASTLE"

- A once wealthy teenage boy whose family has fallen on hard times is found dead in a rowboat floating along the lake in Central Park. As Castle and Beckett try to piece together the events leading up to his death, his friends do everything in their power to thwart the investigation. As they unravel the truth from the lies, a story of betrayal and obsession emerges. Meanwhile, Castle debates whether he can leave Martha home alone while he chaperones Alexis' class trip to Washington, DC. Martha might be an aspiring "Life Coach," but that doesn't mean she's trustworthy, on "Castle," MONDAY, MARCH 23 (10:02-11:00 p.m. ET) on the ABC Television Network.

"Castle" stars Nathan Fillion as Richard Castle, Stana Katic as NYPD Detective Kate Beckett, Susan Sullivan as Martha Rodgers, Molly Quinn as Alexis Castle, Ruben Santiago-Hudson as NYPD Captain Roy Montgomery, Tamala Jones as Medical Examiner Lanie Parish, Jon Huertas as NYPD Detective Javier Esposito, and Seamus Dever as NYPD Detective Kevin Ryan.

Guest Cast: Jamie Chung as Romy Lee, Julia Nickson as Mrs. Lee, Nolan Gerard Funk as Brandon, Michelle Page as Amanda Kunal Sharma as Spencer.

"Hedge Fund Homeboys" was written by David Grae and directed by Rob Bowman.

"Hedge Fund Homeboys" is broadcast in 720 Progressive (720P), ABC's selected HDTV format, with 5.1 channel surround sound and Spanish subtitles via secondary closed captioning. A TV parental guideline will be assigned closer to airdate.

Febuary Hedge Fund Performance

Morningstar reported a sharp decline in credit and equity markets as the U.S. government announced its stimulus package and financial stability plan. February saw a huge sell-off in U.S. and European bank stocks caused by concerns of financial health and nationalization.

U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.

"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don't know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.

Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.

Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.

Hedge Fund Manager Investcorp buys into L'azurde

West Palm Beach (HedgeCo.net) - Hedge fund and alternative investor, Investcorp, along with its consortium partners Eastgate Capital Group and The National Investor, announced the acquisition of a 70% stake in Saudi gold and jewelry makers, L'azurde.

L'azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor, employing over 2000 people, selling throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region.

Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp's Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L'azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally.

"Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp's unique business model." Nemir Kirdar, Executive Chairman & CEO of Investcorp, said, "Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership...to add value to L'azurde over the coming years."

AIMA STATEMENT ON THE TURNER REVIEW

“We welcome the publication of the Turner Review, which is an impressive and comprehensive piece of work." Andrew Baker, Chief Executive of The Alternative Investment Management Association (AIMA), said, "It is about the banking system’s role in the current financial crisis and as such its principal focus is the banks, not the hedge fund industry. We are grateful to Lord Turner for his even-handed and measured approach and for not making hedge funds the scapegoat for this crisis."

"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.

We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.

Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.

We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”

AIMA has more than 1,200 corporate members worldwide, based in 43 countries.

Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.

European Commission Looking For Commentary From Hedge Funds

In an effort to makes major changes to the EU financial regulation services, the European Commission (EC) has launched 'Driving European Recovery', a consultation on major structural changes to European financial services and markets regulation.

The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.

The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.

The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.

The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.

The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.

Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."

Kids Beating the Market While Hedge Funds Struggle

Despite the credit crunch, sixth formers at Sunningdale Preparatory School, near Ascot, Berkshire, have entered funds into a virtual trading competition... and their early efforts are beating the market. Far from being discouraged by the doom and gloom reported on a daily basis, their interest has been ignited.

William Brooks, Deputy Headmaster, is impressed. "The boys are enthused; they have opened accounts and are trading against each other and the staff. I recently showed some prospective parents around and they could not believe their eyes... two boys discussing what limit to place on their newly acquired Allied Irish stock."
In the past, schools would introduce pupils to share dealing by referring to price lists in the daily newspapers, and tallying results by hand. But the internet has brought realistic trading simulations that bring real time reporting, automated paper trails and full historical records, all at the click of a button.

Brooks continued, "We looked at several alternatives but chose Stockopedia as it enables us to research, discuss and trade all from the same website. Using the site allows the boys to better understand market timing without risking real money, while the online community has helped to generate trading ideas."

Before the markets resumed their recent plunge to new lows, the Sunningdale sixth formers traded a rally in banking stocks and managed to exit profitably. Overall, the Sunningdale funds have outperformed the FTSE benchmark by 8.1% over the last month. At the end of March, the 2009 Stockopedia Challenge officially launches and both the boys and the staff are well placed for the prizes on offer, including flights to visit Wall Street.

Edward Croft, Managing Director of Stockopedia, is pleasantly surprised by the results. "Sunningdale's performance to date has been impressive and one of their boys, Archie Bannister, 13, has been this week's top performer. While the FTSE 100 has dropped 15% recently, his fund has made positive gains - making up 10% in the last week alone... it's a very promising start." Croft is pleased that young people are using the site to learn to become more financially autonomous. "Recent scandals, like the Madoff affair, have shown that blindly trusting market professionals can be extremely dangerous - so it's reassuring to see schools encourage independent thinking and analysis in this area at such an early age".

The Headmaster, Tom Dawson, is "delighted that the boys are filling in some of their free time in this way. My only concern is that they are proving far better investors than I am!"

Madoff Linked Fund Manager Sells NY Condo

A hedge fund manager and his partner recently sold their NY condo in Midtown East/Turtle Bay for $1.049 million, according to the Manhattan Blockshopper.

David S. Upson III is the director of hedge fund research, managing director and partner at CTC Consulting, Inc., an investment consulting firm in New York City.

Although there were some links in a court filing to the Madoff hedge fund, CTC says that none of its present and past employees have ever been clients of the Madoff hedge fund, however, according to a statement this month, CTC did provide the performance data given to them by the Madoff funds upon request.

Hedge Fund Manager Joins Water Reclamation Company

Long time hedge fund manager, Eric D. Pedersen has been appointed to the position of Chief Executive Officer and Chairman of the Board of Directors at fresh water reclamation company, STW Resources, Inc.

Pedersen has over 20 years of mergers and acquisitions and financing transaction experience, a significant portion of which has been in the water industry. Prior to joining STW, Pedersen co-managed The Water Fund, LP, a New York-based hedge fund that invested globally in water-related companies.

“We are delighted to bring someone with Eric’s skill set aboard,” Gene Brock, President of the Company, commented. “The depth of his experience in both the finance and water sectors is very complementary to our already strong management bench.”

Pedersen added, “The combination of STW’s oilfield and project management capability with GE’s robust technology creates a partnership that can provide truly unique solutions to our customers’ product water challenges. I am very excited to be part of this dedicated and capable team.”

STW’s first project will utilize technology developed by GE Water & Process Technologies to reclaim approximately 70% of the fresh water from otherwise unusable oil and natural gas hydraulic fracture flow-back water and salt water that is produced in conjunction with the production of oil and natural gas.

February Sees Lower Hedge Fund Redemptions

There were fewer redemptions in February 2009,($11 billion) compared to January,($30 billion), according to preliminary reports from Eurekahedge, pointing towards the easing of redemption pressures for hedge funds in the future.

The Hedge Fund Index was down 0.5% in February suggesting another month of loss mitigation and strong relative outperformance – The S&P500 was down 11%.

Interestingly, Eurekahedge says, fund of funds managers (-0.2%), on average, have now outperformed hedge fund managers for the first two months of 2009 after 12 months of consecutive underperformance for 2008.

Latin American funds were the only ones to finish the month with decent gains (0.7%), as managers in the region were afforded opportunities with the weakening of most regional currencies against the US dollar, among other things during the month.

Connecticut To Raise Accredited Hedge Fund Investor Standard

The Banks Committee of the Connecticut General Assembly voted yesterday to pass a bill that will raise the minimum financial qualifications for hedge fund investors to $2.5 million and for institutional investors, $5 million.

If the bill, called "An Act Concerning Hedge Funds" is passed by the Connecticut General Assembly, it may become effective as early as October 1, 2009.

This marks a substantial increase above the minimum investor assets ($1 million) required under existing federal standards, making it harder for hedge fund managers in Connecticut to raise capital.

The Connecticut Bill was one of three bills introduced in mid-February to the legislature for consideration by the Banks Committee of the Connecticut General Assembly. Two other bills cover financial disclosure and licensing requirements, they up for vote in the near future.

Survey Reports $1.64 Trillion In Hedge Fund Assets

The top 10 hedge fund adminstraators reported $1.64 trillion in hedge fund assets under administration (AuA) in the Q4 2008, according to HFN, with Citco Fund Services, State Street Alternative Investment Solutions and Goldman Sachs Administration Services taking the top three positions.

HFN also released early estimates for February hedge fund asset flows which indicate the outflow from the industry continued during the month, but at a much slower rate than prior months. Early estimates show hedge fund assets fell an additional 2.2% in February 2009 to $1.746 trillion compared to a reduction of 7.6% in January 09.

The drop was largely due to net investor redemptions and fund liquidations of $35.9 billion during the month and combined with a reduction due to performance losses of $3.53 billion. Early estimates have the HFN Hedge Fund Aggregate Average -0.61% for February, but this figure will likely go lower as more funds report.

Taking into account internal estimates of where month end performance will likely settle, February 2009 should go down as the 5th highest level of hedge fund outperformance over equity markets in the last twenty years.

The Q4 2008 HFN Administrator Survey contains information on hedge fund and fund of funds assets under administration (AuA) from 60 administrators. Results detail total reported AuA, regional concentration, growth rates and top ten lists for more than 20 criteria.

SEC To Contact Hedge Fund Investors

At the MFA Legal, Compliance and Operations Seminar in New York last week, SEC staff described its examination and enforcement priorities for the foreseeable future with respect to hedge funds and investment advisers.

According to a letter obtained by HedgeCo, the SEC staff said that as part of their examination of hedge funds and investment advisers, the SEC intends to contact investors, verifying that the hedge fund/investment manager is providing the same statement information to both the client and SEC staff.

The concern here is that the manager might be providing one set of statements to the SEC for exam purposes and another set of statements to the clients that contain materially different account balances or performance information.

This aspect of the exam program may have significant investor relationship implications for fund managers. When questioned, the SEC staff members indicated that they may issue a press release stating that this aspect will be part of examinations going forward.

The SEC staff indicated that fund managers may run the risk of obstructing the examination by getting ahead of the process and communicating directly with investors ahead of SEC staff.

The SEC also warned investors about con-artists who may use the names of SEC employees to mislead, trick and conduct "emergency" examinations.

Hedge Fund Manager To Take Investors On Central Asia Investment Tour

Ansher Fund Management is planning an on-site tour of emerging investment opportunities in Uzbekistan and Kazakhstan, two representative markets across the Central Asian region.

Beginning in Tashkent, the capital of Uzbekistan and then to Almaty, the financial center of Kazakhstan, Ansher's investment team will deliver detailed presentations on the region's investment opportunities. The tour begins in Zurich on March 31st.

"During the visit, you will have a unique opportunity to gain a direct insight into political and business environment, as well as into potential lucrative investment opportunities of the Region." Ravshan Yunusov, Managing Director said, "You will have a chance to meet with the representatives to understand the legal and regulatory framework for the protection of foreign investments in these countries."

Ansher says they will assist with booking/flight/tickets/visas, see; www.ansherholding.com for more details.

"We strongly believe that as a result of this trip, you will be pleasantly surprised with the investment potential of the Region, and explore the new frontier markets that offer opportunities for both diversification and growth of your portfolio." Yunusov said, "Central Asia and the Caucasus is still expected to remain as the fastest growing Region of the world according to IMF. Accordingly, our funds have performed strongly in 2008 (+14.2%), and we still anticipate significant growth opportunities in the Region for 2009."

Hedge Fund Calculator Team Expansion

HedgeCo Networks announced the creation of a new Hedge Fund Calculator Professional Services team. The team consists of experienced graphic designers, hedge fund marketers and consultants, CAIAs and CFAs.

The HedgeCo Hedge Fund Calculator has been in use by HedgeCo.Net for over 7 years, creating tens of thousands of hedge fund performance reports. In the first ninety days after its inception, the HedgeCo Hedge Fund Calculator gained widespread recognition and attracted hundreds of hedge funds who generated thousands of analytical reports.

"The addition of our Professional Services team will make our offering incredibly compelling, especially for managers aiming to save time, cut costs and produce high quality performance reports for their investors and prospective investors," stated Aaron Wormus, Managing Director of HedgeCo Networks. "The combination of ground-breaking technology and relevant expertise enables us to create reports with a lead time of as little as 24 hours. Managers no longer need to spend countless hours and thousands of dollars on complicated software. We consult with each client individually to produce personalized reports at a fraction of the price of other solutions in the marketplace."

HedgeCo Networks LLC manages HedgeCo.Net along with a portfolio of nine other websites devoted to alternative investments. With over 25,000 active members, HedgeCo.Net offers a vast array of hedge fund services, including website design, consultation, and third-party marketing and seeding. The Company has consulted or helped to launch over 500 new hedge funds, both onshore and offshore. HedgeCo Networks was founded in 2001 by Evan Rapoport and Andrew Schneider.

Diamond Fund Set to Launch

KPR Capital Limited announces the launch of the KPR Diamond Fund. The fund offers investors a unique access to physical diamonds capitalising on the price appreciation of top quality colourless diamonds.

The Fund aims to provide returns which are not correlated with traditional asset classes, act as a hedge against inflation and benefit from the supply/demand imbalance over the long term. The fund is part of KPR Fund SPC, a Cayman Islands open-ended investment company.

The investment manager has engaged a team of diamond industry experts that have in-depth knowledge and industry insight of the diamond market. The fund’s investment adviser is Goldwinds Asset Management Limited, a London based asset management firm.

Giovanni Pennetta, CEO of Goldwinds Asset Management, said, “The long term outlook for diamonds is robust. We are confident that this fund will provide the means for investors to diversify their portfolio and gain exposure to physical diamonds in a cost-efficient way. We see this as a huge investment opportunity that investors should not miss.”

The fund is open to investors in February and will launch on the 2nd March 2009. The fund has a minimum investment of US$ 250,000. Investors in the fund may benefit from the option to purchase stones on selected diamond sales by the fund at a wholesale price. The Diamond Segregated Portfolio may be offered, sold or transferred directly or indirectly to Non US Taxpayers and US Tax-exempt investors. US Taxpayers may invest in interest of the Partnership, KPR Diamond Fund L.P.

Hedge Funds Hold Up in January

Morningstar reported a summary of hedge fund performance for January 2009 as well as asset flows for 2008. As stocks and government bonds got clobbered in January, hedge funds held up relatively well, the report said.

The Morningstar 1000 Hedge Fund Index declined only 1.2% and the currency-hedged Morningstar with MSCI Hedge Fund Composite Asset-Weighted Index rose 1.2%, against the MSCI World Index's 8.9% drop and the BarCap Global Aggregate Index's 3.3% decline.

"Some liquidity returned to the credit markets in January, helping certain hedge fund strategies, but even hedge funds trading equities persevered through January's tough markets," said Morningstar Hedge Fund Analyst Nadia Papagiannis. "Overall, hedge funds held their own in January."

The rise in the U.S. dollar created profits for some price-trend-following and global-macro non-trend funds in January, but volatility across equity, government bond, and commodity markets throughout the month led to trading losses. The Morningstar Global Non-Trend Hedge Fund Index rose 0.1% while the Morningstar Global Trend Hedge Fund Index declined 1.6%.

Investors continued to pull out of hedge funds, withdrawing $26 billion in December and $70 billion for the year. Europe- and U.S.-equity hedge funds saw the largest redemptions, losing $14.8 and $18.3 billion respectively in 2008.

Rasmala Launches 2 Saudi Funds

The Saudi Capital Market Authority has approved Rasmala Investments request to launch two Saudi Equity funds. One of the funds 'Rasmala Saudi Equity Fund' will be managed according to the Shari'a guidelines approved by the fund's Shari'a Committee Jadwa and the other will be a conventional fund.

"The funds will invest in companies and industries that are poised to benefit from continuing opportunities in the Saudi economy. We believe the steep correction the market has witnessed since late last year has created many valuable opportunities, particularly for investors who view the prospects and strength of the Saudi economy favorably," Muhammad Shabbir, Head of Asset Management and CIO, said.

"Both funds will be suitable for investors who seek capital appreciation over the medium to long-term and will focus on adding value through a robust stock selection process relying primarily on the fundamental analysis skills of Rasmala's asset management team." Hamad Al Huthaili, Managing Director of Rasmala said, "Rasmala pioneered the fund-of-funds model in the MENA markets and the Company strives to provide high quality investment products to major segments of Saudi investors."

AlphaMetrix Launches Index Tracker Fund

The AlphaMetrix STTI tracker fund, launched in mid-December 2008 by AlphaMetrix LLC, is designed to track the performance of Newedge’s AlternativeEdgeSM Short-Term Traders Index (STTI).

The fund currently has approximately $70 million under management, with additional commitments from large institutional investors expected in the coming months, according to the company. In January 2009, its first full month, the fund was up 1.94%.

"Short-term strategies have little to no correlation to any traditional or alternative investments, making them appealing to investors seeking to add pure ‘liquid alpha’ to their portfolios," said Aleks Kins, CEO of AlphaMetrix. "Further, the Short-Term Traders Index includes a wide range of diversified trading strategies, with each CTA heavily vetted, highly liquid and completely transparent."

Interest in short-term trading strategies is rising for many reasons, including unease over the lack of liquidity in other alternative investments such as hedge funds, the counter party guarantee offered by the exchange-traded derivatives market, historically strong risk-adjusted returns, limited downside risk and low volatility.

"The index is a highly practical application of our research into the best ways to construct portfolios,” said Galen Burghardt, head of research for Newedge. “We expected short-term futures traders to demonstrate valuable diversifying properties, and we have been very satisfied with the results. We expect the index to produce results that continue to be uncorrelated to every major asset class and expect the average correlation of returns in the index to remain low. As a result, we expect the index to track returns in this space with very low volatility."

Case Dismissed Against SAC Hedge Fund

Federal Judge Stanley R. Chesler of the Federal District Court of New Jersey, Friday threw out a Canadian pharmaceutical company shareholder lawsuit against a group of hedge funds including SAC Capital Advisors LP.

The Judge dismissed the lawsuit, saying "The conduct is so egregious, and the futility of imposing alternate sanctions is so clear, that dismissal is the only appropriate sanction."

Apparently the shareholders had violated a New York judge’s order sealing documents in a related Biovail case.

"The record before the court suggests that these proceedings and the RICO action proceedings were all part of a choreographed strategy by Biovail and its attorneys designed to constitute a counterattack against the Biovail securities action," the Judge wrote.

"We are gratified that the court has seen through this charade and has dismissed the case," a spokesman for SAC said.

Taurus Launches Shriah Compliant Mutual Fund

India hedge fund manager, Taurus Mutual Fund, launched India’s first actively managed Equity Oriented Shariah compliant fund, the ‘Taurus Ethical Fund’.

With a minimum investment of INR 5000 ($100K), the open-ended actively managed mutual fund opens on February 19, 2009 and closes on March 20, 2009.

Launching in Mumbai, the fund has been certified by an independent Shariah Board named TASIS (Taqwaa Advisory and Shariah Investment Solutions).

“It’s all about investing in the right businesses and Shariah compliance ensures that," Waqar Naqvi, CEO, Taurus Mutual Fund said, "The need to pick businesses that foster wealth creation over the long term and distribute it equitably forms the basis of Shariah investing. It also provides an effective filter to identify and avoid speculative businesses. No wonder, Shariah compliant businesses have weathered the sub prime crisis”.

Hedge Fund Provider Teams up With FN in India Investing Summit

Financial News is hosting the the Investors India Summit 2009 on the 19th and 20th May in London with Indian hedge fund provider Axience as its media partner.

The summit is aimed at delivering insight into the domestic as well as global development of India while identifying the potential hurdles and risks of doing business in the country. In this process, it intends to examine the possible impact of a global economic downturn on India as well as provide a unique meeting point and networking platform for all those doing or wishing to do business with or in India.

The conference will cover keynote discussions on varied subjects like ‘The global challenges of the 21st century', ‘Global Indian Investments', ‘Development of Financial Markets in India', ‘India - Fertile ground for Private Equity', etc. It will also discuss case studies on diverse topics like Capital markets, Infrastructure, Technology, Media, Telecommunication, Real Estate, etc.

Approximately 500 delegates including senior executives representing reputed firms from across the globe are expected to attend this summit.

Financial News has appointed Axience, an India-based business services firm, as its Media Partner for the conference. Axience provides bespoke research and analytics solutions to financial service institutions, consulting firms and general industries. Its key clients include global investment banks, asset management, hedge fund and private equity firms, leading consultancies and governmental agencies.

'We are glad to partner with Financial News for this key industry event which promises to bring industry, regulators, agencies and financial services firms together. Though doing business in and with India has been a topic of interest since quite sometime now, yet we still lack platforms which bring various parts of industry together. Financial News Summit 2009 fills in that gap,' said Hemant Jain, CEO of Axience.

Hedge Fund Trembulant Ups Stake in Fast Food

Hedge fund Tremblant Capital reported that it now owns 1.1 million shares of Chipotle Mexican Grill, bringing its total shares in the Denver-based fast food restaurant to 5.7%.

"Chipotle shares have fallen recently, and the hedge fund obviously saw opportunity there," news resource SeekingAlpha says, "keep in mind that this hedge fund typically doesn't take larger than 5% stakes in companies (which requires a 13G filing), so it definitely likes this name, as this is the first major filing from them in quite some time."

With $4.1 billion in assets under management, hedge fund Tremblant is based in New York and run by Bret Barakett, who is a former portfolio manager at Moore Capital Management.

Asian Macro Hedge Fund Launch

A new Asia macro hedge fund has been launched by Dexion Capital and Morgan Stanley veterans Andrew Gale and Lee Ka Sha.

With a minimum investment is $100,000, the fund will invest in Asian interest rates and currencies, opening trading on May 1, according to HedgeWeek.

Lee will play the role of CEO, with Gale as chief executive. Gale most recently was responsible for product development and fundraising for Dexion Capital's London-listed closed-ended funds of hedge funds and third-party funds. Lee was a founding member of Abax Global Capital in Hong Kong, where he managed both the South Asia special situations portfolio and macro positioning.

“In the course of these discussions it has become apparent that most investors look to their macro investments to be a diversifier providing a different source of returns than the inherent beta in credit and equity strategies,” Gale said, "the fund launch was based on investor demand."

Prime brokers doing away with OTC 'give ups'

Hedge funds of varying sizes report being given notice by prime brokers that OTC derivative give up arrangements will end - quickly. Funds ranging in size from $25M to $2.5B are being told new derivative trades "done away" will no longer be accepted near the end of the first quarter and that give up relationships will end completely in April.

‘Give up arrangements’ are where the executing broker writes trade tickets on behalf of both counterparties to the trade – provided hedge funds with three advantages: easier post-trade operations, cross margining and credit intermediation.

“Challenged by investors to provide increasing levels of transparency, independent validation and reporting frequency, funds would also have to find the operational bandwidth and capability to efficiently manage the complexities of OTC trade processing involving multiple instruments, high volumes and multiple counterparties." Hans Hufschmid, CEO of GlobeOp Financial Services commented, "And the February 28 deadline after which major dealers will not accept novation consents by email looms.”

GlobeOp also noted that during the Lehman Brothers crisis in September 2008, hedge funds began diversifying counterparty risk by abandoning the practice of single prime broker give ups and converting to multiple direct counterparty relationships.

Now, Hufschmid observes, “Intense revenue pressure on banks and on credit risk overall is forcing banks with prime broking activities to take a very tough approach to profitability. Give ups were, for many, never a core business, used to support the profitable business of lending securities to hedge funds. As risk tolerances and the lending business have become less attractive, the reasons for providing low or non- profitable support services like give ups are falling away."

“If the initial signals become a trend as financial markets and the hedge fund sector restructure, out sourcing will increase in appeal as hedge funds simultaneously face increased investor demand for independent administration and robust infrastructure declining fund performance and management fees to fund or ramp up the required technology and people resources continued attractive opportunities for strategies involving OTC derivatives.”

Emerging Hedge Fund Managers Get Fee Cuts Through Philanthropy

Hedge fund admin provider, Variman LLC, and Hedge Funds Care are working together offering discounted monthly service fees to emerging hedge fund managers who donate the standard set-up fee to Hedge Funds Care on behalf of Variman LLC.

"Given the difficult times our industry is currently facing, Variman Fund Services is making an effort to support both the needs of the marketplace and those of abused children, we believe this initiative will be worthwhile and bring solid value to all involved." Variman said.

Hedge Funds Care was established in 1998, Hedge Funds Care has distributed over $18 million through more than 500 grants. In 2009, annual benefits will take place in New York, San Francisco, Chicago, Atlanta, Boston, Denver, Toronto, London and the Cayman Islands. Variman LLC is headquartered in Short Hills, NJ, USA with offices in Dubai and India.

Diamond Hedgers Report Increase in Fund Assets

Recently launched Codiam Fund, which invests in pre-cut colored diamonds, has reported an increase of 9% in the fund's net asset value over the first three months of trading.

"We launched the fund in difficult market conditions, confident that our experience and expertise would enable us to identify and purchase rare coloured diamonds that would grow in value for our investors, and the increase to our net asset value has proved this to be true," says Codiam managing director Philip Baldwin, who co-founded the business with Mahyar Makhzani.

The fund managers believe the colored diamonds offer a hedge against market and political crises, as they have not decreased in price on a wholesale level in 35 years, consistently outperforming other diamond categories, with their value increasing on average between ten and 15% a year.

Investcorp Sponsors Alternative Investments CRISP Program

Alternative investment manager, Investcorp, sponsored a group of Bahraini students from the Crown Prince's International Scholarship Program (CPISP), to spend a day at Investcorp’s London office, meeting and questioning senior managers and learning about hedge funds and other alternative investments.

As a global operator with strong roots in the Gulf region, Investcorp was of great interest to the group. Presentations on Investcorp’s various business areas were made by Carsten Hagenbucher, who presented on private equity; Jonathan Feeney, who spoke on hedge funds, and Alex Lien, who discussed technology investment.

"The Crown Prince's International Scholarship Program should be congratulated on providing such an exceptional opportunity for young Bahraini students to take places in top international Universities and Colleges." Investcorp President and Chief Operating Officer, Gary Long, said, "Investcorp is very proud to continue its support of the program."

Credit Crunch Hedge Fund Killers - Movie Debut

West Palm Beach (HedgeCo.net) - Playing a hedge fund banker turned killer, Dougray Scott stars in the 'credit crunch' movie: New Town Killers. It being shown for the first time in Scotland tonight as part of the Glasgow Film Festival's fifth anniversary.

Filmed in Edinburgh's streets, according to UK's DailyRecord, the movie is high octane, violent and bloody. New Town Killers was made for only £1 million and with perfect timing, as it has already been dubbed the first credit-crunch movie of 2009.

It shows Dougray as a cold-hearted hedge fund banker who turns killer for kicks, playing a 12-hour game of hunt, hide and seek with underprivileged people, according to the paper.

"In creating a scenario where the well-heeled and privileged prey on the poor and deprived, director Richard Jobson is clearly wearing political concerns on his sleeve in his latest film, and is to be admired for it." Says Michael Hayden, of the British Film Institute, "Yet New Town Killers is not bleeding-heart social commentary, but an ambitious and kinetic thriller, a tension-packed joyride through Edinburgh streets; it is obvious Jobson knows the city well, and that he loves it, he presents it wonderfully."

Also in the film is James Anthony Pearson, Joy Division guitarist and actress Liz White, in debt and playing the banker's game for cash. It also stars Joely Richardson, Vanessa Redgrave, Eddie Izzard, Jason Priestley and Brian Cox as Dougray's dad, Dennis.

Dougray said, "The fact that Jobson wrote this before all the banking collapses is incredible. The film gets a cinema release in June.

- Alexis Akesson

Mexican Hedge Fund Takes Over Canadian Mining Company

Canadian mining, development and exploration company, Frontera Copper Corporation, has agreed, due to the recent downturn in the copper market, to Mexican hedge fund Invecture's hostile take over bid.

After determining that the hedge fund, Invecture Group, S.A. de C.V's, offer was superior to the offer previously received from Southern Copper Corporation, the Company's financial advisor, RBC Capital Markets, said that from a financial point of view, the hedge fund's offer is fair to Frontera shareholders.

Frontera's principal activity is the production of copper cathode from the Piedras Verdes run-of-mine heap-leach copper operation in Sonora, Mexico. Based on the January 1, 2008 ore reserves and the estimated recoverable copper contained on the leach pads at December 31, 2007, approximately 1 billion pounds of copper is projected to be produced over the remaining 17-year life of the operation.

Betsy Waters on Basics of Investment Strategy at NY Traders Expo

dbFX Global Director Betsy Waters will moderate a panel discussion entitled, “Investing in Managed Accounts: The What, How, and Why,” during the International Traders Expo, the largest and only expo designed exclusively for active traders. The workshop will be held on Sunday, February 22, 2009 at 1:15 p.m. at New York’s Marriott Marquis.

“The panel discussion will be an excellent opportunity for investors to understand what they should consider before engaging an account manager to execute their FX investments,” said Waters. “Workshop participants will leave the session with a keen understanding of how managed accounts work and how they can benefit from working with a professional manager, as well as how to identify and interview a prospective manager, and what fees and costs are associated with managed accounts.”

Waters will be joined on the panel by Robert Sharpe, Founder and CEO of SolomonFX; Patrick Lafferty, President, Capital Trading Group; David Johnson, Founder, Global Capital Investments, and; Marc Zupicich, financial advisor for Morgan Stanley.

Hedge Funds Need Help in Recovering Losses: Fiduciary Experts Say

Independent forensic professionals, Chris McConnell and Eric Steinwald are two are finding themselves in increasing demand as hedge funds and other investors turn to experts for help in recovering from losses caused by fraud, Ponzi schemes, stock market or real estate market losses.

"Any asset, at any time, may bercome subject to fiduciary duty standards, "McConnell said, "Fiduciary duty is not simply a good idea or a best practice; rather, it's the highest standard known under the law."

McConnell, AIFA of Fiduciary Forensics, has over 25 years of experience in the field and is an acknowledged fiduciary expert in the securities, compensation and valuation fields based upon actual, inside hands-on Wall Street securities industry experience. Steinwald is a principal of Steinwald and Kaufmann, a Brentwood/Los Angeles, California tax and forensics accounting CPA firm, and also has 25 years of experience of serving financial clients. Together, the two bring over 50 years of unmatched expertise to plaintiffs who experience suspicious investment losses of any kind.

"Courts often hold trustees and/or third party investment fiduciaries (banks, brokers, trust companies, investment advisers, hedge funds, and even custodians) may be liable, measured against the expert investment standard regarding personal liability. "McConnell said, "The amount of potential fraud, loss of income, and/or insurance claims looks to increase dramatically as investors face staggering losses. We are ready to help as many people as we can to avoid potential financial catastrophe."

The difference between proving liability and recovering damages and loss is in the actual details, which often provide the edge for success.

Obama's Stimulus Package Approved by Senate

President Barack Obama's $838 billion stimulus plan was approved by the U.S. Senate as part of a plan of action the Senate hopes will revive the collapsing US economy.

$100 billion is to be alotted to hedge funds or other investors, giving them incentive to purchase so-called toxic assets. President Obama welcomed the 61-37 vote as "good news. It's a good start."

Outlining a few details of how the administration would spend the remaining $350 billion of the $700 billion bank bailout program, Treasury Secretary Timothy Geithner separately announced a new public-private partnership to help strengthen banks.

"Critical parts of our financial system are damaged," Geithner said. "The financial system is working against recovery and that's the dangerous dynamic we need to change."

In a related government commitment of financial support, the Federal Reserve broadened a program designed to boost resources for consumer credit and small business loans - from $200 billion up to $1 trillion. Additionally, Obama has campaigned to include funds for school construction in the bill.

Conyers Expands Cayman Islands Team

Pioneers in the field of offshore law, Conyers Dill & Pearman, (Conyers) is expanding its Cayman Islands presence with three new associates as attorneys-at-law. Stephen Leontsinis has joined the Litigation team, while Tania Dons and Preetha Pillai have joined the Corporate Department.

“Our superior investment funds and litigation capabilities have reinforced our reputation as a preferred firm to partner with in transactions of this nature." Richard Finlay, Managing Partner of Conyers’ Cayman Islands office, "We continue to expand our team in line with our strategic plans to build on the strengths and capabilities of our Cayman Islands practice. We are proud of our reputation as global leader which attracts such depth of talent and are delighted to have Stephen, Tania and Preetha join us.”

Since its establishment in July 2003, Conyers’ Cayman Islands office has grown into a full service practice with a current complement of 20 lawyers and 60 staff. The growth of the Cayman Islands practice complements Conyers’ continued growth globally. Last year, the firm opened three new offices in Moscow, Mauritius and São Paulo, as well as making several key hires. Today, Conyers comprises of over 550 staff in 11 jurisdictions with more than 150 lawyers.

With over 150 lawyers, Conyers Dill & Pearman advises on the laws of Anguilla, Bermuda, British Virgin Islands, Cayman Islands and Mauritius from those islands and from Dubai, Hong Kong, London, Moscow, and Singapore. The firm has earned clients’ trust, loyalty and respect by consistently providing responsive, timely and thorough advice on all aspects of offshore corporate and commercial law, commercial litigation and private client matters.

IAS presents a ‘Forensic’ approach to Due Diligence

In response to the recent need to restore confidence and liquidity in the mortgage market, Integrated Asset Services, LLC (IAS), a default management and residential collateral valuation company, is introducing iCDA Credit Due Diligence Analytics.

Expecting clients from hedge funds, mutual funds, private investors, government agencies, ratings agencies, and mortgage originators, IAS calls their system a “surgically precise” review of borrower credit worthiness, collateral valuation, and compliance for loan buyers.

“iCDA is designed to expose both the risk and merit of an asset beyond the historic origination and compliance guidelines," John Coughlin, VP of Capital Markets for IAS said, "Using our suite of analytic tools to forecast performance, we can identify exit strategies and recommend loan modifications and repayment plans for your assets.”

“We’ve combined IAS’s expert default professional services with innovative new technology and a few key alliances to provide a robust, single-source solution,” says Robert Vanderbilt, First Vice President for Integrated Asset Services. "We have to think the integrity of our approach and the fullness of our product will go a long way toward getting the mortgage market moving again,” said Vanderbilt.

Hedge Fund Veteran Acts to Improve Fund Transparency

Mike Griffin of Spectrum Global Fund Administration has launched the a hedge fund website that he believes will improve hedge fund transparancy, HedgeACT.com.

“As a former hedge fund executive, I know first-hand how important transparency is during the capital allocation process,” said Michael Griffin, founder and CEO of HedgeACT and Chief Operating Officer of Fenchurch Capital Management from 1985 to 1998. “This is a difficult time for many hedge fund investors, and we think that giving them better information will make the entire analysis and allocation process much better for everyone involved.”

The “ACT” in HedgeACT.com refers to the site’s three key benefits for the hedge fund community, including Analytics, Capital Introduction and Transparency.

Providing investors with free access to hundreds of data points and analytics for over 7,500 hedge funds, HedgeAct's data is licensed from Morningstar.

Additionally, hedge funds and hedge fund administrators will have the ability to augment this data with their own timely, vetted information on fund performance, track record and other important investor criteria.

Pelorus Advisors Offer Risk Service Exclusively To Hedge Funds

As investors look to independent and unbiased hedge fund risk due diligence, Pelorus Advisors has decided to launch an operational risk management service for hedge fund investors. Unlike other due diligence firms, Pelorus only offers its risk due diligence service to hedge fund investors.

“It’s an enormous conflict of interest for diligence teams to be compensated by the same hedge funds they cover,” said Jeff Rathgeber, co-founder and partner of Pelorus. “The hedge fund community has seen more than enough target-sponsored ‘independent’ report cards. We'll let other risk management firms issue their seals of approval based on manager-supplied data.”

Pelorus is staffed by a team of hedge fund experts that have spent years operating inside complicated hedge fund structures. “It is only from this vantage point that an advisory firm gains the experience needed to identify the true risks that hide within hedge funds,” said Ken McGee, Managing Director of Pelorus’ Hedge Fund Practice Group. “It is exactly this kind of experience that is missing from most hedge fund due diligence firms. In our opinion, this lack of inside experience is what moves most firms away from being Hedge Fund Risk Experts and moves them into the category of Data Regression Analysts.”

“A clear distinction that separates Pelorus Advisors from other firms is that we don’t harvest massive amounts of publicly available data, crunch it, and issue armchair reports to investors,” said Rathgeber. “Nor do we merely rely on data that is supplied by the target hedge funds we audit. Instead, we conduct in-depth, on-site engagements to dig deep into a hedge fund's operations and run through its control structure to ensure that our clients’ investments are properly protected.”

Arkanar Financial Global Macro Hedge Fund Launch

Alternative investment consultant and director, Bob Torkelund has announced the launch of a Cayman regulated fund, the Arkanar Global Macro SP. The fund is being monitored and the due diligence work done by the Cayman regulator before the launch took place.

The initial offering period runs throughout February 2009, with a minimum investment of $10.000.

Torkelund said, “The fund is easy dealing and settlement: we have organised electronic clearing via Clearstream/Euroclear ‘payment against delivery’ which makes the fund available to most European and international banks in line with other international securities.”

The fund has a 20% high water mark performance fee and 0.5% per quarter as management fee and an expected annual return of 15–20%.

Torkelund is director of global retail sales, marketing and operations for several boutique fund managers. He was also responsible for the formulation and execution of Threadneedle Investments and has become a serious player in Continental Europe.

Hedge Fund MC Subpoenad by Feds

Wall Street's highest-ranking woman, Erin Callan, was subpoenaed by a federal grand jury, along with 24 other Lehman executives regarding the collapse of Lehman Brothers, according to the New York Post.

Now in seclusion, the NYP says she taking a five-month personal leave. Callan joined Credit Suisse five months ago after being ousted as CFO of collapsed investment bank Lehman Brothers.

NYP excerpt: "At Lehman, Callan had been an admired public face of Lehman's whirlwind dance with hedge fund chiefs, but then-CEO Dick Fuld blamed her for Lehman's collapse, and pushed her out just months before the firm imploded, wiping out billions for investors and employees."

Madoff Hedge Fund Shut Down by Luxembourg Regulators

Swiss bank UBS AG's money manager, Luxalpha, was one of the main European hedge funds that gave money to US money manager Bernard Madoff, it is now being shut down by CSSF, Luxembourg's financial supervisors.

The Luxalpha assets were frozen in January, in what appears to be the first court action in Europe. Another private investor in a second UBS-run feeder fund, Luxembourg Investment Fund-US Equity Plus, is also considering legal action against the Swiss bank.

People with knowledge of the situation claimed that the two Luxembourg funds were not actively marketed by the bank and were set up at the request of clients to send money to Madoff. One of the Luxalpha board members, Rene-Thierry Magon de la Villehuchet, committed suicide in December after loosing $1.4 billion in his Madoff investments.

Hedge Fund Manager to head up River & Mercantile Fund Launch

UK fund manager, River & Mercantile, is launching an Equity Income Fund with the aim to invest in the best ideas generated by their UK team.

Hedge fund manager Richard Staveley is taking the lead with a philosophy which involves analyzing companies based on their potential, valuation and timing. In other words, he is looking for the potential growth opportunities in companies throughout their life cycle; companies that are attractively valued; and companies with earnings upgrades as the timing of these upgrades can have a positive impact on share prices.

Staveley qualified as a Chartered Accountant with PriceWaterhouseCoopers in 1999, before joining the hedge fund boutique Bradshaw Asset Management as an Assistant Fund Manager. In 2001 he moved to SGAM and became Head of UK Small Company investments in 2002. Richard joined River and Mercantile in August 2006. He holds the CFA designation. Richard is Research Director with responsibility for the team research function. As a Fund Manager he will be focused on the UK Unconstrained and Small/Mid Cap strategies.

At launch the fund is expected to yield approximately 5.1% and it will invest in companies of all sizes. In order to monitor risk, it will however invest no more than 15% in smaller companies and no more than 30% in medium sized companies. It can invest up to 100% in larger companies if this is where the manager finds the best opportunities.

River and Mercantile is a new long only investment management boutique. The business was incorporated in 2006 as a Limited Liability Partnership with significant management interest. The cornerstone investor is Pacific Investments which is owned by Sir John Beckwith.

Tuckerbrook to Provide Daily Transparency to Hedge Fund Clients

In the wake of the Madoff scandal, Tuckerbrook Alternative Investments is offering its hedge fund investors the daily market value of assets in their capital accounts.

"In light of the impact 2008 is having on the hedge fund business, transparency is the most important enhancement the industry can embrace," John Hassett, Managing Principal of Tuckerbrook, said, "Tuckerbrook has always used third-party prime brokers, administrators and auditors in order to provide independent verification of fund activity, so it made sense to us to have daily asset transparency reports distributed directly from Citi Hedge Fund Services, to underscore the importance of both independent asset pricing and more frequent transparency. Although unique in the industry now, we would expect this level of reporting to become standard practice in the future."

Moses Grader, Chief Operating Officer of Tuckerbrook, said, "Ninety percent or more of all hedge fund investments are in commingled fund structures, with only the largest investors having daily accountability through separately managed accounts. Daily transparency at the client-account level, delivered by a trusted third party, is a major step up in accountability to those investors that don't have an SMA."

Russian Hedge Fund Pharos Reports on the Russian Investment Landscape

The events of 2008 were dramatic everywhere in the world, but particularly so in Russia. Despite the decline of -72.2% for the MSCI Index in 2008, the Pharos Russia Fund produced a positive 3 year annualized return of 1.3% with 24.8% volatility as compared to the MSCI Russia Index.

The Pharos Russia Fund's 5 year returns also show a strong outperformance against the MSCI Russia Index. The 11 year period of January 1998 through December 2008, which encompasses two market meltdowns and many other mini-crises, the Pharos Russia Fund has returned a total of 100.33%, against a gain of only 3.81% for the MSCI Russia Index.

"Our long history in the Russian financial markets through good times and bad times helps guide our investment philosophy and makes us mindful of the periodic crises that hit the market," Pharos says, "We seek to maximize our investor's returns over the medium term, and one of the most important aspects of that is to protect against severe losses in times of crisis."

Their flagship fund, Pharos Russia Fund, has been the most resilient performer in the Russia & CIS universe in 2008 and in January 09, Pharos Russia was up +0.4% whereas the Russian market RTS was down -15.3% and the MSCI Russia down -11.6%.

The market conditions in Russia deteriorated in an accelerating fashion once the May holiday revelry had ended. The commodity cycle reversed as economic indicators began to reflect the demand destruction caused by the slowing of credit availability. Waves of deleveraging of the global financial system soon followed. Russia suffered initially as the commodity focused investors sold positions, and again as investors generally sold down positions to reduce leverage. The last victim was the Russian oligarch.

The typical Russian billionaire was in fact a house of cards having taken on massive debt against the assets underlying his personal holdings. The publicly traded assets became subject universally to margin calls by international banks, while private assets found their mezzanine financing had evaporated. The result was a flashpoint in late-September when several of the largest local financial groups had become technically insolvent. The markets were frozen for a couple of days while the government intervened to provide liquidity and arrange shotgun marriages.

By this time, Pharos said, they had adjusted their positions to reflect the bankruptcy of Lehman Brothers and the growing instability of global markets. "While our overlay gave investors protection against a collapsing market, we realized that the fundamental structure of the markets was changing, and that our risk management concerns had to change."

"As the financial crisis continued, we were concerned about other effects on the market. Our experience in the 1998 crisis taught us that markets can get caught in downward spirals. We were particularly concerned that most Russian market players were fully invested and many were highly leveraged. This was a situation ripe for forced selling and further dramatic market declines."

While this tale of misadventure is unsurprising for an emerging market, it has also become the dangerous reality in the US and other developed markets as well, Pharos said.

"In Russia, there are a few key triggers that we are looking for before investing fully into the market. In past letters, we have identified credit normalization and commodity price stabilization as the two necessary, but perhaps not sufficient, conditions for Russia's bear market to end. While we do not expect credit availability to reach the extreme levels of the last few years, basic credit does need to flow again for companies to move out of crisis mode and for trade to resume in a normal manner. The Russian government has taken admirable steps to deal with the shutdown of credit, and after a slow start is now using the large reserves built up during the commodity boom to supply credit to Russian corporations that need help rolling over their debt."

The instability of the Russian markets will continue so long as oil prices remain unstable. At this stage, the oil price determines the fair value of the ruble, which, in turn, dictates the future course of Russia's economic growth, however, Pharos believes that the key to success from here is sizing positions to adjust for volatility, while being prepared to act quickly once signs of stability emerge.

Contributing Factors To Hedge Funds' 2008 Failure

Credit Suisse Tremont Index LLC released a new research piece, 'One for the History Books: Hedge Fund Performance in 2008', a review of the factors which contributed to hedge funds’ dismal -19% return in 2008

The report discusses the impact of events such as the fall of Lehman Brothers, the short sale ban and the scandal surrounding Bernard Madoff, offering insight into the impact of each event on individual sectors and the hedge fund industry as a whole. The piece also offers some comparisons to past market downturns, periods in which strategies saw severe declines in assets under management and how performance was impacted in the years that followed.

Some key takeaways from the report include:

The Broad Index, a diversified, asset weighted hedge fund index comprised of 496 underlying hedge funds (as of December 31, 2008), was down 19% for the year, marking 2008 the worst year in the history of the Broad Index.

It is estimated that the hedge fund industry lost approximately 29% of assets in 2008, totaling $582 billion, representing the first time in six years that the hedge fund industry has seen net asset losses.

One in five funds within the Broad Index posted positive returns for the year, with almost one in seven posting returns in the double digits.

Hedge Fund Manager to Appear in Court

Hedge fund manager Arthur Nadel is scheduled for a bail hearing in federal court in Tampa this afternoon.

Nadel faces a federal charge of securities and wire fraud after using “manipulative and deceptive devices” to bilk investors out of hundreds of millions. Shortly after the infamous arrest of Bernard Madoff, Nadel’s family reported him missing on January 14.

The day Nadel disappeared, he was expected to disburse $50 million in redemptions to investors from the six total funds he managed. Nadel reportedly wrote a letter to his wife before he missing.

According to the criminal complaint, Nadel’s fraud dates back to at least 2003 and has affected over 100 victims nationwide. There is also a civil complaint filed against Nadel by the U.S. Securities and Exchange Commission, who alleges that he transferred $1.25 million into secret bank accounts.

Green Alternative Investment Software To Be Developed

CommodityPoint, a utilities analyst and consulting firm of UtiliPoint International, is partnering with Global Change Associates, convergence of energy and environmental financial markets specialist, to undertake a multi-client research project and to produce a study report around emissions trading & monitoring software.

“Green trading has now become established and various 'green' commodities are now actively traded by a variety of participants including carbon, SOx and Nox as well as RECs (Renwable Energy Credits). Investor interest in trading these commodities is at an all time high. Consequently there is a growing demand for software products that will support these trading and risk management activities as well as in those software products that monitor and help manage emissions," said Dr. Gary M. Vasey of CommodityPoint. "Indeed, as forecast in our book 'Trends in Energy Trading, Transaction and Risk Management Software - a Primer' (Booksurge, 2006), these two software categories are morphing as the two software markets collide."

“The emerging greenhouse gas market is now ripe for software solutions on an enterprise level. Today, the environmental software space is quite small. It is estimated at $100 million with many small companies developing and extending their domain expertise into this area and beyond energy company applications (energy companies have had to comply with environmental laws in many jurisdictions for over a decade),“ said Mr. Peter C. Fusaro of Global Change Associates Inc.“The need to measure and manage greenhouse gas emissions data is becoming a new area of business development for software companies especially with impending federal greenhouse gas laws in the United States."

Deephaven's Hedge Fund Bought by Stark Investments

Deephaven Capital Management signed a deal on Tuesday to sell the assets of its flagship hedge fund, Knight Capital Group Inc., to Stark Investments.

The founders, Brian Stark and Mike Roth, will give Deephaven investors the option to become investors in Stark Funds by contributing their share of their Deephaven Fund portfolio positions, they said in a letter to shareholders. Deephaven in October suspended withdrawals from its $1.6 billion Deephaven Global Multi-Strategy funds after being overwhelmed by investor redemption requests.

"We believe this agreement is advantageous for Stark's and Deephaven's investors, and we are excited about the prospect of retaining their high quality investor base," Mike Roth said, "In strategically managing the business, we have put ourselves in a position to capitalize upon these types of situations. We will continue to be on the lookout for additional opportunities that complement our strategic plan and strengthen our organization."

Stark has headquarters in Milwaukee, Miami, London and Hong Kong.