HedgeCo News - Experts predict greater market discipline from investors and an increased focus on due diligence by providers and custodians.
Joel Press, Managing Director of Morgan Stanley’s Prime Brokerage Division; Todd Groome, non-Executive Chairman of the Alternative Investment Management Association (AIMA); and Gregory Zuckerman, author and special writer with The Wall Street Journal were among the experts who offered their predictions for 2010 at a seminar for more than 300 members of the financial industry in New York, hosted by international offshore law firm Walkers.
Greater allocations to hedge funds were anticipated at the expense of equities, while the latest regulatory waves and the next likely bubbles in the market were also debated.
“In today’s environment, there can no longer simply be a checklist to confirm a process. Potential investors must look at what motivates and drives the relevant provider,” said Ingrid Pierce, Partner with Walkers and head of the firm’s Cayman Islands Hedge Fund practice. “Custody diligence is very much at the forefront of people’s minds. Key questions include whether counterparties have the ability to move or re-hypothecate assets and whether contracts will hold up in an insolvency.”
Investigative diligence, which looks in a very detailed way at precisely what various providers do, not just what they say they do, has also become a key focus as investors and other players ramp up their policies in this area, according to Ms. Pierce.
“It is important for both funds and investors to work out well in advance exactly what their exit strategy will be and how the provisions in the fund’s documents will actually work,” Ms Pierce said. “The heightened levels of diligence we have seen throughout the investment process are not going to diminish anytime soon. All participants, including legal counsel have to increase our awareness of the issues and address key areas of risk with our clients.”
Highlighting some positive trends in hedge funds, AIMA’s Todd Groome pointed to new allocations going to a variety of strategies. For example, managers in Asia are seeing 75 percent of net new allocations coming from the United States, primarily from pension funds. He also noted the launch of new hedge funds represents a clear increase in confidence.
“Market discipline from investors is back with a vengeance,” said Mr. Groome. “Investors are asking for greater transparency. They want to use the transparency to create a more idiosyncratic contract for their particular situation and a particular strategy.”
On the regulatory front, in this current challenging policy environment, Mr Groome said things will take time and require considerable coordination among financial leaders, policy makers, and investors.
Joel Press of Morgan Stanley offered his personal insights on what can be expected in the hedge fund market going forward. He anticipates hundreds of smaller start ups in 2010 and said that seeding is more important than ever. With inflows still coming into the market, Mr Press predicted that the industry will be worth US$3 trillion four years from now, compared to the current estimated value of US$1.8 trillion.
“There is no need for hedge fund fees to go down,” Mr Press said. “If you look at long-term investing, hedge funds are absolutely performing better than any other investment vehicle. Investors are looking to replace equities with hedge fund allocations and hedge funds are increasingly being used as an equity substitute.”
The seminar also featured an in-depth examination of the role of fiduciaries, notably issues of responsibilities and accountability, from Guy Locke, Partner and Joint Head of the Corporate and Financial Restructuring Group at Walkers and Scott Lennon, Senior Vice President at Walkers Fund Services.
“It is a brand new world for hedge fund directors. Questionnaires are more extensive and elaborate and people want to know that manuals have been fully tested,” Mr Lennon said. “With changing standards of care and liability caps for auditors and other service providers, managers are in a tough negotiating environment. It is important to understand the whole picture of risk and where it will fall if things go wrong.”
Hedge fund financing was addressed by Philip Paschalides, a Walkers Partner and head of the firm’s Finance and Corporate Group in the Cayman Islands. Mr Paschalides said that the banking team in Walkers’ Cayman office had its busiest year ever for hedge fund financing, suggesting that leverage may not be a thing of the past. “Lenders are generally quite savvy about the hedge fund world,” Mr Paschalides said. “They keep databases, look at redemptions and gates and will lower borrowing bases to account for liquidity and concentration issues.”
Gregory Zuckerman from The Wall Street Journal said we are in an age of bubbles, citing housing, energy, Asian currencies and technology stocks as examples of bubbles the market has experienced over the past decade.
“The next bubble may be emerging markets, Brazil, China, or pockets of real estate in Asia or Australia,” Mr Zuckerman said. “Everyone is worried about the next investor. There is an incentive to increasingly pile on trades and now it is much easier to express trades using ETFs, synthetic CDS and other types of derivatives. Managers today are fully invested and talking about adding leverage, but they don’t really believe in the long term nature of these investments. It might work out in the short term but long term you wonder if they can all get out.”
The New York event was the latest in the ‘Walkers Fundamentals’ series designed to bring discussions of key financial issues to the world’s investment capitals. Video highlights of the seminar will be posted to Walkers’ website.
“We were delighted to hear attendees use words such as ‘enlightening’ and ‘relevant’ to describe the event,” said Mark Lewis, Senior Investment Funds Partner with Walkers, who opened the seminar. “Walkers believes the best way to ensure best practices in the financial community is through open discussion and education by all the participants.”
Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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18 Jan 2010
UCITS III Compliant Fund of Hedge Funds Launched By HSBC
HedgeCo News - HSBC has launched a Sterling Class of its HSBC UCITS AdvantEdge fund of hedge funds. The Fund will comply with the new ‘reporting’ tax regime for offshore funds, allowing UK investors to be taxed at capital gains rather than income tax rates on disposal of their interests.
“The Sterling classes will allow UK investors to gain maximum benefit from the opportunities to participate in the hedge fund sector offered by the HSBC UCITS AdvantEdge fund.” Chris Allen, CEO of HSBC Alternative Investments Ltd, said, ” The hedge fund industry is leaner and fitter as we enter 2010 and as weaker performers continue to withdraw we believe the remaining providers will reap the rewards from their stronger platforms in the coming months.”
The Fund combines a number of core strategies that are expected to benefit from opportunities created by the credit crunch, such as discretionary macro, equity market neutral, managed futures, and equity long/short.
The Fund is a new generation fund of hedge funds, designed to enable both retail and institutional investors to participate in the absolute return opportunities offered by current market conditions via a more liquid and regulated vehicle than a traditional fund of hedge funds.
The Fund offers weekly liquidity, and complies with the strict UCITS III rules concerning leverage, counterparty risk and investments traded. The Fund’s investment manager is HSBC Alternative Investments Ltd, an established adviser of funds of hedge funds.
All underlying UCITS hedge funds under consideration go through its quantitative and qualitative investment due diligence process which has been proven over many years.
“The Sterling classes will allow UK investors to gain maximum benefit from the opportunities to participate in the hedge fund sector offered by the HSBC UCITS AdvantEdge fund.” Chris Allen, CEO of HSBC Alternative Investments Ltd, said, ” The hedge fund industry is leaner and fitter as we enter 2010 and as weaker performers continue to withdraw we believe the remaining providers will reap the rewards from their stronger platforms in the coming months.”
The Fund combines a number of core strategies that are expected to benefit from opportunities created by the credit crunch, such as discretionary macro, equity market neutral, managed futures, and equity long/short.
The Fund is a new generation fund of hedge funds, designed to enable both retail and institutional investors to participate in the absolute return opportunities offered by current market conditions via a more liquid and regulated vehicle than a traditional fund of hedge funds.
The Fund offers weekly liquidity, and complies with the strict UCITS III rules concerning leverage, counterparty risk and investments traded. The Fund’s investment manager is HSBC Alternative Investments Ltd, an established adviser of funds of hedge funds.
All underlying UCITS hedge funds under consideration go through its quantitative and qualitative investment due diligence process which has been proven over many years.
14 Jan 2010
Hedge Funds Industry Trends report
Heidrick & Struggles surveyed more than 400 portfolio managers (PMs) and studied more than 100 hedge fund firms for the report, providing a comprehensive view of the industry and its talent flows. Highlights of the report include:
* Tight talent inventory: The availability of senior top talent is decreasing as hedge fund investment professionals re-surface at other hedge funds, proprietary trading banks, asset management firms, and a host of other destinations including endowments, foundations, and family offices.
* SEC changes drawing talent: Veteran hedge fund and markets professionals are also in demand at the SEC, where a promise of increasing government enforcement and the creation of a new Division of Risk, Strategy, and Financial Innovation are leading to new hires.
* Compensation bidding wars will return: "The post-TARP brain drain is turning around, with a significant increase in hiring at most large banks/proprietary trading firms," says Mr. Schwab. "But comp will not reach levels prior to the summer and fall of 2008."
* New, "safer" investment vehicles helping to drive asset-building frenzy: "Assets are coming back to funds, swayed by innovative, more transparent investment products that give more control and liquidity to investors," he says. "Marketing professionals who can sell these products will be key drivers of this activity as funds gear up for the best fundraising opportunity in two years."
* Re-emergence of seeding funds and boom in new launches: Despite the number of funds closing in '08 and '09, launches exceeded liquidations beginning in 3Q '09 and continuing into 4Q.
* Return of comp guarantees in '10: Front office professionals in 2010 can expect to see compensation guarantees return, although this will be coupled with an increase in clawbacks and deferrals.
"It has been a tremendous turnaround year for hedge fund survivors, marking their best returns in over 10 years," says Claude Schwab, head of the U.S. hedge fund practice and a partner at Heidrick & Struggles. "By November 2009, the industry re-crossed the $2 trillion mark, and this was largely due to performance rather than net inflows."
"But this has been a Pyrrhic victory for the industry as a whole," says Mr. Schwab, who is one of the report's authors. "The fact is that more than 20% of hedge funds shut down in the past two years, with 1,500 liquidations in 2008 and 900 in 2009 – and those firms under $1 billion and underwater are especially vulnerable. This vulnerability will have a direct impact on talent flow in 2010; top talent seeks high-quality, stable firms."
Which funds will lose talent in 2010?
"An active hiring market in 2010 will mean that some firms can expect to lose their senior-most talent," says Mr. Schwab. Through their intensive study of firms and portfolio managers, Heidrick & Struggles was able to identify eight characteristics of firms that are the most vulnerable to talent leaving.
Fund underperformance was the top factor cited in the report. Other factors making firms vulnerable include: a lack of formulaic payouts to PMs; shared portfolios; traditionally centralized structures; firms where trigger-pulling responsibility has been pulled from individual PMs; "placeholder" firms housing talent from funds that shut down; those with lower capital (under $1 billion), except for more recent 2009 startups; and funds undergoing a significant internal event, such as a merger or acquisition.
Which funds are most likely to retain talent in 2010? How can top performers be lured away?
"In addition to spotting the most likely firms from which to recruit talent, we were able to identify the characteristics of firms from which it will be difficult to pull the top people. These include firms with strong performance and access to stable, sizeable capital. Other factors keeping talent put include well-run management that provides relative autonomy and a healthy, transparent work environment. And, of course, the best talent will expect lucrative, competitive payout models.
"It's very difficult to pull a strong performer from a firm that has all of these factors in place. A true 'game-changing' opportunity is what it would take to lure the best professionals from such a firm," says Mr. Schwab. Examples of "game changers" include: a very significant increase in capital allocation; sufficient capital to start one's own firm; the opportunity to build a firm and/or be a key part of the firm's succession plan; and the opportunity to serve a cause while investing.
"Major endowments, sovereign wealth funds, and the SEC made key hires in 2009 where candidates were attracted to the cause or mission associated with the institution as well as the investment opportunity. The year 2010 will see a continuation of this trend."
* Tight talent inventory: The availability of senior top talent is decreasing as hedge fund investment professionals re-surface at other hedge funds, proprietary trading banks, asset management firms, and a host of other destinations including endowments, foundations, and family offices.
* SEC changes drawing talent: Veteran hedge fund and markets professionals are also in demand at the SEC, where a promise of increasing government enforcement and the creation of a new Division of Risk, Strategy, and Financial Innovation are leading to new hires.
* Compensation bidding wars will return: "The post-TARP brain drain is turning around, with a significant increase in hiring at most large banks/proprietary trading firms," says Mr. Schwab. "But comp will not reach levels prior to the summer and fall of 2008."
* New, "safer" investment vehicles helping to drive asset-building frenzy: "Assets are coming back to funds, swayed by innovative, more transparent investment products that give more control and liquidity to investors," he says. "Marketing professionals who can sell these products will be key drivers of this activity as funds gear up for the best fundraising opportunity in two years."
* Re-emergence of seeding funds and boom in new launches: Despite the number of funds closing in '08 and '09, launches exceeded liquidations beginning in 3Q '09 and continuing into 4Q.
* Return of comp guarantees in '10: Front office professionals in 2010 can expect to see compensation guarantees return, although this will be coupled with an increase in clawbacks and deferrals.
"It has been a tremendous turnaround year for hedge fund survivors, marking their best returns in over 10 years," says Claude Schwab, head of the U.S. hedge fund practice and a partner at Heidrick & Struggles. "By November 2009, the industry re-crossed the $2 trillion mark, and this was largely due to performance rather than net inflows."
"But this has been a Pyrrhic victory for the industry as a whole," says Mr. Schwab, who is one of the report's authors. "The fact is that more than 20% of hedge funds shut down in the past two years, with 1,500 liquidations in 2008 and 900 in 2009 – and those firms under $1 billion and underwater are especially vulnerable. This vulnerability will have a direct impact on talent flow in 2010; top talent seeks high-quality, stable firms."
Which funds will lose talent in 2010?
"An active hiring market in 2010 will mean that some firms can expect to lose their senior-most talent," says Mr. Schwab. Through their intensive study of firms and portfolio managers, Heidrick & Struggles was able to identify eight characteristics of firms that are the most vulnerable to talent leaving.
Fund underperformance was the top factor cited in the report. Other factors making firms vulnerable include: a lack of formulaic payouts to PMs; shared portfolios; traditionally centralized structures; firms where trigger-pulling responsibility has been pulled from individual PMs; "placeholder" firms housing talent from funds that shut down; those with lower capital (under $1 billion), except for more recent 2009 startups; and funds undergoing a significant internal event, such as a merger or acquisition.
Which funds are most likely to retain talent in 2010? How can top performers be lured away?
"In addition to spotting the most likely firms from which to recruit talent, we were able to identify the characteristics of firms from which it will be difficult to pull the top people. These include firms with strong performance and access to stable, sizeable capital. Other factors keeping talent put include well-run management that provides relative autonomy and a healthy, transparent work environment. And, of course, the best talent will expect lucrative, competitive payout models.
"It's very difficult to pull a strong performer from a firm that has all of these factors in place. A true 'game-changing' opportunity is what it would take to lure the best professionals from such a firm," says Mr. Schwab. Examples of "game changers" include: a very significant increase in capital allocation; sufficient capital to start one's own firm; the opportunity to build a firm and/or be a key part of the firm's succession plan; and the opportunity to serve a cause while investing.
"Major endowments, sovereign wealth funds, and the SEC made key hires in 2009 where candidates were attracted to the cause or mission associated with the institution as well as the investment opportunity. The year 2010 will see a continuation of this trend."
ITG to Donate a Portion of Friday's Revenues to Haitian Relief Funds
Investment Technology Group, Inc. (NYSE:ITG) announced that the firm will contribute ten percent of its global trading revenues on Friday, January 15, toward Haitian earthquake relief efforts. In addition, ITG is organizing a firm-wide employee charity day to encourage donations to the affected region.
ITG will donate to the following charities: the American Red Cross, Partners in Health, and Save the Children. To make a donation to any of these charities, contact information is provided below:
AMERICAN RED CROSS
www.redcross.org
Text "HAITI" to "90999 to make a $10 donation.
2025 E Street, NW
Washington, D.C. 20006
(800) REDCROSS (733-2767)
PARTNERS IN HEALTH
www.pih.org
P.O. Box 845578
Boston, MA 02284-5578
(617) 432-5256
SAVE THE CHILDREN
www.savethechildren.org
Haiti Earthquake Children in Emergency Fund
54 Wilton Road
Westport, CT 06880
(800) 728-3843
About ITG
Investment Technology Group, Inc., is a specialized agency brokerage and financial technology firm that partners with asset managers globally to provide innovative solutions spanning the investment continuum. A leader in electronic trading since launching POSIT in 1987, ITG's integrated approach now includes a range of products from portfolio management and pre-trade analysis to trade execution and post-trade evaluation. Asset managers rely on ITG's independence, experience, and agility to help mitigate risk, improve performance and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific regions. For more information on ITG, please visit www.itg.com.
ITG will donate to the following charities: the American Red Cross, Partners in Health, and Save the Children. To make a donation to any of these charities, contact information is provided below:
AMERICAN RED CROSS
www.redcross.org
Text "HAITI" to "90999 to make a $10 donation.
2025 E Street, NW
Washington, D.C. 20006
(800) REDCROSS (733-2767)
PARTNERS IN HEALTH
www.pih.org
P.O. Box 845578
Boston, MA 02284-5578
(617) 432-5256
SAVE THE CHILDREN
www.savethechildren.org
Haiti Earthquake Children in Emergency Fund
54 Wilton Road
Westport, CT 06880
(800) 728-3843
About ITG
Investment Technology Group, Inc., is a specialized agency brokerage and financial technology firm that partners with asset managers globally to provide innovative solutions spanning the investment continuum. A leader in electronic trading since launching POSIT in 1987, ITG's integrated approach now includes a range of products from portfolio management and pre-trade analysis to trade execution and post-trade evaluation. Asset managers rely on ITG's independence, experience, and agility to help mitigate risk, improve performance and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific regions. For more information on ITG, please visit www.itg.com.
13 Jan 2010
Rajaratnam Attacks Wiretap Evidence In Hedge Fund Case
HedgeCo News - Hedge fund manager Raj Rajaratnam won approval yesterday from U.S. District Court Judge Richard Holwell to stay free on $100 million bail while awaiting trial on his insider trading case. The judge refused to reduce or revoke bail.
Rajaratnam's lawyer attacked the U.S. government's wiretap evidence saying he would file a motion to suppress the telephone recordings which were used to arrest Rajaratnam and more than a dozen other people in the Galleon raid. A hedge fund manager known as "Tipper X", and hedge fund consultant Roomy Khan are cooperating with investigators in providing evidence against Rajaratnam.
"The recordings were cherry picked and mismanaged and someone did not do their homework," Dowd told the Judge, according to reports.
Last week Federal prosecutors doubled the sum of the allegations and former senior partner at McKinsey & Co., Anil Kumar, pleaded guilty to conspiracy, insider trading and securities fraud.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in what is being called the USA’s largest hedge fund insider-trading scheme.
The insider trading case involves the employees of some of America’s best-known companies, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp. Danielle Chiesi, an executive at New Castle Funds LLC was also indicted on multiple counts of conspiracy and securities fraud.
Rajaratnam's lawyer attacked the U.S. government's wiretap evidence saying he would file a motion to suppress the telephone recordings which were used to arrest Rajaratnam and more than a dozen other people in the Galleon raid. A hedge fund manager known as "Tipper X", and hedge fund consultant Roomy Khan are cooperating with investigators in providing evidence against Rajaratnam.
"The recordings were cherry picked and mismanaged and someone did not do their homework," Dowd told the Judge, according to reports.
Last week Federal prosecutors doubled the sum of the allegations and former senior partner at McKinsey & Co., Anil Kumar, pleaded guilty to conspiracy, insider trading and securities fraud.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in what is being called the USA’s largest hedge fund insider-trading scheme.
The insider trading case involves the employees of some of America’s best-known companies, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp. Danielle Chiesi, an executive at New Castle Funds LLC was also indicted on multiple counts of conspiracy and securities fraud.
12 Jan 2010
UK Hedge Fund Manager Launches Green Investment Opportunity
HedgeCo News - Future Capital Partners (FCP), the £6 billion ($9.68 billion) hedge fund and alternative investment boutique, has launched a groundbreaking investment opportunity that will allow UK investors to invest in the rapidly growing Renewable Transport Fuels (RTF) sector for the first time.
The production of European RTFs is expected to grow tenfold over the next decade, and RTFs are currently the only sector into which Shell and BP are committing significant Renewable Energy investments.
The partnership expects to provide its investors returns of over 30% per annum over a five to seven year period. It will be raising £40 million ($64.56 million) equity, of which it has already secured over £5 million ($8 million) (including a £3 million ($investment from Future Capital Partners itself), and there will be a minimum investment of £50,000 ($87,000). A trade sale or IPO is targeted within 5 years of commissioning of the plant.
“RTFs are the investment opportunity of the future." Tim Levy, CEO at Future Capital Partners said, "The global focus on renewable energy is there for all to see, yet opportunities to invest in such an obvious growth sector are currently non-existent. Future Fuels will provide investors with the opportunity to invest in one of only three RTF production plants in the country. Climate change “is the moral issue of our time” (Ed Miliband) and “the greatest challenge facing humanity” (Lord Stern). Many of us believe that ranking not far behind are issues of oil reserves and price, together with food security. This project has at its heart all of these issues.”
Levy added: “Investment in first generation Renewable Transport Fuels is essential to underpin investment in second and third generation technologies – and is a crucial step towards the long term goal of replacing oil in transport fuels (in the UK this accounts for about 70% of our oil imports).”
EU and UK directives have indicated that by 2020 13% (estimated at 23 billion litres) of all the Europe’s petrol fuel must come from renewable sources. Currently, just 2 billion litres (or 3.5%) of the Europe’s petrol fuel comes from renewable sources, meaning that the petrol based Renewable Transport sector is set to grow more than ten-fold in the next decade.
“We believe this project is not only worthy of investment on purely commercial terms but also allows investors to be a ‘catalyst for change’ in an incredibly important way." Levy said.
“It is a chance to capitalise on a non-correlated, niche investment of huge potential and at the same time benefiting from the risk controls we have placed around the partnership. Moreover, by securing off take agreements for the plant’s produce, we have done a great deal to ensure the project’s long term success. For the first time, Future Fuels will give UK investors the chance to take advantage of the next decade’s most lucrative investment.” Levy concluded.
The production of European RTFs is expected to grow tenfold over the next decade, and RTFs are currently the only sector into which Shell and BP are committing significant Renewable Energy investments.
The partnership expects to provide its investors returns of over 30% per annum over a five to seven year period. It will be raising £40 million ($64.56 million) equity, of which it has already secured over £5 million ($8 million) (including a £3 million ($investment from Future Capital Partners itself), and there will be a minimum investment of £50,000 ($87,000). A trade sale or IPO is targeted within 5 years of commissioning of the plant.
“RTFs are the investment opportunity of the future." Tim Levy, CEO at Future Capital Partners said, "The global focus on renewable energy is there for all to see, yet opportunities to invest in such an obvious growth sector are currently non-existent. Future Fuels will provide investors with the opportunity to invest in one of only three RTF production plants in the country. Climate change “is the moral issue of our time” (Ed Miliband) and “the greatest challenge facing humanity” (Lord Stern). Many of us believe that ranking not far behind are issues of oil reserves and price, together with food security. This project has at its heart all of these issues.”
Levy added: “Investment in first generation Renewable Transport Fuels is essential to underpin investment in second and third generation technologies – and is a crucial step towards the long term goal of replacing oil in transport fuels (in the UK this accounts for about 70% of our oil imports).”
EU and UK directives have indicated that by 2020 13% (estimated at 23 billion litres) of all the Europe’s petrol fuel must come from renewable sources. Currently, just 2 billion litres (or 3.5%) of the Europe’s petrol fuel comes from renewable sources, meaning that the petrol based Renewable Transport sector is set to grow more than ten-fold in the next decade.
“We believe this project is not only worthy of investment on purely commercial terms but also allows investors to be a ‘catalyst for change’ in an incredibly important way." Levy said.
“It is a chance to capitalise on a non-correlated, niche investment of huge potential and at the same time benefiting from the risk controls we have placed around the partnership. Moreover, by securing off take agreements for the plant’s produce, we have done a great deal to ensure the project’s long term success. For the first time, Future Fuels will give UK investors the chance to take advantage of the next decade’s most lucrative investment.” Levy concluded.
Bandon Embraces Alternative Strategy for Non-accredited Investors
Hedge fund manager, Bandon Capital Management, LLC, announced a new relationship with American Independent Securities Group, LLC (AISG) enabling the advisors of AISG to make available Bandon’s flagship investment strategy, the Directional Interest Rate Strategy (DIRS), to clients as a separately managed account featuring daily liquidity with minimum investments as low as $25,000.
The Strategy, available to both accredited and non-accredited investors, was created by a former New York Federal Reserve economist and seeks to provide investors with absolute returns, uncorrelated with the equity and fixed income markets, by investing in the US Treasury Market through ETF’s or mutual funds.
Diana Burrell, President of AISG said “We‘re incredibly excited about the new relationship with Bandon and the opportunity for our clients to have access to liquid, non-correlated, absolute return strategies. We believe investors make money in the long term by constructing portfolios with high compound annual returns, low volatility and low probability of large draw downs - Bandon qualifies on all accounts.”
Bandon identifies institutional quality alternative strategies that can be translated and implemented using liquid, transparent securities and distributes these solutions through financial intermediaries.
The Strategy, available to both accredited and non-accredited investors, was created by a former New York Federal Reserve economist and seeks to provide investors with absolute returns, uncorrelated with the equity and fixed income markets, by investing in the US Treasury Market through ETF’s or mutual funds.
Diana Burrell, President of AISG said “We‘re incredibly excited about the new relationship with Bandon and the opportunity for our clients to have access to liquid, non-correlated, absolute return strategies. We believe investors make money in the long term by constructing portfolios with high compound annual returns, low volatility and low probability of large draw downs - Bandon qualifies on all accounts.”
Bandon identifies institutional quality alternative strategies that can be translated and implemented using liquid, transparent securities and distributes these solutions through financial intermediaries.
Father-Son Advisor Team Charged With Nadel Related Hedge Fund Fraud
HedgeCo News - The SEC has charged two investment advisers with securities fraud for misleading investors about the financial condition of three hedge funds they managed, and misrepresenting that they controlled the funds' investment and trading activities when in fact they were being handled by Arthur G. Nadel.
The SEC alleges that Sarasota, Fla.-based Neil V. Moody and his son, Christopher D. Moody, distributed offering materials, account statements, and newsletters to investors that misrepresented the hedge funds' historical investment returns and overstated their asset values by as much as $160 million.
According to the SEC's complaint, hedge funds Valhalla Investment Partners L.P., Viking IRA Fund LLC, and Viking Fund were controlled by Nadel with no meaningful supervision or oversight by the Moodys. The SEC charged Nadel with fraud last year and obtained an emergency court order to freeze his assets.
"The Moodys led investors to believe that they were faithfully managing funds invested with them," said Glenn S. Gordon, Associate Director of the SEC's Miami Regional Office. "Instead, they abdicated their responsibilities to investors and ignored warning signs that should have alerted them to the fraud that was occurring all around them."
In its complaint against the Moodys, the SEC seeks permanent injunctions, financial penalties, and disgorgement of illegal gains. Without admitting or denying the SEC's allegations, the Moodys have consented to permanent injunctions against future securities fraud violations and are bared from associating with any investment adviser for five years.
The SEC alleges that Sarasota, Fla.-based Neil V. Moody and his son, Christopher D. Moody, distributed offering materials, account statements, and newsletters to investors that misrepresented the hedge funds' historical investment returns and overstated their asset values by as much as $160 million.
According to the SEC's complaint, hedge funds Valhalla Investment Partners L.P., Viking IRA Fund LLC, and Viking Fund were controlled by Nadel with no meaningful supervision or oversight by the Moodys. The SEC charged Nadel with fraud last year and obtained an emergency court order to freeze his assets.
"The Moodys led investors to believe that they were faithfully managing funds invested with them," said Glenn S. Gordon, Associate Director of the SEC's Miami Regional Office. "Instead, they abdicated their responsibilities to investors and ignored warning signs that should have alerted them to the fraud that was occurring all around them."
In its complaint against the Moodys, the SEC seeks permanent injunctions, financial penalties, and disgorgement of illegal gains. Without admitting or denying the SEC's allegations, the Moodys have consented to permanent injunctions against future securities fraud violations and are bared from associating with any investment adviser for five years.
11 Jan 2010
Future Crisis Worries - Hedge Fund Compliance Survey
HedgeCo.net News - Three quarters of the world’s senior banking and compliance officers polled as part of a wide-ranging survey by Complinet, a hedge fund compliance company, said they are expecting the next financial crisis will strike within the first half of this decade, the company said.
The survey found that the majority of regulatory experts questioned predicted the next significant economic downturn before 2015. 77% said recent reforms were insufficient to avoid another crash similar to the 2008 collapse.
The survey of 232 global compliance officers was made up of 34% from the banking sector, 9% insurance, 32% securities, 7% legal, 18% others.
“The continuing lack of company transparency and accountability to the markets and the public makes the possibility of another crisis almost assured,” said one of the businesses questioned.
The Complinet survey also showed that only 40% thought their firm had changed its approach to compensating employees based on a better understanding of risks associated with the business.
And 91% recognised that the current bonus culture is resented by those outside the financial services industry.
But the survey also showed that 62% of senior management believe they’re putting the right controls in place.
“Regulatory reform and implementation of effective compliance solutions are clearly vital to avoid another crash,” says Paul Johns, Vice President of Global Markets at Complinet.
“The key message from this survey is financial institutions must ensure they have enough compliance resource to navigate through the regulatory maze and reduce the risk of falling foul of the rules.”
The survey found that the majority of regulatory experts questioned predicted the next significant economic downturn before 2015. 77% said recent reforms were insufficient to avoid another crash similar to the 2008 collapse.
The survey of 232 global compliance officers was made up of 34% from the banking sector, 9% insurance, 32% securities, 7% legal, 18% others.
“The continuing lack of company transparency and accountability to the markets and the public makes the possibility of another crisis almost assured,” said one of the businesses questioned.
The Complinet survey also showed that only 40% thought their firm had changed its approach to compensating employees based on a better understanding of risks associated with the business.
And 91% recognised that the current bonus culture is resented by those outside the financial services industry.
But the survey also showed that 62% of senior management believe they’re putting the right controls in place.
“Regulatory reform and implementation of effective compliance solutions are clearly vital to avoid another crash,” says Paul Johns, Vice President of Global Markets at Complinet.
“The key message from this survey is financial institutions must ensure they have enough compliance resource to navigate through the regulatory maze and reduce the risk of falling foul of the rules.”
Bluenose To Launch Onshore Hedge Fund
HedgeCo News - BVI-based investment manager Bluenose Capital Management is planning to launch The Bluenose North American Market Neutral fund, an onshore version of its flagship offshore hedge fund on March 1st, 2010.
The Delaware-domiciled fund has a 1 year lock-up period, with a minimum investment of $250,000, with a 1% management fee and 20% incentive.
Bluenose's JS Pelletier and Dario Borelli will be managing the fund.
Aimed at U.S. accredited and qualified investors, the US & Canada equity market neutral fund has 4 underlying strategies employed according to prevailing market conditions, including systematic, quantitative & automated investment process. With rigorous risk management practices ensuring low downside volatility the new fund trades only highly liquid exchange-listed securities.
The objective is to generate an annualized compound rate of return of 15% with lower downside volatility vs. the S&P500 and TSX benchmarks. Using proprietary multi-factor models, the fund will engage in short-term market neutral trading in Canadian and U.S. liquid exchange-listed securities. The Fund has a capacity of $700M at the trading level.
The Delaware-domiciled fund has a 1 year lock-up period, with a minimum investment of $250,000, with a 1% management fee and 20% incentive.
Bluenose's JS Pelletier and Dario Borelli will be managing the fund.
Aimed at U.S. accredited and qualified investors, the US & Canada equity market neutral fund has 4 underlying strategies employed according to prevailing market conditions, including systematic, quantitative & automated investment process. With rigorous risk management practices ensuring low downside volatility the new fund trades only highly liquid exchange-listed securities.
The objective is to generate an annualized compound rate of return of 15% with lower downside volatility vs. the S&P500 and TSX benchmarks. Using proprietary multi-factor models, the fund will engage in short-term market neutral trading in Canadian and U.S. liquid exchange-listed securities. The Fund has a capacity of $700M at the trading level.
8 Jan 2010
Kumar Pleads Guilty in Galleon Hedge Fund Case
New York - Former senior partner at McKinsey & Co., Anil Kumar, yesterday pleaded guilty to conspiracy, insider trading and securities fraud in the Galleon/Raj Rajaratnam hedge fund fraud case, the U.S. Attorney’s Office said.
The prosecution alledged, before US District Judge Denny Chin in Manhattanthat, that Rajaratnam paid Kumar up to $1 million a year for his inside tips, making the hedge fund over $19 million. Kumar, 51, of Saratoga, Calif., is cooperating with prosecutors. He will be sentenced on March 26.
The investigation started with suspicions in the 1990s when chip maker Intel Corp alleged that Rajaratnam was receiving tips from an Intel insider. The investigation was based on a witness who had first entered into a plea agreement with the United States before she began to cooperate in an investigation into Rajaratnam’s practices.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in the USA’s largest hedge fund insider-trading scheme. His bail was set at $100 million.
The insider trading case involves the employees of some of America’s best-known companies, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp.
7 Jan 2010
Hedge Fund Greatwater Shows Strong Gains In First Year
New York (HedgeCo.net) – Greatwater Investment Management, Inc. (GWIM) last year launched the Greatwater Fund, LP., whose unique strategy and philosophy focuses on risk adjusted returns in the emerging markets. In its first year, the Greatwater Fund gained 69.6%.
Domiciled in Delaware, the Greatwater Fund is hedged against market extremes in Latin America with a concentration of investments in the Central Pacific region of Costa Rica. With no lockup period, the hedge fund has monthly redemptions and subscriptions subject to cash flows and development schedule. The fund is expected to run for eight to ten years with distributions planned in year five.
With a minimum investment of $100,000, the 2% management fee, and 25% incentive fee are for retail investors, with institutional fees being adjusted based on investment size. The hedge fund focuses on asset management in the areas of global trends, real estate, marketing and management.
“Our unique marketing strategies have been so successful they we are working on what promises to be the countries most interesting and attractive adventure resort.” Richard Lackey, the hedge fund’s managing director, said, “Imagine taking jungle tours on a Segway, or riding a zip line through a cave or waterfall.”
One of the world’s leading talent agencies is now working with fund management on a reality TV show (non-scripted) featuring their global “eco-architect challenge” where architects and engineers from around the world will compete to design the ultimate luxury tree house. In addition to a stable of luxury tree houses, the resort promises to have luxury homes, jungle villas, lake front villas and a 5 star boutique hotel.
Several factors are keeping Costa Rica investments low risk and high return, ahead of most of their emerging market peers. The low cost of living, close proximity to the US, and democratic government are drawing second-home buyers and retirees to Costa Rica.
“Our strategies are working better than expected,” Lackey said, “Our first hotel has gone from a ranking of 48 out of 80 to number 1 in eighteen months, surpassing our five year expectations. I am even more confident now that this unique space will continue to offer a low volatility opportunity to fund of funds and others wanting exposure in Latin America.”
The Greatwater Fund hosts investor and advisor groups almost monthly at their hotel in Manuel Antonio, Costa Rica. They expect their fund to fully capitalized by mid-May 2010
Domiciled in Delaware, the Greatwater Fund is hedged against market extremes in Latin America with a concentration of investments in the Central Pacific region of Costa Rica. With no lockup period, the hedge fund has monthly redemptions and subscriptions subject to cash flows and development schedule. The fund is expected to run for eight to ten years with distributions planned in year five.
With a minimum investment of $100,000, the 2% management fee, and 25% incentive fee are for retail investors, with institutional fees being adjusted based on investment size. The hedge fund focuses on asset management in the areas of global trends, real estate, marketing and management.
“Our unique marketing strategies have been so successful they we are working on what promises to be the countries most interesting and attractive adventure resort.” Richard Lackey, the hedge fund’s managing director, said, “Imagine taking jungle tours on a Segway, or riding a zip line through a cave or waterfall.”
One of the world’s leading talent agencies is now working with fund management on a reality TV show (non-scripted) featuring their global “eco-architect challenge” where architects and engineers from around the world will compete to design the ultimate luxury tree house. In addition to a stable of luxury tree houses, the resort promises to have luxury homes, jungle villas, lake front villas and a 5 star boutique hotel.
Several factors are keeping Costa Rica investments low risk and high return, ahead of most of their emerging market peers. The low cost of living, close proximity to the US, and democratic government are drawing second-home buyers and retirees to Costa Rica.
“Our strategies are working better than expected,” Lackey said, “Our first hotel has gone from a ranking of 48 out of 80 to number 1 in eighteen months, surpassing our five year expectations. I am even more confident now that this unique space will continue to offer a low volatility opportunity to fund of funds and others wanting exposure in Latin America.”
The Greatwater Fund hosts investor and advisor groups almost monthly at their hotel in Manuel Antonio, Costa Rica. They expect their fund to fully capitalized by mid-May 2010
Ponta Negra Hedge Fund Manager Pleads Guilty
New York (HedgeCo.net) - Former Stamford hedge fund manager, Francesco Rusciano. waived his right to indictment and pleaded guilty today before US Judge Ellen Bree Burns in New Haven to one count of wire fraud.
According to court documents and statements made in court, from approximately March 2007 to April 2009, Rusciano operated a private investment fund, the Ponta Negra Fund I, LLC at his residence in Stamford. In approximately January 2009, he started the Ponta Negra Offshore Fund, LTD. Rusciano implied that the money invested in his hedge funds would be used for trading of spot, forwards, non-deliverable forwards, and options in G7 and emerging market economies.
In pleading guilty, he admitted that he defrauded investors by overstating his background and experience as a currency trader with his prior employer and by overstating his performance history.
Rusciano's investors placed approximately $24 million in principal with the hedge funds during their time of operation and, in turn, investors redeemed approximately $9 million before his scheme was discovered. At the time the Securities and Exchange Commission froze the assets of the Funds in April 2009, approximately $15 million remained in the Funds.
Judge Burns has scheduled sentencing for April 2, 2010, at which time Rusciano faces a maximum term of imprisonment of 20 years. The FBI arrested Rusciano at his residence on May 1, 2009. He has been released on bond under electronic monitoring since May 4th.
According to court documents and statements made in court, from approximately March 2007 to April 2009, Rusciano operated a private investment fund, the Ponta Negra Fund I, LLC at his residence in Stamford. In approximately January 2009, he started the Ponta Negra Offshore Fund, LTD. Rusciano implied that the money invested in his hedge funds would be used for trading of spot, forwards, non-deliverable forwards, and options in G7 and emerging market economies.
In pleading guilty, he admitted that he defrauded investors by overstating his background and experience as a currency trader with his prior employer and by overstating his performance history.
Rusciano's investors placed approximately $24 million in principal with the hedge funds during their time of operation and, in turn, investors redeemed approximately $9 million before his scheme was discovered. At the time the Securities and Exchange Commission froze the assets of the Funds in April 2009, approximately $15 million remained in the Funds.
Judge Burns has scheduled sentencing for April 2, 2010, at which time Rusciano faces a maximum term of imprisonment of 20 years. The FBI arrested Rusciano at his residence on May 1, 2009. He has been released on bond under electronic monitoring since May 4th.
6 Jan 2010
Fed Doubles Rajaratnam Hedge Fund Allegations
New York (HedgeCo.net) - U.S. prosecutors yesterday filed papers saying Raj Rajaratnam’s profits in the alleged Galleon hedge fund scheme are higher than previously thought. Federal prosecutors doubled the sum to $36 million from the previous allegations of $17 million in fraudulent income. Prosecutors also opposed Rajaratnam’s bid for reduced bail.
The investigation started with suspicions in the 1990s when chip maker Intel Corp alleged that Rajaratnam was receiving tips from an Intel insider. The investigation was based on a witness who had first entered into a plea agreement with the United States before she began to cooperate in an investigation into Rajaratnam's practices.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in the USA's largest hedge fund insider-trading scheme. His bail was set at $100 million, Rajaratnam said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
Rajaratnam was hailed a hero in post-tsunami Sri Lanka, now however, his massive donations are being called into question.
Rajaratnam is a U.S. citizen and the most prominent defendant among 21 people criminally or civilly charged in an insider trading case involving employees of some of America's best-known companies, according to Bloomberg, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp.
The investigation started with suspicions in the 1990s when chip maker Intel Corp alleged that Rajaratnam was receiving tips from an Intel insider. The investigation was based on a witness who had first entered into a plea agreement with the United States before she began to cooperate in an investigation into Rajaratnam's practices.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in the USA's largest hedge fund insider-trading scheme. His bail was set at $100 million, Rajaratnam said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
Rajaratnam was hailed a hero in post-tsunami Sri Lanka, now however, his massive donations are being called into question.
Rajaratnam is a U.S. citizen and the most prominent defendant among 21 people criminally or civilly charged in an insider trading case involving employees of some of America's best-known companies, according to Bloomberg, including International Business Machines Corp, McKinsey & Co and Intel Capital, an arm of Intel Corp.
4 Jan 2010
Trends in Hedge Fund Capital Raising for 2010
HedgeCo News - Several dominant trends regarding capital flows into the hedge fund arena were identified through conversations with more than 200 hedge fund organizations and 1000 institutional investors during 2009, according to Agecroft Partners.
These hedge fund trends include:
Continued Improvement of Capital Flows: The past 16 months witnessed unprecedented changes in the hedge fund industry with assets off 40% from their peak levels and industry revenues down approximately 70%. The environment was worse for fund raising where we estimate that new flows were likely down 95% from peak levels for the 4Q08 and 1Q09. The asset raising environment slowly improved during the 2nd and 3rd quarter, with a significant increase in the 4th quarter. However, it was still down an estimated 60% to 70% from the peak. During each successive quarter in 2010, we expect hedge fund capital inflows will continue to improve. A major driver of this renewed growth will be a gradual yet substantial increase in allocations made by pension funds.
Increased Competition: While asset flows had been a fraction of their previous highs, 2009 saw a significant increase in competition as many hedge funds, previously closed to new investors, began to market their funds. This trend will continue throughout 2010 as many leading hedge funds strive to return to their previous asset peak. The asset raising environment in 2009 was also affected by the development of a large secondary market for hedge funds, where investors could buy into many hedge funds at a large discount to NAV, as well as receive the benefit of investing below the high-water mark. Secondary funds should not be as big a factor in 2010 as discounts to NAV narrow. Finally, while there was a ‘flight to safety’ by institutional investors to larger hedge funds with strong brands in 2009, this trend should reverse itself as investors seek out smaller and more nimble alpha generators.
Increased Importance of Marketing: Due to the aforementioned increased competition, and the dynamic changes occurring amongst the major investor types, marketing and branding of hedge funds plays a more crucial role today than in the past. While most institutional allocators were stable investors throughout the crisis, high net worth individuals led the redemption wave and created liquidity problems for many hedge funds and hedge fund of funds, along with their underlying investors. Hedge funds will be more focused on their investor demographics in the wake of 2008. The resulting landscape features institutional investors as the preferred client, controlling a greater market share of hedge fund allocations. This trend will continue as pension funds significantly increase allocations to hedge funds. These changes highlight the need for a professional, proactive and knowledgeable sales force able to sell a fund’s specific attributes to an appropriate mix of investors.
Extension of the Due Diligence Process: The due diligence process of hedge fund investors is longer, more focused and deeper than ever before. Institutional investors typically require three to five meetings before making an investment decision. Their process focuses on multiple evaluation factors including: (1) organizational quality, (2) investment team, (3) investment process, (4) risk controls, (5) operational infrastructure, (6) terms and (7) historical performance. The weighting of the various attributes varies among investors, but the trend, particularly in the wake of the Madoff scandal, is toward longer due diligence and increased focus on areas of operational due diligence and risk management policies.
Marketplace Segmentation by Investor Type: The hedge fund marketplace consists of many different segments each displaying a unique profile with regard to the following factors: (1) decision-making structure, (2) length of due diligence process, (3) evaluation factors utilized, (4) average duration of investment and (5) impact on capital flows in the hedge fund industry. Next we will highlight the trends in hedge fund allocations by major investor types.
Pension Funds: The average pension fund portfolio allocates approximately 2.5% to hedge funds. Although it is still only a small fraction of the allocation of the top endowments, this percentage represents a significant increase from ten years ago. We anticipate that pension funds will gradually increase allocations to hedge funds during the next decade, approaching 15% of their asset base. Furthermore, we estimate that 90% of pension funds that allocate to hedge funds currently use a fund of hedge funds structure. However, over time we expect an increasing number of pension funds to choose direct access to managers as they acquire more knowledge and experience of hedge funds. Smaller pension funds will continue to use fund of funds. In addition, rather than separating hedge funds out as a separate asset class, we expect many pension funds to use hedge fund managers within their existing equity and fixed income buckets as a best of breed solution. During the recent crisis, pension funds were the most stable investor in hedge funds and will continue to be a sought-after investor by managers.
Endowments and Foundations: During 2009, endowments and foundations redeemed well below industry average. Primarily liquidity issues, as opposed to less favorable long-term opinion on the merits of investing in hedge funds, drove these redemptions. The endowment and foundation space is a bifurcated market comprised of organizations with more than $1B AUM and those with less than $1B AUM. Many of the larger endowments and foundations are fully allocated to hedge funds and will continue (in some instances) to favor a portfolio allocation of more than 50% to managers. Although we do not underestimate the positive impact that endowments and foundations have had as early adopters of hedge funds, the growth in this space is limited given current, already large allocations. The primary opportunity in this space is, as we see it, takeaway business, where a new manager will replace an existing manager. For endowments and foundations with less than $1B AUM, we anticipate growing portfolio allocations to hedge funds up from an estimated 10-25% overall. We also anticipate an increase in reliance on access to hedge funds through consultants for smaller endowments and foundations.
Fund of Hedge Funds: 2009 saw significant contraction in hedge fund of funds assets. The crisis of 2008 did not treat all fund of hedge funds equally. Some fund of funds experienced significantly fewer redemptions relative to peers due to a variety of factors including, (1) higher concentrations of institutional clients, (2) avoiding extreme leverage, (3) low Madoff exposure, (4) outperforming peers and (5) proactively educating clients on appropriate comparative benchmarks. While we expect the absolute dollar amount invested in funds of funds to increase with the expansion of assets in the hedge fund industry, the market share of funds of funds should decrease as increasing numbers of institutional investors go ‘direct’ to single managers.
The hedge fund of funds industry also consolidated throughout 2009—a trend we expect to continue. Some larger funds of funds ceased operations due to (1) Madoff exposure, (2) poor performance or (3) strategic decisions by a parent company. Larger competitors with greater distribution capabilities also acquired some smaller funds of hedge funds. As funds of funds continue to consolidate, opportunities will arise for smaller firms to differentiate themselves.
Consultants: The institutional hedge fund consultant market place has seen explosive growth as more institutional investors begin to go direct. Most of these firms saw few redemptions from their client base in 2009, while seeing the number of clients expand. This trend will continue well into the future, with increased competition from traditional institutional consultant firms and fund of fund organization that create separately managed portfolios for large institutional investors.
High Net Worth Investors: Generally, high net-worth investors fall into two categories: institutional and non-institutional. The first group, categorized by high sophistication, portfolio stability and endowment style approach to investing, constitutes a desirable investor. Many among this group operate from a family-office structure or spend a majority of their time independently evaluating hedge fund managers. The second category, characterized by less sophistication and fewer resources, tends to chase performance, and utilize a follow the herd mentality to investing. Unfortunately, we believe that this group bears primary responsibility for redemptions from both hedge funds and hedge fund of funds in the recent crisis. A large percent of assets controlled by this latter group have left the hedge fund space and we anticipate their return to be a lengthy process. The return of this capital will likely involve the engagement of advisors and consultants
Conclusion: The hedge fund industry is moving toward a period of sustained growth driven by institutional investors that will increasingly adopt a more institutionalized process for evaluating hedge fund managers. The majority of assets will flow to a small percentage of managers representing firms characterized by: (1) strong distribution, (2) clear comprehension of nuances among investor segments, (3) strong brand, and (4) consistent high-quality marketing message.
These hedge fund trends include:
Continued Improvement of Capital Flows: The past 16 months witnessed unprecedented changes in the hedge fund industry with assets off 40% from their peak levels and industry revenues down approximately 70%. The environment was worse for fund raising where we estimate that new flows were likely down 95% from peak levels for the 4Q08 and 1Q09. The asset raising environment slowly improved during the 2nd and 3rd quarter, with a significant increase in the 4th quarter. However, it was still down an estimated 60% to 70% from the peak. During each successive quarter in 2010, we expect hedge fund capital inflows will continue to improve. A major driver of this renewed growth will be a gradual yet substantial increase in allocations made by pension funds.
Increased Competition: While asset flows had been a fraction of their previous highs, 2009 saw a significant increase in competition as many hedge funds, previously closed to new investors, began to market their funds. This trend will continue throughout 2010 as many leading hedge funds strive to return to their previous asset peak. The asset raising environment in 2009 was also affected by the development of a large secondary market for hedge funds, where investors could buy into many hedge funds at a large discount to NAV, as well as receive the benefit of investing below the high-water mark. Secondary funds should not be as big a factor in 2010 as discounts to NAV narrow. Finally, while there was a ‘flight to safety’ by institutional investors to larger hedge funds with strong brands in 2009, this trend should reverse itself as investors seek out smaller and more nimble alpha generators.
Increased Importance of Marketing: Due to the aforementioned increased competition, and the dynamic changes occurring amongst the major investor types, marketing and branding of hedge funds plays a more crucial role today than in the past. While most institutional allocators were stable investors throughout the crisis, high net worth individuals led the redemption wave and created liquidity problems for many hedge funds and hedge fund of funds, along with their underlying investors. Hedge funds will be more focused on their investor demographics in the wake of 2008. The resulting landscape features institutional investors as the preferred client, controlling a greater market share of hedge fund allocations. This trend will continue as pension funds significantly increase allocations to hedge funds. These changes highlight the need for a professional, proactive and knowledgeable sales force able to sell a fund’s specific attributes to an appropriate mix of investors.
Extension of the Due Diligence Process: The due diligence process of hedge fund investors is longer, more focused and deeper than ever before. Institutional investors typically require three to five meetings before making an investment decision. Their process focuses on multiple evaluation factors including: (1) organizational quality, (2) investment team, (3) investment process, (4) risk controls, (5) operational infrastructure, (6) terms and (7) historical performance. The weighting of the various attributes varies among investors, but the trend, particularly in the wake of the Madoff scandal, is toward longer due diligence and increased focus on areas of operational due diligence and risk management policies.
Marketplace Segmentation by Investor Type: The hedge fund marketplace consists of many different segments each displaying a unique profile with regard to the following factors: (1) decision-making structure, (2) length of due diligence process, (3) evaluation factors utilized, (4) average duration of investment and (5) impact on capital flows in the hedge fund industry. Next we will highlight the trends in hedge fund allocations by major investor types.
Pension Funds: The average pension fund portfolio allocates approximately 2.5% to hedge funds. Although it is still only a small fraction of the allocation of the top endowments, this percentage represents a significant increase from ten years ago. We anticipate that pension funds will gradually increase allocations to hedge funds during the next decade, approaching 15% of their asset base. Furthermore, we estimate that 90% of pension funds that allocate to hedge funds currently use a fund of hedge funds structure. However, over time we expect an increasing number of pension funds to choose direct access to managers as they acquire more knowledge and experience of hedge funds. Smaller pension funds will continue to use fund of funds. In addition, rather than separating hedge funds out as a separate asset class, we expect many pension funds to use hedge fund managers within their existing equity and fixed income buckets as a best of breed solution. During the recent crisis, pension funds were the most stable investor in hedge funds and will continue to be a sought-after investor by managers.
Endowments and Foundations: During 2009, endowments and foundations redeemed well below industry average. Primarily liquidity issues, as opposed to less favorable long-term opinion on the merits of investing in hedge funds, drove these redemptions. The endowment and foundation space is a bifurcated market comprised of organizations with more than $1B AUM and those with less than $1B AUM. Many of the larger endowments and foundations are fully allocated to hedge funds and will continue (in some instances) to favor a portfolio allocation of more than 50% to managers. Although we do not underestimate the positive impact that endowments and foundations have had as early adopters of hedge funds, the growth in this space is limited given current, already large allocations. The primary opportunity in this space is, as we see it, takeaway business, where a new manager will replace an existing manager. For endowments and foundations with less than $1B AUM, we anticipate growing portfolio allocations to hedge funds up from an estimated 10-25% overall. We also anticipate an increase in reliance on access to hedge funds through consultants for smaller endowments and foundations.
Fund of Hedge Funds: 2009 saw significant contraction in hedge fund of funds assets. The crisis of 2008 did not treat all fund of hedge funds equally. Some fund of funds experienced significantly fewer redemptions relative to peers due to a variety of factors including, (1) higher concentrations of institutional clients, (2) avoiding extreme leverage, (3) low Madoff exposure, (4) outperforming peers and (5) proactively educating clients on appropriate comparative benchmarks. While we expect the absolute dollar amount invested in funds of funds to increase with the expansion of assets in the hedge fund industry, the market share of funds of funds should decrease as increasing numbers of institutional investors go ‘direct’ to single managers.
The hedge fund of funds industry also consolidated throughout 2009—a trend we expect to continue. Some larger funds of funds ceased operations due to (1) Madoff exposure, (2) poor performance or (3) strategic decisions by a parent company. Larger competitors with greater distribution capabilities also acquired some smaller funds of hedge funds. As funds of funds continue to consolidate, opportunities will arise for smaller firms to differentiate themselves.
Consultants: The institutional hedge fund consultant market place has seen explosive growth as more institutional investors begin to go direct. Most of these firms saw few redemptions from their client base in 2009, while seeing the number of clients expand. This trend will continue well into the future, with increased competition from traditional institutional consultant firms and fund of fund organization that create separately managed portfolios for large institutional investors.
High Net Worth Investors: Generally, high net-worth investors fall into two categories: institutional and non-institutional. The first group, categorized by high sophistication, portfolio stability and endowment style approach to investing, constitutes a desirable investor. Many among this group operate from a family-office structure or spend a majority of their time independently evaluating hedge fund managers. The second category, characterized by less sophistication and fewer resources, tends to chase performance, and utilize a follow the herd mentality to investing. Unfortunately, we believe that this group bears primary responsibility for redemptions from both hedge funds and hedge fund of funds in the recent crisis. A large percent of assets controlled by this latter group have left the hedge fund space and we anticipate their return to be a lengthy process. The return of this capital will likely involve the engagement of advisors and consultants
Conclusion: The hedge fund industry is moving toward a period of sustained growth driven by institutional investors that will increasingly adopt a more institutionalized process for evaluating hedge fund managers. The majority of assets will flow to a small percentage of managers representing firms characterized by: (1) strong distribution, (2) clear comprehension of nuances among investor segments, (3) strong brand, and (4) consistent high-quality marketing message.
Diamond Notch Fund Manager to Join WindTamer Board
Wind turbine technology company WindTamer Corporation has elected hedge fund investment advisor Steven DiNunzio as an independent member of the Company's Board of Directors.
DiNunzio is currently CFO of Diamond Notch Asset Management, LLC, a multi-strategy investment advisor with approximately $430 million of assets under management. His responsibilities at the company include accounting and financial management and reporting, middle and back office operations and managing service provider relationships, for administration, audit, tax and most prime broker relationships for the Diamond Notch Funds.
Prior to joining Diamond Notch Asset Management, from 2002 to 2007 Mr. DiNunzio held several positions in the Fund Derivatives Department at BNP Paribas and Zurich Capital Markets, most recently as Director and Head of Fund Derivatives Operations for BNP Paribas in New York. Previous to that, Mr. DiNunzio was a Director at Dune Partners, Ltd., a London based hedge fund where his responsibilities included directing operations, compliance and finance. Mr. DiNunzio has also held various positions at Swiss Bank/UBS in the Foreign Exchange, Middle Office and Program Management groups.
"We are very pleased that Steve DiNunzio has agreed to join the WindTamer team," said Gerald E. Brock, WindTamer's Chairman and Chief Executive Officer. "Steve's skills and his long experience in the financial services industry will bring a valuable perspective to our Board of Directors."
DiNunzio is currently CFO of Diamond Notch Asset Management, LLC, a multi-strategy investment advisor with approximately $430 million of assets under management. His responsibilities at the company include accounting and financial management and reporting, middle and back office operations and managing service provider relationships, for administration, audit, tax and most prime broker relationships for the Diamond Notch Funds.
Prior to joining Diamond Notch Asset Management, from 2002 to 2007 Mr. DiNunzio held several positions in the Fund Derivatives Department at BNP Paribas and Zurich Capital Markets, most recently as Director and Head of Fund Derivatives Operations for BNP Paribas in New York. Previous to that, Mr. DiNunzio was a Director at Dune Partners, Ltd., a London based hedge fund where his responsibilities included directing operations, compliance and finance. Mr. DiNunzio has also held various positions at Swiss Bank/UBS in the Foreign Exchange, Middle Office and Program Management groups.
"We are very pleased that Steve DiNunzio has agreed to join the WindTamer team," said Gerald E. Brock, WindTamer's Chairman and Chief Executive Officer. "Steve's skills and his long experience in the financial services industry will bring a valuable perspective to our Board of Directors."
28 Dec 2009
Marshall Wace To Spend $87.6 Million On Hedge Fund Bonuses
HedgeCo News - The hedge fund manager of Eureka Fund, Europe's largest telecom, media and technology sector hedge fund is set to pay out £54.8 million ($87.6 million) in bonuses, according to UK newspaper The Daily Mail.
The hedge fund set up by Paul Marshall is one of Europe's largest alternative investment groups, Marshall founded the hedge fund in 1997 with Ian Wace. The hedge fund gathered steam when it developed a computer system to analyse recommendations from investment banks.
Marshal Wace reported a strong year with profits up from £50 million to £89 million, ($80 million to $142 million) the newspaper reported. The firm's 21 fund managers will share the bulk of the bonus pot while the remainder will go to 75 administrative workers.
18 Dec 2009
UK to Look Into Russia Hedge Fund Corruption Claims
New York (HedgeCo.net) - Commenting on the death of hedge fund Hermitage Capital's anti-corruption lawyer Sergey Magnitskiy, the U.K. Prime Minister said he "was deeply concerned to hear of the death," and, "I welcome the Russian undertaking that there will be a full investigation." the Daily Telegraph reported this morning.
Magnitskiy died on November 16 in a detention centre in Moscow. The US-born, British naturalised lawyer was arrested in 2008 after accusing senior officers in the Interior Ministry of taking part in a $230m state-sponsored scam, leading to the theft of companies owned by hedge funds Hermitage and HSBC. Hermitage has filed law suits and sent letters to Russian anti-corruption authorities, naming top-ranked officials and their role in the alleged tax scam.
The 37 year old father of two was held in Moscow’s Matrosskaya Tishina detention center for almost a year. "Sergey Magnitskiy was refused bail and kept in detention for a year without trial," Hermitage said in a statement. "He was denied the ability to see his mother and his wife and speak to his children for the entire time of his detention."
The U.K. Government has also contacted senior Russian politicians regarding the investigation, the newspaper said.
Magnitskiy died on November 16 in a detention centre in Moscow. The US-born, British naturalised lawyer was arrested in 2008 after accusing senior officers in the Interior Ministry of taking part in a $230m state-sponsored scam, leading to the theft of companies owned by hedge funds Hermitage and HSBC. Hermitage has filed law suits and sent letters to Russian anti-corruption authorities, naming top-ranked officials and their role in the alleged tax scam.
The 37 year old father of two was held in Moscow’s Matrosskaya Tishina detention center for almost a year. "Sergey Magnitskiy was refused bail and kept in detention for a year without trial," Hermitage said in a statement. "He was denied the ability to see his mother and his wife and speak to his children for the entire time of his detention."
The U.K. Government has also contacted senior Russian politicians regarding the investigation, the newspaper said.
17 Dec 2009
100 Women in Hedge Funds partners with Prince William in support of Youth Homeless Charity Centrepoint
100 Women in Hedge Funds, announced during Prince William’s visit to a Centrepoint hostel that, as part of the Prince’s patronage of 100 Women in Hedge Funds, it has chosen to partner with Centrepoint as well.
Centrepoint is the UK’s leading national youth homeless charity, to build on its existing mentoring programme. This announcement follows the news in October that Prince William, who in 2005, chose Centrepoint to be the first charity of which he would become patron, will be patron of 100 Women in Hedge Funds’ philanthropic initiatives.
100 Women in Hedge Funds has a track record of supporting charities in the fields of family health, mentoring and education. From January 2010, 100 Women in Hedge Funds will focus its philanthropic endeavours consecutively, for a year each, on three of Prince William’s Patronages: Centrepoint in 2010; the Child Bereavement Charity in 2011; and Skill Force in 2012.
Seyi Obakin, Chief Executive, Centrepoint said: “At Centrepoint, we are committed to giving homeless young people a future. We are delighted that, with Prince William’s patronage, 100 Women in Hedge Funds will be supporting Centrepoint throughout 2010. This support will make an invaluable contribution to lives of the 800 homeless young people we support each day.”
Commenting on the announcement, Anne Popkin, Chair of 100 Women in Hedge Funds, said: “We are thrilled as an organisation to partner with Centrepoint as they continue to meet their mission beyond their 40th anniversary, and are pleased to be working in partnership with Prince William to do so. All of our efforts and programs are aimed at supporting our three pillars of education, professional peer leverage, and philanthropy; and this partnership allows us to leverage our collective abilities and expertise in order to give back to the community.”
Funds raised by 100 Women in Hedge Funds in 2010 will be used to fund a mentoring programme aimed at enhancing the efforts already made by Centrepoint to impact the lives of young people by developing their employability skills, building their sense of self worth and self-esteem and setting goals for the future.
“In addition to Prince William’s patronage, we are pleased to announce that Financial Risk Management and its chairman Blaine Tomlinson have signed on to be the first Patronage Sponsor where they will support the charity of the year selected by 100 Women in Hedge Funds over the next three years,” added Popkin.
100 Women in Hedge Funds is planning a number of events in London during the year that will culminate in the 100 Women in Hedge Funds London Gala on September 30, 2010 at The Honorable Society of the Middle Temple.
Firms and individuals interested in learning more about sponsorship opportunities or for further details on 100 Women in Hedge Fund’s Gala event for 2010, email:
Londongala@100womeninhedgefunds.org.
Centrepoint is the UK’s leading national youth homeless charity, to build on its existing mentoring programme. This announcement follows the news in October that Prince William, who in 2005, chose Centrepoint to be the first charity of which he would become patron, will be patron of 100 Women in Hedge Funds’ philanthropic initiatives.
100 Women in Hedge Funds has a track record of supporting charities in the fields of family health, mentoring and education. From January 2010, 100 Women in Hedge Funds will focus its philanthropic endeavours consecutively, for a year each, on three of Prince William’s Patronages: Centrepoint in 2010; the Child Bereavement Charity in 2011; and Skill Force in 2012.
Seyi Obakin, Chief Executive, Centrepoint said: “At Centrepoint, we are committed to giving homeless young people a future. We are delighted that, with Prince William’s patronage, 100 Women in Hedge Funds will be supporting Centrepoint throughout 2010. This support will make an invaluable contribution to lives of the 800 homeless young people we support each day.”
Commenting on the announcement, Anne Popkin, Chair of 100 Women in Hedge Funds, said: “We are thrilled as an organisation to partner with Centrepoint as they continue to meet their mission beyond their 40th anniversary, and are pleased to be working in partnership with Prince William to do so. All of our efforts and programs are aimed at supporting our three pillars of education, professional peer leverage, and philanthropy; and this partnership allows us to leverage our collective abilities and expertise in order to give back to the community.”
Funds raised by 100 Women in Hedge Funds in 2010 will be used to fund a mentoring programme aimed at enhancing the efforts already made by Centrepoint to impact the lives of young people by developing their employability skills, building their sense of self worth and self-esteem and setting goals for the future.
“In addition to Prince William’s patronage, we are pleased to announce that Financial Risk Management and its chairman Blaine Tomlinson have signed on to be the first Patronage Sponsor where they will support the charity of the year selected by 100 Women in Hedge Funds over the next three years,” added Popkin.
100 Women in Hedge Funds is planning a number of events in London during the year that will culminate in the 100 Women in Hedge Funds London Gala on September 30, 2010 at The Honorable Society of the Middle Temple.
Firms and individuals interested in learning more about sponsorship opportunities or for further details on 100 Women in Hedge Fund’s Gala event for 2010, email:
Londongala@100womeninhedgefunds.org.
Khan's Plea Accepted At Hedge Fund Billionaire Raj Rajaratnam’s Trial
HedgeCo News Archives - Hedge fund consultant Roomy Khan made her first public appearance a Manhattan court yesterday, according to Bloomberg.
In October of this year, Khan pleaded guilty to a criminal information charging her with conspiracy to commit securities fraud and obstruction of justice, she entered her plea three days after hedge fund billionaire Raj Rajaratnam’s arrest.
Khan lived in California, where she traded securities on her own behalf, and also served as a paid consultant to a hedge fund located in New York. Khan admitted to compensating certain of her sources of inside information by giving them other inside information, cash and/or by executing trades in their personal brokerage accounts.
Khan also admitted in her plea to deleting an incriminating e-mail that she had received from a co-conspirator and attempted to deter other co-conspirators from sending incriminating e-mails or instant messages in light of the then-pending SEC investigation. Khan profited approximately $1.6 million as a result of her insider trading.
Bloomberg reported that U.S. District Judge Richard Berman yesterday formally accepted her plea after asking her several questions, including one about her cooperation agreement with prosecutors. “I just want to make sure you understand you have that obligation?” Berman asked.
Khan answered with "Yes, Sir" or "I understand" to the judge's questions.
Khan is one of six traders or lawyers who have pleaded guilty and are cooperating.
In October of this year, Khan pleaded guilty to a criminal information charging her with conspiracy to commit securities fraud and obstruction of justice, she entered her plea three days after hedge fund billionaire Raj Rajaratnam’s arrest.
Khan lived in California, where she traded securities on her own behalf, and also served as a paid consultant to a hedge fund located in New York. Khan admitted to compensating certain of her sources of inside information by giving them other inside information, cash and/or by executing trades in their personal brokerage accounts.
Khan also admitted in her plea to deleting an incriminating e-mail that she had received from a co-conspirator and attempted to deter other co-conspirators from sending incriminating e-mails or instant messages in light of the then-pending SEC investigation. Khan profited approximately $1.6 million as a result of her insider trading.
Bloomberg reported that U.S. District Judge Richard Berman yesterday formally accepted her plea after asking her several questions, including one about her cooperation agreement with prosecutors. “I just want to make sure you understand you have that obligation?” Berman asked.
Khan answered with "Yes, Sir" or "I understand" to the judge's questions.
Khan is one of six traders or lawyers who have pleaded guilty and are cooperating.
Manager Gets 24 Years In Hedge Fund Fraud Case
HedgeCo News Archives - Hedge fund manager Won Sok Lee, was sentenced this week by Judge Kenneth Ryskamp on wire fraud charges for his participation in a massive hedge fund fraud scheme, according to the Miami FBI.
Lee was sentenced to 298 months in prison, to be followed by 3 years of supervised release. In addition, he was ordered to pay over $78 million in restitution.
In December 2006, Won Sok Lee, Jung Kim, and Yung Bae Kim were indicted on charges that they orchestrated a massive investment fraud in the operation of various hedge funds under the umbrella of the KL Group, LLC, initially in California and later in Palm Beach County.
According to the Indictment, documents filed with the court, and statements made during the plea hearings, the defendants used quarterly mailings and website postings to misrepresent to investors that the KL Financial Group was a hugely successful family of hedge funds. In fact, however, the KL funds lost millions of dollars, and, in Ponzi scheme fashion, used new investors’ monies to make payments owed to previous investors. From 2000 through 2005, KL received approximately $194 million in investor funds.
Also charged in the Indictment were three hedge fund advisor companies that were owned and controlled by the individual defendants: KL Group, LLC, KL Triangulum Management, LLC, and Shoreland Trading, LLC. The companies pled guilty in July 2007 to participating in the investment fraud conspiracy.
Defendant Won Lee remained a fugitive from December 2006 until early 2009. In 2009, federal authorities located Won Lee in South Korea. He was extradited to South Florida in April 2009 to face the federal charges pending against him. Won Lee admitted lying to investors to induce them to invest in the hedge funds and to keep their monies invested or to reinvest in different hedge funds.
The misrepresentations included false statements about the soundness and performance of particular funds. Victims were told that the funds were profitable, when in fact, none were. Lee also admitted his complicity in creating counterfeit clearing firm statements that were used to perpetrate and conceal the scheme.
In addition, Lee admitted lying to a clearing house about the origin of monies used to buy and sell stocks cleared through Penson, a Texas-based clearing firm. Lee also admitted to creating fictitious stock trading sheets, which were used to show a one-day profit of $22 million in a stock known as RIMM, the company that manufactures the popular “Blackberry” device. The RIMM trade, however, never took place, and the fictitious stock trading sheets were used to fool investors concerning the profitable trades being conducted by the KL hedge funds.
The case is being prosecuted by Assistant U.S. Attorneys Stephen Carlton and Edward Nucci.
Lee was sentenced to 298 months in prison, to be followed by 3 years of supervised release. In addition, he was ordered to pay over $78 million in restitution.
In December 2006, Won Sok Lee, Jung Kim, and Yung Bae Kim were indicted on charges that they orchestrated a massive investment fraud in the operation of various hedge funds under the umbrella of the KL Group, LLC, initially in California and later in Palm Beach County.
According to the Indictment, documents filed with the court, and statements made during the plea hearings, the defendants used quarterly mailings and website postings to misrepresent to investors that the KL Financial Group was a hugely successful family of hedge funds. In fact, however, the KL funds lost millions of dollars, and, in Ponzi scheme fashion, used new investors’ monies to make payments owed to previous investors. From 2000 through 2005, KL received approximately $194 million in investor funds.
Also charged in the Indictment were three hedge fund advisor companies that were owned and controlled by the individual defendants: KL Group, LLC, KL Triangulum Management, LLC, and Shoreland Trading, LLC. The companies pled guilty in July 2007 to participating in the investment fraud conspiracy.
Defendant Won Lee remained a fugitive from December 2006 until early 2009. In 2009, federal authorities located Won Lee in South Korea. He was extradited to South Florida in April 2009 to face the federal charges pending against him. Won Lee admitted lying to investors to induce them to invest in the hedge funds and to keep their monies invested or to reinvest in different hedge funds.
The misrepresentations included false statements about the soundness and performance of particular funds. Victims were told that the funds were profitable, when in fact, none were. Lee also admitted his complicity in creating counterfeit clearing firm statements that were used to perpetrate and conceal the scheme.
In addition, Lee admitted lying to a clearing house about the origin of monies used to buy and sell stocks cleared through Penson, a Texas-based clearing firm. Lee also admitted to creating fictitious stock trading sheets, which were used to show a one-day profit of $22 million in a stock known as RIMM, the company that manufactures the popular “Blackberry” device. The RIMM trade, however, never took place, and the fictitious stock trading sheets were used to fool investors concerning the profitable trades being conducted by the KL hedge funds.
The case is being prosecuted by Assistant U.S. Attorneys Stephen Carlton and Edward Nucci.
16 Dec 2009
Hedge Funds Win London Lehman Case
Hedge funds controlled by Goldman Sachs and GLG Partners won a significant court ruling yesterday, over how to properly distribute billions of dollars of clients money held by Lehman Brothers when it collapsed, The Financial Times reported.
The High Court in London said that the Lehman funds were not “ring-fenced,” by the investment bank’s European arm and could not be claimed out of a $1 billion pool of funds currently controlled by Lehman administrators.
The Financial Times also said that while the ruling is a win for Goldman and GLG, whose cash was properly ring-fenced, it is a blow to several Lehman affiliates and other hedge fund clients, who now will not be eligible to pursue $3 billion worth of claims against the pool of funds.
The New York Times reported that roughly $11.4 billion in assets, including stocks, bonds, derivative contracts and other securities owned by hedge funds, insurance companies and other investors remain to be distributed in Lehman International’s trust account. Those funds have been frozen since Lehman collapsed in September 2008, frustrating some hedge funds that made trades through the firm before it fell into bankruptcy, the newspaper said.
The High Court in London said that the Lehman funds were not “ring-fenced,” by the investment bank’s European arm and could not be claimed out of a $1 billion pool of funds currently controlled by Lehman administrators.
The Financial Times also said that while the ruling is a win for Goldman and GLG, whose cash was properly ring-fenced, it is a blow to several Lehman affiliates and other hedge fund clients, who now will not be eligible to pursue $3 billion worth of claims against the pool of funds.
The New York Times reported that roughly $11.4 billion in assets, including stocks, bonds, derivative contracts and other securities owned by hedge funds, insurance companies and other investors remain to be distributed in Lehman International’s trust account. Those funds have been frozen since Lehman collapsed in September 2008, frustrating some hedge funds that made trades through the firm before it fell into bankruptcy, the newspaper said.
Rajaratnam and Chiesi Indicted In Hedge Fund Fraud Case
HedgeCo.net News Archives - Galleon hedge fund founder Raj Rajaratnam and Danielle Chiesi, an executive at New Castle Funds LLC were indicted Tuesday on multiple counts of conspiracy and securities fraud.
“Mr. Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence,” his lawyer, John Dowd, said.
The indictment includes 17 counts of conspiracy and securities fraud and seeks to recover $20.8 million. Among the stocks they traded illegally were those of Google Inc., Advanced Micro Devices Inc. and Intel Corp., according to the indictment.
“We intend to plead not guilty and defend the case and hopefully at the end prove the client’s innocence,” Chiesi’s lawyer, Alan Kaufman, said in an interview with Bloomberg. A court hearing is scheduled in Manhattan on Monday.
“Mr. Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence,” his lawyer, John Dowd, said.
The indictment includes 17 counts of conspiracy and securities fraud and seeks to recover $20.8 million. Among the stocks they traded illegally were those of Google Inc., Advanced Micro Devices Inc. and Intel Corp., according to the indictment.
“We intend to plead not guilty and defend the case and hopefully at the end prove the client’s innocence,” Chiesi’s lawyer, Alan Kaufman, said in an interview with Bloomberg. A court hearing is scheduled in Manhattan on Monday.
15 Dec 2009
Hedge Funds Gain $14.93 Billion in November
HedgeCo News Archives - The hedge fund industry grew by $14.93 billion in November, according to the Eurekahedge report, with performance-based gains of $9.92 billion and net inflows of $5 billion. The total size of the hedge fund universe now stands at $1.47 trillion – back to December 2008 level.
Hedge funds are up 18.24% November YTD, at par with the best November YTD performance on record. Asia ex-Japan funds are up 34.4% November YTD, on track to post the biggest annual gains on record across all regional hedge fund indices.
The Eurekahedge report also found that funds of funds withdrawals have accounted for 60% of the total redemptions from the hedge fund industry in 2009.
10 Investment Themes for 2010
HedgeCo News Archives - In the recently published December RIC Report, the BofA Merrill Lynch Research Investment Committee, led by Hartnett, identified 10 key themes that the bank's clients should be positioned for in 2010.
-- Government Balance Sheet Risk: The soaring U.S. budget deficit and a Chinese currency revaluation will drive 10-year U.S. Treasury yields above 4 percent by year-end 2010. Shorter-duration Treasuries and U.S. investment-grade corporate credit are less susceptible to such risks.
-- Rising Taxation: The soaring U.S. budget deficit, looming U.S. healthcare reform and a likely second stimulus package will need to be funded through higher tax rates. Opportunities include essential purpose revenue and general obligation municipal bonds, and municipal bond exchange-traded funds.
-- Alternative Dividend Yield Strategies: Dividend taxes are likely to rise in 2011, and as the prospect of higher taxes erodes the popularity of traditional dividend yield-oriented strategies, tax-advantaged or tax-deferred strategies will benefit.
-- Financial Sector Rehabilitation: Steepening yield curves around the world, increased M&A activity and the still-underestimated normalized earnings power of financials should foster their returns surprise on the upside. Opportunities can be found in best-of-breed mega-cap global financials.
-- Corporate Cash Flow Beneficiaries: High cash balances will translate into strategic M&A, a term describing non-speculative, non-private equity mergers. In addition, companies will increase capital spending and possibly dividends. We expect the beneficiaries of capital spending to include the industrial sector and temporary staffing companies as production expands.
-- Rising Global Growth: The global policy stimulus seen in 2009 will continue to support global growth led by emerging markets, while in the U.S. an inventory restocking cycle and higher capex converge to push global growth well above 4 percent. Opportunities include best-of-breed mega-cap multinationals based in developed markets with a large presence in emerging markets.
-- The Emerging Market Consumer: The emerging market consumer is at the beginning, not the end, of the credit cycle. Opportunities include emerging market currencies versus the U.S. dollar and, in equities, U.S. energy stocks, global energy majors and mega-cap multinationals.
-- Commodity Price Inflation: Supply constraints are likely to resurface in the year ahead as commodity demand outpaces the productive capacity of current resources. Investment opportunities include long position in gold and global energy stocks.
-- Alternative Energy: Truly economical renewables may be years away, buy investment in alternative energy is an important secular theme that will continue to gain ground. Alternative energy ETFs offer exposure to the burgeoning industry while providing important diversification across multiple technologies and business models. Old technology
energy equities such as utilities will be a source of, not a beneficiary of, alternative energy investment.
-- The Return of Active Management: Volatility has come down in 2009, especially since central banks began their critical quantitative easing in March. Lower volatility leads to lower correlation, resulting in greater differentiation in asset price performance. The trend favors active over passive management. Such a stock-picking environment should result in high-quality, best-of-breed stocks outperforming in 2010.
"Poor returns from the equities markets over the past decade, particularly from large cap equities, have created a pessimism bubble among investors," said Bianco. "We believe the S&P 500 is now undervalued, which could create many investment opportunities in the year ahead. Given our expectations for global growth led by emerging economies, a slow but steady U.S. recovery, and healthy S&P 500 EPS growth, we think that the pessimism bubble will finally burst in 2010."
2010 Forecast Highlights
BofA Merrill Lynch Global Research released its Global Macro Year Ahead economic and market forecasts, projecting higher-than-consensus GDP growth, low inflation, a bullish outlook for equities, a strengthening U.S. dollar against select currencies and a less attractive outlook for government and corporate bonds.
"We believe the global economy will gather momentum in 2010," said Ethan Harris, head of North America economics and coordinator of global economics. "We think that the unprecedented mix of near-zero interest rates and high budget deficits will engineer an economic recovery that is real and sustainable. We aren't forecasting a swift return to robust growth. In fact, the recovery will likely lag behind those of previous recessions - but we believe that the world economy will perform far better than the economic consensus would indicate."
2010 Forecast Highlights
-- The BofA Merrill Lynch Global Economics Research team forecasts global
GDP growth to be 4.4 percent in 2010, well above the 3.1 percent
predicted by the International Monetary Fund. The team projects growth
will be led by China at 10.1 percent, while projecting U.S. GDP growth
to be 3.2 percent.
-- Harris expects a further fall in core inflation and projects that the
U.S. Consumer Price Index will be 2.5 percent. He feels that the
transmission process whereby monetary easing leads to rising prices is
currently "stuck in neutral" as banks are rebuilding there balance
sheets. He also believes that central banks will have plenty of time
to sop up liquidity before inflation becomes a real issue.
-- Michael Hartnett, chief global equity strategist and chairman of the
BofA Merrill Lynch Research Investment Committee, is targeting the
MSCI All-Country World Index at 350, roughly a 20 percent upside and
is bullish on European equities, Asia and emerging markets.
-- David Bianco, head of U.S. equity strategy, expects the S&P 500 to
appreciate about 15 percent by 2010 year end to 1275. Bianco expects
this appreciation to be driven by S&P 500 sales growth in four "global
cyclical" sectors of Technology, Energy, Industrials and Materials.
"These four sectors have high direct foreign sales and benefit from
high commodity prices and U.S. exports," said Bianco. "We also expect
Financials to outperform as a result of steepening yield curves and
underestimated normalized earnings power."
-- Francisco Blanch, head of commodities strategy, expects that
commodities will be driven by strong demand in emerging markets.
"Crude oil could break $100 per barrel by late 2010 and we're
forecasting gold to top $1,500 per ounce in the next 18 months,
particularly if the dollar weakens further against certain undervalued
emerging market currencies," said Blanch.
-- The BofA Merrill Lynch Research U.S. Interest Rate Committee expects
returns on long-term Treasuries and municipals to be modestly negative
and forecasts 10-year Treasury yield to be 4.25 percent, while the
30-year Treasury yield is predicted to be 4.95 percent.
-- Jeff Rosenberg, chief global credit strategist, expects to see
normalized returns as corporate credit outperforms both government
bonds and cash. "We expect high-yield returns to reach 10 percent,
outperforming the high-grade sector, which we forecast as providing
returns in the 2 percent to 3 percent range," said Rosenberg. "The
returns delivered by the credit markets over the past year are
impressive, but unsustainable. Going forward, investors will need to
adjust their expectations for price appreciation to more normalized
levels for the entire asset class."
-- Steven Pearson, head of G10 currency strategy, forecasts the U.S.
dollar to strengthen against G10 currencies next year, primarily
against the euro. However, over the first half of 2010, he expects the
Japanese yen to rise further against both the USD and EUR.
"Despite reassuring market strength, 2009 ultimately played out as a year of contradictions," said Hartnett. "While credit markets, commodities and stocks surged, many investors stayed on the sidelines, awaiting surer signs of recovery. The coming months will reveal whether investors can move forward with confidence or whether a policy misstep will interrupt the slow and steady recovery we think is possible."
"We believe the global economy will gather momentum in 2010," said Ethan Harris, head of North America economics and coordinator of global economics. "We think that the unprecedented mix of near-zero interest rates and high budget deficits will engineer an economic recovery that is real and sustainable. We aren't forecasting a swift return to robust growth. In fact, the recovery will likely lag behind those of previous recessions - but we believe that the world economy will perform far better than the economic consensus would indicate."
2010 Forecast Highlights
-- The BofA Merrill Lynch Global Economics Research team forecasts global
GDP growth to be 4.4 percent in 2010, well above the 3.1 percent
predicted by the International Monetary Fund. The team projects growth
will be led by China at 10.1 percent, while projecting U.S. GDP growth
to be 3.2 percent.
-- Harris expects a further fall in core inflation and projects that the
U.S. Consumer Price Index will be 2.5 percent. He feels that the
transmission process whereby monetary easing leads to rising prices is
currently "stuck in neutral" as banks are rebuilding there balance
sheets. He also believes that central banks will have plenty of time
to sop up liquidity before inflation becomes a real issue.
-- Michael Hartnett, chief global equity strategist and chairman of the
BofA Merrill Lynch Research Investment Committee, is targeting the
MSCI All-Country World Index at 350, roughly a 20 percent upside and
is bullish on European equities, Asia and emerging markets.
-- David Bianco, head of U.S. equity strategy, expects the S&P 500 to
appreciate about 15 percent by 2010 year end to 1275. Bianco expects
this appreciation to be driven by S&P 500 sales growth in four "global
cyclical" sectors of Technology, Energy, Industrials and Materials.
"These four sectors have high direct foreign sales and benefit from
high commodity prices and U.S. exports," said Bianco. "We also expect
Financials to outperform as a result of steepening yield curves and
underestimated normalized earnings power."
-- Francisco Blanch, head of commodities strategy, expects that
commodities will be driven by strong demand in emerging markets.
"Crude oil could break $100 per barrel by late 2010 and we're
forecasting gold to top $1,500 per ounce in the next 18 months,
particularly if the dollar weakens further against certain undervalued
emerging market currencies," said Blanch.
-- The BofA Merrill Lynch Research U.S. Interest Rate Committee expects
returns on long-term Treasuries and municipals to be modestly negative
and forecasts 10-year Treasury yield to be 4.25 percent, while the
30-year Treasury yield is predicted to be 4.95 percent.
-- Jeff Rosenberg, chief global credit strategist, expects to see
normalized returns as corporate credit outperforms both government
bonds and cash. "We expect high-yield returns to reach 10 percent,
outperforming the high-grade sector, which we forecast as providing
returns in the 2 percent to 3 percent range," said Rosenberg. "The
returns delivered by the credit markets over the past year are
impressive, but unsustainable. Going forward, investors will need to
adjust their expectations for price appreciation to more normalized
levels for the entire asset class."
-- Steven Pearson, head of G10 currency strategy, forecasts the U.S.
dollar to strengthen against G10 currencies next year, primarily
against the euro. However, over the first half of 2010, he expects the
Japanese yen to rise further against both the USD and EUR.
"Despite reassuring market strength, 2009 ultimately played out as a year of contradictions," said Hartnett. "While credit markets, commodities and stocks surged, many investors stayed on the sidelines, awaiting surer signs of recovery. The coming months will reveal whether investors can move forward with confidence or whether a policy misstep will interrupt the slow and steady recovery we think is possible."
14 Dec 2009
BNY Launches Independant Hedge Fund Validation Service
Hedge fund administrator BNY Mellon Alternative Investment Services has launched a service that independently validates a hedge fund's position records to third-parties - prime brokers, custodians, trustees and agent banks - and independently verifies the pricing of that fund's securities. The new service provides fund managers and their investors with greater transparency and additional assurance that fund assets are independently priced and validated.
"Hedge fund clients are telling us their investors are demanding an independent validation of their holdings. The price verification/asset validation service helps address this need, which in turn helps hedge funds retain and grow their investor base," said Brian Ruane, chief executive officer of BNY Mellon Alternative Investment Services. "While our broad network of pricing vendors and counterparties are the power behind this new offering, greater transparency is clearly the motivation."
Currently, the price verification/asset validation service reconciles more than 27,000 client investment positions, with a total market value in excess of $24 billion. Client coverage rates (assets validated as a percentage of total portfolio scope and value) are in the range of 95-99%. Clients can elect the service on a monthly or quarterly basis.
BNY Mellon Alternative Investment Services is a leading hedge fund administrator with more than $225 billion in assets under administration and an extensive global presence, including locations in Bermuda, Cayman Islands, Hong Kong, Ireland, Luxembourg, Singapore and the United Kingdom, as well as U.S. offices in California, Florida, Massachusetts, New Jersey, New York, Pennsylvania and Texas. In addition to administration the company offers a wide range of accounting, cash management, collateral management, custody, corporate trust, asset management and wealth management services to the hedge fund industry.
10 Dec 2009
Cyprus as a Hedge Fund Epicenter - Interview With The Cyprus Trade Commissioner
HedgeCo.net Exclusive Interview – There has been a recent focus on financial services and the hedge fund space in Cyprus, the UN went so far as to declare Cyprus the forerunner for the new Luxembourg UCITS model. The government, working closely with a US based consultancy is planning a program geared specifically to hedge funds and financial services sectors in the US market. The program is slated to begin February 2010.
Editor for HedgeCo.net
The effort to transform Cyprus into a global hedge fund and asset management epicenter has been in the works for over 5 years, with the aim of providing access to key markets such as the Middle East, the Eastern European region, Asia and Russia. Some of the top hedge funds globally have already established a footprint in Cyprus in an effort to adapt to international standards. As an accesspoint to the EU, Cyprus works for the Pan/European hedge fund model, with worldwide offices and execution from the island.
In an exclusive interview with the Cyprus Trade Commissioner, Aristos Constantine of the Ministry of Commerce, Industry and Tourism, I learned that Cyprus has the lowest corporate tax regime in the whole of the EU, at 10%. Cyprus also has some of the EU’s strongest double taxation treaties (DTT), with more than 40 countries worldwide.
“It has been a primary mandate in the past five years to transform the financial system into a favored conduit for International investment.” Trade Commissioner Aristos Constantine said in the interview, “The close private-public sector cooperation that characterizes Cyprus’ approach to forming its regulatory policy is a key factor in our ability and aim for continually reviewing and reforming our regulatory framework to provide greater flexibility, efficiency and transparency within the financial services and asset management sub-sector, whilst taking into account international compliance mechanisms with due consideration to recent changes in the industry.”
Cyprus maintains a fluid regulatory system which means that the Government will have the ability to anticipate potential issues and reconcile policy to meet private sector needs, ensuring a modern and transparent regulatory framework conducive to investment funds, including a favourable tax regime.
Over the past 10 years, specifically since its accession to the EU in 2004, Cyprus has moved from being an offshore to an onshore jurisdiction. It has completed a program of reforming finance sector legislation with international best practice.
“The Cypriot Government has put a simplified, effective and transparent tax system in place that is fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Forum,” Commissioner Aristos Constantine, said.
Cyprus is actively involved with the OECD and part of its “white list”. It closely works with the EU and the Commonwealth in modelling global regulatory policy.
“Within the context of the prevailing global economic climate, the need to better function within the perspective of an ever increasing global environment has never been more profound. Cyprus, as a dynamic, flexible and adaptive economy, has seriously taken up this challenge and has worked extensively to ensure we function with clarity and transparency among both our EU neighbors and partners abroad.” Trade Commissioner Aristos Constantine stated in closing.
Alex AkessonEditor for HedgeCo.net
9 Dec 2009
Added Focus on Sovereign Wealth Funds Illuminates Interconnectivity of ‘The New Normal’ of Capital Markets
RiskMetrics Group’s recent report on ten of the world’s Sovereign Wealth Funds and their disclosure practices significantly illuminates the interconnectivity – connecting the dots – of ESG and Sustainability, Corporate Responsibility, Investor Responsibility and other aspects of the ”new normal” of the capital markets and the corporate environment, according to the Governance & Accountability Institute.
The G&A Institute tracks the major players in Sovereign Wealth Funds and ESG/Sustainable investing (environmental, social and governance Key Performance Indicators), and select US Public Sector Employee Investment Funds.
In a “Perspectives & Insights” communiqué to its clients, the G&A Institute detailed RiskMetrics’ rise and ever-expanding presence as a third party advisor beyond its already formidable role as a major player worldwide in corporate proxy season activities, including advising on corporate governance issues and assisting asset owners and managers in voting their proxies.
According to G&A Institute Chairman Hank Boerner: “We see this as part of the trend of accelerating the embrace of ESG and Sustainability among many more asset owners – which will have profound effects on corporate issuers. Stay tuned to ESG and RiskMetrics’ actions – in the company’s traditional spheres of influence, and now, with the recent moves, in the areas of ESG / Sustainability Investment and the activities of a powerful group of investors – the Sovereign Wealth Funds!
Noted the G&A Institute: “RiskMetrics is a major player worldwide in corporate proxy season activities, including advising on corporate governance issues and assisting asset owners and managers in voting their proxies. In 2009 the company bought the business of Innovest Strategic Investment Advisors and in November, the business of KLD Research and Analytics, Inc. Both moves move RiskMetrics firmly into the pantheon of global ESG / Sustainability research organizations.”
Recently RiskMetrics established its presence in the emerging (and increasingly more important) universe of sovereign investors, and especially Sovereign Wealth Funds. RiskMetrics and its affiliated Investors Responsibility Research Center (IRRC) are examining the transparency and disclosure practices of these investors.
As the sovereign investors (nation-states, city-states, regional coalitions, public sector pension funds, and related institutions) direct their strategic investments in other countries – by definition, SWFs are public sector monies invested outside of the home country – questions are raised about these investments, and whether the investors are transparent enough (most are not is the general opinion).
The RiskMetrics/IRRC Institute study found the following:
- Half of the top 10 largest SWFs have achieved a relatively high level of disclosure;
- Other funds have yet to adopt meaningful initiatives to improve compliance with the voluntary code of conduct;
- While the aggregate size of the top 10 SWFS is USD$2.2 trillion, the actual impact on international markets has been smaller at USD$1 trillion.
The full report is “An Analysis of Proxy Voting and Engagement Policies of the SWFs,” available at: www.irrcinstitute.org and www.riskmetrics.com
The SWFs covered in the report: the funds of Abu Dhabi, Australia, China (2), Singapore (2), Kuwait, Libya, Russia, and Qatar.
About Governance & Accountability Institute
Governance & Accountability Institute, Inc. (www.ga-institute.com) provides timely news, actionable research and information, perspectives and opinion, reliable data, and customized advisory services to organizations, institutions and individuals seeking to do the right thing for the right reasons. INSIGHTS-edge is the Institute’s Web-based platform, available to subscribers and clients to identify, understand, track and engage with third party organizations that are shaping the capital markets and the corporate environment through their focus on key sustainability factors.
8 Dec 2009
People Moves: Infonic Expands Fund of Hedge Fund Team
Swiss fund of hedge fund(FoHF) provider, Infonic AG, Infonic AG, has added Ian Morley to its Board of Directors. Morley, a UK-based alternative investment management industry veteran joins new Chair of the Board and US-based Managing Partner of Azimuth Partners LLC, Virginia Gambale; and non-company executive Director, Alexander Aebi, the Swiss-based CEO of Abiba Consulting AG. The board is completed by Infonic company executive Directors Tom Furrer, CEO, and Roman Bargezi, Head of Engineering.
"I’m delighted to welcome Ian Morley to our Board and to have Virginia Gambale take its Chair. Virginia is an exceptionally well experienced Director of fast growing companies and I look forward to making great strides under her leadership. Ian Morley brings a wealth of experience across the global asset management industry, and Infonic is privileged to be benefiting from his insight and expertise,” said Tom Furrer, CEO of Infonic AG. “As founding Chairman of the Alternative Investment Management Association (AIMA) and advisor to central banks and regulatory authorities, Ian is a true industry leader who understands the business, regulatory, and operational issues that the hedge fund industry faces. We look forward to leveraging the combined talents of this amazing team to become the global operational backbone of the hedge fund industry.”
Morley has had an extensive career in financial services, and the alternative asset management industry in particular. He holds chairmanships and directorships at several firms, including Corazon Capital, Allenbridge Hedge, and Wentworth Hall, a consulting and private equity company. During his career, Morley served as CEO of DDO, a fund of hedge fund, and as Head of Derivatives and Quantitative Fund Management at AIB Govett. Earlier, he was Managing Director of Rudolf Wolff Fund Management and European Director of Managed Futures at Lehman Brothers.
Ms. Gambale is Managing Partner of Azimuth Partners LLC, an investment and advisory firm she founded in 2003. She has served on over 20 public and private boards as well as several Advisory Boards in the finance and technology industry. Today, she holds public company board seats on Jet Blue and Piper Jaffray. Prior to 2003, she held senior management positions, including CIO, at global corporations including: Merrill Lynch, Marsh & McLennan, Bankers Trust Alex Brown and Deutsche Bank. Additionally, she headed DB Strategic Ventures, was General Partner in ABS Ventures, and was subsequently a partner at DB Capital Partners.
"I’m delighted to welcome Ian Morley to our Board and to have Virginia Gambale take its Chair. Virginia is an exceptionally well experienced Director of fast growing companies and I look forward to making great strides under her leadership. Ian Morley brings a wealth of experience across the global asset management industry, and Infonic is privileged to be benefiting from his insight and expertise,” said Tom Furrer, CEO of Infonic AG. “As founding Chairman of the Alternative Investment Management Association (AIMA) and advisor to central banks and regulatory authorities, Ian is a true industry leader who understands the business, regulatory, and operational issues that the hedge fund industry faces. We look forward to leveraging the combined talents of this amazing team to become the global operational backbone of the hedge fund industry.”
Morley has had an extensive career in financial services, and the alternative asset management industry in particular. He holds chairmanships and directorships at several firms, including Corazon Capital, Allenbridge Hedge, and Wentworth Hall, a consulting and private equity company. During his career, Morley served as CEO of DDO, a fund of hedge fund, and as Head of Derivatives and Quantitative Fund Management at AIB Govett. Earlier, he was Managing Director of Rudolf Wolff Fund Management and European Director of Managed Futures at Lehman Brothers.
Ms. Gambale is Managing Partner of Azimuth Partners LLC, an investment and advisory firm she founded in 2003. She has served on over 20 public and private boards as well as several Advisory Boards in the finance and technology industry. Today, she holds public company board seats on Jet Blue and Piper Jaffray. Prior to 2003, she held senior management positions, including CIO, at global corporations including: Merrill Lynch, Marsh & McLennan, Bankers Trust Alex Brown and Deutsche Bank. Additionally, she headed DB Strategic Ventures, was General Partner in ABS Ventures, and was subsequently a partner at DB Capital Partners.
Hedge Funds Up +1.70% In November 2009
Hedge fund adviser Hennessee Group LLC said that the Hennessee Hedge Fund Index advanced +1.70% in November (+22.40% YTD), while the S&P 500 rose +5.34% (+20.84% YTD), the Dow Jones Industrial Average increased +6.51% (+17.87% YTD), and the NASDAQ Composite Index advanced +4.86% (+35.99% YTD). The Barclays Aggregate Bond Index advanced +1.29% (+7.61% YTD).
“While hedge funds have generated strong returns this year and kept pace with the majority of the equity benchmarks, they have not been without their challenges,” said Lee Hennessee, Managing Principal of Hennessee Group. “The rally that commenced in March has been very broad based. Stock specific fundamentals have not mattered much to investors. This has resulted in consistent losses in the short portfolios of many hedge funds and has served as a drag on performance. That said, we are beginning to see the environment for shorting improve.”
The Hennessee Long/Short Equity Index advanced +1.76% in November (+18.98% YTD). The equity markets rebounded in November due to encouraging economic data and better than expected earnings reports. Large cap stocks outperformed with the S&P 500 Index gaining +5.3% and reaching new highs for 2009. All ten sectors experienced gains during the month led by materials (+11.3%), industrials (+8.7%) and healthcare (+9.0%). Long/short equity funds generated gains in November, however lagged their traditional counterparts due to their defensive posturing and reduced exposures. Long/short equity managers remain cautious as they measure the strength and depth of the economic recovery and question current market multiples. In addition, some managers appear content maintaining reduced risk exposures through the end of the year.
The Hennessee Arbitrage/Event Driven Index gained +1.85% in November (+28.25% YTD). The spread on the Merrill Lynch High Yield Index widened slightly from 760 basis points to 765 basis points in November, hitting a low of 751 basis points mid-month. Bonds were again positive, however high yield bonds underperformed high grade and treasuries for the first time in a year. High yield and high grade primary markets remain open with significant investor interest. The Hennessee Distressed Index advanced +3.13% in November (+36.78% YTD). Distressed funds continue to benefit from their directional bias. Many managers are now focusing on post-reorganization equities as several companies emerge from bankruptcy, including Delphi and CIT. Managers are also starting to look at the 2005 to 2007 leverage buyout vintages and expect these deals to be the next large set of defaults. The Hennessee Convertible Arbitrage Index advanced +0.75% (+40.57% YTD). Despite a slight widening of spreads and decline in volatility, managers were able to generate gains due to strong secondary market performance and lower interest rates. New issuance remains disappointing, while redemptions remained high. The Hennessee Merger Arbitrage Index advanced +0.74% in November (+7.84% YTD). Many managers saw allocations to merger arbitrage decline significantly after closure of the big pharmaceutical deals. However, many feel that M&A activity is going to continue and anticipate increasing allocations as new deals emerge. Many are encouraged by the pick up in bidding situations, such as Hershey and Kraft bidding for Cadbury.
The Hennessee Global/Macro Index advanced +1.46% in November (+22.34% YTD). Global equities increased, though underperformed U.S. markets, as the MSCI EAFE Index advanced +1.75% (+26.03% YTD). The Hennessee International Index advanced +2.67% (+20.78% YTD). Emerging markets were strong, led by Latin America . Managers lost money in India due to Dubai World’s announcement of restructuring and request of a standstill agreement from providers of financing. The Hennessee Macro Index advanced +1.00% in November (+9.73% YTD). One of the most common macro themes, long gold, was profitable in November as the S&P GSCI gold spot index increased +13.64% during the month, its largest monthly advance in 2009. The dollar short continues to be a profitable trade as the US dollar index continued to decline in November. One of the key detractors for the month was the short treasury trade. Treasures rallied as the 2-year Treasury yield dropped from 0.85% to 0.65%, and the 10-year Treasury yield fell from 3.39% to 3.20%. At the same time, the 30-year Treasury yield eased from 4.23% to 4.19%.
“The gold trade continued to snow ball in November as Central Banks have become net buyers along with major hedge funds,” commented Charles Gradante, Co-Founder of Hennessee Group. “Never in my 38 year investment career have I seen so many respected investors focused on a single strategy.”
“While hedge funds have generated strong returns this year and kept pace with the majority of the equity benchmarks, they have not been without their challenges,” said Lee Hennessee, Managing Principal of Hennessee Group. “The rally that commenced in March has been very broad based. Stock specific fundamentals have not mattered much to investors. This has resulted in consistent losses in the short portfolios of many hedge funds and has served as a drag on performance. That said, we are beginning to see the environment for shorting improve.”
The Hennessee Long/Short Equity Index advanced +1.76% in November (+18.98% YTD). The equity markets rebounded in November due to encouraging economic data and better than expected earnings reports. Large cap stocks outperformed with the S&P 500 Index gaining +5.3% and reaching new highs for 2009. All ten sectors experienced gains during the month led by materials (+11.3%), industrials (+8.7%) and healthcare (+9.0%). Long/short equity funds generated gains in November, however lagged their traditional counterparts due to their defensive posturing and reduced exposures. Long/short equity managers remain cautious as they measure the strength and depth of the economic recovery and question current market multiples. In addition, some managers appear content maintaining reduced risk exposures through the end of the year.
The Hennessee Arbitrage/Event Driven Index gained +1.85% in November (+28.25% YTD). The spread on the Merrill Lynch High Yield Index widened slightly from 760 basis points to 765 basis points in November, hitting a low of 751 basis points mid-month. Bonds were again positive, however high yield bonds underperformed high grade and treasuries for the first time in a year. High yield and high grade primary markets remain open with significant investor interest. The Hennessee Distressed Index advanced +3.13% in November (+36.78% YTD). Distressed funds continue to benefit from their directional bias. Many managers are now focusing on post-reorganization equities as several companies emerge from bankruptcy, including Delphi and CIT. Managers are also starting to look at the 2005 to 2007 leverage buyout vintages and expect these deals to be the next large set of defaults. The Hennessee Convertible Arbitrage Index advanced +0.75% (+40.57% YTD). Despite a slight widening of spreads and decline in volatility, managers were able to generate gains due to strong secondary market performance and lower interest rates. New issuance remains disappointing, while redemptions remained high. The Hennessee Merger Arbitrage Index advanced +0.74% in November (+7.84% YTD). Many managers saw allocations to merger arbitrage decline significantly after closure of the big pharmaceutical deals. However, many feel that M&A activity is going to continue and anticipate increasing allocations as new deals emerge. Many are encouraged by the pick up in bidding situations, such as Hershey and Kraft bidding for Cadbury.
The Hennessee Global/Macro Index advanced +1.46% in November (+22.34% YTD). Global equities increased, though underperformed U.S. markets, as the MSCI EAFE Index advanced +1.75% (+26.03% YTD). The Hennessee International Index advanced +2.67% (+20.78% YTD). Emerging markets were strong, led by Latin America . Managers lost money in India due to Dubai World’s announcement of restructuring and request of a standstill agreement from providers of financing. The Hennessee Macro Index advanced +1.00% in November (+9.73% YTD). One of the most common macro themes, long gold, was profitable in November as the S&P GSCI gold spot index increased +13.64% during the month, its largest monthly advance in 2009. The dollar short continues to be a profitable trade as the US dollar index continued to decline in November. One of the key detractors for the month was the short treasury trade. Treasures rallied as the 2-year Treasury yield dropped from 0.85% to 0.65%, and the 10-year Treasury yield fell from 3.39% to 3.20%. At the same time, the 30-year Treasury yield eased from 4.23% to 4.19%.
“The gold trade continued to snow ball in November as Central Banks have become net buyers along with major hedge funds,” commented Charles Gradante, Co-Founder of Hennessee Group. “Never in my 38 year investment career have I seen so many respected investors focused on a single strategy.”
5 Dec 2009
Deadlines For 2010 Registration Renewals
It’s that time of year again - firm registration renewals are due by December 11, 2009.
Other important upcoming dates:
* December 24, 2009 - Deadline to submit any form filings for 2009.
* December 25, 2009 to January 3, 2010 - Both the IARD and CRD systems will be unavailable between these dates.
* January 1, 2010 - FINRA’s new fee hikes on the Gross Income Assessment schedule take effect. See Regulatory Notice 09-68
* February 5, 2010 - Deadline to submit any renewal changes or final payments on delinquent accounts.
* March 31, 2010 - Deadline for Form ADV and Form BD amendments.
Other important upcoming dates:
* December 24, 2009 - Deadline to submit any form filings for 2009.
* December 25, 2009 to January 3, 2010 - Both the IARD and CRD systems will be unavailable between these dates.
* January 1, 2010 - FINRA’s new fee hikes on the Gross Income Assessment schedule take effect. See Regulatory Notice 09-68
* February 5, 2010 - Deadline to submit any renewal changes or final payments on delinquent accounts.
* March 31, 2010 - Deadline for Form ADV and Form BD amendments.
AIMA Expresses Concern Over Proposed Threshhold For U.S Systemic Resolution Fund
Blogger - “The Alternative Investment Management Association, as the global hedge fund industry association, supports the efforts of policymakers in the U.S. to tackle systemic risk. We support the reporting of systemically relevant information by larger hedge fund managers to the national authorities in the interests of financial stability.”
“However we do wish to express our concern over a measure contained in the proposed Financial Stability Improvement Act of 2009, which was just approved by the House Committee on Financial Services, whereby the hedge fund industry would be subject to more onerous requirements than other financial institutions.” Under this proposal, the asset threshold for firms required to contribute to the Systemic Resolution Fund – a pool of capital that would be used to rescue firms deemed too big to fail – would be set at $10 billion for hedge funds yet $50 billion for all other financial institutions.
The result of this would be to impose disproportionately high costs on hedge fund managers who do not themselves pose systemic risk. “We hope this proposed measure is reconsidered before it becomes law and look forward to working with policymakers on a proportionate and workable outcome.”
“However we do wish to express our concern over a measure contained in the proposed Financial Stability Improvement Act of 2009, which was just approved by the House Committee on Financial Services, whereby the hedge fund industry would be subject to more onerous requirements than other financial institutions.” Under this proposal, the asset threshold for firms required to contribute to the Systemic Resolution Fund – a pool of capital that would be used to rescue firms deemed too big to fail – would be set at $10 billion for hedge funds yet $50 billion for all other financial institutions.
The result of this would be to impose disproportionately high costs on hedge fund managers who do not themselves pose systemic risk. “We hope this proposed measure is reconsidered before it becomes law and look forward to working with policymakers on a proportionate and workable outcome.”
4 Dec 2009
Hedge Funds Settle Deutsche Bank Suit
HedgeCo News Archives - Three hedge funds managed by $24.8 billion Highland Capital Management, L.P. have agreed on a settlement with Deutsche Bank AG. The hedge funds' had filed suit against Deutsche Bank and Deutsche Bank against the hedge funds. The suit was filed in October and November of 2008.
"We are pleased that we were able to come to a mutually satisfactory agreement with Deutsche Bank regarding this dispute. As a staunch advocate of our investors' interests, we reached a mutually beneficial financial resolution for our funds." said Jim Dondero, President.
The terms of the settlement remain confidential.
Galleon Hedge Fund Founder Investigated 10 Years Ago
HedgeCo News Archive - Hedge fund founder Raj Rajaratnam was investigated by federal prosecutors ten years ago according to legal filings obtained by The Wall Street Journal. The paper reported that the prosecutors were unable to prove their suspicions at the time.
The investigation started with suspicions in the 1990s when chip maker Intel Corp alleged that Rajaratnam was receiving tips from an Intel insider. The investigation was based on a witness who had first entered into a plea agreement with the United States before she began to cooperate in an investigation into Rajaratnam's practices.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in the USA's largest hedge fund insider-trading scheme. His bail was set at $100 million, Rajaratnam said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
3 Dec 2009
Alternative Investor LeapFrog Invests $6 Million in AllLife
HedgeCo News Archives - LeapFrog Investments has announced a ZAR 50 million (over $6 million) investment in AllLife, one of Africa's most innovative insurance businesses. The announcement took place after World AIDS Day.
Launched with President Bill Clinton in 2008, LeapFrog has raised $47 million to date from leading banks, funds, and microfinance and insurance investors. Its profit-with-purpose investment approach has been hailed by many global leaders as a new frontier for alternative investment and microfinance.
"AllLife has developed a distinctive and profitable business model, reaching customers that other insurers have been unable to access," says Gary Herbert, a LeapFrog Principal. "LeapFrog is providing AllLife's team with support to grow their client base by several multiples, and expertise to help management cascade their unique systems into new products and markets."
AllLife, a pioneer in continuous underwriting, links insurance products to an adherence management program. The program ensures clients manage their health appropriately, routinely alerting them to potential health concerns and helping them take action to maintain their wellbeing - such as regularly testing and taking anti-retroviral medications. As a result, AllLife offers more competitively priced products, and covers people whom the insurance industry has often regarded as uninsurable.
"No one who is willing to manage their disease appropriately should be denied life insurance," says Ross Beerman, Managing Director of AllLife. "These are potential policyholders, willing to pay for reasonably priced insurance, and willing to take steps to manage their disease so that they lead long and productive lives. From a business risk and profitability perspective, of course they're insurable - we simply had to invent systems to monitor and support them in the right ways."
AllLife's world-class team and strong strategic plan position it to continue a rapid growth trajectory - its client base grew by 250% last year. AllLife targets reaching 50,000 HIV+ and diabetic policyholders in just a few years, generating strong profits and significant social impact.
In total, 250,000 policyholders and dependents will enjoy the financial security that insurance provides. Most have been unable to obtain insurance or could do so at very high cost - preventing them from taking out home loans, starting businesses, or engaging in other economic activities requiring insurance. Access to insurance has also been shown to reduce stigma associated with HIV, and measurably improve health outcomes. According to Beerman, the company sees an average 15% improvement in clients' health, just from having an AllLife insurance policy.
"We saw in this extraordinary company an opportunity to generate meaningful profits for investors while ending the exclusion of thousands of families from life insurance and participation in the economy," says Ingo Weber, an Investment Committee Member of LeapFrog and a former Managing Director at Swiss Re. LeapFrog's Founder and President, Andrew Kuper, concluded: "For anyone wondering if it's possible to do well by doing good, today that question is answered."
Long/Short Equity Hedge Fund Sector Fell Short in November - Credit Suisse
HedgeCo News Archive - Based on November performance for the Credit Suisse Long/Short Equity Liquid Index (LAB Long/Short Equity Liquid Index), Long/Short Equity funds did not fully capitalize on November's equity market rally since many funds are maintaining more conservative positions in anticipation of year-end, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
"Long/Short Equity hedge funds underperformed most global equity markets as managers maintained relatively neutral exposure to equity markets and many began to lock in profits before the end of the year." Dr. Drachman noted, "Global Macro hedge funds experienced positive performance this month as managers capitalized on increased macro-economic activity. The LAB Long/Short Equity Liquid Index was down -0.75% (net) for the month, while the Credit Suisse Global Macro Liquid Index (LAB Global Macro Liquid Index) finished up 2.23% (net) in the same period."
LAB (formerly known as Alternative Index Replication or AIR) is a series of indices that seek to replicate the aggregate return profiles of alternative investment strategies using liquid, tradable instruments. The LAB umbrella currently includes the Long/Short Equity Liquid Index and the Global Macro Liquid Index which enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index.
2 Dec 2009
Update2: State Street Buys $170 Billion UK Fund Management Company
New York (HedgeCo.net) – State Street Corporation is expanding its global servicing capabilities with an agreement to acquire alternative fund manager Mourant International Finance Administration in a cash transaction. The UK fund is headquartered in Jersey in the Channel Islands with approximately $170 billion in assets under administration.
“As alternative asset classes have become more mainstream, our institutional customers plan to continue to expand their use of this asset class,” said Jay Hooley, president and chief operating officer of State Street.
State Street has been expanding its capabilities in alternative investments over the last seven years. In 2002, the company acquired International Fund Services (IFS), a leading provider of hedge fund administration services and in 2007 State Street significantly expanded its leadership in this market with its acquisitions of both Investors Financial Services Corp. and Palmeri Fund Administrators.
State Street’s Alternative Investment Solutions (AIS) team has more than $420 billion in alternative assets under administration as of September 30, 2009. The acquisition will bring the total to $600 billion, ranking the combined State Street and MIFA businesses No. 1 in alternative asset, private equity and real estate asset servicing globally and No. 2 in hedge fund servicing globally, based on industry survey data. The transaction is expected to close in the first quarter of 2010.
Alex Akesson
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Merlin Securities Launches 24-Hour International and Domestic Trade Coverage
Merlin Securities has expanded its trading capabilities to include 24-hour international and domestic coverage. Hedge fund experts Troy Prince and John Perna will oversee the expanded trading desk.
“Our clients increasingly seek to trade around the clock and around the globe. We have launched our 24-hour international and domestic desk to provide comprehensive access to the world’s markets,” said Eric Morgan , senior partner and head of trading at Merlin Securities. “Our clients now have the capability to execute in 96 countries across six continents – a level of access that has historically been provided only by the largest prime brokers to the largest hedge funds. The trading team at Merlin takes great pride in our outstanding trading capabilities, services and technology that clients cannot find elsewhere. We welcome Troy and John to the firm as we launch this new level of coverage.”
Troy Prince was most recently a U.S. and Asian equity trader with RBC Capital Markets, where he was the primary trader for a discretionary global equity long/short fund. Prior to that he was a Japanese and global equity execution trader for Barclays, based in Tokyo. Previously, Prince spent five years with ETG, LLC – an affiliate of Spear, Leeds & Kellogg – where he served as a global equity proprietary trader based in New York and Madrid. Earlier in his career Prince was a Japanese equity and convertible bond sales trader with Diawa Securities in Tokyo as well as a portfolio trader with O.G. Williams Capital. He holds a bachelors degree from the Stern School of Business at New York University.
John Perna was most recently a vice president and international equities sales trader at J.P. Morgan and, prior to that, an associate director and international trader for Bear Stearns. In these roles he gained extensive experience trading in Asian, European and Latin American markets, executing customer orders using DMA, DOT and various types of algorithms. Perna holds a bachelors degree in economics from Duke University.
“Our clients increasingly seek to trade around the clock and around the globe. We have launched our 24-hour international and domestic desk to provide comprehensive access to the world’s markets,” said Eric Morgan , senior partner and head of trading at Merlin Securities. “Our clients now have the capability to execute in 96 countries across six continents – a level of access that has historically been provided only by the largest prime brokers to the largest hedge funds. The trading team at Merlin takes great pride in our outstanding trading capabilities, services and technology that clients cannot find elsewhere. We welcome Troy and John to the firm as we launch this new level of coverage.”
Troy Prince was most recently a U.S. and Asian equity trader with RBC Capital Markets, where he was the primary trader for a discretionary global equity long/short fund. Prior to that he was a Japanese and global equity execution trader for Barclays, based in Tokyo. Previously, Prince spent five years with ETG, LLC – an affiliate of Spear, Leeds & Kellogg – where he served as a global equity proprietary trader based in New York and Madrid. Earlier in his career Prince was a Japanese equity and convertible bond sales trader with Diawa Securities in Tokyo as well as a portfolio trader with O.G. Williams Capital. He holds a bachelors degree from the Stern School of Business at New York University.
John Perna was most recently a vice president and international equities sales trader at J.P. Morgan and, prior to that, an associate director and international trader for Bear Stearns. In these roles he gained extensive experience trading in Asian, European and Latin American markets, executing customer orders using DMA, DOT and various types of algorithms. Perna holds a bachelors degree in economics from Duke University.
Old Lane Founders Launch $300 Million Equities Hedge Fund
HedgeCo News Archives - In one of the years biggest US hedge fund launches, the Wall Street Journal reports that four of the founders of the now defunct Citigroup hedge fund, Old Lane, have a new start up hedge fund, Meru Capital Group.
The hedge fund has some $300 million in capital, the Wall Street Journal reports. Meru started trading on December 1st with a large chunk of the partner's own funds, up to $75 million, according to some reports.
The New York based hedge fund invests in derivatives, equities, fixed-income, and currencies. It plans to move in and out of positions quickly, with no single investment accounting for more than 5% of the fund’s assets, the Wall Street Journal reported this morning.
The hedge fund has some $300 million in capital, the Wall Street Journal reports. Meru started trading on December 1st with a large chunk of the partner's own funds, up to $75 million, according to some reports.
The New York based hedge fund invests in derivatives, equities, fixed-income, and currencies. It plans to move in and out of positions quickly, with no single investment accounting for more than 5% of the fund’s assets, the Wall Street Journal reported this morning.
1 Dec 2009
HedgeCo Hedge Fund Capital Introduction Event
Hedge funds are well positioned for a good year in 2010 and are likely to continue their momentum into the end of the year, which will lead to additional gains for investors during the month of December, Hennessee research shows. Because of this optimistic forecast, hedge fund managers are ramping up their fund raising efforts.
In an effort to match up investors with hedge funds looking for new allocations, HedgeCo held the Fall 2009 Capital Introduction Round Tables. The event attracted 65 investors and 6 hedge fund managers. The investors were separated into 6 groups, while the hedge fund managers rotated at 20 minute intervals, enabling the investors to address each manager individually.
"Unlike other capital introduction events where the ratio of managers to investors is small, we take pride that our events have a substantial qualified investor turnout." Evan Rapoport, Co-Founder of HedgeCo Networks, said, "As a result of our conferences, investors have reported notable asset increases."
"I've been to a lot of capital introduction events and as a veteran Hedge Fund manager I can say that this has been the best event so far." Kurt Hovan, manager of Hovan Capital Management, said of the event, "The HedgeCo team did a terrific job in putting together a group of high quality investors, and giving the managers a format which enabled direct interaction with every investor. I look forward to attending future events."
The next event will be held mid-to-late January in NYC, it will also be a Round Table format and HedgeCo is currently accepting applications for new managers to present their funds to members of the alternative investment community.
“We hope to continue having these events and keeping the hedge fund community well networked.” Andrew Schneider, co-founder of HedgeCo Networks, said, “Networking is especially important as the economy continues to change, knowing what is going on in the hedge fund community and having connections in the industry is all-important.”
Recognized as having the largest attendance for any type of event in the hedge fund industry, the HedgeCo Networking Events have quickly become the top destination for generating new business and meeting new industry contacts.
In an effort to match up investors with hedge funds looking for new allocations, HedgeCo held the Fall 2009 Capital Introduction Round Tables. The event attracted 65 investors and 6 hedge fund managers. The investors were separated into 6 groups, while the hedge fund managers rotated at 20 minute intervals, enabling the investors to address each manager individually.
"Unlike other capital introduction events where the ratio of managers to investors is small, we take pride that our events have a substantial qualified investor turnout." Evan Rapoport, Co-Founder of HedgeCo Networks, said, "As a result of our conferences, investors have reported notable asset increases."
"I've been to a lot of capital introduction events and as a veteran Hedge Fund manager I can say that this has been the best event so far." Kurt Hovan, manager of Hovan Capital Management, said of the event, "The HedgeCo team did a terrific job in putting together a group of high quality investors, and giving the managers a format which enabled direct interaction with every investor. I look forward to attending future events."
The next event will be held mid-to-late January in NYC, it will also be a Round Table format and HedgeCo is currently accepting applications for new managers to present their funds to members of the alternative investment community.
“We hope to continue having these events and keeping the hedge fund community well networked.” Andrew Schneider, co-founder of HedgeCo Networks, said, “Networking is especially important as the economy continues to change, knowing what is going on in the hedge fund community and having connections in the industry is all-important.”
Recognized as having the largest attendance for any type of event in the hedge fund industry, the HedgeCo Networking Events have quickly become the top destination for generating new business and meeting new industry contacts.
Regulations Increase Need For Hedge Fund Administration And Law Firms
HedgeCo News Archive - New regulations and laws, including the recently enacted anti-money laundering and know-your-client laws are making the outsourcing of hedge fund administration more and more common, according to G&S Fund Services, who said "When administrating their own fund, many fund managers find they are in over their head."
"Last week there were expansions, as back and middle office service providers globally, caught up with the trend." Andrew Schneider, founder and co-principal of hedge fund research and services firm, HedgeCo Networks, said.
Privately owned hedge fund administration company, Opus Fund Services, today opened a Chicago office, appointing Stephen Giannone as the firms President. He has previously worked in senior management positions at Bear Stearns and Deutsche Bank and most recently at hedge fund administrators Spectrum and Omnium (formerly Citadel Solutions). Opus Fund Services is headquartered in Bermuda and has offices in New York, the United Kingdom, and the Cayman Islands.
And also in the off-shore news, hedge fund law firm, Conyers Dill & Pearman, announced an expansion into Cyprus. Conyers will launch its Cyprus practice out of its Moscow office and will advise on all aspects of Cyprus corporate law.
Cypriot law firm Antis Triantafyllides & Sons LLC (ATS) has entered into an arrangement with Conyers for mutual co-operation on Cyprus, Bermuda, British Virgin Islands, Cayman Islands and Mauritius work, and will assign a lawyer from their Cyprus office to Conyers' Moscow office.
"Last week there were expansions, as back and middle office service providers globally, caught up with the trend." Andrew Schneider, founder and co-principal of hedge fund research and services firm, HedgeCo Networks, said.
Privately owned hedge fund administration company, Opus Fund Services, today opened a Chicago office, appointing Stephen Giannone as the firms President. He has previously worked in senior management positions at Bear Stearns and Deutsche Bank and most recently at hedge fund administrators Spectrum and Omnium (formerly Citadel Solutions). Opus Fund Services is headquartered in Bermuda and has offices in New York, the United Kingdom, and the Cayman Islands.
And also in the off-shore news, hedge fund law firm, Conyers Dill & Pearman, announced an expansion into Cyprus. Conyers will launch its Cyprus practice out of its Moscow office and will advise on all aspects of Cyprus corporate law.
Cypriot law firm Antis Triantafyllides & Sons LLC (ATS) has entered into an arrangement with Conyers for mutual co-operation on Cyprus, Bermuda, British Virgin Islands, Cayman Islands and Mauritius work, and will assign a lawyer from their Cyprus office to Conyers' Moscow office.
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