The Securities and Exchange Commission filed a restraining order yesterday to halt an on-going multi-million dollar Ponzi scheme. The SEC says that Defendant, Toronto hedge fund manager Weizhen Tang, orchestrated the fraud through an overseas hedge fund and a Texas-based investment adviser.
U.S. District Judge Jane Boyle granted a temporary restraining order, asset freeze, and other emergency relief against the Defendants, including the appointment of a receiver to take control of assets belonging to the Investment Adviser and two Relief Defendants — WinWin Capital Partners, LP, and Bluejay Investment, LLC, d/b/a Vintage International Investment, LLC.
The fraud began as early as 2004, and through the hedge fund Tang raised between $50 million and $75 million from more than 200 investors. According to the SEC complaint, Weizhen Tang (the self-described “Chinese Warren Buffet”) recently admitted to investors that the hedge fund operated as a Ponzi scheme since at least 2006.
Tang specifically targeted members of the Chinese-American community and solicited U.S. investors to directly and indirectly invest in the hedge fund, according to the SEC.
In addition to the emergency relief granted by the Court, the SEC wants permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties against the Defendants.
7 Apr 2009
Hedge Funds Available In Sweden For The First Time
The Swedish state pension platform, PPM, is including Salus Alpha funds in their premium pension portfolio with immediate effect. The Salus Alpha funds that were chosen are UCITS III compliant, and meet the strict requirements regarding transparency, daily liquidity and adequate administration procedures set up for the Premium Pension Authority.
By launching the first UCITS III fund that tracks a hedge fund index in September 2007, Salus Alpha paved the way for hedge funds as an optimal portfolio component for retirement investment, by adding multi-manager alternative investment products, the returns can be increased while decreasing the risk.
The Swedish pension system is divided in three parts; income pension, guaranteed pension and premium pension. For the premium pension the pension saver has a number of funds to choose from. Every pension saver can decide in which fund and what amount of money he wants to invest. At the moment the Premium Pension Authority’s fund holdings of 5.8 million pension savers are valued at a total of 27.5 Billion Euro ($36.7 billion).
By including these funds in the portfolio the Swedish Premium Pension Authority confirmed the market leadership of Salus Alpha in the regulated alternative investment sector.
By launching the first UCITS III fund that tracks a hedge fund index in September 2007, Salus Alpha paved the way for hedge funds as an optimal portfolio component for retirement investment, by adding multi-manager alternative investment products, the returns can be increased while decreasing the risk.
The Swedish pension system is divided in three parts; income pension, guaranteed pension and premium pension. For the premium pension the pension saver has a number of funds to choose from. Every pension saver can decide in which fund and what amount of money he wants to invest. At the moment the Premium Pension Authority’s fund holdings of 5.8 million pension savers are valued at a total of 27.5 Billion Euro ($36.7 billion).
By including these funds in the portfolio the Swedish Premium Pension Authority confirmed the market leadership of Salus Alpha in the regulated alternative investment sector.
6 Apr 2009
Strong Performance In First Six Months For ACP Fund
London hedge fund manager ACP Partners, which is soon to merge with TriAlpha Investment Advisors, said that their long/short eguity strategy fund, ACP Financial Opportunities, has beaten its benchmark by over 65% in its first six months.
Since the fund launch on 1 September 2008 through 28 February 2009, the new fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9%. Its benchmark, the S&P 1200 Global Financials, returned -60.7% over the same period, and the HFRI Equity Hedge Index -22.2%.
"Financials account for around 20% of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors." Stephen Greene, partner and CIO of the ACP’s Multi Manager business, said, "Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value."
"The key to achieving positive returns has been portfolio construction. The portfolio was specifically structured to benefit from the expected market volatility as we placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation. Unusually, our fund was one of only a very few fund of funds to be market neutral over this period of turmoil." Greene concluded.
As examples, the portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises. The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition. Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.
The fund has a minimim investment of $1,000,000 (or equivalent) with quarterly redemptions, and a managment fee of 1% and performance fee of 10%.
Since the fund launch on 1 September 2008 through 28 February 2009, the new fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9%. Its benchmark, the S&P 1200 Global Financials, returned -60.7% over the same period, and the HFRI Equity Hedge Index -22.2%.
"Financials account for around 20% of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors." Stephen Greene, partner and CIO of the ACP’s Multi Manager business, said, "Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value."
"The key to achieving positive returns has been portfolio construction. The portfolio was specifically structured to benefit from the expected market volatility as we placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation. Unusually, our fund was one of only a very few fund of funds to be market neutral over this period of turmoil." Greene concluded.
As examples, the portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises. The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition. Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.
The fund has a minimim investment of $1,000,000 (or equivalent) with quarterly redemptions, and a managment fee of 1% and performance fee of 10%.
Hedge Fund Manager Silk Invest Launches Two Equity Funds
FSA regulated asset manager, Silk Invest Ltd, successfully launched the African Lions Fund and the Arab Falcons Fund, which helped the hedge fund manager achieve its goals in becoming a specialist in Arab and African equities.
The Luxembourg domiciled African Lions fund and Arab Falcons fund went live on 27th March with an NAV of Euro 100 ($135.2). The portfolio managers, based in London, Cairo, Casablanca and Johannesburg, plan to build up the portfolio up cautiously, taking advantage of liquidity opportunities.
"Raising assets in these markets proved extremely challenging," Zin Bekkali, CEO of Silk Invest said, "Ultimately, the strength of our investment proposition, and the valuation of the markets we specialise, convinced investors to support the launch."
African and Arab markets account for 4% of worldwide market capitalization and this is projected to increase as the region is set to further grow its share of the world’s GDP.
Baldwin Berges, director of business development, observed that “the funds should grow in size fairly rapidly. Investors understand well our proposition and we have built a pitch book in excess of Euro 500 million ($676.2 million). Many of these investors have committed to invest in our funds, once the fund is up and running.”
Daniel Broby, the Chief Investment Officer of Silk Invest says that the launch “is perfectly timed from an investor perspective. There is now immense opportunity in frontier markets of the dramatic declines caused by the credit crisis.”
The Luxembourg domiciled African Lions fund and Arab Falcons fund went live on 27th March with an NAV of Euro 100 ($135.2). The portfolio managers, based in London, Cairo, Casablanca and Johannesburg, plan to build up the portfolio up cautiously, taking advantage of liquidity opportunities.
"Raising assets in these markets proved extremely challenging," Zin Bekkali, CEO of Silk Invest said, "Ultimately, the strength of our investment proposition, and the valuation of the markets we specialise, convinced investors to support the launch."
African and Arab markets account for 4% of worldwide market capitalization and this is projected to increase as the region is set to further grow its share of the world’s GDP.
Baldwin Berges, director of business development, observed that “the funds should grow in size fairly rapidly. Investors understand well our proposition and we have built a pitch book in excess of Euro 500 million ($676.2 million). Many of these investors have committed to invest in our funds, once the fund is up and running.”
Daniel Broby, the Chief Investment Officer of Silk Invest says that the launch “is perfectly timed from an investor perspective. There is now immense opportunity in frontier markets of the dramatic declines caused by the credit crisis.”
Stark Opens NY Hedge Fund Hotel
"The bright side of an economic downturn is that business people are branching out on their own," said Adam Stark, president of Stark Business Solutions. "We have made it seamless for enterprising individuals to establish new businesses without significant expense and with very little risk. We are looking forward to helping grow the business community in Scarsdale."
Customized trading floors have been installed to accommodate hedge funds and trading operations along with mahogany furnishings. SBS operates three other executive suites in Westchester: White Plains, Mount Kisco and Harrison. More than 100 people attended the opening event.
Customized trading floors have been installed to accommodate hedge funds and trading operations along with mahogany furnishings. SBS operates three other executive suites in Westchester: White Plains, Mount Kisco and Harrison. More than 100 people attended the opening event.
3 Apr 2009
Hedge Fund Manager Capitalises On Mispriced Asian Performing Debt
Singapore hedge fund manager, 3 Degrees Asset Management, is launching ADF Prime Ltd, a credit opportunities fund that will invest primarily in the performing debt obligations of Asian companies that have been mispriced as a result of the Global Financial Crisis.
3 Degrees also manages the award winning Asian Debt Fund, an Asian distressed debt fund that has been active since 2004.
In Asia, debt prices have corrected far more sharply than in the US and Europe. This is driven by technical factors, the fund manager says, as Asian investment banks unwind their portfolios, global hedge funds close their Asian operations, and capital is generally pulled from the region.
The new fund will capitalize on the systemic inefficiencies endemic to Asian credit markets. Due to the limited number of players, and the highly relationship‐driven nature of Asian markets, inefficiencies are being exaggerated by the global financial crisis.
Targeting quality companies that either have, or can generate, enough cash flow to repay maturing debt without dependence on capital markets, the fund seeks annual, unlevered net returns in excess of 25%.
3 Degrees has received numerous awards, including “Best Asian Distressed Debt Fund”
and “Best Singapore Hedge Fund”. In 2007, Moe Ibrahim, the founder, was selected as
One of 20 Rising Stars of Hedge Funds by Institutional Investor. ADF Prime will be co‐managed by Moe Ibrahim and Jeff Tolk.
ADF Prime is also available to institutional investors and ultra high net worth individuals via the Firm’s Managed Accounts platform.
3 Degrees also manages the award winning Asian Debt Fund, an Asian distressed debt fund that has been active since 2004.
In Asia, debt prices have corrected far more sharply than in the US and Europe. This is driven by technical factors, the fund manager says, as Asian investment banks unwind their portfolios, global hedge funds close their Asian operations, and capital is generally pulled from the region.
The new fund will capitalize on the systemic inefficiencies endemic to Asian credit markets. Due to the limited number of players, and the highly relationship‐driven nature of Asian markets, inefficiencies are being exaggerated by the global financial crisis.
Targeting quality companies that either have, or can generate, enough cash flow to repay maturing debt without dependence on capital markets, the fund seeks annual, unlevered net returns in excess of 25%.
3 Degrees has received numerous awards, including “Best Asian Distressed Debt Fund”
and “Best Singapore Hedge Fund”. In 2007, Moe Ibrahim, the founder, was selected as
One of 20 Rising Stars of Hedge Funds by Institutional Investor. ADF Prime will be co‐managed by Moe Ibrahim and Jeff Tolk.
ADF Prime is also available to institutional investors and ultra high net worth individuals via the Firm’s Managed Accounts platform.
1 Apr 2009
Hedge Fund Shareholders Seek Legal action
A former hedge fund shareholder of Canadian securities company, Capital Units of Oil Sands Split Trust, is taking legal action regarding the Trust's Special Annual Retraction that occurred in December, 2008.
The hedge fund said it would take the complaint to the Ontario Superior Court of Justice for, among other things, the timing of the payout and reimbursment of the money owed.
Sentry Select said in a statement that the legal action is without merit and, if the application is brought, it will be vigorously defended.
The hedge fund said it would take the complaint to the Ontario Superior Court of Justice for, among other things, the timing of the payout and reimbursment of the money owed.
Sentry Select said in a statement that the legal action is without merit and, if the application is brought, it will be vigorously defended.
The Economist to Launch London Theme Park
As part of a strategy designed to broaden the revenue base, leverage content over new platforms and promote The Economist brand to a young and dynamic audience, The Economist Group is delighted to announce the development of a public-entertainment facility that combines the magic of a theme park with the excitement of macroeconomics.
After six months of negotiations with the British government, The Economist Group can confirm that Econoland will be built on a former industrial estate in East London, close to the beating heart of the City and thus to a large potential market of financial-sector employees.
Thanks to issues relating to its previous use, the site has been acquired at an advantageous price. Most of the toxic wastes have been cleared and levels of carcinogens appear to have returned to normal. High unemployment in the area will only increase the facility's attractions, as former City workers seek to recapture some of the excitement they enjoyed in their professional life. Heavy investment in security and a landscaped moat and electric fence will neutralise any potential threat from the growing anarchist presence.
Among the thrilling experiences Econoland will offer are:
The currency high-roller: Float like a butterfly with the euro and drop like a stone with the pound!
Chamber of horrors: Tremble at the wailing of distressed debt!
Fiscal fantasyland: Watch the economy shrivel before your very eyes as you struggle to stop growth falling!
Bankrupt Britain: Pit your wits against the government as you try to sink sterling and bring the country to its knees!
The severe contest: Try your strength against a bear market!
Econoland will appeal to the kid in everyone, although children themselves will not be admitted. The park will open on April 1st.
Explore a clickable map of The Economist's new theme park
31 Mar 2009
Hedge Funds Size/Performance, Crisis Analysis
West Palm Beach (HedgeCo.net) - A recent paper by AlternativeSoft regarding the influence of hedge fund size and strategy during the recent crisis, showed that that from July to December 2008, large and medium hedge funds outperformed their smaller peers in terms of returns; also large hedge funds outperformed smaller hedge funds in term of Sharpe ratio.
The study was done using the AlternativeSoft software platform, enabling the group to quickly run statistics on individual funds, as well as on a group of hedge funds.
Looking at CTA strategies, Equity Long-Short, Macro and Multi-Strategies, AlternativeSoft found that from July to December 2008, medium sized hedge funds using CTA, Equity Long-Short and Multi-Strategy performed the best; however the large sized funds had the best Sharpe Ratio. This indicates that the medium sized hedge funds were exposing themselves to slightly more risk (assuming risk is defined with volatility only). In Macro, the large funds had higher returns and larger Sharpe ratio than smaller funds.
In conclusion, the analysis found that the larger funds performed better than their smaller peers, occurring because larger funds were able to better manage risk than smaller funds. In addition, the larger funds had more experience as shown below with a longer track record history. So experience matters when crash comes.
The average track record for a hedge fund is:
Small, 66 months
Medium, 78 months
Large, 91 months
Super Large, 139 months
A basic strategy investing in the 10 Super Large hedge funds mixed with large hedge funds ($500m), would have easily outperformed the hedge fund indices and other smaller hedge funds, in term of returns and Sharpe ratio during 2008.
Hedge funds with assets over $10 million and funds of hedge funds were not included in the study. December 2008 data were not available for all funds. In the ‘Super-large’ group, two hedge funds had large returns, which may skew the results. AlternativeSoft intentionally does not use statistical measures like R-squared, t-statistics or Granger causality in order to keep the paper readable.
The study was done using the AlternativeSoft software platform, enabling the group to quickly run statistics on individual funds, as well as on a group of hedge funds.
Looking at CTA strategies, Equity Long-Short, Macro and Multi-Strategies, AlternativeSoft found that from July to December 2008, medium sized hedge funds using CTA, Equity Long-Short and Multi-Strategy performed the best; however the large sized funds had the best Sharpe Ratio. This indicates that the medium sized hedge funds were exposing themselves to slightly more risk (assuming risk is defined with volatility only). In Macro, the large funds had higher returns and larger Sharpe ratio than smaller funds.
In conclusion, the analysis found that the larger funds performed better than their smaller peers, occurring because larger funds were able to better manage risk than smaller funds. In addition, the larger funds had more experience as shown below with a longer track record history. So experience matters when crash comes.
The average track record for a hedge fund is:
Small, 66 months
Medium, 78 months
Large, 91 months
Super Large, 139 months
A basic strategy investing in the 10 Super Large hedge funds mixed with large hedge funds ($500m), would have easily outperformed the hedge fund indices and other smaller hedge funds, in term of returns and Sharpe ratio during 2008.
Hedge funds with assets over $10 million and funds of hedge funds were not included in the study. December 2008 data were not available for all funds. In the ‘Super-large’ group, two hedge funds had large returns, which may skew the results. AlternativeSoft intentionally does not use statistical measures like R-squared, t-statistics or Granger causality in order to keep the paper readable.
30 Mar 2009
Tax Information Assistance In Cayman Islands Extended to 20 Countries
The Cayman Islands Government today announced that it will provide access to comprehensive tax information assistance to 20 countries, including the majority of Cayman’s major trading partners.
Ireland, Japan, the Netherlands and South Africa now join eight other countries afforded tax information assistance to OECD standards, with a "unilateral mechanism, which does not require a bilateral treaty."
“The Cayman Islands took the proactive step of introducing the unilateral mechanism for the provision of information in tax matters, as a complement to our bilateral negotiation programme,” Cayman Islands Leader of Government Business, the Honourable Kurt Tibbetts said. “We recognised the need to increase the pace at which we could enter into tax information arrangements, while offering a phased approach to our negotiating partners under our bilateral programme in appropriate circumstances. We look forward to continuing this progressive approach.”
In combination, the arrangements noted above cover four of the seven G-7 states and 17 of the 30 OECD member states.
Based on its current negotiating programme – which reflects OECD countries (including significant trading partners) that have indicated interest in tax cooperation arrangements – the Cayman Islands aims in the following months to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.
Ireland, Japan, the Netherlands and South Africa now join eight other countries afforded tax information assistance to OECD standards, with a "unilateral mechanism, which does not require a bilateral treaty."
“The Cayman Islands took the proactive step of introducing the unilateral mechanism for the provision of information in tax matters, as a complement to our bilateral negotiation programme,” Cayman Islands Leader of Government Business, the Honourable Kurt Tibbetts said. “We recognised the need to increase the pace at which we could enter into tax information arrangements, while offering a phased approach to our negotiating partners under our bilateral programme in appropriate circumstances. We look forward to continuing this progressive approach.”
In combination, the arrangements noted above cover four of the seven G-7 states and 17 of the 30 OECD member states.
Based on its current negotiating programme – which reflects OECD countries (including significant trading partners) that have indicated interest in tax cooperation arrangements – the Cayman Islands aims in the following months to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.
Investor Confidence in the Hedge Fund Industry - Survey
Eighty per cent of hedge fund investors continue to believe that hedge funds can provide good, long-term returns, according to a recent survey conducted by IRC Conferences / Terrapinn, a leading global business media company and organiser of London's HEDGE 2009 congress. Only 20 per cent of investors said that recent global events have shaken their belief in the hedge fund industry.
The survey, which was conducted amongst 273 institutional investors, hedge fund managers and service providers from around the world, revealed that 39% of investors believe that the current depressed markets and heightened risk premia offer a great entry point for fresh investment. Unsurprisingly, the hedge funds themselves are even more optimistic, with 55% of hedge funds stating that the current environment offers exceptional opportunity.
Responses also showed that there was widespread agreement across the industry with regard to the reforms that are required, with one exception - the prickly issue of fees.
Investors, fund managers and service providers all agreed that the industry needs to have better transparency (95%, 97% and 97%) and stronger internal risk, compliance and audit functions (93%, 96% and 100%.) They also agreed on the necessity of having stronger self-regulation and statutory regulation.
While 43% of investors rated the issue of fees "very important" in reviving enthusiasm, only 14% of hedge funds did so. It is not simply lower fees that investors want, but fees which are better structured, to align more closely hedge fund managers' interests with those of investors.
While all categories saw better self-regulation as more important than statutory regulation, the difference between investors and hedge funds was again marked. Thirty two per cent of investors see statutory regulation as "very important," but only 13% of hedge funds believe it to be so.
Three key lessons were almost universally acknowledged in the respondents' feedback. Both investors and hedge funds acknowledged that independent administrators and custodians are essential (87% and 92 % respectively) and that a greater match is needed between hedge fund terms and liquidity (85% and 80%.) They also agreed that due diligence is more important than they realized (76% and 73%.)
The more sobering news for hedge funds is the suggestion that they may have to wait until 2010 for net inflows to the industry to restart. The majority of hedge funds expect net inflows to the hedge fund industry to commence in the second half of this year, but most investors do not expect this to happen before 2010.
Unsurprisingly, the hedge funds strongly believed that money entrusted to their care needs to stick around longer term. As a result, hedge funds are more enthusiastic than ever to attract capital from long-term, institutional investors such as pension funds.
Some of the hedge funds who responded to the survey said that they are implementing structural changes to make their product offering more attractive to investors. By far the most common response was that funds are looking at how they can improve their transparency. This answer figures at least twice as much as any other issue. The following list appears in order of number of citations:
Changes being considered or enacted by hedge funds
Greater transparency
Improved communication to investors, particularly with regard to return attribution analysis
Improved internal risk management processes
Amendments to fund terms regarding gates, redemption notices or offering daily liquidity
Focus on managed accounts
More dynamic strategies to control drawdowns / more focus on "absolute return"
Focus on quality of service providers e.g. administrators, custodian
Greater focus on investing in liquid assets
Reduction in fees / offering a variety of fee structures
Improving due diligence processes
New product offerings to meet changing requirements of investors
Lower leverage
Greater focus on "values"
The survey, which was conducted amongst 273 institutional investors, hedge fund managers and service providers from around the world, revealed that 39% of investors believe that the current depressed markets and heightened risk premia offer a great entry point for fresh investment. Unsurprisingly, the hedge funds themselves are even more optimistic, with 55% of hedge funds stating that the current environment offers exceptional opportunity.
Responses also showed that there was widespread agreement across the industry with regard to the reforms that are required, with one exception - the prickly issue of fees.
Investors, fund managers and service providers all agreed that the industry needs to have better transparency (95%, 97% and 97%) and stronger internal risk, compliance and audit functions (93%, 96% and 100%.) They also agreed on the necessity of having stronger self-regulation and statutory regulation.
While 43% of investors rated the issue of fees "very important" in reviving enthusiasm, only 14% of hedge funds did so. It is not simply lower fees that investors want, but fees which are better structured, to align more closely hedge fund managers' interests with those of investors.
While all categories saw better self-regulation as more important than statutory regulation, the difference between investors and hedge funds was again marked. Thirty two per cent of investors see statutory regulation as "very important," but only 13% of hedge funds believe it to be so.
Three key lessons were almost universally acknowledged in the respondents' feedback. Both investors and hedge funds acknowledged that independent administrators and custodians are essential (87% and 92 % respectively) and that a greater match is needed between hedge fund terms and liquidity (85% and 80%.) They also agreed that due diligence is more important than they realized (76% and 73%.)
The more sobering news for hedge funds is the suggestion that they may have to wait until 2010 for net inflows to the industry to restart. The majority of hedge funds expect net inflows to the hedge fund industry to commence in the second half of this year, but most investors do not expect this to happen before 2010.
Unsurprisingly, the hedge funds strongly believed that money entrusted to their care needs to stick around longer term. As a result, hedge funds are more enthusiastic than ever to attract capital from long-term, institutional investors such as pension funds.
Some of the hedge funds who responded to the survey said that they are implementing structural changes to make their product offering more attractive to investors. By far the most common response was that funds are looking at how they can improve their transparency. This answer figures at least twice as much as any other issue. The following list appears in order of number of citations:
Changes being considered or enacted by hedge funds
Greater transparency
Improved communication to investors, particularly with regard to return attribution analysis
Improved internal risk management processes
Amendments to fund terms regarding gates, redemption notices or offering daily liquidity
Focus on managed accounts
More dynamic strategies to control drawdowns / more focus on "absolute return"
Focus on quality of service providers e.g. administrators, custodian
Greater focus on investing in liquid assets
Reduction in fees / offering a variety of fee structures
Improving due diligence processes
New product offerings to meet changing requirements of investors
Lower leverage
Greater focus on "values"
27 Mar 2009
Institutional Investors Plan to Increase Hedge Fund Allocations in 2009
A study by State Street Corporation indicates that the turbulent financial markets have not caused major shifts in institutional asset allocations. Three quarters of institutional investors said they do not plan to modify portfolio allocations.
While the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months.
“Hedge funds have not been immune to the extremely volatile market environment,” said Gary Enos, executive vice president and head of relationship management and client strategy for State Street’s Alternative Investment Solutions team. “While alternative investments, including hedge funds, largely outperformed traditional investments in 2008, negative returns understandably disappointed. Although hedge fund allocations declined slightly over the past year, we anticipate growth will resume later in 2009, as institutional investors continue to focus on diversification and risk management.”
The results of State Street’s 2009 hedge fund study show a moderate decline in overall allocations to hedge funds, with institutions allocating more than five percent of their portfolio to hedge funds decreasing from two-thirds (68 percent) in 2007 to one half (51 percent) in 2008. Nevertheless, most institutions intend to either increase (49 percent) or maintain (39 percent) their allocation to hedge funds in the next year.
Another encouraging sign for alternatives is increased institutional interest in private equity funds. Over half of institutions (53 percent) have allocated more than five percent of their portfolio to private equity funds, and half intend to increase their allocation to private equity over the next 12 months.
Institutional investors also continue to emphasize transparency. Five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings.
While the study results indicate a moderate decline in overall allocations to hedge funds, the majority of institutions report an intention to increase or maintain current hedge fund allocations over the next 12 months.
“Hedge funds have not been immune to the extremely volatile market environment,” said Gary Enos, executive vice president and head of relationship management and client strategy for State Street’s Alternative Investment Solutions team. “While alternative investments, including hedge funds, largely outperformed traditional investments in 2008, negative returns understandably disappointed. Although hedge fund allocations declined slightly over the past year, we anticipate growth will resume later in 2009, as institutional investors continue to focus on diversification and risk management.”
The results of State Street’s 2009 hedge fund study show a moderate decline in overall allocations to hedge funds, with institutions allocating more than five percent of their portfolio to hedge funds decreasing from two-thirds (68 percent) in 2007 to one half (51 percent) in 2008. Nevertheless, most institutions intend to either increase (49 percent) or maintain (39 percent) their allocation to hedge funds in the next year.
Another encouraging sign for alternatives is increased institutional interest in private equity funds. Over half of institutions (53 percent) have allocated more than five percent of their portfolio to private equity funds, and half intend to increase their allocation to private equity over the next 12 months.
Institutional investors also continue to emphasize transparency. Five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings.
25 Mar 2009
New Legislation Proposed, Raising Hedge Fund Issues
Carried interest legislation is being considered at the federal, state and local level, raising significant local and international tax issues.
Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.
Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.
Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.
During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.
President Obama's Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.
Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.
Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.
Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.
During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.
President Obama's Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.
AIMA Supports New US Treasury Investment Program
Todd Groome, Chairman of the Alternative Investment Management Association (AIMA) said in a statement regarding the Public-Private Investment Program announced by Tim Geithner, "It shows that there is recognition among policy makers at the highest level that the hedge fund industry is part of the solution."
The Treasury's Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.
"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.
"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.
The Treasury's Public−Private Investment Program aims to unclog credit markets and promote credit extensions, according to the Northern Trust Economic Research Department. The program has chalked out two initiatives – Legacy Loans Program and Legacy Securities Program. The Legacy Loans Program combines FDIC guarantee with debt financing from the private sector and Treasury to purchase troubled loans from financial institutions.
"Hedge funds can and should play a crucial role in assisting the recovery by providing counter-cyclical risk capital at times of distress like this," Groome said.
"AIMA, as the global trade body for the world’s hedge fund industry, is committed to working with policy makers internationally to help solve the current market crisis and prevent future crises from taking place," he concluded.
23 Mar 2009
"Hedge Fund Homeboys"
Press Release
Air Date: Monday, March 23, 2009
Time Slot: 10:02 PM-11:00 PM EST on ABC
Episode Title: (#103) "Hedge Fund Homeboys"
CASTLE AND BECKETT UNCOVER THE DARK SIDE OF PREP SCHOOL TEEN CULTURE WHEN A BODY TURNS UP IN CENTRAL PARK, ON ABC's "CASTLE"
- A once wealthy teenage boy whose family has fallen on hard times is found dead in a rowboat floating along the lake in Central Park. As Castle and Beckett try to piece together the events leading up to his death, his friends do everything in their power to thwart the investigation. As they unravel the truth from the lies, a story of betrayal and obsession emerges. Meanwhile, Castle debates whether he can leave Martha home alone while he chaperones Alexis' class trip to Washington, DC. Martha might be an aspiring "Life Coach," but that doesn't mean she's trustworthy, on "Castle," MONDAY, MARCH 23 (10:02-11:00 p.m. ET) on the ABC Television Network.
"Castle" stars Nathan Fillion as Richard Castle, Stana Katic as NYPD Detective Kate Beckett, Susan Sullivan as Martha Rodgers, Molly Quinn as Alexis Castle, Ruben Santiago-Hudson as NYPD Captain Roy Montgomery, Tamala Jones as Medical Examiner Lanie Parish, Jon Huertas as NYPD Detective Javier Esposito, and Seamus Dever as NYPD Detective Kevin Ryan.
Guest Cast: Jamie Chung as Romy Lee, Julia Nickson as Mrs. Lee, Nolan Gerard Funk as Brandon, Michelle Page as Amanda Kunal Sharma as Spencer.
"Hedge Fund Homeboys" was written by David Grae and directed by Rob Bowman.
"Hedge Fund Homeboys" is broadcast in 720 Progressive (720P), ABC's selected HDTV format, with 5.1 channel surround sound and Spanish subtitles via secondary closed captioning. A TV parental guideline will be assigned closer to airdate.
Air Date: Monday, March 23, 2009
Time Slot: 10:02 PM-11:00 PM EST on ABC
Episode Title: (#103) "Hedge Fund Homeboys"
CASTLE AND BECKETT UNCOVER THE DARK SIDE OF PREP SCHOOL TEEN CULTURE WHEN A BODY TURNS UP IN CENTRAL PARK, ON ABC's "CASTLE"
- A once wealthy teenage boy whose family has fallen on hard times is found dead in a rowboat floating along the lake in Central Park. As Castle and Beckett try to piece together the events leading up to his death, his friends do everything in their power to thwart the investigation. As they unravel the truth from the lies, a story of betrayal and obsession emerges. Meanwhile, Castle debates whether he can leave Martha home alone while he chaperones Alexis' class trip to Washington, DC. Martha might be an aspiring "Life Coach," but that doesn't mean she's trustworthy, on "Castle," MONDAY, MARCH 23 (10:02-11:00 p.m. ET) on the ABC Television Network.
"Castle" stars Nathan Fillion as Richard Castle, Stana Katic as NYPD Detective Kate Beckett, Susan Sullivan as Martha Rodgers, Molly Quinn as Alexis Castle, Ruben Santiago-Hudson as NYPD Captain Roy Montgomery, Tamala Jones as Medical Examiner Lanie Parish, Jon Huertas as NYPD Detective Javier Esposito, and Seamus Dever as NYPD Detective Kevin Ryan.
Guest Cast: Jamie Chung as Romy Lee, Julia Nickson as Mrs. Lee, Nolan Gerard Funk as Brandon, Michelle Page as Amanda Kunal Sharma as Spencer.
"Hedge Fund Homeboys" was written by David Grae and directed by Rob Bowman.
"Hedge Fund Homeboys" is broadcast in 720 Progressive (720P), ABC's selected HDTV format, with 5.1 channel surround sound and Spanish subtitles via secondary closed captioning. A TV parental guideline will be assigned closer to airdate.
20 Mar 2009
Febuary Hedge Fund Performance
Morningstar reported a sharp decline in credit and equity markets as the U.S. government announced its stimulus package and financial stability plan. February saw a huge sell-off in U.S. and European bank stocks caused by concerns of financial health and nationalization.
U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.
"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don't know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.
Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.
Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.
U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.
"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don't know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.
Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.
Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.
19 Mar 2009
Hedge Fund Manager Investcorp buys into L'azurde
West Palm Beach (HedgeCo.net) - Hedge fund and alternative investor, Investcorp, along with its consortium partners Eastgate Capital Group and The National Investor, announced the acquisition of a 70% stake in Saudi gold and jewelry makers, L'azurde.
L'azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor, employing over 2000 people, selling throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region.
Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp's Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L'azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally.
"Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp's unique business model." Nemir Kirdar, Executive Chairman & CEO of Investcorp, said, "Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership...to add value to L'azurde over the coming years."
L'azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor, employing over 2000 people, selling throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region.
Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp's Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L'azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally.
"Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp's unique business model." Nemir Kirdar, Executive Chairman & CEO of Investcorp, said, "Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership...to add value to L'azurde over the coming years."
18 Mar 2009
AIMA STATEMENT ON THE TURNER REVIEW
“We welcome the publication of the Turner Review, which is an impressive and comprehensive piece of work." Andrew Baker, Chief Executive of The Alternative Investment Management Association (AIMA), said, "It is about the banking system’s role in the current financial crisis and as such its principal focus is the banks, not the hedge fund industry. We are grateful to Lord Turner for his even-handed and measured approach and for not making hedge funds the scapegoat for this crisis."
"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.
We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.
Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.
We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”
AIMA has more than 1,200 corporate members worldwide, based in 43 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
"The Review says that regulators and central banks need to gather better macro-prudential information on hedge fund activities and we completely support this – in fact we called, in our new policy platform of the 24th February, for the disclosure of systemically significant information by hedge fund managers to their national regulators (not all assets are managed in a collective fund structure). We also called for a global manager authorisation and supervision template on the FSA model. AIMA took the lead on behalf of the hedge fund industry globally in these respects.
We are glad that the Review points out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”.
Given those qualifications, we do appreciate why in the interests of financial stability the Review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.
We note that any such regulation is hypothetical at present (the Review talks of “if it ever did become appropriate” to do this) and we are glad that Lord Turner has stressed that any regulation in this respect should focus on economic substance not legal form.”
AIMA has more than 1,200 corporate members worldwide, based in 43 countries.
Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
17 Mar 2009
European Commission Looking For Commentary From Hedge Funds
In an effort to makes major changes to the EU financial regulation services, the European Commission (EC) has launched 'Driving European Recovery', a consultation on major structural changes to European financial services and markets regulation.
The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.
The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.
The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.
The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.
The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.
Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."
The EC are looking for investors such as hedge funds and other interested parties to interview and submit comments before April 10th, when the EC intends to publish its proposals on the future of the EU supervisory architecture.
The Commission endorses the key principles set out in the recent de Larosière report and calls for a supervisory system combining stronger oversight at EU level with maintaining a key role for national supervisors.
The Commission will propose an ambitious new reform programme, designed to deliver “responsible and reliable financial markets for the future”.
The reform program will present a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets.
The Commission will present a European financial supervision package before the end of May 2009, according to a statement, fill gaps where European or national regulation is insufficient or incomplete, based on a ‘safety first’ approach and improve risk management in financial firms and align pay incentives with sustainable performance.
Among other proposals to be revealed in May, the EC will, "Ensure more effective sanctions against market wrongdoing."
Subscribe to:
Posts (Atom)