Leading alternative investment firms are adopting best practices for their funds with an eye to the Sarbanes-Oxley act*, hedge fund provider, TKS Solutions said in an announcement, also launching a new system specifically designed for hedge funds.
*The act was created in 2002 as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. A new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies.
"New regulations are not the only issue funds have to deal with" says Ron Kashden, president of TKS Solutions. "With the tight capital market many investors are demanding more flexibility in their fee structure and liquidity terms. The days of complacent investors willing to lock in their capital for years at a time may be over. Funds that have always allowed for annual and even quarterly redemptions are finding that they have to offer monthly liquidity to attract new capital. While this makes sense from a business stand-point, it introduces accounting complexities that are wreaking havoc in the back office. Simple tasks, such as accruing management fees, can quickly become an arduous calculation when funds that charge quarterly allow redemptions on a monthly basis.
Adding to the complexity, TKS said, is that fund administrators are reporting new fee structures with innovative loss-recovery provisions. While this adds pressure for portfolio performance, it also provides the fund with a revenue source to live off of in bad times. Managing these intricacies necessitates accounting tools and practices that funds may not have required historically. Yesterday’s spreadsheets are giving way to sophisticated software packages specifically tailored for the back-office needs.
From an operational perspective, the hedge fund industry is finally growing up, TKS said. Their ad-hoc practices, more appropriate to a "mom and pop" shop than a sophisticated financial enterprise, are being replaced with a regulatory best practices framework and the expert systems used by their institutional counter parts.
TKS Solutions works with partners worldwide to serve its customer base of leading hedge funds, fund of funds, private equity firms, administrators and management companies, ranging from $50 million up to $20 billion under management.
20 May 2009
19 May 2009
FRSGlobal to Work With Hedge Funds On New Regulations
Hedge fund risk and regulatory compliance solutions provider, FRSGlobal, is preparing to work with the hedge fund industry to help it comply with the new wave of global regulations expected to be in place later this year.
Compliance experts within FRSGlobal's Centre of Risk & Regulatory Excellence (CoR2E) are actively monitoring the discussions taking place at the various U.S. regulatory agencies and are ready to advise hedge funds on the best ways to automate their reporting processes as soon as any new legislation is enacted.
"U.S. regulators are demanding more oversight of the hedge fund industry which means that registration is imminent, "Richard Ferrari, FRS Vice President, commented, "Hedge funds are going to be subject to far greater scrutiny than ever before. Whether it is increased transparency around the trading and valuation of OTC derivatives and structured products or the amount of leverage being taken on, regulators are going to require comprehensive, timely and accurate reporting, a requirement that hedge funds typically have little experience of.
"While the exact form of regulatory reporting is still to be finalized, it is clear from our discussions with market participants and U.S. governing bodies that there is going to be an overwhelming need for the kind of flexible risk and regulatory reporting tools developed by FRSGlobal that have helped hundreds of banks worldwide meet the their regulatory needs over the past twenty years. This experience and expertise is now going to be available to the hedge fund industry."
FRSGlobal's unified platform has coverage for over 30 countries.
Compliance experts within FRSGlobal's Centre of Risk & Regulatory Excellence (CoR2E) are actively monitoring the discussions taking place at the various U.S. regulatory agencies and are ready to advise hedge funds on the best ways to automate their reporting processes as soon as any new legislation is enacted.
"U.S. regulators are demanding more oversight of the hedge fund industry which means that registration is imminent, "Richard Ferrari, FRS Vice President, commented, "Hedge funds are going to be subject to far greater scrutiny than ever before. Whether it is increased transparency around the trading and valuation of OTC derivatives and structured products or the amount of leverage being taken on, regulators are going to require comprehensive, timely and accurate reporting, a requirement that hedge funds typically have little experience of.
"While the exact form of regulatory reporting is still to be finalized, it is clear from our discussions with market participants and U.S. governing bodies that there is going to be an overwhelming need for the kind of flexible risk and regulatory reporting tools developed by FRSGlobal that have helped hundreds of banks worldwide meet the their regulatory needs over the past twenty years. This experience and expertise is now going to be available to the hedge fund industry."
FRSGlobal's unified platform has coverage for over 30 countries.
18 May 2009
Properties Searched in UK/Cayman Hedge Fund Investigation
The UK Serious Fraud Office (SFO) Friday conducted searches on two residential properties (one in Kent, the other in Surrey) assisted by the City of London Police, in connection with its investigation into an alleged fraud involving the recently collapsed hedge fund, Weavering Capital.
Two men, aged 43 and 45, were arrested and have been taken to a police station for questioning.
Hedge fund Weavering Capital launched in March 2009, acting as investment advisor to a Cayman Islands incorporated hedge fund, Weavering Macro Fixed Income Fund Limited. The Macro Fund was understood to have funds under management of around $639 million in late 2008.
The investigation is currently focused, the SFO said, on certain interest rate swap transactions between the Macro Fund and a company registered in the British Virgin Islands, Weavering Capital Fund Limited, which appears to be a related third party, which inflated the apparent Net Asset Value of the Macro Fund. More details to be released as the case proceeds.
Two men, aged 43 and 45, were arrested and have been taken to a police station for questioning.
Hedge fund Weavering Capital launched in March 2009, acting as investment advisor to a Cayman Islands incorporated hedge fund, Weavering Macro Fixed Income Fund Limited. The Macro Fund was understood to have funds under management of around $639 million in late 2008.
The investigation is currently focused, the SFO said, on certain interest rate swap transactions between the Macro Fund and a company registered in the British Virgin Islands, Weavering Capital Fund Limited, which appears to be a related third party, which inflated the apparent Net Asset Value of the Macro Fund. More details to be released as the case proceeds.
Hedge Fund Backed Korean-American for Boston Mayor?
Hedge fund donors are behind Sam Yoon, candidate for mayor of Boston, according to the Boston Globe.
South Korea born, Yoon is already among the most prominent Korean-Americans in elected office, along with the mayors of Irvine, Calif., and Edison, N.J. He has used his stature to raise his profile as a political activist, the paper reported.
A Korean-American hedge fund manager in New Jersey last gear gave $100,000 with which Yoon founded a political action group, Asian Political Leadership Fund.
Yoon has spent $60,000 from the fund to run ads in Asian-language newspapers for candidates nationwide, including Hubert Vo, a Vietnamese-American state representative in Texas; Ashwin Madia, an Indian-American Iraq war veteran who ran unsuccessfully for Congress in Minnesota; and Barack Obama.
South Korea born, Yoon is already among the most prominent Korean-Americans in elected office, along with the mayors of Irvine, Calif., and Edison, N.J. He has used his stature to raise his profile as a political activist, the paper reported.
A Korean-American hedge fund manager in New Jersey last gear gave $100,000 with which Yoon founded a political action group, Asian Political Leadership Fund.
Yoon has spent $60,000 from the fund to run ads in Asian-language newspapers for candidates nationwide, including Hubert Vo, a Vietnamese-American state representative in Texas; Ashwin Madia, an Indian-American Iraq war veteran who ran unsuccessfully for Congress in Minnesota; and Barack Obama.
17 May 2009
Convertible Arbitrage: Shifting Gears - Review
Convertible Arbitrage: Shifting Gears, a new 15 page white paper released by Credit Suisse/Tremont Hedge Fund Index, examines the reasons behind the Convertible Arbitrage meltdown in 2008 and the factors driving the strategy’s recent turnaround.
Convertible Arbitrage went from being one of the worst-performing strategies in the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) in 2008, to one of the best-performing strategies in the first quarter of this year. Many believe that the fundamental and technical reasons for convertibles’ devaluation in 2008 may correct as credit markets begin to stabilize and if deleveraging continues to abate. Convertible Arbitrage: Shifting Gears discusses the strategy’s ability to generate positive returns both during the declines in equity markets in January and February, as well as during the global market rallies in March and April.
Here are some highlights from the report:
Convertible Arbitrage funds were caught in a “perfect storm” of fundamental and technical difficulties following the fall of Lehman Brothers, resulting in a decline of 25.5% in the period from September 1 to December 31, 2008.
In January, convertible bond yields were atypically more attractive than straight bond yields with similar maturity and seniority in the capital structure.
Although yields have dropped since their highs at the end of 2008, the resurgence of new issuances as well as continued cheapening of the asset class points to Convertible Arbitrage as a strategy that may continue to rebound in 2009 if conditions in the credit markets continue to improve.
Volatility trading of the strategy was curtailed during the large declines in 4Q 2008 and early 2009, but may come back later in the year if equity markets stabilize, albeit with a reduction in the use of leverage.
Convertible Arbitrage registered one of the best performances in the Broad Index for 1Q 2009, returning 7.7%.
And in summary, as a result of the dramatic market events in the last four months of 2008, convertible bond valuations have dropped, possibly creating investment opportunities on both absolute and relative bases.
Factors to consider are:
— Attractive yield levels have persisted through the first quarter of 2009 while credits spreads have widened as many investors were forced to delever
— Equity volatility may remain high in 2009, which could make the convertible bonds an attractive way to gain exposure to stocks
— For equity crossover investors, convertibles have been trading in some instances for small premiums above their conversion value, providing for some a yield-generating equity substitute that has seniority in the capital structure to common equity
— On the credit side, many single name convertible bonds have been in the position of trading at higher yields than straight debt from the same issuers with similar maturities and seniority in the capital structure, thereby providing the equity option at no cost (with some even trading below their bond floor)
So in summary, volatility trading, usually an important aspect of the Convertible Arbitrage strategy, has been curtailed due to the reduction in the use of leverage, the low level of new issuances at the start of 2009, and the weakness of the equity markets in January and February, while the credit play has garnered more attention due to the overall appreciation in the convertible bond market.
This has resulted in a shift in focus for many arbitrageurs, as they take advantage of opportunities on the long side of the credit market, tactically resorting to hedges to contain certain risks. With the fundamental and technical problems that impaired the strategy’s performance in September and October’s environment showing signs of abating, Convertible Arbitrage could be poised for a rebound over the next 12-24 months, although Credit Suisse/Tremont believes there may be some bumps along the way.
Convertible Arbitrage went from being one of the worst-performing strategies in the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) in 2008, to one of the best-performing strategies in the first quarter of this year. Many believe that the fundamental and technical reasons for convertibles’ devaluation in 2008 may correct as credit markets begin to stabilize and if deleveraging continues to abate. Convertible Arbitrage: Shifting Gears discusses the strategy’s ability to generate positive returns both during the declines in equity markets in January and February, as well as during the global market rallies in March and April.
Here are some highlights from the report:
Convertible Arbitrage funds were caught in a “perfect storm” of fundamental and technical difficulties following the fall of Lehman Brothers, resulting in a decline of 25.5% in the period from September 1 to December 31, 2008.
In January, convertible bond yields were atypically more attractive than straight bond yields with similar maturity and seniority in the capital structure.
Although yields have dropped since their highs at the end of 2008, the resurgence of new issuances as well as continued cheapening of the asset class points to Convertible Arbitrage as a strategy that may continue to rebound in 2009 if conditions in the credit markets continue to improve.
Volatility trading of the strategy was curtailed during the large declines in 4Q 2008 and early 2009, but may come back later in the year if equity markets stabilize, albeit with a reduction in the use of leverage.
Convertible Arbitrage registered one of the best performances in the Broad Index for 1Q 2009, returning 7.7%.
And in summary, as a result of the dramatic market events in the last four months of 2008, convertible bond valuations have dropped, possibly creating investment opportunities on both absolute and relative bases.
Factors to consider are:
— Attractive yield levels have persisted through the first quarter of 2009 while credits spreads have widened as many investors were forced to delever
— Equity volatility may remain high in 2009, which could make the convertible bonds an attractive way to gain exposure to stocks
— For equity crossover investors, convertibles have been trading in some instances for small premiums above their conversion value, providing for some a yield-generating equity substitute that has seniority in the capital structure to common equity
— On the credit side, many single name convertible bonds have been in the position of trading at higher yields than straight debt from the same issuers with similar maturities and seniority in the capital structure, thereby providing the equity option at no cost (with some even trading below their bond floor)
So in summary, volatility trading, usually an important aspect of the Convertible Arbitrage strategy, has been curtailed due to the reduction in the use of leverage, the low level of new issuances at the start of 2009, and the weakness of the equity markets in January and February, while the credit play has garnered more attention due to the overall appreciation in the convertible bond market.
This has resulted in a shift in focus for many arbitrageurs, as they take advantage of opportunities on the long side of the credit market, tactically resorting to hedges to contain certain risks. With the fundamental and technical problems that impaired the strategy’s performance in September and October’s environment showing signs of abating, Convertible Arbitrage could be poised for a rebound over the next 12-24 months, although Credit Suisse/Tremont believes there may be some bumps along the way.
15 May 2009
SEC Proposes to Further Strengthen Safeguards of Investor Funds
The SEC has proposed rule amendments to substantially increase protections for investors who entrust their money to investment advisers, hedge funds and FoHF's.
The SEC is seeking public comment on the proposed measures, which are intended to ensure that investment advisers who have “custody” of clients’ funds and securities are handling those assets properly, investment law firm, Pillsbury Winthrop Shaw Pittman LLP, said.
“These new safeguards are designed to decrease the likelihood that an investment adviser could misappropriate a client’s assets and go undetected,” said SEC Chairman Mary Schapiro. “That’s because an independent public accountant will be looking over their shoulder on at least an annual basis.”
The additional safeguards proposed by the SEC include a yearly “surprise exam” of investment advisers performed by an independent public accountant to verify client assets. In addition, when an adviser or an affiliate directly holds client assets, a custody control review would have to be conducted by a PCAOB-registered and inspected accountant.
The SEC’s proposed rule amendments, if adopted, would promote independent custody and enable independent public accountants to act as third-party monitors.
Public comments on today’s proposed rule amendments must be received by the Commission within 60 days after their publication in the Federal Register. The full text of the proposed rule amendments will be posted to the SEC Web site soon, the law firm said.
The SEC is seeking public comment on the proposed measures, which are intended to ensure that investment advisers who have “custody” of clients’ funds and securities are handling those assets properly, investment law firm, Pillsbury Winthrop Shaw Pittman LLP, said.
“These new safeguards are designed to decrease the likelihood that an investment adviser could misappropriate a client’s assets and go undetected,” said SEC Chairman Mary Schapiro. “That’s because an independent public accountant will be looking over their shoulder on at least an annual basis.”
The additional safeguards proposed by the SEC include a yearly “surprise exam” of investment advisers performed by an independent public accountant to verify client assets. In addition, when an adviser or an affiliate directly holds client assets, a custody control review would have to be conducted by a PCAOB-registered and inspected accountant.
The SEC’s proposed rule amendments, if adopted, would promote independent custody and enable independent public accountants to act as third-party monitors.
Public comments on today’s proposed rule amendments must be received by the Commission within 60 days after their publication in the Federal Register. The full text of the proposed rule amendments will be posted to the SEC Web site soon, the law firm said.
14 May 2009
Ex Hedgie To Build and Run World's Largest Solar Project
Former hedge fund manager, Mitchell Dong, and his new company, Mohave Sun Power, LLC, has announced plans to build a solar project, operating what it says will be the world's largest solar-thermal power plant on land in northwest Arizona.
Dong got in trouble last year with the SEC over some alleged improper trading with his hedge fund Chronos, he was however, able to settle the issue without litigation.
Sunlight will be collected using mirrored troughs and focused on a tube of oil running through the center of the troughs. The oil will be transported back to a central facility where it will be used to generate steam. Some of the energy will be stored in molten salt tanks until it is needed during peak energy times.
"It's a synthetic oil heated to 800 degrees by the sun's light," Dong said. "There are rows and rows of these collectors, and this 800-degree oil is pumped to a central power block, a central location where that hot oil goes to a boiler. It makes steam and drives a single steam turbine."
Dong said some of the generated heat will be stored in molten salt that will allow the plant to generate power at night when cloud cover diminishes solar radiation. However, the company must first settle the sensitive issue of groundwater, as well as obtaining the permits and approval at the federal, state and local level.
Dong got in trouble last year with the SEC over some alleged improper trading with his hedge fund Chronos, he was however, able to settle the issue without litigation.
Sunlight will be collected using mirrored troughs and focused on a tube of oil running through the center of the troughs. The oil will be transported back to a central facility where it will be used to generate steam. Some of the energy will be stored in molten salt tanks until it is needed during peak energy times.
"It's a synthetic oil heated to 800 degrees by the sun's light," Dong said. "There are rows and rows of these collectors, and this 800-degree oil is pumped to a central power block, a central location where that hot oil goes to a boiler. It makes steam and drives a single steam turbine."
Dong said some of the generated heat will be stored in molten salt that will allow the plant to generate power at night when cloud cover diminishes solar radiation. However, the company must first settle the sensitive issue of groundwater, as well as obtaining the permits and approval at the federal, state and local level.
MENA Multistrategy Hedge Fund Launch
Alternative asset manager, Duet Group, has launched the first Middle East and North Africa (MENA) multistrategy hedge fund "Duet MENA Opportunities Fund". The new fund will target both equity and fixed income markets in the MENA region and will be managed by Duet MENA Limited, a DIFC licensed asset manager.
Rabih Sultani, Chief Investment Officer, will manage the fund under the leadership of Hedi Ben Mlouka, Chief Executive Officer of Duet MENA. Rabih brings over 9 years of fund management and research experience across equities and fixed income.
"The investment team has one of the longest established track records in the Middle East." Hedi Ben Mlouka said, "The current unfolding crisis has created unprecedented opportunities in global markets. Such opportunities appear to be even more eye-catching in the MENA region, and we, Duet Group, are well positioned to take advantage of these prospects for our clients. I am pleased to announce that Duet's commitment to the Middle East has led to the allocation of significant capital to the fund from existing shareholders and clients".
The new hedge fund will deploy three main investment strategies: Conviction, Relative Arbitrage and Opportunistic trading. These will be premised on pricing dislocations and valuation imbalances that are created from time to time under the influence of economic, political and capital flow factors.
The hedge fund manager has $2 billion of equity under management and their flagship hedge fund 'Duet Global Opportunities Fund' was awarded Best Equity Market Neutral Fund of the year in 2007 by Euro Hedge and HFM.
Rabih Sultani, Chief Investment Officer, will manage the fund under the leadership of Hedi Ben Mlouka, Chief Executive Officer of Duet MENA. Rabih brings over 9 years of fund management and research experience across equities and fixed income.
"The investment team has one of the longest established track records in the Middle East." Hedi Ben Mlouka said, "The current unfolding crisis has created unprecedented opportunities in global markets. Such opportunities appear to be even more eye-catching in the MENA region, and we, Duet Group, are well positioned to take advantage of these prospects for our clients. I am pleased to announce that Duet's commitment to the Middle East has led to the allocation of significant capital to the fund from existing shareholders and clients".
The new hedge fund will deploy three main investment strategies: Conviction, Relative Arbitrage and Opportunistic trading. These will be premised on pricing dislocations and valuation imbalances that are created from time to time under the influence of economic, political and capital flow factors.
The hedge fund manager has $2 billion of equity under management and their flagship hedge fund 'Duet Global Opportunities Fund' was awarded Best Equity Market Neutral Fund of the year in 2007 by Euro Hedge and HFM.
13 May 2009
BNY Mellon is Hedge Fund Administrator of The Year, Wins 7 Awards
Along with an award for Hedge Fund Administrator of the year for their alternative investment services (AIS), the Bank of New York Mellon received 6 other awards at the International Custody & Fund Administration (ICFA) Global Awards 2009 in London.
BNY Mellon also received the award for White Paper of The Year for 'Inside the Engine Room', published in June 2008, which examined the operational challenges and opportunities for Nordic institutions.
The Global Awards judging panel included Dr Werner Frey, CEO of the European Securities Forum and Angela Knight, CEO of The British Bankers Association.
"Receiving both the Hedge Fund Administrator and Broker Dealer Custody & Clearing Provider awards shows that the industry has a profound appreciation of how we continue to meet the needs of our clients as their business models converge and evolve." Art Certosimo, Head of Alternative Investment & Broker-Dealer Services, said, "We are offering a unique combination of administration, custody, collateral management and liquidity services that enables our clients to deliver the services and transparency that investors are seeking."
BNY Mellon also received the award for White Paper of The Year for 'Inside the Engine Room', published in June 2008, which examined the operational challenges and opportunities for Nordic institutions.
The Global Awards judging panel included Dr Werner Frey, CEO of the European Securities Forum and Angela Knight, CEO of The British Bankers Association.
"Receiving both the Hedge Fund Administrator and Broker Dealer Custody & Clearing Provider awards shows that the industry has a profound appreciation of how we continue to meet the needs of our clients as their business models converge and evolve." Art Certosimo, Head of Alternative Investment & Broker-Dealer Services, said, "We are offering a unique combination of administration, custody, collateral management and liquidity services that enables our clients to deliver the services and transparency that investors are seeking."
QPRC Patent Asset Hedge Fund Launch
Intellectual Property Asset Manager, Quest Patent Research Corporation, (QPRC) has entered into an exclusive capital management agreement with a newly formed Delaware limited liability company, PSI Capital Management, LLC. (PSI) to launch a new patent asset hedge fund, Patent Strategies I Fund, LP.
Domiciled in New York, with $250,000 as minimum investment, the fund has a 2% management fee, a 2 year lockup period and JP Morgan Chase as custodian. The launch comes with a new website.
Jon Scahill, QPRC President, and Joby A. Hughes, minority PSI owner will serve as the Principals of PSI. Under the terms of the agreement, QPRC, through PSI, will be solely responsible for researching, selecting and monitoring investments and deciding on when and how much to invest or withdraw from a particular investment. The new fund has an investment strategy of acquiring interests in patent assets and generating revenues from licensing activities relating to patent assets.
"QPRC’s management provides a unique resource for taking on intellectual property assets at any stage in their development." Hughes said, "As a market leader in the development of early stage intellectual property, QPRC is already in a position to manage and commercialize those types of assets. PSI provides QPRC additional financial resources to develop a wider array of assets to their fullest potential. It is exciting and an honor to be included in this next phase for QPRC.”
“Collaboration on this initiative with an individual of such caliber and performance as Hughes is a tremendous value." Scahill said, "This new partnership will further our ability to provide shareholders participation in a dynamic asset class, uncorrelated to the broader market.”
Domiciled in New York, with $250,000 as minimum investment, the fund has a 2% management fee, a 2 year lockup period and JP Morgan Chase as custodian. The launch comes with a new website.
Jon Scahill, QPRC President, and Joby A. Hughes, minority PSI owner will serve as the Principals of PSI. Under the terms of the agreement, QPRC, through PSI, will be solely responsible for researching, selecting and monitoring investments and deciding on when and how much to invest or withdraw from a particular investment. The new fund has an investment strategy of acquiring interests in patent assets and generating revenues from licensing activities relating to patent assets.
"QPRC’s management provides a unique resource for taking on intellectual property assets at any stage in their development." Hughes said, "As a market leader in the development of early stage intellectual property, QPRC is already in a position to manage and commercialize those types of assets. PSI provides QPRC additional financial resources to develop a wider array of assets to their fullest potential. It is exciting and an honor to be included in this next phase for QPRC.”
“Collaboration on this initiative with an individual of such caliber and performance as Hughes is a tremendous value." Scahill said, "This new partnership will further our ability to provide shareholders participation in a dynamic asset class, uncorrelated to the broader market.”
12 May 2009
Hedge Fund managers In Bermuda To Register By June 30th
Two new legislations were introduced in Bermuda January 1, requiring regulated financial institutions to comply with various obligations under the recently updated legislative framework, according to Cayman Islands law firm Conyers Dill & Pearman.
The firm said that the updated legislation defines 'Financial Institutions' as persons who, among other things, carry on the business of a 'fund administrator', or are 'operators' of investment funds.
The BMA expects Financial Institutions, under its supervision, to address their management of the relevant risks in a thoughtful and considered way, and to establish and maintain systems and procedures which are appropriate and proportionate to the risks identified.
Investment fund operators and fund administrators are required to appoint a Money Laundering Reporting Officer (“Reporting Officer”) to whom reports should be made and who shall have responsibility to make reports when suspicious circumstances require.
It is a requirement for “non-licensed persons” to register with the BMA by 30 June 2009 using the BMA’s prescribed form and paying the relevant fee. Failure to comply will result in their inability to carry on business activities, the firm said.
The firm said that the updated legislation defines 'Financial Institutions' as persons who, among other things, carry on the business of a 'fund administrator', or are 'operators' of investment funds.
The BMA expects Financial Institutions, under its supervision, to address their management of the relevant risks in a thoughtful and considered way, and to establish and maintain systems and procedures which are appropriate and proportionate to the risks identified.
Investment fund operators and fund administrators are required to appoint a Money Laundering Reporting Officer (“Reporting Officer”) to whom reports should be made and who shall have responsibility to make reports when suspicious circumstances require.
It is a requirement for “non-licensed persons” to register with the BMA by 30 June 2009 using the BMA’s prescribed form and paying the relevant fee. Failure to comply will result in their inability to carry on business activities, the firm said.
Hennessee: April Challenging but Hedge Funds Advance
Hedge fund adviser, Hennessee Group LLC, announced that the Hennessee Hedge Fund Index advanced +3.84% in April (+5.02% YTD).
“April continued to be a challenging environment for hedge funds, as the market rally was driven by short covering and momentum, rather than changes in fundamentals,” commented Charles Gradante, Co-Founder of Hennessee Group. “While we have seen some improvement in data (most typically that the rate of deterioration is slowing), most funds remain conservatively positioned. Funds are cautious and will wait for fundamentals to improve before significantly expanding their net exposures.”
“Hedge funds underperformed again in April, but have still outperformed year to date. Volatility remains elevated with the S&P 500 experiencing a gain or loss greater than 8% each month this year,” said Lee Hennessee , Managing Principal of Hennessee Group . “Last year hedge funds did a good job of protecting capital, so they don’t need a huge rally to reach a new high water mark. Equity markets would need to double from current levels to reach their previous high.”
“April continued to be a challenging environment for hedge funds, as the market rally was driven by short covering and momentum, rather than changes in fundamentals,” commented Charles Gradante, Co-Founder of Hennessee Group. “While we have seen some improvement in data (most typically that the rate of deterioration is slowing), most funds remain conservatively positioned. Funds are cautious and will wait for fundamentals to improve before significantly expanding their net exposures.”
“Hedge funds underperformed again in April, but have still outperformed year to date. Volatility remains elevated with the S&P 500 experiencing a gain or loss greater than 8% each month this year,” said Lee Hennessee , Managing Principal of Hennessee Group . “Last year hedge funds did a good job of protecting capital, so they don’t need a huge rally to reach a new high water mark. Equity markets would need to double from current levels to reach their previous high.”
11 May 2009
Lipper: UK Hedge Funds led by Emerging Markets
UK-domiciled funds had a strong week to Friday May 8, led by global emerging markets products, according to data from Thomson Reuters research firm Lipper.
Asia Pacific funds also performed well, as did funds investing in European smaller companies. Global bonds, UK gilts and UK index-linked gilts were the only sectors to post negative returns in the week.
Lipper, a Thomson Reuters company, is a leading fund research and analysis organisation, providing independent insight on global collective investment including mutual funds, retirement funds, hedge funds, fund fees and fund expenses to the asset management and media communities.
Asia Pacific funds also performed well, as did funds investing in European smaller companies. Global bonds, UK gilts and UK index-linked gilts were the only sectors to post negative returns in the week.
Lipper, a Thomson Reuters company, is a leading fund research and analysis organisation, providing independent insight on global collective investment including mutual funds, retirement funds, hedge funds, fund fees and fund expenses to the asset management and media communities.
8 May 2009
Proactive Preparations For Hedge Fund Regulation
In a white paper which was presented to high-level asset managers in New York by FinServ Consulting, 'Preparing for Alternative Asset Management Regulation', it is said that hedge funds should be prepared to identify, aggregate and report on counterparty risk exposures, enterprise-wide.
“The majority of hedge funds and private equity funds spent the latter part of 2008 and early 2009 instituting layoffs and shutting down projects. Now, in light of coming regulation, the heads of these funds will be faced with having to do more with less. Therefore, it is going to be critical that funds approach their compliance efforts in an organized and efficient manner,” said Howard Weinstein, Managing Partner of FinServ Consulting. “We recommend that funds identify a partner who can help them navigate these important steps. Ultimately, finding an experienced firm who has been through this process before will enable the fund to save both time and money.”
The paper outlines a roadmap for planning cost-effective, asset-building infrastructures to meet new rules, such as approaching new regulatory rules as opportunities, and facing compliance activities proactively, with a budget for meeting future requirements and exceeding investor expectations, particularly as investors return to the market.·
“The majority of hedge funds and private equity funds spent the latter part of 2008 and early 2009 instituting layoffs and shutting down projects. Now, in light of coming regulation, the heads of these funds will be faced with having to do more with less. Therefore, it is going to be critical that funds approach their compliance efforts in an organized and efficient manner,” said Howard Weinstein, Managing Partner of FinServ Consulting. “We recommend that funds identify a partner who can help them navigate these important steps. Ultimately, finding an experienced firm who has been through this process before will enable the fund to save both time and money.”
The paper outlines a roadmap for planning cost-effective, asset-building infrastructures to meet new rules, such as approaching new regulatory rules as opportunities, and facing compliance activities proactively, with a budget for meeting future requirements and exceeding investor expectations, particularly as investors return to the market.·
7 May 2009
MFA Supports the Registration of Hedge Fund Investment Advisors
In testimony before the House Financial Services Subcommittee “Perspectives on Hedge Fund Registration”, the Managed Funds Association (MFA) announced its support for the new push for mandatory registration of managers with the SEC.
"Though hedge funds were not the cause of the ongoing problems in our financial markets and our economy, MFA and our members share the commitment of policy makers to enact measures that will help restore stability to our markets, strengthen financial institutions and restore investor confidence." Richard H. Baker, MFA President and CEO, said, "We believe supporting mandatory registration for investment advisers is just one of the many important steps that can be taken towards these mutually shared goals."
Baker’s testimony stressed that while hedge funds are important to the capital markets and the financial system, the relatively small size and scope of the industry, with approximately $1.5 trillion in assets under management, did not pose significant systemic risk. He also stressed that hedge funds are substantially less leveraged than banks, have outperformed the overall market and have not sought any federal assistance.
“A registration framework that overwhelms the resources, technology and capabilities of regulators will not achieve the intended objective, and will greatly impair the ability of the regulator to fulfill their existing responsibilities, as well as their new responsibilities.
"Though hedge funds were not the cause of the ongoing problems in our financial markets and our economy, MFA and our members share the commitment of policy makers to enact measures that will help restore stability to our markets, strengthen financial institutions and restore investor confidence." Richard H. Baker, MFA President and CEO, said, "We believe supporting mandatory registration for investment advisers is just one of the many important steps that can be taken towards these mutually shared goals."
Baker’s testimony stressed that while hedge funds are important to the capital markets and the financial system, the relatively small size and scope of the industry, with approximately $1.5 trillion in assets under management, did not pose significant systemic risk. He also stressed that hedge funds are substantially less leveraged than banks, have outperformed the overall market and have not sought any federal assistance.
“A registration framework that overwhelms the resources, technology and capabilities of regulators will not achieve the intended objective, and will greatly impair the ability of the regulator to fulfill their existing responsibilities, as well as their new responsibilities.
AIMA Guide to Sound Practices for Funds of Hedge Funds Managers
Global hedge fund association AIMA (The Alternative Investment Management Association), has published the world’s first global Guide to Sound Practices for Funds of Hedge Funds Managers.
The guide was developed by some of the world’s leading funds of hedge funds practitioners. It focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues. The group consisted of Unigestion, Financial Risk Management; Man Investments; Fauchier Partners; Pacific Alternative Asset Management; Ivy Asset Management; HDF Finance; Penjing Asset Management and Simmons & Simmons.
“AIMA has produced a huge body of work on sound practices and this was the ‘missing book in the library’." Andrew Baker, CEO of AIMA, and a member of the steering group, commented, "It is particularly important given recent events that there should be dedicated guidelines for funds of hedge funds managers. Funds of funds are a critical sector in the industry, are of particular interest to institutional investors, and it is right that AIMA has taken the lead in documenting sound practices. We hope that these guidelines that have been drawn up by such a distinguished and experienced group will be widely observed within the industry.”
The guide was developed by some of the world’s leading funds of hedge funds practitioners. It focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues. The group consisted of Unigestion, Financial Risk Management; Man Investments; Fauchier Partners; Pacific Alternative Asset Management; Ivy Asset Management; HDF Finance; Penjing Asset Management and Simmons & Simmons.
“AIMA has produced a huge body of work on sound practices and this was the ‘missing book in the library’." Andrew Baker, CEO of AIMA, and a member of the steering group, commented, "It is particularly important given recent events that there should be dedicated guidelines for funds of hedge funds managers. Funds of funds are a critical sector in the industry, are of particular interest to institutional investors, and it is right that AIMA has taken the lead in documenting sound practices. We hope that these guidelines that have been drawn up by such a distinguished and experienced group will be widely observed within the industry.”
SHINE as 100 Women in Hedge Funds' 2009 Beneficiary
Childrens educational program SHINE has been named UK Charity of the year by 100 Women in Hedge Funds and beneficiary of its Annual London fundraising event in October.
“It is always a difficult process to pick from many eligible beneficiaries, we believe in SHINE and are thrilled to help fund the important support they gives to educational programmes." Effie Datson, Chair of 100 Women in Hedge Funds in London, said, "SHINE is investing in a meaningful and measurable way in the future prosperity of the UK, while bringing hope, happiness, and a sense of achievement to children that might otherwise have been left behind. The work they does is vital - now more than ever.”
"It is not just another educational charity - it funds only those programmes which have a real and measurable impact on improving the educational attainment of those children and young people who face the greatest challenges in life.” Sarah Brown, Patron of SHINE, said.
100 Women in Hedge Funds serves over 10,000 alternative investment management investors and practitioners through educational, professional development and philanthropic initiatives. Since its first educational event in 2002, 100 Women in Hedge Funds has hosted more than 150 sessions globally, connected more than 150 senior women through Peer Advisory Councils and raised in excess of $15 million for philanthropic causes in the areas of women’s health, education and mentoring.
“It is always a difficult process to pick from many eligible beneficiaries, we believe in SHINE and are thrilled to help fund the important support they gives to educational programmes." Effie Datson, Chair of 100 Women in Hedge Funds in London, said, "SHINE is investing in a meaningful and measurable way in the future prosperity of the UK, while bringing hope, happiness, and a sense of achievement to children that might otherwise have been left behind. The work they does is vital - now more than ever.”
"It is not just another educational charity - it funds only those programmes which have a real and measurable impact on improving the educational attainment of those children and young people who face the greatest challenges in life.” Sarah Brown, Patron of SHINE, said.
100 Women in Hedge Funds serves over 10,000 alternative investment management investors and practitioners through educational, professional development and philanthropic initiatives. Since its first educational event in 2002, 100 Women in Hedge Funds has hosted more than 150 sessions globally, connected more than 150 senior women through Peer Advisory Councils and raised in excess of $15 million for philanthropic causes in the areas of women’s health, education and mentoring.
6 May 2009
Dow Jones Halts Hedge Fund Publications
Due to poor market conditions in the distressed securities space, Dow Jones's hedge fund arm has suspended publication of the Dow Jones Hedge Fund Distressed Securities Strategy Benchmark.
The Dow Jones Hedge Fund Convertible Arbitrage Strategy Benchmark was also halted in January, 2009 and remains suspended until further notice. The remaining strategies—Equity Long/Short, Equity Market Neutral, Event Driven and Merger Arbitrage, will continue to be published on an end-of-day basis.
Launched in November 2003, the Dow Jones Hedge Fund Strategy Benchmarks measure individual hedge fund strategies. The six existing strategies are Equity Market Neutral, Convertible Arbitrage (suspended), Distressed Securities (suspended), Merger Arbitrage, Event Driven and Equity Long/Short . DJHFI provides style-pure, hedge fund strategy indexes that exhibit highly correlated component returns.
The Dow Jones Hedge Fund Convertible Arbitrage Strategy Benchmark was also halted in January, 2009 and remains suspended until further notice. The remaining strategies—Equity Long/Short, Equity Market Neutral, Event Driven and Merger Arbitrage, will continue to be published on an end-of-day basis.
Launched in November 2003, the Dow Jones Hedge Fund Strategy Benchmarks measure individual hedge fund strategies. The six existing strategies are Equity Market Neutral, Convertible Arbitrage (suspended), Distressed Securities (suspended), Merger Arbitrage, Event Driven and Equity Long/Short . DJHFI provides style-pure, hedge fund strategy indexes that exhibit highly correlated component returns.
5 May 2009
Hedge Fund Citadel's Investment Banking Division Launch
Citadel Securities has added three former Merrill Lynch and Goldman Sachs senior investment bankers to the hedge fund company, at the same time launching Citadels Investment Banking division.
Todd Kaplan joined Citadel in March, he will assume the role of Head of Investment Banking for Citadel Securities. Brian Maier joins as Head of Industry Groups and Carl Mayer joins as Head of Leveraged Finance.
“By bringing Todd to Citadel Securities to head up our banking effort, we are executing our strategy of developing a leading, fully integrated, client-facing franchise across investment banking and institutional sales and trading," Rohit D’Souza, CEO of Citadel Securities said "Todd and his team are outstanding investment bankers with strong relationships who have experience across a broad spectrum of capital markets areas."
Commenting on the opportunities for Citadel in the marketplace, Kaplan said, "Now more than ever, corporations are looking for sound, actionable advice. With Citadel Securities’ unique set of assets, I look forward to building our investment banking operation as we provide innovative products and services to a broad group of clients in an increasingly complex environment.”
“We have the foundation of an exceptional team of esteemed banking professionals,” said D’Souza. “Together we will be able to deliver fully developed world class capabilities to meet our clients' needs.”
Todd Kaplan joined Citadel in March, he will assume the role of Head of Investment Banking for Citadel Securities. Brian Maier joins as Head of Industry Groups and Carl Mayer joins as Head of Leveraged Finance.
“By bringing Todd to Citadel Securities to head up our banking effort, we are executing our strategy of developing a leading, fully integrated, client-facing franchise across investment banking and institutional sales and trading," Rohit D’Souza, CEO of Citadel Securities said "Todd and his team are outstanding investment bankers with strong relationships who have experience across a broad spectrum of capital markets areas."
Commenting on the opportunities for Citadel in the marketplace, Kaplan said, "Now more than ever, corporations are looking for sound, actionable advice. With Citadel Securities’ unique set of assets, I look forward to building our investment banking operation as we provide innovative products and services to a broad group of clients in an increasingly complex environment.”
“We have the foundation of an exceptional team of esteemed banking professionals,” said D’Souza. “Together we will be able to deliver fully developed world class capabilities to meet our clients' needs.”
Hedge Fund Manager Rusciano Released on Bond
The Connecticut-based hedge fund manager who had his assets frozen by the SEC last month, Francesco Rusciano, was released on $500,000 bond to the custody of his parents after a court hearing in Bridgeport federal court.
According to the SEC's complaint, Francesco Rusciano solicited investments for two hedge funds, Ponta Negra Fund I, LLC and Ponta Negra Offshore Fund I, LTD, which is the principal of Ponta Negra Group, LLC, located at his residence in Stamford, Conn.
The hedge fund manager also sent out an e-mail to investors saying that his Ponta Negra hedge funds had $59 million in assets under management as of February 2009. According to the SEC's complaint, the hedge funds had less than $10 million.
The SEC says that Rusciano forged brokerage account statements to make it appear that another hedge fund account had more than $43 million in assets, when it had less than $3 million.
"Rusciano went to great lengths to deceive investors, and the SEC is committed to ensuring that money managers who provide inaccurate information to investors and fail to uphold their fiduciary duties are held responsible for their misconduct," said Rose Romero, Director of the SEC's Fort Worth Regional Office.
According to the SEC's complaint, Francesco Rusciano solicited investments for two hedge funds, Ponta Negra Fund I, LLC and Ponta Negra Offshore Fund I, LTD, which is the principal of Ponta Negra Group, LLC, located at his residence in Stamford, Conn.
The hedge fund manager also sent out an e-mail to investors saying that his Ponta Negra hedge funds had $59 million in assets under management as of February 2009. According to the SEC's complaint, the hedge funds had less than $10 million.
The SEC says that Rusciano forged brokerage account statements to make it appear that another hedge fund account had more than $43 million in assets, when it had less than $3 million.
"Rusciano went to great lengths to deceive investors, and the SEC is committed to ensuring that money managers who provide inaccurate information to investors and fail to uphold their fiduciary duties are held responsible for their misconduct," said Rose Romero, Director of the SEC's Fort Worth Regional Office.
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