The Age Illusion: How the Wealthy are Redefining Their Retirement

New York (HedgeCo.net) Global hedge fund manager Barclays Wealth reports that retirement is being rejected by a new breed of wealthy workers – the 'Nevertirees' - who want to carry on working for as long as they are able.

Ledbury Research surveyed over 2,000 high net worth individuals, all of whom had over $1.5m/1m in investable assets, 200 had more than $15m/10m. Respondents came from 20 countries across Europe, North America, South America, Middle East and Asia Pacific.

Sixty percent of wealthy individuals polled in a global survey say that they plan to become a Nevertiree, shunning traditional retirement, instead continuing to work, start businesses and take on new projects in their later years.

The report, the 12th in the Barclays Wealth Insights series, is based on a survey of more than 2,000 high net worth individuals, who were asked to consider what retirement and later life means to them.

The findings show that the concept of nevertirement is expected to grow over the coming decades, with over 70% of respondents under the age of 45 saying that they will always be involved in some form of work.

In particular, 75% of U.S. respondents plan to work part time after they have stopped working permanently, seven percent more than the global average. Specifically, 32% plan to work between five and 20 hours per week in "retirement", and seven percent plan to work more than 20 hours per week, "simply reaching the normal age to retire" is not at all important in determining when they stop working.


Only 40% of U.S. high net worth individuals "completely agree" that they are "totally confident" in having enough money for retirement, with another 37% "slightly agreeing". Only 48% of U.S. high net worth individuals would completely classify themselves as financially secure.

When planning for retirement 35% of U.S. wealthy feel that the rate of tax they have to pay is predictable, compared to 58% of Latin American high net worth individuals and 73% of wealthy individuals in Switzerland.

Further, one in ten of the wealthiest surveyed do not agree that they have enough money for retirement (greater than $15m in investable assets). Among the global wealthy who are already retired, only 51% agree they are completely confident in having enough money for their retirement.

Hedge Fund Launch: Clareville Capital Partners LLP

HedgeCo News - Privately owned financial management company, ML Capital Asset Management, (ML Capital) announced that the first manager to launch on the Montlake UCTIS platform* will be Clareville Capital Partners LLP, the hedge fund founded by David Yarrow. The fund will commence trading on October 1, 2010.

"The UCITS revolution allows investors to access managers who can actively short stocks and hedge a portfolio, however managers with long and successful experience of running equity hedge funds are in short supply." John Lowry, Chairman of ML Capital said, "The Pegasus fund has been running for over a decade and has always been run in line with the UCITS principles, which is very comforting to our investors."

David Yarrow and Angus Donaldson will co-manage a UCITS compliant derivative of the 13-year-old Pegasus Fund, which employs a UK Long/Short equity strategy.

"Yarrow and Donaldson's investment style will appeal to a lot of our investors. Their strong performance in upwardly trending markets and excellent downside protection in perilous markets is demonstrated by their track record." Lowry said.

"The past 10 years have illustrated the limitations of traditional "long only" equity investing." Angus Donaldson added, "All investors should have the opportunity to protect themselves from market volatility by investing in regulated hedge funds. However, many of the managers who have launched alternative UCITS products have found that they have weak brand awareness outside of the hedge fund world. This applies not just to smaller boutiques but also some of the very largest hedge fund houses. "

*Domiciled in Ireland, the Montlake UCITS platform Plc, provides investment managers with a turnkey solution for launching UCITS funds under its umbrella structure.

Dublin As A Center Of Hedge Fund Expertise

HedgeCo News New Jersey-based hedge fund service provider Fi-Tek LLC has chosen Dublin for it's European headquarters. "Ireland's pro-business environment, availability of highly skilled personnel, the presence of many of our clients, and working with IDA were the key reasons Ireland was chosen as the location for our European Headquarters." Peter Marshall, Managing Director, Fi-Tek Ireland said.

The company provides software products and solutions for the alternative investments, trust, asset servicing and securities processing industries. The company's HedgeTek product, a fully integrated book and tax allocation platform for hedge funds, covers both US partnerships and unitised funds, is used by many of the leading hedge fund administrators, accounting firms and fund managers servicing over 3,500 funds with over $400 billion in assets..

"Ireland is the largest hedge fund administration centre in the world with almost half of all global alternative investment funds operated from here." Ireland's Minister for Enterprise, Trade and Innovation Batt O'Keeffe said, "Fi-Tek's decision to establish a European headquarters in Dublin shows we can out-perform rival locations for major global investments in the financial services sector. More than half the world's leading financial services firms now have operations in Ireland."

"Fi-Tek Ireland has recently gone live implementing HedgeTek with two leading global banks in Dublin," stated Subir Chatterjee, Fi-Tek founder and CEO. "Dublin has become a center of expertise for hedge fund administration globally, and our intent is to make Fi-Tek Ireland a centre of excellence for us as well."

Charter Launches London Hedge Fund

HedgeCo News - Charter Group has teamed up with Brian Taitz to launch a new hedge fund administration firm, Charter Group Fund Administration Ltd. The firm is based in London and focuses primarily on offshore funds managed by boutique fund managers.

Taitz founded and successfully managed an award-winning fund administration operation in Sydney, Australia before relocating to the UK. In Taitz’s previous firm, clients included regional Hedge Fund of the Year winners, Best Market Neutral Fund winners, other alternatives including electricity and power hedge funds, as well as established and distinguished long only boutiques.

Taitz says that the UK market is fragmented with larger administrators turning away smaller funds and relying more on their size than their service levels to win clients. This leads to clients having to look to foreign providers to fill the gap and then having to deal with a plethora of issues such as time zones and language or cultural differences. Taitz says it is re-assuring for a fund manager to know that they can deal directly with the principals of the business whose office is around the corner.

The boutique offers full service fund administration to offshore funds and caters for a wide variety of strategies including equity long/short, long only, market neutral, arbitrage, global macro, private equity, fund-of-hedge funds and others. For more traditional funds, the firm offers an attribution/ performance analysis reporting service.

The firm sees its differentiating factors as being: an unrelenting focus on service quality; having the best technology available; hiring properly qualified staff; and being based in London, in close proximity to intended clients. “Our clients are not just one of hundreds fighting for management’s attention which may be the case at the larger shops” says Taitz.

The firm also has the distinct technological advantage that all its administrative services are carried out through a single integrated system - investor registry, fund accounting, investing and complex performance fees – reducing risk and leading to greater efficiencies.

“Our key strategic differentiator, however, is to pace our growth.” Taitz continues, “As a result we will position ourselves as a premier provider of fund administration services to boutiques. We will soft close periodically to ensure that service levels are never compromised.”

People Moves: Hedgeye Names Gagliardi Managing Director of Energy

HedgeCo News – Virtual hedge fund, Hedgeye Risk Management, has appointed industry veteran Louis Gagliardi as Managing Director of Energy.

Gagliardi was noted in Robert Bryce’s book as being an “Analyst Who Thinks” and “the first time any major Wall Street research firm had dared question Enron’s valuation.” Gagliardi is also known for alerting investors as early as 2003 ahead of buying opportunities in emerging markets: Brazil’s Petrobras, Russia’s Lukoil, China’s PetroChina, Austria’s OMV, and Hungary’s MOL. Gagliardi has been cited throughout the media including CNBC, NY Times, Forbes, and Financial Times.

“We’re thrilled to have Lou champion our Energy effort and add to our growing platform; he brings experience across investment analysis and corporate, a stellar track record, and a history of thinking independently on behalf of his clients.” Keith McCullough, CEO of Hedgeye notes, “To that end, we’re confident that his standards and expertise will hold up to our client’s expectations, and our reputation.”

Hedgeye Risk Management will officially launch its Energy sector research and services to subscribers on September 16, 2010.

Book Review: Too Big To Fail

HedgeCo Blogs - I asked Andrew Ross Sorkin: "In hindsight, what is the most important lesson to be learned from the financial crisis?"

"It all comes back to one word: debt." Sorkin said, "We can blame the financial crisis on a lot of things -- misguided housing policy, too-low interest rates, global imbalances, lax regulation, bankers-gone-wild -- but in the end, it was a function of an over-leveraged system."

Andrew Sorkin, the award winning financial reporter for the New York Times, spent over five hundred hours interviewing high net worth individuals, advisers and officials in an effort to capture the full account of the Financial crisis in detail.

In his book: "Too Big To Fail - The inside story on how Wall Street and Washington fought to save the financial system - and themselves", Sorkin recounts the maelstrom that struck high finance in 2008 in story-like detail.

I can see why it has been on the bestseller list for over 40 weeks. Once revealed, it is hard to look away from the secret life of those in power. "Pay very much attention to the man behind the curtain."

Sorkin is also the editor and founder of Dealbook, an online daily financial report. He has won a Gerald Loeb Award, been named Young Global Leader by The World Economic Forum and has recently been added to The Directorship 100, which recognizes influential US corporate boardroom members.

6 Months Inside For Robert Moffat in Hedge Fund Insider Trading Ring

HedgeCo News - Former IBM vice president Robert Moffat was sentenced to six months in prison in the Rajaratnam/Chiesi hedge fund insider trading case, the Courthouse News Services reported this morning. Judge Deborah Batts additionally fined Moffat $50,000.

“White-collar crime is just as destructive to our social fabric as the crimes of drugs and violence,” the Judge said in handing down the sentence. Moffat’s conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000. His securities fraud count carries a maximum sentence of 20 years in prison and a fine of $5 million.

Moffat pleaded guilty in March to conspiracy and securities fraud stemming from his involvement in the largest US hedge fund insider trading case in history.

The court documents reveal that in September 2008, Moffat provided Chiesi with insider information in August to October 2008, relating to IBM and Lenovo Group Ltd.

Moffat confessed to providing the indider information to to Danielle Chiesi, Rajaratnam’s co-defendant. She worked for New Castle Partners, an equity hedge fund group affiliated with JPMorgan Chase & Co.
Chiesi, along with Sri Lankan billionaire Raj Rajaratnam, are scheduled for trial in 2011.

Moffat said he did not use the information to make money, but that he passed it along to Chiesi through “misplaced trust” and “a misguided desire to appear important and knowledgeable.” the Courthouse News Services said.

Hedge Fund Launch: Peakside Opens Real Estate Private Equity Firm

HedgeCo News - Peakside Capital and its affiliates are launching a new real estate private equity firm and concluding a transaction with Bank of America Merrill Lynch (“BofAML”) involving the following elements:

• the acquisition by Peakside of BofAML’s 100% indirect interest in the general partner of the Merrill Lynch European Real Estate Opportunity Fund L.P. (“MLEREOF”), which has a total of EUR 261 million ($335.6 million) of capital commitments;
• the replacement of an affiliate of BofAML with Peakside as the manager of MLEREOF;
• the acquisition by Peakside of BofAML’s interests in the general partner and investment manager of the Bosphorus Real Estate Fund I (“BREF”), which has a total of EUR 204 million ($262 million) of capital commitments; and
• the completion of a portfolio management agreement between Peakside and an affiliate of BofAML for Peakside to manage a portfolio of European real estate investments held directly or indirectly by BofAML affiliates.

The Fund portions of this transaction have been approved, with the requisite voting percentages, by the limited partners of both the MLEREOF and BREF funds. In connection with the transaction, MLEREOF will be renamed “Peakside Real Estate Fund I”. BofAML plans to maintain its limited partnership positions in both funds following the transaction.

“Peakside will launch as a mid-sized manager with a strong track record, an experienced team and the investment capacity needed to take advantage of the opportunities that are rapidly emerging in real estate in Europe." Roger Barris, Chairman of Peakside, said.

Peakside has been newly created by the former senior managers of the European team of the Real Estate Principal Investments group within BofAML, consisting of Roger Barris, Stefan Aumann, Boris Schran and Mark Fenchelle. The team was responsible for the management of the two real estate funds and the European BofAML portfolio, In addition to the senior managers, Peakside has employed 13 former members of the BofAML group and plans to hire an additional 4 persons, including Christoph Munte, formerly of Morgan Stanley, who will join as General Counsel and a member of the Peakside Management Committee.

Peakside has opened offices in the Cayman Islands, Switzerland, the United Kingdom, and Luxembourg. Peakside will provide investment advisory, deal origination and execution, asset management and fund management services in real estate across Europe, including CEE and Turkey, to qualified investor clients such as institutions and high-net-worth individuals. Going forward, Peakside plans to raise discretionary funds, but also plans to take non-discretionary investment mandates from investors.

“We considered many alternatives for these assets, and driven by our confidence in the Peakside team, we concluded that the best option, in our capacity as a limited partner in the funds and the owner of the proprietary assets, is to allow the Peakside team to continue to manage the funds and the legacy European real estate assets as an independent company.” Jim Forbes, BofAML Global Principal Investments executive, said.

Swiss Hedge Fund Acquires Dunedin Independent

HedgeCo News - Helvetia Wealth has expanded its influence in Scotland with the acquisition of Dunedin Independent, Scotland's largest independently-owned financial advisor (IFA) . With GBP350 million ($539 million) in AUM, Dundein is ranked in the top 100 wealth management companies in the UK.

"With offices also in Liechtenstein, Geneva, London, Hamburg, Mauritius, Dublin and Glasgow, Helvetia Wealth AG now has an increased asset base of CHF 1.5-billion ($1.47 billion), with the UK earmarked as one of the group's key markets," Helvetia CEO Kamil Stender, said. "Employing the latest methodologies in wealth management, we are well positioned to service the rapidly growing demand for wealth management services. This demand is the result of globalisation and the increased prosperity it engenders."

"There are now in excess of 7.6 million high net worth individuals worldwide. Since 2002, this market has grown at a rate of 7.5% p.a. And total assets under management now exceed CHF 36Trillion ($35.5 trillion)." Stender said.

"The enlarged group features two prominent IFA firms in Scotland, Dunedin Independent plc and City Gate Money Managers. In addition, Helvetia owns a controlling stake in London-based TAM Asset Management with a London Stock Exchange brokerage licence allowing us to execute our own trades faster at better margins." Yuill Irvine, MD at Dunedin Independent said, "The amalgamation will introduce a range of cost attractive synergies for Helvetia and attractive efficiencies for all three firm's clients as well as offering our clients access to Swiss banking facilities."

A team from leading national law firm HBJ Gateley Wareing acted on behalf of the shareholders of Dunedin Independent. "

Cayman Ranked #1 For Hedge Funds, Specialized Finance

HedgeCo News - The world’s largest domicile for hedge funds, healthcare insurance captives and catastrophe bond transactions, has been named the top specialised financial center by The Banker, a banking and finance magazine, in it’s 2010 IFC Rankings released this month.

Cayman, for the second year running, has been awarded first place by an increased margin over other jurisdictions such as Bermuda, Jersey, Guernsey, Malta, Gibraltar, Monaco and Cyprus.

The Banker’s ranking of international financial centres is based not simply on the size of the financial services industry in each location, but focuses instead on the level of international business and the value offered to institutions seeking to expand their overseas operations.

“This is yet another objective finding that reinforces the fact that Cayman is regarded by institutions, if not by stubborn popular press, as a successful and transparent tax neutral jurisdiction from which to base international operations.” Anthony Travers, OBE, Chairman of Cayman Finance said.

“This result comes at a time when Cayman has just signed its twentieth tax information exchange agreement and statistics from the Islands’ regulating body CIMA show a continuingly robust performance by the financial services industry over the past year. Most importantly the financial crisis has been negotiated without the need to introduce corporate, income, capital gains, payroll or property taxes, the absence of which is likely to enhance Cayman’s attraction in the immediate future.” Travers said.

Statistics from the Cayman Islands Monetary Authority (CIMA) note that Cayman still maintains US$1.795 trillion in deposits and interbank bookings.

Lance Futures To Launch Hedge Funds, Futures Funds

HedgeCo News – Frankfurt based Lance Futures has established a team of Commodity Trading Advisors and is launching CTA based hedge funds and managed futures funds, providing their clients with risk-adjusted returns with low volatility.

Lance will be diversifying class fund assets transversely with a team of money managers whose expertise in technical strategies would help diversify portfolios of the investors as they are well-versed in counter-trend, pattern recognition, intra-market spreads and option volatility arbitrage.

The new fund management utilizes well-researched strategies across worldwide liquid exchange-traded futures markets and at the same time evaluates these futures markets across various time frames.

Targeting annual returns of 10-20 percent with less than 10 percent draw-downs and with expected annual volatilities of 10-to 15 percent, the Lance Futures Investment Team targets such performance through due diligence, fund management strategies, qualitative and quantitative screening, monitoring and rigorous selection processes.

Centaur Appointed Hedge Fund Administrator at Scipion Capital

HedgeCo News - Frontier market investment specialist, Scipion Capital, has appointed hedge fund specialist, Centaur Fund Services to take over fund administration for its range of funds.

"To be a successful frontier markets investor you must understand the landscape." Nicolas Clavel, CIO and founder of Scipion, said, "There are outstanding returns available in frontier markets, but accessing them requires an intimate knowledge of the regions and an agile and nuanced strategy to capitalise on the opportunities as they appear. There is no such thing as a generalised frontier market strategy."

Centaur will provide Scipion with the full suite of fund administration services, including fund accounting and investor and corporate services. Scipion’s fund range, including the firm’s flagship Commodities Trade Finance Fund, will use Centaur’s cutting edge iNAV process model, which provides an accurate daily NAV calculation and support services around the funds.

"Scipion’s range of funds has highly specialised and innovative strategies." Ronan Daly, Chairman of Centaur, added, "In many cases, the strategies they offer their investors are the first of their kind in the market."

Scipion was established in February 2007 by Nicolas Clavel, who has over 30 years’ experience of the financial services industry in Africa, with notable previous roles including CEO of both Citibank in Senegal and Stanbic Bank Sarl in the Congo.

The firm has an outstanding track record investing in Africa. The Scipion Commodity Trade Finance Fund, launched in August 07, has returned 35% since inception. The firm’s other strategies, The Scipion Alpha Seeker Fund, and the Scipion Ai40 Index Tracker Fund, the world’s first pan-African investible index, have both made positive returns for the year to date.

Established last year, Centaur already has approximately $1 billion in assets under administration. Its founders, Ronan Daly, Karen Malone and Eric Bertrand, have over 50 years of combined experience working within the hedge fund market in Europe.

Hedge Fund Boosts Red Cross Flood Relief in Pakistan

New York (HedgeCo.net) - Harris today announced its support of Red Cross flood relief and recovery efforts in Pakistan through a $100,000 contribution from the bank's parent company, BMO Financial Group. Additionally, through Sept. 17, 2010, Harris branches will accept donations to the Red Cross and will waive wire transfer fees for customers sending funds to Pakistan to help facilitate additional humanitarian aid.

"Our team at Harris is deeply saddened by the devastation in Pakistan," said Ellen Costello, president and CEO, Harris Financial Corp. "We hope that by utilizing our resources -- our retail branch network and ability to carry out wire transfers -- we can help facilitate the emergency relief work of agencies like the Red Cross, which is providing vital aid to victims of this disaster."

"We're so pleased that Harris Bank continues to make supporting humanitarian relief efforts a priority. They've been a valued partner and continue to provide much needed help to people affected by disasters that strike here in our backyard, across the country or around the world," said Heidi Mucha, Chief Advancement Officer, American Red Cross of Greater Chicago.

$14 Billion Swiss Hedge Fund Develops Dow Jones Index Relationship

New York (HedgeCo.net) - SAM, the E11.2 billion ($14.36 billion) hedge fund boutique focused exclusively on Sustainability Investing, is deepening its eleven-year-old collaboration with Dow Jones Indexes by expanding its worldwide Sustainability Index offering.

Under this joint marketing agreement, Dow Jones Indexes will be responsible for calculation, marketing and distribution of the indexes including the European indexes, while SAM remains responsible for the component selections. As a result, SAM’s collaboration with STOXX Ltd., which had previously calculated the European STOXX Sustainability Indexes, has been terminated.

“Over the past eleven years, the Dow Jones Sustainability Indexes have been successfully developed and expanded worldwide." Rodrigo Amandi, Managing Director SAM Indexes said, "Through what is now an exclusive global collaboration with Dow Jones Indexes, we are taking account of the growing significance of sustainability benchmarks by offering investors around the world a homogeneous index family. We extend our thanks to partner STOXX for the positive cooperation to date and look forward, in partnership with Dow Jones Indexes, to continuing our pioneering work in the field of sustainability and shaping the segment’s future growth.”

SAM retains responsibility for component selection The Dow Jones Sustainability Indexes (DJSI) are the oldest benchmarks for Sustainability Investing. Aggregate investment volumes in DJSI-based portfolios now total more than USD 8bn.

The firm’s offering comprises asset management, indexes and private equity. Its asset management capabilities include a range of single-theme, multi-theme and core sustainability investment strategies catering to institutional asset owners and financial intermediaries in Europe, the United States, Asia-Pacific and the Middle East.

SAM was founded in 1995, is headquartered in Zurich and employs over 100 professionals.

Grant Thornton LLP outlines key financial reform issues in Dodd-Frank Act for public company audit committees paper

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) will change the landscape for financial services firms and financial institutions. The Act addresses four major issues: transparency, risk management, accountability and structural oversight; and will create new regulators, bring new firms and markets under regulatory oversight, and provide new rulemaking and enforcement powers to regulators.

Although central elements of the Act focus on regulating the financial services sector, it also includes provisions affecting every public company, including enhanced SEC enforcement authority and additional corporate governance requirements.

Grant Thornton LLP’s Financial Service practice has created a paper – Financial reform: What public companies and their audit committees need to know about the Dodd-Frank Act– that outlines some key financial reform issues that public companies and their audit committees should understand, as well as actions they can consider to help guide their companies through this changing regulatory landscape.

“Although many audit committee members may not want to mire themselves in the minutiae of this complex legislation, they need to know that the important details are being addressed by their management teams,” noted Jack Katz, national managing partner of Grant Thornton’s Financial Services practice.

Some of the issues covered in the paper include:

1. Enhanced whistleblower protections

2. Nonbinding shareholder votes on “Say on Pay” and golden parachutes

3. Risk committees

4. Independence of compensation committees

5. SOX Section 404 (b) exemption

To download a full copy of Financial reform: What public companies and their audit committees need to know about the Dodd-Frank Act, please click here.

Many of the specific rules of the Act have yet to be shaped by regulators, and firms must stay a step ahead. To help companies navigate this uncharted territory, Grant Thornton LLP has created the Financial Regulatory Reform Resource Center. For more information about the legislation and emerging issues from the legislation, visit www.GrantThornton.com/financialreform.

Hedge Fund Handbook Released: ‘A Guide to Fund Management’

HedgeCo.net News – There is a new book on the market for those who are planning to set up their own hedge fund. Daniel Broby’s ‘A Guide to Fund Management’ is published by Risk Books, a specialist in hedge fund and risk related publication.

“I wanted to capture all aspects of running a firm in one book.” Daniel Broby, Chief Investment Officer at Silk Invest, said, “I have spent far too much of my career reading industry white papers and compliance manuals. I wrote the sort of book that I wanted to buy when I first became a Chief Investment Officer over ten years ago.”

The book’s text is complimented by diagrams and bullet points that simplify the vast array of information.

Broby has had a long and successful career in both fund management and the hedge fund industry. He set up the first regulated and listed hedge fund in the Danish market for Bankinvest and launched a number of alternative funds for the investment arm of the Russian giant Renaissance Capital. After that that he branched out on his own.

“The advice is equally applicable for hedge funds as it is for established fund managers, especially as relates to the client centric firm. Essentially, it is a ‘how to do it’ manual that covers everything from the industry, investment process, through the front, middle and back office.” Broby said.

Hedge Fund Broker Lighthouse Suspends Trading Activities

HedgeCo News – New York-based Lighthouse Financial Group has suspended their trading activities until further notice, effective August 3rd 2010, according to the hedge fund brokers’ website.

Lighthouse became a subsidiary of Lighthouse Global Partners, LLC in 2005, the shutdown includes the Lighthouse Prime Services unit.

According to hedge fund and private equity news source FINalternatives, the firm has been unable to make payroll, and has informed clients that they could only sell assets through the firm.

“A different source close to the firm says that Lighthouse is in talks with a boutique firm that has eyes on becoming a much larger player and is making a bid for all of the divisions, and an announcement could come as early as this afternoon.” FINalternatives said.

Hedge Fund Association To Sponsor AT&T Cycling Championship

HedgeCo News - The AT&T USA Cycling Professional Criterium National Championship at the Glencoe Grand Prix is being sponsored this year by The Hedge Fund Association, a not-for-profit international educational and philanthropic group. The race will be be held Saturday August 14, 2010 in the village of Glencoe, Illinois.

“This event’s incredible popularity will allow the Hedge Fund Association and the Glencoe Education Foundation to draw attention to the issues plaguing today’s schools,” said Jim Gabriele, HFA Midwest Chapter Director and Managing Director of Butterfield Fulcrum.

The race, a regional staple for 23 years, will support the Glencoe Educational Foundation, a non-profit organization that seeks to enhance education in the Glencoe School District. As an event sponsor, the HFA will have its own tent where food and refreshments will be offered all day. For devoted racing fans, arrival time is suggested at noon on August 14, 2010, but arrivals are permitted as late as 6pm. A block party will follow the race.

“This is a wonderful opportunity for the hedge fund industry to contribute to education,” stated Stuart Brogan, HFA Director, Business Leader for Hedge Funds at Morningstar Inc and racer at the event. “Through the race’s collaboration with the Glencoe Educational Foundation, we will be supporting technology in the classroom, which is essential for today’s students.”

U.S. Hedge Fund Reform: Investor Protection Provisions

HedgeCo.net - On July 21, 2010, after a legislative process that included intensive lobbying by influential interest groups and a partisan minority, President Obama signed into law H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”). With this legislation, Congress approved the most sweeping overhaul of U. S. financial regulation since the Great Depression.

The U.S. Chamber of Commerce says the Act will require federal agencies to develop 520 rules, conduct 81 studies, and issue 93 reports. As a result of the legislation, the U.S. Treasury Department will create a Federal Insurance Office and the Federal Reserve Board will create a Consumer Financial Protection Agency, which will have an Office of Financial Protection for Older Americans and an Office of Financial Literacy. The topics the Financial Literacy Office will address include retirement planning. Other sections of the Act will revamp bank and hedge fund regulation and create a Financial Stability Oversight Council.

Investor Protection Provisions of the Act

General Purposes & Approach
While further regulations and studies are yet to be developed under the Act, the Investor Protection Provisions aim generally to protect investors, foster efficient and competitive markets, and enable the best services to investors. A fundamental purpose is to address areas identified as adversely impacting investors during the 2008 and 2009 credit and financial crisis. To better protect investors, the Act focuses primarily on enhanced SEC regulatory authority and penalty imposition with respect to financial institutions, securities brokers and dealers, and investment advisers.

With respect specifically to investment advisers, the Investor Protection Provisions generally first empower the SEC to gather and monitor from such advisers additional information regarding financial products sold, trading strategies, fee and commission structures and related matters. Second, they authorize expanded SEC examinations of, and enforcement protocols against, investment advisers, including imposition of civil penalties. Additional provisions include prohibitions against improper credit (margin) extension to investors.

A. Disclosure & Oversight Provisions
The Act amends the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940 and establishes an Investor Advisory Committee to advise and consult with the SEC on (1) regulatory priorities and issues regarding new products, trading strategies, fee structures, and the effectiveness of disclosures; (2) initiatives to protect investor interests; and (3) initiatives to promote investor confidence in the integrity of the financial marketplace.

Observation: To enforce the new disclosure rules, the SEC is authorized to gather information, communicate with investors or other members of the public, and engage in temporary or experimental programs in the public interest or for the protection of investors.

The SEC is also directed to establish a standard of conduct or fiduciary duty for brokers, dealers, and investment advisers to act, without regard to their own financial or other interests, in the best interests of the customer when providing personalized investment advice about securities to a retail customer.

Additionally, the SEC is required to:

• Publish a study that examines the nature of “retail customers,” the range of products and services sold to them, the sellers or providers, and information such customers should receive before their purchase of investment products or services; and, following completion of this study, promulgate rules requiring that the appropriate persons or entities provide designated documents or information to retail customers prior to the purchase of identified investment products or services.

• Report to Congress on the need for enhanced examination and enforcement resources for investment advisers, and regarding the regulation and oversight of financial planning.

B. Enforcement and Remedies
The Act authorizes the SEC to restrict or prohibit mandatory dispute arbitration affecting customers or clients of brokers and dealers, including municipal securities dealers, and requires reporting to Congress on the costs of arbitration related to the Financial Industry Regulatory Authority as overseen by the SEC. The Act also expands incentives and protections for so-called whistleblowers and funding to the SEC to pay awards to whistleblowers as well as to provide investor education initiatives to help investors protect themselves against securities fraud or other violations of securities laws and regulations.

Observation: The Act also broadens the regulation of brokers, dealers, municipal securities dealers, transfer agents, and investment advisers, to revise requirements for collateral bars or suspensions in the case of persons associated, or seeking to be associated, with any who are subject to penalties for specified offenses. The Investment Advisers Act of 1940 is also broadened with regard to liability of, and prosecution and penalties for, persons who aid or abet violations of that act.

Enhanced SEC enforcement and remedies also include:
(1) Expanded deadlines and procedures for completing compliance examinations, inspections, and enforcement actions for violations of securities laws; (2) nationwide service of subpoenas; (3) imposition of civil penalties in cease and desist proceedings; (4) enforcement authority over any person who at the time of the alleged misconduct was a member or employee of specified bodies (formerly associated persons); (5) the sharing of privileged information with other authorities; (6) increased access to grand jury information; (7) recklessness as an element of the aiding and abetting standard of knowledge; and (8) SEC extraterritorial jurisdiction with respect to antifraud activities.

• Requirements for the fidelity bonding of registered management companies.

• Reasonable periodic, special or other information and document requests by SEC representatives conducting surveillance or risk assessments of all securities markets, national securities exchanges, their members, brokers or dealers who transact a business in securities through the medium of any such member, SEC-registered securities associations, registered brokers or dealers and municipal securities dealers, registered securities information processors, registered transfer agents, and other persons.

• Record-examination requirements for registered investment companies, and each underwriter, broker, dealer, or investment adviser that is a majority-owned subsidiary of such a company.

• Provision that any person who controls a person liable for a violation is also jointly and severally liable to the SEC in certain actions it may bring.

• Extension of SEC rulemaking authority to prescribe rules for proxy access by shareholders.

Observation: Section 413 of the Act excludes a primary residence from an investor’s net worth for purposes of determining “accredited investor” status under Rule 501(a)(5) of the SEC’s private placement safe harbor in Regulation D. This exclusion, immediately effective upon enactment without any further action by the SEC, will make it more difficult for natural persons to qualify as accredited investors. Issuers and other participants in private placement transactions should review their disclosure and subscription documents immediately and make necessary changes to conform to the new standard.

Also regarding Section 413, it has been reported that the staff of the SEC is expressing informally its view that, in determining an individual’s net worth for such purposes, the amount of mortgage or other indebtedness secured by the investor’s primary residence – to the extent such indebtedness does not exceed the value of the residence – does not need to be considered as a liability, but where the indebtedness secured by the primary residence exceeds the value of the residence and the lender has other recourse against the investor, the excess should be deducted from the investor’s net worth.

Observation: The Act addresses manipulative and deceptive devices, and (1) makes it unlawful for any person to effect, accept, or facilitate a transaction involving the loan or borrowing of securities in contravention of SEC rules and regulations; (2) imposes requirements for the reporting of lost and stolen securities to include canceled securities or any other category the SEC may prescribe; (3) requires fingerprinting of partners, directors, officers, and employees of registered securities information processors, national securities exchanges, and national securities associations; and (4) declares void any condition, stipulation or provision binding any person to waive compliance with the rules of a self-regulatory organization.

Further, the Act:

• Revises the prohibition against unlawful credit extension (margin lending) to customers.

• Extends the definition of “interested person” to any natural person who is a member of a class of persons the SEC determines are unlikely to exercise an appropriate degree of independence due to (1) a material business or professional relationship with a company or any affiliated person of such company or (2) a close familial relationship with any natural person who is an affiliated person of such company.

• Repeals two current requirements dealing with execution of portfolio transactions and the lending of money or other property.

• Authorizes the SEC to limit the extent to which a registered open-end investment company may own, hold, or invest in illiquid securities or other illiquid property.

• Subjects to domiciliary state registration requirements certain mid-sized investment advisers otherwise not exempt from federal registration requirements.

• Directs the SEC to adopt a rule making it unlawful for an SEC-registered investment adviser to have custody of funds or securities of a client the value of which exceeds $10 million, unless: (1) the funds and securities are maintained with a qualified custodian either in a separate account for each client under the client’s name, or in accounts that contain only client funds and securities under the name of the investment adviser as agent or trustee for the client; and (2) the qualified custodian does not directly or indirectly provide investment advice with respect to such funds or securities.

• Requires the SEC to revise recordkeeping requirements for each person with custody or use of a registered investment company’s securities, deposits, or credits.

• Requires the SEC to revise requirements for beneficial ownership and short-swing profit reporting.

• Requires every institutional investment manager who effects a short sale of an equity security to file daily with the SEC specified short sale disclosures and makes it unlawful to effect manipulative short sales of securities.

• Requires registered brokers or dealers to notify customers that (1) they may elect not to allow their fully paid securities to be used in connection with short sales and (2) the broker or dealer may receive compensation in connection with lending the customer’s securities.

C. SEC Funding and Organization and Additional Reforms
The Act directs the SEC to promulgate rules to collect fees annually from registered investment advisers, in order to recover the cost of inspections and examinations of such advisers. To implement this provision, the SEC is required to hire an independent consultant to examine and report to the SEC and Congress on SEC internal operations, structure, funding and the need for comprehensive reform, including the SEC’s reliance upon self-regulatory organizations for the regulation of securities matters and the protection of investors.

The SEC is also now required to report to certain congressional committees on the implementation of SEC reforms in the wake of the Madoff fraud.

Additionally, the Act directs the SEC, the Public Company Accounting Oversight Board (PCAOB), and a designated standard-setting body to provide oral testimony annually for five years to the Committee on Financial Services of the House of Representatives regarding efforts to reduce the complexity in financial reporting, in order to provide more accurate and clear financial information to investors.

On other procedural matters, the Act also:

• Directs the Comptroller General to study and report to Congress on SEC employees who leave the agency to work for financial institutions regulated by the SEC.

• Establishes a Financial Reporting Forum composed of certain senior federal agency personnel to report annually to Congress on immediate and long-term issues critical to financial reporting.

• Requires the SEC to (1) appoint an Ombudsman to act as a liaison between the SEC and any affected person who may have a problem dealing with the SEC as a result of its regulatory activities; and (2) revise its regulations to require due diligence on the part of brokers and dealers and other specified paying agents to search for lost security holders who have been sent checks for dividends, interest, and other valuable property which have not yet been negotiated.

• Revises requirements for SEC filing procedures with respect to proposed rule changes.

D. Securities Investor Protection Act Amendments
The Act amends the Securities Investor Protection Act of 1970 (SIPA) to increase: (1) the minimum assessment paid by Securities Investor Protection Corporation (SIPC) members; (2) the borrowing limit on Treasury loans; (3) the standard maximum cash advance for each customer (including an inflation adjustment); and (4) the fine for certain prohibited acts, including misrepresentation of SIPC membership or protection for investors.

Additionally, the Act:

• Amends SIPA with respect to (1) SIPC trusteeship in liquidation proceedings; (2) insider ineligibility for SIPC advances; and (3) futures held in a portfolio margin securities account.

• Revises requirements for determining whether a SIPC member qualifies for SIPC use of the direct payment procedure to satisfy customer claims without a liquidation proceeding; and increases from $250,000 to $850,000 the maximum aggregate amount of claims of all customers of a SIPC member that, among other criteria, allows SIPC to use the direct payment procedure.

• Directs the Comptroller General to study and report to Congress whether SIPC should be required to impose risk-based assessments on member brokers and dealers in order to maintain the SIPC Fund adequately and to provide additional levels of coverage on an optional basis.

E. Seniors’ Investment Protection
With regard to older investors, the Act directs the SEC to establish a program of grants to states to (1) investigate and prosecute misleading and fraudulent marketing practices and/or (2) develop educational materials and training to reduce misleading and fraudulent marketing of financial products.

F. Registration of Municipal Financial Advisors
The Act requires municipal financial advisers to register with the SEC.

Conclusion
The reports and regulations to implement the key Investor Protection Provisions of the Act will be developed over the next 6 to 18 months or longer, reflecting varying effective dates for different provisions and allowing in many cases a transition period for affected institutions to meet new requirements.

For more information, contact: swittner@eisnerllp.com

Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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People Moves: Hedge Fund Specialist Takes Position at $3 Billion Arts Foundation

HedgeCo News - Marc A. Schwartz has been named chief investment officer of The Broad Foundation's $3 billion portfolio, working closely with founder Eli Broad.

"Marc's vast experience in hedge funds, private equity and other similar investments that are consistent with our portfolio makes him a perfect fit," said Broad. "I am impressed with Marc's intelligence, drive, instincts and investment success, and we are delighted that Marc will join our team."

Schwartz joins The Broad Foundations from Reservoir Capital Group, a more than $4.5 billion hybrid fund where he served for nine years as managing director, principal and vice president. Schwartz was a senior member of the Reservoir investment team and most recently was focused on private fund sponsorship and direct co-investments. Before joining Reservoir, Schwartz spent much of the previous decade working in senior positions at a global holding company and an international private equity firm.

The Broad Foundations were established by entrepreneur and philanthropist Eli Broad to advance entrepreneurship for the public good in education, science and the arts. The Broad Foundations include The Eli and Edythe Broad Foundation and The Broad Art Foundation.