A number of Asian central banks, among the biggest investors in U.S. government debt, are looking at alternative targets for their vast dollar holdings.
Since 1997, currency reserves at Asia’s central banks have risen to about $3 trillion, leaving fewer dollar denominated securities in which hedge funds can trade, putting hedge funds on the defensive.
A report showing the U.S. economy is holding its ground may drive the dollar higher. Central banks such as the People’s Bank of China may see that as a perfect opportunity to sell a chunk of their U.S. holdings, pushing the market in a direction that traders don’t expect.
Central banks often carefully choose the moments when they expect an increase in market liquidity, when Federal Reserve officials speak or Japan releases inflation data, to make adjustments in their holdings. More and more, it’s turning Asia’s central banks into market heavyweights.
In the last couple of years, many speculators bet on a drop in U.S. debt prices. That left plenty of securities for purchases by foreign central banks.
The issue may be high on the list of topics discussed at next week’s IMF meeting in Singapore. It’s not about looking out for hedge funds; it’s about taming volatility in economies. Yet it’s also about exploring the wisdom of central banks amassing ever-growing stockpiles of reserves.
A recent paper from the Bank for International Settlements underlines the urgency. In it, BIS staffers Madhusudan Mohanty and Philip Turner express surprise that the reserve buildup hasn’t caused inflation.
In Taiwan, the current system for managing the nation’s $206.63 billion in reserves, the third-largest in the world, “might not be an efficient use of our resources,” says government minister Hu Sheng-cheng. Taiwan’s central bank has accumulated “too much” foreign exchange from Taiwanese exporters and from inflows to its capital markets, he says. Mr. Hu is heading a task force that will announce in the next few weeks details of a plan to use reserves to help local companies buy machinery and intellectual property rights overseas, he says.
Elsewhere in Asia in recent weeks, however, some governments have begun discussing plans to chip away at their dollar mountains. The initial amounts are small, but taken together they send a clear signal. South Korea’s plans are the most ambitious and could have the biggest impact on the dollar.
The International Monetary Fund’s last meeting in Asia was in 1997 and featured a debate about hedge funds. U.S. Treasury Secretary Robert Rubin argued that hedge funds were a vital source of liquidity when markets dry up. Asian policy makers saw them as predators causing undue volatility and overwhelming central banks. Either way, hedge funds are taking a backseat in Asia to the new Asian central banks.
18 Sept 2006
Fund of Hedge Fund Investment
According to a Reuters poll this week, funds of hedge fund managers have downgraded expectations for returns over the next six months as global growth and a commodities bull run cooled.
A fund of hedge funds is an investment company that invests in hedge funds, rather than investing in individual securities. Not all funds of hedge funds register with the SEC. Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.
The quarterly survey of 13 funds of hedge fund managers, which together manage more than $100 billion, showed they expected average returns, with only a few strategies, such as emerging markets, anticipated to bring above average results.
The poll, carried out between August 30 and September 8, showed a shift down in sentiment from the last survey, when half of all strategies were forecast to deliver superior returns in one or both of the following two quarters.
While some managers expect to benefit from an increase in volatility that has gripped markets in recent months, most are turning to strategies that aim to offer consistent returns in any market cycle, such as multi-strategy hedge funds which allocate funds to various sectors and regions.
And while managers trimmed down their exposure to emerging markets, they also forecast above average returns there in the fourth quarter this year.
These funds accounted for 44 percent of new money in 2005, down from 50 percent a year before. Total assets covered by the survey stood at $1.26 trillion (670 billion pounds) last year, up by about a fifth on 2004.
Investors have been encouraged to look beyond the traditional asset strongholds of listed equities, bonds and cash in recent years to reduce exposure to volatile stocks and be sure of getting income they need as populations age.
Funds of hedge funds allow investors to spread their money among a variety of hedge fund strategies in a single package deal.
Last year, pension funds globally invested more than $77 billion pounds of new money in alternative assets, up from $62 billion in 2004.
Property took the biggest share of pension funds’ new money to alternatives, at 35 percent, followed by 34 percent into funds of hedge funds.
Retirement funds are the single largest holder of alternative assets, accounting for about $465 billion, or 37 percent, of the total assets covered by the survey.
A fund of hedge funds is an investment company that invests in hedge funds, rather than investing in individual securities. Not all funds of hedge funds register with the SEC. Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.
The quarterly survey of 13 funds of hedge fund managers, which together manage more than $100 billion, showed they expected average returns, with only a few strategies, such as emerging markets, anticipated to bring above average results.
The poll, carried out between August 30 and September 8, showed a shift down in sentiment from the last survey, when half of all strategies were forecast to deliver superior returns in one or both of the following two quarters.
While some managers expect to benefit from an increase in volatility that has gripped markets in recent months, most are turning to strategies that aim to offer consistent returns in any market cycle, such as multi-strategy hedge funds which allocate funds to various sectors and regions.
And while managers trimmed down their exposure to emerging markets, they also forecast above average returns there in the fourth quarter this year.
These funds accounted for 44 percent of new money in 2005, down from 50 percent a year before. Total assets covered by the survey stood at $1.26 trillion (670 billion pounds) last year, up by about a fifth on 2004.
Investors have been encouraged to look beyond the traditional asset strongholds of listed equities, bonds and cash in recent years to reduce exposure to volatile stocks and be sure of getting income they need as populations age.
Funds of hedge funds allow investors to spread their money among a variety of hedge fund strategies in a single package deal.
Last year, pension funds globally invested more than $77 billion pounds of new money in alternative assets, up from $62 billion in 2004.
Property took the biggest share of pension funds’ new money to alternatives, at 35 percent, followed by 34 percent into funds of hedge funds.
Retirement funds are the single largest holder of alternative assets, accounting for about $465 billion, or 37 percent, of the total assets covered by the survey.
15 Sept 2006
AmericaVest Lauches "10/10" Hedge Fund
AmericaVest Capital Management LLC has announced the launching of its new flagship hedge fund, the AmericaVest “10/10 Fund”. Drawing on over 70 years of collective experience in financial services, wealth management and asset backed investing.
The hedge fund offers investors the opportunity for a fixed priority annual return of 10%. The strategy is designed to target absolute returns and outperform traditional equity and bond markets, with low volatility. The hedge fund believes that diversification, low correlation and consistent capital appreciation can be achieved through active portfolio management and exposure to a combination of carefully selected pools of mortgage loans.
AmericaVest Capital Management doesn’t participate in any of the performance of the portfolio until after investors have received their priority return on a quarter over quarter basis. Once the specified fixed annualized priority return is achieved, investors then share in 10% of the hedge fund’s net profits, the proirity return has a high water mark.
The AmericaVest 10/10 Fund aim is to provide investors with consistent steady returns according to released statement. The minimum investment requirement is $250,000. Additions are monthly, with a 36 month lockup and quarterly redemptions.
AmericaVest Capital’s management team will also tailor Structured Portfolios to meet the specific requirements of qualified accredited, private and institutional investors.
The hedge fund’s goal is to acquire, manage, securitize and liquidate pools of performing,underperforming or distressed mortgages and hard money loans, for both commercial and residential. The fund provides diversification through an asset class which has low-correlation to other traditional assets classes
The new hedge fund will be managed by two veteran managers, Robert D.Damigella, Nelson A. Garcia and and their experienced portfolio management team.
Mr. Damigella has nearly 25 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. During most of the first 10 years of his career, Mr. Damigella was a vice president for Lehman Brothers.
Mr. Garcia has over 23 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. Mr.Garcia’s primary experience is in fixed income where he began his career at Glickenhaus & Co and then moved on to Gruntal & Co where he distributed fixed income investments to institutions and high net worth individuals.
AmericaVest Capital Managements portfolio management team, is the architect behind the fund’s core investment strategy. The team has over 24 years of experience with real estate investments. For the past 10 years,they has been managers of more than 50 individual investment funds.
More Details on the AmericaVest 10/10 Fund visit www.americavest.net and can be found in the fund’s listing on the HedgeCo.Net Free Hedge Fund Database found at www.hedgeco.net.
The hedge fund offers investors the opportunity for a fixed priority annual return of 10%. The strategy is designed to target absolute returns and outperform traditional equity and bond markets, with low volatility. The hedge fund believes that diversification, low correlation and consistent capital appreciation can be achieved through active portfolio management and exposure to a combination of carefully selected pools of mortgage loans.
AmericaVest Capital Management doesn’t participate in any of the performance of the portfolio until after investors have received their priority return on a quarter over quarter basis. Once the specified fixed annualized priority return is achieved, investors then share in 10% of the hedge fund’s net profits, the proirity return has a high water mark.
The AmericaVest 10/10 Fund aim is to provide investors with consistent steady returns according to released statement. The minimum investment requirement is $250,000. Additions are monthly, with a 36 month lockup and quarterly redemptions.
AmericaVest Capital’s management team will also tailor Structured Portfolios to meet the specific requirements of qualified accredited, private and institutional investors.
The hedge fund’s goal is to acquire, manage, securitize and liquidate pools of performing,underperforming or distressed mortgages and hard money loans, for both commercial and residential. The fund provides diversification through an asset class which has low-correlation to other traditional assets classes
The new hedge fund will be managed by two veteran managers, Robert D.Damigella, Nelson A. Garcia and and their experienced portfolio management team.
Mr. Damigella has nearly 25 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. During most of the first 10 years of his career, Mr. Damigella was a vice president for Lehman Brothers.
Mr. Garcia has over 23 years experience in financial services and serves as co-managing member of AmericaVest Capital Management, LLC, the General Partner of AmericaVest Partners, LP. Mr.Garcia’s primary experience is in fixed income where he began his career at Glickenhaus & Co and then moved on to Gruntal & Co where he distributed fixed income investments to institutions and high net worth individuals.
AmericaVest Capital Managements portfolio management team, is the architect behind the fund’s core investment strategy. The team has over 24 years of experience with real estate investments. For the past 10 years,they has been managers of more than 50 individual investment funds.
More Details on the AmericaVest 10/10 Fund visit www.americavest.net and can be found in the fund’s listing on the HedgeCo.Net Free Hedge Fund Database found at www.hedgeco.net.
14 Sept 2006
Citigroup offers Alternative Investment Hedge Fund arm in Asia
Citigroup offers Alternative Investment Hedge Fund arm in Asia
Citigroup has launched an administration business hedge fund in Asia Pacific. The service will benefit hedge fund mangers by easing their administration burden. In effect clients will be outsourcing their administration requirements to Citigroup.
In a statement, Matthew Brown, Asia Pacific head of fund services said, “Hedge fund managers increasingly want an integrated service provider. The combination of prime brokerage and alternative investment administration services means Citigroup is able to offer clients the complete transaction banking service. From fund administration, to global custody and cash management to prime brokerage, Citigroup can now offer the full service to clients in Asia Pacific,”
Asia Pacific is one of the fastest growing regions in terms of funds under management. According to Eurekahedege, the number of new fund launches is forecast to hit 216 in 2006, up from 95 in 2003 and assets under management have doubled since 2003, according to data from Eurekahedge.
The business will compete with firms including HSBC Holdings Plc, and Fortis to provide accounting, valuation, record keeping, reporting and other services for Asian hedge funds.
The Citigroup division, which has about 150 employees globally, already administers about $45 billion in hedge fund assets. The hedge fund administration in Asia is under the local command of managing director Matt Brown.
The firm already offers these services elsewhere in the world, as the world’s largest bank, Citibank said it had launched its hedge fund administration business into Asia, hoping to win a slice of the fast growing market. It established its hedge-fund administration services originally in the United States in December 2004, and now has $45 billion in assets under administration and employs a roster of 150 staff.
Citigroup is a leading provider of alternative investment around the world and the launch of this servicing capability in Asia Pacific will complement the growth of the emerging markets.
Citigroup has launched an administration business hedge fund in Asia Pacific. The service will benefit hedge fund mangers by easing their administration burden. In effect clients will be outsourcing their administration requirements to Citigroup.
In a statement, Matthew Brown, Asia Pacific head of fund services said, “Hedge fund managers increasingly want an integrated service provider. The combination of prime brokerage and alternative investment administration services means Citigroup is able to offer clients the complete transaction banking service. From fund administration, to global custody and cash management to prime brokerage, Citigroup can now offer the full service to clients in Asia Pacific,”
Asia Pacific is one of the fastest growing regions in terms of funds under management. According to Eurekahedege, the number of new fund launches is forecast to hit 216 in 2006, up from 95 in 2003 and assets under management have doubled since 2003, according to data from Eurekahedge.
The business will compete with firms including HSBC Holdings Plc, and Fortis to provide accounting, valuation, record keeping, reporting and other services for Asian hedge funds.
The Citigroup division, which has about 150 employees globally, already administers about $45 billion in hedge fund assets. The hedge fund administration in Asia is under the local command of managing director Matt Brown.
The firm already offers these services elsewhere in the world, as the world’s largest bank, Citibank said it had launched its hedge fund administration business into Asia, hoping to win a slice of the fast growing market. It established its hedge-fund administration services originally in the United States in December 2004, and now has $45 billion in assets under administration and employs a roster of 150 staff.
Citigroup is a leading provider of alternative investment around the world and the launch of this servicing capability in Asia Pacific will complement the growth of the emerging markets.
Singapore Encouraging Hedge Fund Growth
Tokyo is currently Asia’s biggest currency market, bur Singapore now too will target hedge funds, commodities trading and Islamic finance to sustain growth, said Heng Swee Keat, managing director of the Central Bank of Singapore.
After seeing the booming economies of emerging BRIC markets; India and China, Singapore is also trying to cash in on the region’s growing number of millionaires.
The Monetary Authority of Singapore predicts “very strong growth” in asset management, which stood at $458 billion in 2005 after five years of expansion. The $118 billion economy expanded 6.4 percent in 2005. Financial services account for about 10 percent of gross domestic product.
Singapore beat 174 other nations to take first place in the World Bank’s annual ranking of business conditions, which looks at property rights, taxes, access to credit, labor laws and regulations on customs and licenses.
The Singapore government is also offering tax breaks as incentives to attract hedge funds and companies engaged in derivatives trading. There are over 100 hedge funds in Singapore overseeing about $10 billion in total assets, according to the central bank.
After seeing the booming economies of emerging BRIC markets; India and China, Singapore is also trying to cash in on the region’s growing number of millionaires.
The Monetary Authority of Singapore predicts “very strong growth” in asset management, which stood at $458 billion in 2005 after five years of expansion. The $118 billion economy expanded 6.4 percent in 2005. Financial services account for about 10 percent of gross domestic product.
Singapore beat 174 other nations to take first place in the World Bank’s annual ranking of business conditions, which looks at property rights, taxes, access to credit, labor laws and regulations on customs and licenses.
The Singapore government is also offering tax breaks as incentives to attract hedge funds and companies engaged in derivatives trading. There are over 100 hedge funds in Singapore overseeing about $10 billion in total assets, according to the central bank.
Fink Steps Down from MAN Hedge Fund
Stanley Fink, the chief executive of Man Group hedge fund is stepping down as chief executive after almost twenty years at the company. He will be succeeded on 1 April 2007, by Peter Clarke, the firm’s finance director, according to MAN group.
Mr Fink took over as chief executive in 2000 and led the transformation of Man Group from a commodities trader into a hedge fund manager. During his tenure as CEO the firm has seen its investment funds under management grow from $4.7 billion to over $54 billion at 30 June 2006, while pretax profits have risen to $1.2 billion.
Mr Clarke has worked at Man for the past 13 years, has been finance director for the last six. Analysts said the transition at the top would do little to shake investor confidence.
Clarke studied law at Queens’ College in Cambridge, England, and became a solicitor in 1985. After a stint at the law firm of Slaughter and May in London, he worked in mergers and acquisitions at Morgan Grenfell and Citicorp.
Harvey McGrath, Chairman of Man Group said in a statement, “Stanley has indicated to the board his wishes to become nonexecutive, not least in order to be able to commit more time to personal interests, in particular his philanthropic activities,”
Stanley Fink is valued to be worth around £8.3 billion, with his personal shareholding in value to £111 million.
Mr Fink took over as chief executive in 2000 and led the transformation of Man Group from a commodities trader into a hedge fund manager. During his tenure as CEO the firm has seen its investment funds under management grow from $4.7 billion to over $54 billion at 30 June 2006, while pretax profits have risen to $1.2 billion.
Mr Clarke has worked at Man for the past 13 years, has been finance director for the last six. Analysts said the transition at the top would do little to shake investor confidence.
Clarke studied law at Queens’ College in Cambridge, England, and became a solicitor in 1985. After a stint at the law firm of Slaughter and May in London, he worked in mergers and acquisitions at Morgan Grenfell and Citicorp.
Harvey McGrath, Chairman of Man Group said in a statement, “Stanley has indicated to the board his wishes to become nonexecutive, not least in order to be able to commit more time to personal interests, in particular his philanthropic activities,”
Stanley Fink is valued to be worth around £8.3 billion, with his personal shareholding in value to £111 million.
Canada Reports Suspicious Activty in Debt Market
The Bank of Canada warned 19 of the countries largest bond dealers not to take advantage of Canadian debt by manipulating the bond market. The bank suspected a hedge fund might have bought up a large share of the issue and used that stake to manipulate prices in its favour.
The bank issued a public statement and is making no secret of the fact that it doesn’t like to see irregular trading activity on the secondary bond market. Dealers and hedge funds could face fines of $5 million or more, or up to three times the amount of money illicitly gained. Dealers can also be kicked out of the organization, losing their rights to buy and sell bonds.
At stake is Canada’s reputation as a stable place to invest. The fact that the central bank is calling this gathering points to just how easy it has become for even small financial players and hedge funds to influence the fixed income market.
The meeting stems from an investigation of suspicious bond trading activity in the last three weeks of May, when the price spiked on benchmark government of Canada 10-year debt and derivates priced off that bond.
There are $10-billion of these bonds outstanding, but the IDA’s initial investigation turned up “insufficient grounds” for further digging.
The federal government has billions of dollars at stake in the bond market, and a smoothly functioning bond trade is crucial for the country’s economic health.
The bank issued a public statement and is making no secret of the fact that it doesn’t like to see irregular trading activity on the secondary bond market. Dealers and hedge funds could face fines of $5 million or more, or up to three times the amount of money illicitly gained. Dealers can also be kicked out of the organization, losing their rights to buy and sell bonds.
At stake is Canada’s reputation as a stable place to invest. The fact that the central bank is calling this gathering points to just how easy it has become for even small financial players and hedge funds to influence the fixed income market.
The meeting stems from an investigation of suspicious bond trading activity in the last three weeks of May, when the price spiked on benchmark government of Canada 10-year debt and derivates priced off that bond.
There are $10-billion of these bonds outstanding, but the IDA’s initial investigation turned up “insufficient grounds” for further digging.
The federal government has billions of dollars at stake in the bond market, and a smoothly functioning bond trade is crucial for the country’s economic health.
Emerging Markets see continued Hedge Fund Intrest
Recent TABB survey forcasts, surveying 81 U.S. hedge funds managing some $89 billion in early 2006, confirming research which suggests that money continues to flow into emerging market hedge funds, largely from institutional investors looking for above market returns.
Hedge fund industry assets are variously estimated to be anywhere from $1.2 trillion to $1.5 trillion. U.S. hedge funds are expected to dramatically raise their investment in overseas markets in coming years as domestic markets get more crowded and returns diminish, according to analysis released on late last week.
The biggest percentage investment increases are expected to be in Asia Pacific markets, which could see U.S. hedge fund assets nearly double to $107 billion from 2006 to 2008, according to TABB Group, an independent research firm.
But in dollars, European markets are expected to be the biggest beneficiaries of U.S. hedge fund investment, seen growing to $437 billion in 2008 from some $330 billion in 2006, TABB said.
There are currently approximately 8,500 hedge funds, they are usually private and don’t publicly disclose assets.
TABB also forecasted Latin American investment by U.S. hedge funds will grow to $29 billion in 2008 from $19 billion in 2006, while investment in other emerging markets will grow to $21 billion from $14 billion during that period.
Adam Sussman, TABB senior research analyst, said U.S. hedge funds are less likely to be concerned about recent volatility in emerging markets than retail investors.
Overseas investing “is a continuing trend. I don’t think they are going to be scared off by a few volatile months,” said Sussman in an interview with Reuters. “Long term, more and more hedge funds are going to be invested in emerging markets.”
Hedge fund industry assets are variously estimated to be anywhere from $1.2 trillion to $1.5 trillion. U.S. hedge funds are expected to dramatically raise their investment in overseas markets in coming years as domestic markets get more crowded and returns diminish, according to analysis released on late last week.
The biggest percentage investment increases are expected to be in Asia Pacific markets, which could see U.S. hedge fund assets nearly double to $107 billion from 2006 to 2008, according to TABB Group, an independent research firm.
But in dollars, European markets are expected to be the biggest beneficiaries of U.S. hedge fund investment, seen growing to $437 billion in 2008 from some $330 billion in 2006, TABB said.
There are currently approximately 8,500 hedge funds, they are usually private and don’t publicly disclose assets.
TABB also forecasted Latin American investment by U.S. hedge funds will grow to $29 billion in 2008 from $19 billion in 2006, while investment in other emerging markets will grow to $21 billion from $14 billion during that period.
Adam Sussman, TABB senior research analyst, said U.S. hedge funds are less likely to be concerned about recent volatility in emerging markets than retail investors.
Overseas investing “is a continuing trend. I don’t think they are going to be scared off by a few volatile months,” said Sussman in an interview with Reuters. “Long term, more and more hedge funds are going to be invested in emerging markets.”
Islamic Hedge Fund Niche
Hedge fund Shariah Capital, is looking for strategic partners in the Middle East among the local banks with international funds, and major investment institutions and high net worth individuals. “Hedge funds are all about diversification” they say.
But wealthy Muslim investors in the Gulf Arab region and Asia have traditionally frowned on hedge funds because they adopt strategies that are considered forbidden by Shariah.
So several fund managers have been trying to develop Shariah compliant strategies that will emulate the strong returns of hedge funds and tap some of the estimated $750bn in Islamic assets parked equity and property related funds.
The ideal ‘fund of caution’ for the Arabian investor is an Islamic hedge fund of funds, argues Eric Meyer, President and CEO of US based Shariah Capital who visited Dubai for the Islamic Funds World Conference to promote what is believed to be the first Shariah compliant fund of hedge funds.
“Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. This is one reason for their strength. It is true that borrowing by hedge funds improves return in a bull market but this will also magnify losses in a downturn.” Meyer said.
Amiri, a UK-based Islamic investment manager with a partner in Bahrain, believes it has found a Sharia compliant way to emulate one of the conventional hedge fund strategies short selling. He plans to launch a global long short equity hedge fund in 2007 that it says will comply with Shariah.
A conventional short is forbidden by shariah because it requires a hedge fund to sell something it does not own, while pay out interest to brokers, considered usury in Islam.
UK-based investment manager said the $1.3tn global hedge fund industry plans to develop a viable $50bn Islamic niche market in the next three years.
But wealthy Muslim investors in the Gulf Arab region and Asia have traditionally frowned on hedge funds because they adopt strategies that are considered forbidden by Shariah.
So several fund managers have been trying to develop Shariah compliant strategies that will emulate the strong returns of hedge funds and tap some of the estimated $750bn in Islamic assets parked equity and property related funds.
The ideal ‘fund of caution’ for the Arabian investor is an Islamic hedge fund of funds, argues Eric Meyer, President and CEO of US based Shariah Capital who visited Dubai for the Islamic Funds World Conference to promote what is believed to be the first Shariah compliant fund of hedge funds.
“Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. This is one reason for their strength. It is true that borrowing by hedge funds improves return in a bull market but this will also magnify losses in a downturn.” Meyer said.
Amiri, a UK-based Islamic investment manager with a partner in Bahrain, believes it has found a Sharia compliant way to emulate one of the conventional hedge fund strategies short selling. He plans to launch a global long short equity hedge fund in 2007 that it says will comply with Shariah.
A conventional short is forbidden by shariah because it requires a hedge fund to sell something it does not own, while pay out interest to brokers, considered usury in Islam.
UK-based investment manager said the $1.3tn global hedge fund industry plans to develop a viable $50bn Islamic niche market in the next three years.
Hedge Fund Hurricane
Hedge funds are embracing the risk of CAT, or catostrophe bonds, as insurers sell more of the securities to protect themselves from increasingly unstable weather triggered by global warming.
After seeing yields of as much as 40 percentage points more than investment grade debt, investors forecast sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year.
A CAT, or catastrophe bond is high yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. Interest generally ranges between 4 percent and 16 percent.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
Now these investors have placed a billion-dollar bet that another Hurricane Katrina won’t hit the U.S. coastline. A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy.
After the busy 2004 storm season, in which four hurricanes hit Florida, and last year, when hurricanes Katrina and Rita devastated the Gulf Coast, more cat bonds are being issued than ever. If a big-enough storm hits, the investors could lose everything.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
Comments
After seeing yields of as much as 40 percentage points more than investment grade debt, investors forecast sales of catastrophe bonds may triple to $4 billion this year. Hurricane Katrina produced record claims of more than $90 billion last year.
A CAT, or catastrophe bond is high yield debt instrument that usually pays higher yields because investors may lose their entire stake in the event of a disastert it is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. Interest generally ranges between 4 percent and 16 percent.
Invented after Hurricane Andrew devastated the Florida coast in 1992, triggering record losses of $20 billion, catastrophe bonds remained a minor tool for spreading insurance risk for the next decade.
Hedge funds bought the highest risk bonds, those securities carry the highest reward because they cover multiple perils: North Atlantic hurricanes, European windstorms, terrorist related threats, and earthquakes in California and Japan.
Now these investors have placed a billion-dollar bet that another Hurricane Katrina won’t hit the U.S. coastline. A big storm can disrupt energy supplies, causing a major fluctuation in the price of gasoline that sends shock waves through the economy.
After the busy 2004 storm season, in which four hurricanes hit Florida, and last year, when hurricanes Katrina and Rita devastated the Gulf Coast, more cat bonds are being issued than ever. If a big-enough storm hits, the investors could lose everything.
While politicians and scientists argue over the extent to which global warming is changing the planet, the insurance industry has concluded the phenomenon is real.
Comments
Oppenheim to launch internal Hedge Fund
Sal Oppenheim Jr. & Cie. has plans to invest E 150 million with a Zurich based hedge fund that will operate a long short global equities investment. The hedge fund is aiming to raise E 300 million to E 400 million in funds managed, according to sources.
Oppenheim’s investment involves just over 1% of its overall E 136 billion in assets under management. Of Oppenheim’s E 136 billion total assets, £6.3 billion is managed by their Swiss subsidiary.
The in house hedge fund is part of a push at Oppenheim’s Swiss bank into investment banking under Siegfried Piel, a partner in the Swiss subsidiary.
Other private banks such as EFG International, which last week saw its CMA Global Hedge PCC Ltd. raise $402 million in an initial public offering. Vontobel Holding AG, bought a large stake in hedge fund house Harcourt last year, and larger banks such as Swiss giant UBS, have financed hedge funds within their operations as a way of stemming defections of key executives and traders for hedge funds.
Shares at Oppenheim are up in price at period end 2006, at E 81.90, compared with last years E 65.32.
Oppenheim’s investment involves just over 1% of its overall E 136 billion in assets under management. Of Oppenheim’s E 136 billion total assets, £6.3 billion is managed by their Swiss subsidiary.
The in house hedge fund is part of a push at Oppenheim’s Swiss bank into investment banking under Siegfried Piel, a partner in the Swiss subsidiary.
Other private banks such as EFG International, which last week saw its CMA Global Hedge PCC Ltd. raise $402 million in an initial public offering. Vontobel Holding AG, bought a large stake in hedge fund house Harcourt last year, and larger banks such as Swiss giant UBS, have financed hedge funds within their operations as a way of stemming defections of key executives and traders for hedge funds.
Shares at Oppenheim are up in price at period end 2006, at E 81.90, compared with last years E 65.32.
Hedge Funds Dig Mining companies
Terence Ortslan, managing director of TSO & Associates, said in his analysis regarding the mining industry, “There’s a clear message that the market is more interested in cash than in building companies.” this brings to light the growing power of hedge funds in the mining sector.
With a focus on independent mining, minerals and fertilizer research for financial institutions. Ortslan brings a great deal of Investment Industry and technical experience to the world of volatile investment strategy.
An example of major companies looking to hedge funds for financing is Phelps Dodge, the Arizona-based copper producer, who has abandoned it’s pursuit of Inco, leaving Brazil’s CVRD as the only bidder for the Canadian nickel miner.
Phelps joined forces with Inco in June to help finance an improved offer by Inco for Falconbridge, another Toronto-based nickel miner. But they were unable to match a hostile bid by Xstrata, the Anglo-Swiss group, which has bought Falconbridge.
Ortslan said the battles for Falconbridge and Inco illustrated the growing trend in seeking out and using the available cash flow that hedge funds offer.
Inco held out hope that the termination of its friendly deal with Phelps might enable it to drum up interest from other potential buyers. It said management had been authorised to explore “potential value-enhancing alternatives”.
CVRD, which is the world’s largest iron ore producer but has diversified in recent years, has made an all-cash offer of C$86 a share, valuing Inco at C$16.1bn (US$14.6bn).
Terence Ortslan worked as a Senior Mining Analyst with firms such as BBN James Capel, LOM, Merrill Lynch, Deacon Barclays de Zoete Wedd Ltd. and Jones Heward. His Investment Industry experience dates back to the mid 1970’s. He is also a member of the Canadian Institute of Mining and Metallurgy, the Society of Mining and Metallurgical Engineers, the National Association of Business Economists, the Prospectors and Developers Association and the Minerals Industry Analyst Group.
With a focus on independent mining, minerals and fertilizer research for financial institutions. Ortslan brings a great deal of Investment Industry and technical experience to the world of volatile investment strategy.
An example of major companies looking to hedge funds for financing is Phelps Dodge, the Arizona-based copper producer, who has abandoned it’s pursuit of Inco, leaving Brazil’s CVRD as the only bidder for the Canadian nickel miner.
Phelps joined forces with Inco in June to help finance an improved offer by Inco for Falconbridge, another Toronto-based nickel miner. But they were unable to match a hostile bid by Xstrata, the Anglo-Swiss group, which has bought Falconbridge.
Ortslan said the battles for Falconbridge and Inco illustrated the growing trend in seeking out and using the available cash flow that hedge funds offer.
Inco held out hope that the termination of its friendly deal with Phelps might enable it to drum up interest from other potential buyers. It said management had been authorised to explore “potential value-enhancing alternatives”.
CVRD, which is the world’s largest iron ore producer but has diversified in recent years, has made an all-cash offer of C$86 a share, valuing Inco at C$16.1bn (US$14.6bn).
Terence Ortslan worked as a Senior Mining Analyst with firms such as BBN James Capel, LOM, Merrill Lynch, Deacon Barclays de Zoete Wedd Ltd. and Jones Heward. His Investment Industry experience dates back to the mid 1970’s. He is also a member of the Canadian Institute of Mining and Metallurgy, the Society of Mining and Metallurgical Engineers, the National Association of Business Economists, the Prospectors and Developers Association and the Minerals Industry Analyst Group.
Exotic Mortgages and Hedge funds
Hedge funds have been particularly active in the ARM mortgage trade, buying risky loans directly from banks and cutting out the middle men.
These hedge funds are willing to buy risky loans, as they can set their own terms that help insulate them from losses. And the banks make up the difference by taking more from the buyers, many of whom qualify for lower rates based on their credit histories.
Some $182 billion of the option ARMs written in 2004 and 2005 and an additional $83 billion this year have been sold to investors as mortgage-backed securities, says Bear, Stearns & Co.
To get the deals done, banks have turned increasingly to unregulated mortgage brokers such as hedge funds, who now account for 80% of all mortgage originations, double what it was 10 years ago,
Research forecasts total defaults of $300 billion across all types of loans, not just option ARMs, over the next five years, with lenders losing only $100 billion. Leaving the majority of the losses on the homeowners heads, as the less a borrower chooses to pay now, the more is tacked onto the balance, with steep penalties to prevent them from refinancing.
The ARM is an adjustable rate mortgage whose interest rate can go up or down. At first glance, an ARM looks like a good deal next to a fixed rate, as the average ARM rate nationwide is usually less than the average fixed-rate.
With an ARM the payments are lower for the first three or four years, and will stay low, provided interest rates in general don’t increase. If they do, the lender typically will adjust the ARM rate upward by a maximum of 2 percentage points a year, and a max of 6 percent over the entire loan period.
Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year. So after prolonging the boom, these exotic mortgages could worsen the bust.
These hedge funds are willing to buy risky loans, as they can set their own terms that help insulate them from losses. And the banks make up the difference by taking more from the buyers, many of whom qualify for lower rates based on their credit histories.
Some $182 billion of the option ARMs written in 2004 and 2005 and an additional $83 billion this year have been sold to investors as mortgage-backed securities, says Bear, Stearns & Co.
To get the deals done, banks have turned increasingly to unregulated mortgage brokers such as hedge funds, who now account for 80% of all mortgage originations, double what it was 10 years ago,
Research forecasts total defaults of $300 billion across all types of loans, not just option ARMs, over the next five years, with lenders losing only $100 billion. Leaving the majority of the losses on the homeowners heads, as the less a borrower chooses to pay now, the more is tacked onto the balance, with steep penalties to prevent them from refinancing.
The ARM is an adjustable rate mortgage whose interest rate can go up or down. At first glance, an ARM looks like a good deal next to a fixed rate, as the average ARM rate nationwide is usually less than the average fixed-rate.
With an ARM the payments are lower for the first three or four years, and will stay low, provided interest rates in general don’t increase. If they do, the lender typically will adjust the ARM rate upward by a maximum of 2 percentage points a year, and a max of 6 percent over the entire loan period.
Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year. So after prolonging the boom, these exotic mortgages could worsen the bust.
Overstock at Overstock.com
Hedge funds have been practicing a tactic called “naked short selling”, which means selling the same piece of property several times over such as shares in companies like Overstock.com.
Patrick Byrne has been fighting an ongoing crusade against the hedge funds and stock market speculators that use these tactics, since his shares went into freefall 18 months ago. He argues that speculators are using dubious tactics to drive down his company’s share price unfairly.
Naked short selling, or naked shorting, is a controversial form of selling shares of securities short. Some forms of naked short-selling are legal and some are not. The controversy has surrounded naked short-selling aimed at profiting from share price declines.
As Overstock.com’s founder and chief executive, Byrne told the Herald that he is willing to consider yanking his company from the stock market altogether through a management buyout worth well over half a billion dollars.
“Management is certainly reviewing all such options open to us,” he said. “If the right…fund or buyout firm came along and wanted to be our partner, it is something we would look at.”
Byrne says as it is, nearly four Overstock shares have been promised for sale for each real one in public hands. Which has caused a share price collapse when the people who think they own the stock will find they only have an IOU.
This practice discourages the smaller, entrepreneurial companies from coming to the stock market.
Byrne says the Securities & Exchange Commission should have a closer look at these tactics and put a stop to it, he said, “The shorts (speculators) are very tight with the people in the Department of Justice, the SEC, the FBI… Canada, Caribbean…I think this leads back to organized crime in central and eastern Europe. This is all mobbed up.”
Patrick Byrne received a bachelor’s degree from Dartmouth College, a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.
Patrick Byrne has been fighting an ongoing crusade against the hedge funds and stock market speculators that use these tactics, since his shares went into freefall 18 months ago. He argues that speculators are using dubious tactics to drive down his company’s share price unfairly.
Naked short selling, or naked shorting, is a controversial form of selling shares of securities short. Some forms of naked short-selling are legal and some are not. The controversy has surrounded naked short-selling aimed at profiting from share price declines.
As Overstock.com’s founder and chief executive, Byrne told the Herald that he is willing to consider yanking his company from the stock market altogether through a management buyout worth well over half a billion dollars.
“Management is certainly reviewing all such options open to us,” he said. “If the right…fund or buyout firm came along and wanted to be our partner, it is something we would look at.”
Byrne says as it is, nearly four Overstock shares have been promised for sale for each real one in public hands. Which has caused a share price collapse when the people who think they own the stock will find they only have an IOU.
This practice discourages the smaller, entrepreneurial companies from coming to the stock market.
Byrne says the Securities & Exchange Commission should have a closer look at these tactics and put a stop to it, he said, “The shorts (speculators) are very tight with the people in the Department of Justice, the SEC, the FBI… Canada, Caribbean…I think this leads back to organized crime in central and eastern Europe. This is all mobbed up.”
Patrick Byrne received a bachelor’s degree from Dartmouth College, a master’s degree in philosophy from Cambridge University as a Marshall scholar, and a doctorate in philosophy from Stanford University.
SEC Drops Fraud Charges
Paul Flynn, the former Canadian Imperial Bank of Commerce official who was arrested two years ago and charged with five felonies, is free of the legal entanglement which developed at his former job as a managing director at Canadian Imperial Bank of Commerce.
The SEC’s enforcement division, which has three weeks to appeal the ruling to the five-member commission, was seeking to have Flynn fined up to $2 million and banned from the securities industry. The division said in its February 2004 lawsuit that from 2001 to 2003 Flynn “knew or was reckless in not knowing” that the hedge funds, Canary Capital Partners LLC and Samaritan Asset Management were engaging in the improper trades.
But Judge Robert G. Mahony, who presided over a trial in March, ruled that Flynn was not aware that any actions he took helped the hedge funds make improper trades. He ruled that Security Trust, a Phoenix-based retirement plan, and also the two hedge funds, had broken security rules with their trading strategies.
Last November, state Attorney General Eliot Spitzer requested and got the dismissal of five felony counts he had lodged against Flynn. A criminal conviction could have resulted in Flynn, a Canadian citizen, being deported from the United States.
“We are very pleased with the SEC’s decision not to appeal,” he said. “It finally puts an end to Paul’s long nightmare.”
Flynn “is now eager to get back to life as normal, along with his wife and children,” Piper Hall, spokeswoman at Flynn’s Washington-based law firm, Dickstein Shapiro, said in an e-mail.
The SEC’s enforcement division, which has three weeks to appeal the ruling to the five-member commission, was seeking to have Flynn fined up to $2 million and banned from the securities industry. The division said in its February 2004 lawsuit that from 2001 to 2003 Flynn “knew or was reckless in not knowing” that the hedge funds, Canary Capital Partners LLC and Samaritan Asset Management were engaging in the improper trades.
But Judge Robert G. Mahony, who presided over a trial in March, ruled that Flynn was not aware that any actions he took helped the hedge funds make improper trades. He ruled that Security Trust, a Phoenix-based retirement plan, and also the two hedge funds, had broken security rules with their trading strategies.
Last November, state Attorney General Eliot Spitzer requested and got the dismissal of five felony counts he had lodged against Flynn. A criminal conviction could have resulted in Flynn, a Canadian citizen, being deported from the United States.
“We are very pleased with the SEC’s decision not to appeal,” he said. “It finally puts an end to Paul’s long nightmare.”
Flynn “is now eager to get back to life as normal, along with his wife and children,” Piper Hall, spokeswoman at Flynn’s Washington-based law firm, Dickstein Shapiro, said in an e-mail.
Hedge Funds Show Cruise the Money
Less than a week after Paramount Pictures cut its ties with Tom Cruise ended their 14-year relationship, his company announced a deal with First and Goal L.L.C., an investor group headed by Daniel M. Snyder, owner of the Washington Redskins and chairman of the Six Flags amusement parks.
The financing is well under $10 million, according to Paula Wagner, Mr. Cruises business partner. Under the deal, Cruise-Wagner Productions will receive funds to cover overhead and develop new projects. Although she suggested last week that hedge funds were eager to invest up to $100 million in the company, it appeared yesterday that such financing had not yet materialized.
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
Mr. Cruise and Ms. Wagner, though, insisted that they had already decided to start their own company and strike out on their own before Mr. Redstone made the announcement.
The financing is well under $10 million, according to Paula Wagner, Mr. Cruises business partner. Under the deal, Cruise-Wagner Productions will receive funds to cover overhead and develop new projects. Although she suggested last week that hedge funds were eager to invest up to $100 million in the company, it appeared yesterday that such financing had not yet materialized.
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
Mr. Cruise and Ms. Wagner, though, insisted that they had already decided to start their own company and strike out on their own before Mr. Redstone made the announcement.
Hedge Fund Investors Warned of Energy Risks
The Energy Hedge Fund Center recently observed an increasing investor risk, due to the collapse of at least one energy commodity trading hedge fund, and also large reported losses at other funds and banks trading in energy commodities. The Energy Hedge Fund Center LLC offers analysis and consulting services in energy and environment.
This continues to demonstrate that energy is a risky sector for investors. Although many energy hedge funds continue to perform significantly better than funds focused on other asset classes, EHFC Principals, Peter C. Fusaro and Dr. Gary M. Vasey continue to warn investors about the additional and often poorly understood risks involved in energy.
The Energy Hedge Funds Center is set up to provide basic information on hedge funds that are active in the energy industry and trading energy commodities. Hedge Funds are highly secretive and it is difficult to obtain information about them and their strategies. This new InfoGrid, developed and maintained in association with Global Change Associates is the only online community focused on energy and environmental alternative investments.
“To some extent, due diligence has become mechanistic following pre-prepared questionnaires that were designed for more traditional investments,” reports Dr. Gary M. Vasey. “This mechanistic approach also speaks to a lack of understanding on the part of the majority of investors as to the underlying additional risks inherent in the energy industry. Energy is the hot asset class for investing but investors be warned, energy expertise is required to perform proper due diligence and to insure that effective risk mitigation is in place.”
In a recent article published by leading energy and utilities industry analysts and consultants UtiliPoint International, Inc., Dr. Vasey stated, “The moral of the story for investors is simply don’t be greedy and understand and mitigate your risks. This means understanding the energy industry in some detail but it also means performing proper due diligence on the investment vehicle that you chose, especially hedge funds.”
Peter C. Fusaro and Dr. Gary M. Vasey are also the co-authors of “Energy and Environmental Hedge Funds”, “The New Investment Paradigm” published by John Wiley.
Comments
This continues to demonstrate that energy is a risky sector for investors. Although many energy hedge funds continue to perform significantly better than funds focused on other asset classes, EHFC Principals, Peter C. Fusaro and Dr. Gary M. Vasey continue to warn investors about the additional and often poorly understood risks involved in energy.
The Energy Hedge Funds Center is set up to provide basic information on hedge funds that are active in the energy industry and trading energy commodities. Hedge Funds are highly secretive and it is difficult to obtain information about them and their strategies. This new InfoGrid, developed and maintained in association with Global Change Associates is the only online community focused on energy and environmental alternative investments.
“To some extent, due diligence has become mechanistic following pre-prepared questionnaires that were designed for more traditional investments,” reports Dr. Gary M. Vasey. “This mechanistic approach also speaks to a lack of understanding on the part of the majority of investors as to the underlying additional risks inherent in the energy industry. Energy is the hot asset class for investing but investors be warned, energy expertise is required to perform proper due diligence and to insure that effective risk mitigation is in place.”
In a recent article published by leading energy and utilities industry analysts and consultants UtiliPoint International, Inc., Dr. Vasey stated, “The moral of the story for investors is simply don’t be greedy and understand and mitigate your risks. This means understanding the energy industry in some detail but it also means performing proper due diligence on the investment vehicle that you chose, especially hedge funds.”
Peter C. Fusaro and Dr. Gary M. Vasey are also the co-authors of “Energy and Environmental Hedge Funds”, “The New Investment Paradigm” published by John Wiley.
Comments
Fake hedge funds cost Investors millions
Kirk Wright, formerly of supposed hedge fund, International Management Associates, skipped town with between $115 and $185 million after it became clear to many of his clients, which include several prominent National Football League players, that something was amiss with International’s management of their money.
After he was caught three months later by the pool at a ritzy hotel in Florida, U.S. Magistrate Stephen Brown in Miami denied the government’s request for detention on a mail fraud charge, and ordered a $1 million corporate surety bond. But before the bond is granted, Wright must prove the collateral backing the bond comes from legitimate sources.
He now also faces 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars. Additionally, Wright and his company face a federal lawsuit from the Securities and Exchange Commission filed Feb. 27 and a civil complaint filed in Georgia state court on Feb. 17.
Examples of Wright’s alleged duplicity are listed in court documents. When several investors demanded to see brokerage account statements from hedge funds in October, Wright produced statements he said were from online brokerage Ameritrade, showing over $166.6 million in assets spread across five hedge funds. To date, authorities and creditors have located less than $200,000.
In hindsight, there were many red flags at International Management: unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager. Not to mention the lavish wedding reception at his sprawling home, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, and concerts, the Bentley, the Jaguar, the Aston Martin, the BMW, and the Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright’s own mother, who’s not a plaintiff in the suits.
Another fraudulent hedge fund, GLT Venture Fund, pled guilty to federal charges that may have cost investors as much as $14 million, admitting that he lied to investors about the fraudulent operation. More than 40 investors poured money into Capital Management from September 2000 to January 2005, when the company was abruptly closed.
John Sahenk, the alias of former New York University student Hakan Yalincak, cost investors more than $7 million in a fake hedge fund scheme. The FBI seized blank checks and a counterfeit $8.8 million check in Yalincak’s name, prosecutors said. Also seized were 23 credit cards, including 13 in Yalincak’s name, and documents in the name of Yalincak’s alias. He is now pleading guilty.
Prosecutors say Terrence Gasper, chief financial officer of the Ohio state’s $15 billion insurance fund for injured workers is charged with a felony count of violating the Racketeer Influenced and Corrupt Organizations Act. He had tried to keep mounting losses in a hedge fund managed by MDL Financial Management quiet. Those losses ultimately hit $215 million, he also played a central role in the state’s $50 million rare-coin investment and the loss of $216 million of bureau money in a Bermuda-based hedge fund.
The 2006 Financial Executive Report on Risk Management surveyed financial executives about their feelings on hedge funds. Extremely popular today, hedge funds now number more than 8,000. The growth of these largely unregulated investment vehicles has been considerable, more than quadrupling their assets since 1999, today hedge funds manage close to $1 trillion.
Nearly all respondents, 92 percent, feel leery about hedge funds, reporting they do not have any of their personal funds invested in hedge funds. Accordingly, 94 percent of respondents feel hedge funds should be required to have a higher-level of transparency. Many fraud cases are dropped by the courts, as investors carry most of the responsibility as to whom they choose to invest in.
After he was caught three months later by the pool at a ritzy hotel in Florida, U.S. Magistrate Stephen Brown in Miami denied the government’s request for detention on a mail fraud charge, and ordered a $1 million corporate surety bond. But before the bond is granted, Wright must prove the collateral backing the bond comes from legitimate sources.
He now also faces 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars. Additionally, Wright and his company face a federal lawsuit from the Securities and Exchange Commission filed Feb. 27 and a civil complaint filed in Georgia state court on Feb. 17.
Examples of Wright’s alleged duplicity are listed in court documents. When several investors demanded to see brokerage account statements from hedge funds in October, Wright produced statements he said were from online brokerage Ameritrade, showing over $166.6 million in assets spread across five hedge funds. To date, authorities and creditors have located less than $200,000.
In hindsight, there were many red flags at International Management: unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager. Not to mention the lavish wedding reception at his sprawling home, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, and concerts, the Bentley, the Jaguar, the Aston Martin, the BMW, and the Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright’s own mother, who’s not a plaintiff in the suits.
Another fraudulent hedge fund, GLT Venture Fund, pled guilty to federal charges that may have cost investors as much as $14 million, admitting that he lied to investors about the fraudulent operation. More than 40 investors poured money into Capital Management from September 2000 to January 2005, when the company was abruptly closed.
John Sahenk, the alias of former New York University student Hakan Yalincak, cost investors more than $7 million in a fake hedge fund scheme. The FBI seized blank checks and a counterfeit $8.8 million check in Yalincak’s name, prosecutors said. Also seized were 23 credit cards, including 13 in Yalincak’s name, and documents in the name of Yalincak’s alias. He is now pleading guilty.
Prosecutors say Terrence Gasper, chief financial officer of the Ohio state’s $15 billion insurance fund for injured workers is charged with a felony count of violating the Racketeer Influenced and Corrupt Organizations Act. He had tried to keep mounting losses in a hedge fund managed by MDL Financial Management quiet. Those losses ultimately hit $215 million, he also played a central role in the state’s $50 million rare-coin investment and the loss of $216 million of bureau money in a Bermuda-based hedge fund.
The 2006 Financial Executive Report on Risk Management surveyed financial executives about their feelings on hedge funds. Extremely popular today, hedge funds now number more than 8,000. The growth of these largely unregulated investment vehicles has been considerable, more than quadrupling their assets since 1999, today hedge funds manage close to $1 trillion.
Nearly all respondents, 92 percent, feel leery about hedge funds, reporting they do not have any of their personal funds invested in hedge funds. Accordingly, 94 percent of respondents feel hedge funds should be required to have a higher-level of transparency. Many fraud cases are dropped by the courts, as investors carry most of the responsibility as to whom they choose to invest in.
Hedge Funds bet on Government Debt
Hedge Funds bet on Government Debt
Hedge fund speculators at the Chicago Board of Trade bet a record $35 billion that the prices of government debt will continue to rise, according to research by CBOT.
CBOT Holdings, Inc. operates a marketplace for the trading of interest rate, agricultural, equity index and metals, energy and other futures contracts, as well as options on futures contracts through its exchange subsidiary, the Board of Trade of the City of Chicago, Inc.
According to CBOT, hedge funds have 347,559 futures in contracts, and wagered that the price of 10 year Treasury notes would rise, in order to profit on their investment. The contracts would not profit from a decline. Hedge funds wager for or against their stock, meaning they can make money whether the market goes up or down.
The Commodities Futures Trading Commission reported 675,003 bets that prices will rise on 10 year notes. In its Commitments of Traders report from Washington it also said that traders believe two years of interest-rate increases by the U.S. Federal Reserve are slowing growth enough to curb inflation.
In contrast, the total of wagers on a decline were 327,444.
Hedge fund speculators at the Chicago Board of Trade bet a record $35 billion that the prices of government debt will continue to rise, according to research by CBOT.
CBOT Holdings, Inc. operates a marketplace for the trading of interest rate, agricultural, equity index and metals, energy and other futures contracts, as well as options on futures contracts through its exchange subsidiary, the Board of Trade of the City of Chicago, Inc.
According to CBOT, hedge funds have 347,559 futures in contracts, and wagered that the price of 10 year Treasury notes would rise, in order to profit on their investment. The contracts would not profit from a decline. Hedge funds wager for or against their stock, meaning they can make money whether the market goes up or down.
The Commodities Futures Trading Commission reported 675,003 bets that prices will rise on 10 year notes. In its Commitments of Traders report from Washington it also said that traders believe two years of interest-rate increases by the U.S. Federal Reserve are slowing growth enough to curb inflation.
In contrast, the total of wagers on a decline were 327,444.
Tom Cruise looking to Hedge Funds for Funding
Motion picture association Paramount pictures recently ended their 14-year association with Cruise/Wagner Productions, a company that Cruise floated with Paula Wagner. But the energetic and outspoken Tom Cruise has let rumours slip that he and Wagner had already found funding worth $100 million to produce independent films, something that the two had been planning for a while, adding that two hedge funds had already committed to the $100 million.
A recent wave of hedge funds and private equity investment in the business have been popping up to help steady studio film slates, allowing studios to finance pics at stratospheric budgets.
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
As austerity becomes the norm, executives will be forced to rationalize more unconventional projects, or lavish producer deals. The latter may look like a waste of money on Wall Street, but for studios they can mean a steady flow ideas into the system.
The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over US$2 billion globally and were responsible for 15 per cent of the gross income the studio generated in the last 10 years.
Wagner said of the new hedge fund financial plan, “This is something we’ve dreamt of, to have an independently financed production company, where we can decide the films that we make, from high-concept to more personal pictures. I think we’re in the forefront of a trend. For us, this is a very new and exciting direction. We look forward to working with all the studios,”
The Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” with “two top hedge funds.” The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $200 to $300 million per year.
A recent wave of hedge funds and private equity investment in the business have been popping up to help steady studio film slates, allowing studios to finance pics at stratospheric budgets.
Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”
As austerity becomes the norm, executives will be forced to rationalize more unconventional projects, or lavish producer deals. The latter may look like a waste of money on Wall Street, but for studios they can mean a steady flow ideas into the system.
The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over US$2 billion globally and were responsible for 15 per cent of the gross income the studio generated in the last 10 years.
Wagner said of the new hedge fund financial plan, “This is something we’ve dreamt of, to have an independently financed production company, where we can decide the films that we make, from high-concept to more personal pictures. I think we’re in the forefront of a trend. For us, this is a very new and exciting direction. We look forward to working with all the studios,”
The Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” with “two top hedge funds.” The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $200 to $300 million per year.
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