According to a report by the Bank of New York, pension plans and nonprofit organizations worldwide are attracted to hedge funds because of the losses that pension plans suffered in the equity bear market after 2000.
The study, “New Frontiers of Risk: The 360° Risk Manager for Pensions and Nonprofits,” found that while market risk remains the foremost concern for plan sponsors, managers are now spending close to 40% of their risk-related time on operational and political considerations, an increase of nearly 20% from five years ago, and about 80% indicate they will increase the time spent on operational risk over the next five years.
The report predicts that by 2010, institutions will put half of the assets directly into a hedge fund and the other half through a fund-of-fund platform. As institutional clients become more confident about investing in the $1.7 trillion hedge fund industry, these clients will increasingly demand that fund-of-hedge-fund companies give tailor-made advice and consultancy service in order to justify their fees.
The Bank of New York and Casey, Quirk & Associates report predicted that institutional investors like pension plans and insurance firms will hold more than $1 trillion of assets in hedge funds by 2010, up from $360 billion now.
According to the study, several factors are influencing the popularity of hedge funds, including the widespread under funding of pension funds. More than half of the participants categorized their funds as “under-funded”.
“The study shows that investors increasingly recognize the non traditional risk factors associated with the global investment landscape. The challenge for all organizations will be embracing this new 360° view and taking the formal steps necessary for eliminating, transferring or managing critical risks,” said Debra Baker, managing director and head of Global Risk Services for The Bank of New York.
The study found that plan sponsors such as hedge funds can ably evaluate fund-wide allocation decisions, broadly monitor market risks, and tap new asset classes with more security and knowledge than ever before. Working together, hedge funds and industry providers are developing advanced analytics and reporting required to quantify risk level and focus on interventions.
Results were compiled from surveys of more than 75 representatives from leading pension institutions and nonprofit organizations from around the world. It is the latest in a series of studies conducted by The Bank of New York, including ones on institutional demand for hedge funds.
16 Nov 2006
15 Nov 2006
Hedge Fund commitee Object to Dura's Bankruptcy Filing
Hedge funds with large holdings in Dura Automotive Systems Inc.’s $1.7 billion debt are protesting the auto parts maker’s plan to finance its bankruptcy, saying the deal threatens to jeopardize their rights.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
A committee made up of hedge funds that claim to own most of Dura’s $225 million in second-lien debt say they don’t like Dura’s plans. Dura listed assets of about $2 billion and debts of $1.7 billion.
The Rochester Hills-based auto parts supplier filed for Chapter 11 protection Oct. 30 with plans for a $300 million debtor-in-possession finance package that would allow it to pay off holders of first-lien debt, who are owed $125 million.
Auto suppliers have drawn more interest lately from private equity firms and hedge funds, an indication that there may be possibillities for the struggling sector to be turned around.
Several firms and hedge funds are vying for control of Delphi, and Visteon Corp. has drawn interest from hedge fund Pardus Capital Management. Lear Corp. recently closed a private stock placement with funds controlled by hedge fund investor Carl Icahn, who is set to become the supplier’s largest shareholder.
US Hedge Fund to parner with Investcorp
Bahrain-based Investcorp has formed an alliance with US hedge fund manager Silverback Asset Management, a convertible arbitrage-focused hedge fund in Chapel Hill, N.C.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
The single manager hedge fund partnership will be run by Elliot Bossen, Silverback’s chief investment officer. Investcorp has approximately $5bn in assets under management, of which around $2bn is proprietary capital.
Mr. Bossen said in a statement that the partnership represents a return to Silverback’s roots of dedicated convertible arbitrage investing and gives it access to Investcorp’s substantial global base of clients.
This “will allow us to effectively manage our liquidity cycles while focusing fully on our top priority of generating superior returns for our investors,” he said.
In addition to its single manager platform, Investcorp has a fund of funds programme. Two other hedge funds that Investcorp has partnered with are Interlachen Capital Group, a multi-strategy firm, and Cura Capital Management, a fixed-income manager.
Silverback Asset management was launched in 2002, having over $237 million in assets this September, according to a filing with the Securities and Exchange Commission.
10 Nov 2006
Man Group Gains Higher than Forecast
Overall gains at Man Group, the world’s largest listed hedge fund, were higher than the company forecast. Sales for the six-month period came in at $10.6 billion, compared with the $10.4 billion forecast in September.
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Harvey McGrath, Man chairman, in an interview with Reuters said, “We are in a market that is growing very rapidly … inflow of assets into these kind of products across the industry is strong,” Man Group, like its hedge fund industry peers, continues to benefit from investors’ ongoing shift away from traditional ways of holding equities and bonds in favour of hedge funds, property and private equity, McGrath said.
According to their statement, Man’s profit before taxes on all operations rose to $766 million (33%) and its recurring net management fee income rose to $452 million (38%).
Assets under management reached $56.8 billion at the end of September and are now estimated at around $58 billion.
McGrath said in a statment “Looking forward we expect Man’s Financial markets to continue to expand and believe that our business model, focused on growing market share, diversifying revenue streams, controlling overheads and exploiting scale advantages will support a continued growth in profitability from this business.”
Women in Hedge Funds
Pomegranate Capital, in a international study by CEO Susan Solovay, found that there are 250 female hedge fund managers worldwide, and wants to open the first fund to invest in hedge funds solely run by women.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
Solovay has gained backing from Fortress and a Monaco-based Safra family to open this first of its kind hedge fund. After researching the performance of hedge funds run by women, Solovay claims that the studies showed women fund managers performed consistenly better than those run by men.
In an interviev with Reuert Stiener, one prospective investor said: “What she is trying to do is launch a business that capitalises on this inefficiency. She feels she can put together a fund of outstanding female managers that don’t have enough investment and build a successful product on the back of this research. Many of the male-run funds are closed whereas the female-run ones still have capacity to take in money.”
She claims that the research showed that male-run hedge funds managers tended to shoot from the hip making big returns one year and poor ones the next. The research, which was undertaken over a period of years, showed women produced more consistent long-term growth with less volatility than those managed by male fund managers. But the research also showed that women struggled to raise the same levels of funding as men.
Pomegranate identified more than 250 funds managed by women, investing in a range of strategies: long/short equity, distressed, special situations, event-driven, global macro and arbitrage.
9 Nov 2006
Hedge Funds and Elections
Democrats have said they will differ from Republicans by being tougher watchdogs of corporate wrongdoing and government spending, recomending heightened scrutiny of sectors such as hedge funds, pharmaceuticals and defense spending.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
The Democrats will want to distinguish themselves from the Republicans early on, but this may not be good for their prospects on Wall Street as leading hedge funds have been making major contributions to the Democratic Party heading up to the midterm elections.
Democrats are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.
The Center on Responsive Politics says about two thirds of the money the top 50 hedge funds have given this election cycle has gone to Democrats. According to politicalmoneyline.com, the DSCC has raised about $25 million more this election cycle than its Republican counterpart. Joe Schocken, a prominent Democratic fundraiser says not just hedge funds, but private equity and other alternative investment groups are giving more.
Nevertheless, according to Wachovia Securities economist Mark Vitner,”there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate and this may explain the stock market’s recent strength.
8 Nov 2006
Indian company Expanding through Hedge Fund Investments
Optical networking vendor Tejas Networks India Ltd. has plans to further expand its operations outside India and into Southeast Asia.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
The Bangalore-based company is said to be raising $20m from India-focused hedge fund Sandstone Capital, followed by a private equity fund buying out existing investors like IL&FS, which holds around 15% stake in the company. Sandstone Capital is one of many investment funds that have sprung up to back Indian startups.
Sandstone Capital is one of the largest India-dedicated investment funds, based in Boston, Massachusetts the company manages capital for U.S. and European universities, foundations and families. Sandstone invests in public and private Indian companies with strong growth prospects.
Tejas Networks was started in 1998 by Guru Raj Deshpande, the founders are Sanjay Nayak, Kumar N Shivrajan, and Arnob Roy. The company has raised funding from investors like Intel Capital, Battery Ventures, ASG Omni, Sycamore Networks, IL&FS and Gabriel Venture Partners.
CEO Sanjay Nayak says the company has won small OEM deals in other emerging markets such as Indonesia and Vietnam, which it will use as a starting point to expand its sales in the region. Tejas is “shipping in the thousands” to OEMs, he says, which include as yet unidentified partners in the U.S. The company has been profitable for the past three quarters and expects to reach $50 million in revenues for the financial year ending in March.
“We believe that the time is ripe for Indian product companies. Tejas has performed very well not only to gain significant market share in the fast-growing but highly competitive Indian telecom market, but has also reached international customers through strong global partnerships”, said Paresh Patel, Managing Director of Sandstone Capital in a statement.
International sales account for around 25% to 30% of the company’s revenues, but “the objective next year is to have an equal split between India and international sales,” Nayak says.
Average Hedge Fund Returns fall Short
According to the recently released data by Hedge Fund Research Inc., hedge funds returned a global average of 1.98% in October, but managers still failed to keep pace with gains by the Standard & Poor’s 500 index and average returns fell short.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
Hedge Funds in Hollywood
Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
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.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.
Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.
Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.
Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”
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.”
One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”
26 Oct 2006
MPs warned against Over-regulation of Hedge Funds
MPs warned against Over-regulation of Hedge Funds
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.
US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”
Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”
A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.
The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.
“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”
It noted that “both countries are rich with opportunity – but also with risk.”
Investors dissatisfied with Fund of Hedge Fund Results
According to Mercer Investment Consulting, a global survey has revealed that despite growing interest in hedge funds, less than a quarter of the pension schemes that invest in them are satisfied with their investment returns.
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
When asked to rate overall satisfaction with their funds of hedge funds manager, the survey of over 180 large pension schemes worldwide found less than half (47%) were satisfied. A further 19% indicating they have not invested in hedge funds yet, but would begin using them within the next two years.
Mercer global head of investment consulting policy Divyesh Hindocha said the lack of satisfaction expressed by investors was likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough.
“While FoHF are attracting a great deal of attention, many investors are unclear about what they wish to achieve by investing in them, and what the funds can realistically deliver,” he said.
“If investors’ objectives are unclear and their expectations are out of kilter with reality, there is scope for disappointment….The survey shows that fund of hedge fund managers can do far more to improve their client servicing skills” Hindocha said.
“Investors want to look under the bonnet to gain a better understanding of a fund’s strategy and operations, but many investment managers are reluctant to disclose full details.”
“Fund managers that are transparent about their strategies and processes are more likely to attract investors and be able to manage their clients’ expectations better.”
25 Oct 2006
Indian Stock Prices Rising
India is at the top of the BSE index in emerging markets with a 30-share benchmark. The country’s trading has recovered from a steep sell off earlier this year to hit a record high last week of 12,994.45.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Philip Ehrmann, a $374.7m fund manager at Jupiter Asset Management said in an interview with Reuters “Given the very high levels of valuation and the strong stock market performance, I think the Indian market is very expensive,”
Ehrmann is former head of Pacific and Emerging Markets at Gartmore where he ran 2 billion pounds in assets. He now manages Jupiter’s Asian portfolio, which was formed after the group split its 73 million pound Far Eastern fund.
The index in India stands at around 16 times 2007 forecast earnings, the growth in the Indian Stock markets undoubtedly helped boost the Indian economy to one of the fastest growing markets in the world.
Around 40 to 50% of the overseas money flowing into the Indian market is through participatory notes, and most of it is coming from hedge funds. Although the Indian authorities continue to modernize its regulatory laws over hedge funds, leading to some positive laws, hedge funds are still a cause for concern not only for the country’s stock markets, but also for the securities and Exchange Board of India [SEBI].
Other emerging markets on the rise according to other of Ehrmann’s recent Gartmore investments are Malaysia, Singapore, Philippines and Indonesia, Korea, Australia, China and Hong Kong.
Hedge Funds to Finance Football Club
Sam Hammam quit his post as Cardiff chairman and has been replaced by Peter Ridsdale as the club prepares for a huge new investment strategy. The identities of the new investors are still unknown, but in a statement Hamman revealed that they are looking to hedge funds to manage Cardiff’s £24m debt in exchange for equity in the club.
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
The statement read: “It has been clear for some time that if Cardiff City Football Club were to fulfil their ambitions to build their new 30,000-seater stadium…there was a requirement to bring new funding into the club… an agreement has now been reached for a debt for equity swap with institutional hedge funds, who have acknowledged the unique huge potential that exists with Cardiff City Football Club.”
Sam Hammam says they are “two or three” London-based financial institutions who specialise in hedge funds. The deal is being brokered by former Football League chairman Keith Harris, now head of investment bank Seymour Pierce. Harris is also advising the Icelandic businessman hoping to buy West Ham United.
Ridsdale said: “We will end up within 12 months being debt-free business and having a new stadium….Sam has taken his shareholding down from 82.5% to not a lot and people who are putting the money in wanted to see a change of management before their investment.” and that the new hedge funds will “become the majority shareholders.”
Hedge Fund wants Board Seat
Hedge fund Basswood Capital Management, a New York hedge fund with about $2 billion in assets under managements, is asking for a boad seat with WCI Communities Inc., due to the company’s “extreme underperformance”.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI’s “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI’s board members “a request it says has been previously ignored…...and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”
WCI is a luxury home builder based in Bonita Springs, recent tradings have been down at $15.87, 16.5 percent below its March 2002 initial public offering price. The company has been progresing steadily downhill,condo defaults are at 4 percent. New orders were down by 80%, and in July, workers were laid off.
Other hedge funds with vested intrest in the issue are Highbridge Capital Management LLC, another activist shareholder with 3% and Wellington Management Co. LLC, with 12.6 percent of WCI.
24 Oct 2006
Hedge Funds see Record Results
Hedge Fund Research(HFR) reported this week that hedge funds took $44.5 billion in the third quarter this year, almost as much as the $46.9 billion invested in the whole of 2005.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
HFR said that hedge fund assets under management grew to $1.34 trillion, the most the hedge fund research firm has seen since its inception in 2003. HFR President Joshua Rosenberg said
“This has been another record quarter and it looks as if it will be a record year,”
Rosenberg also said “While quarterly performance was again less than spectacular, the flow of new assets into the industry remained remarkably strong,.......This may suggest that investors are taking a longer-term perspective with regards to how they allocate assets to hedge funds.”
HFR reported that over half of the new money went to multistrategy funds, equity hedge and event-driven strategies. On average, hedge funds returned just over 1 percent in the third quarter, putting performance this year through the end of September at 7.1 percent.
Funds of hedge funds also had a record quarter for inflows, despite year-through-September returns of just 4.77 percent. They collected $23.8 billion over the quarter, up from $15.6 billion in the second quarter and more than double last year’s net inflow of $9.5 billion.
Two banks set up Hedge Funds
Eastern Europe
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Erste Bank AG, Austria’s Vienna-based lender, has set up a new hedge fund with $30 million of Erste’s own capital on October 1. The Maximum Emerging Alpha Fund will invest 40% of its capital in Central and Eastern Europe.
Erste has put Eastern Europe at the center of its strategy. Last week it paid $2.76 billion to buy Romania’s largest lender, Banca Erste, which has more than $1.3 billion invested in hedge fund Comerciala Romana SA.
Part of the Maximum Emerging Alpha capital will be used to seed new funds, and expects to invest in between 20 and 30 hedge funds at any given time, the company said. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Canada
Harcourt has launched their first onshore fund of hedge funds product structured specifically for Canadian investors. The Belmont Dynamic Growth Fund has aligned itself with the Royal Bank of Canada to offer what the firm believes will be a superior product solution.
The Belmont Dynamic Growth hedge fund was launched on August 1 and is investing in existing Belmont fund of hedge fund managers with long-term performance records. Presently, the portfolio is tactically positioned having exposure to Asia, Europe, US Long/Short Equity, Fixed Income and Market Neutral strategies.
Senator Alarmed by lack of Hedge Fund Transparency
U.S. Senate Finance Committee Chairman Charles Grassley said in a letter to federal agency heads that he plans to look into risks posed by hedge funds to pension funds.
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
Grassley, a republican from Iowa, said in a letter to treasury secretary Henry Paulson and SEC chairman Christopher Cox “to report to him on any transparency requirements facing hedge funds…..Tens of millions of Americans are exposed to the risk of hedge funds through intermediaries such as pension funds, endowments and other investment pools,....The potential for significant losses at our nation’s pension funds due to hedge fund investments could put the retirement security of American workers in jeopardy.’‘
Grassley also sent letters to labor secretary Elaine Chao, commodity futures trading commission chairman Reuben Jeffery, pension benefit director Vincent Snowbarger and six US senators among others.
In an interview with Bloomberg, Grassley said “It’s quite obvious that some hedge funds have problems, maybe even some showing criminal activity,....We want to make sure there’s transparency. Sunshine in the best disinfectant and transparency is our goal at this point.”
19 Oct 2006
German Comapny Moves to Restructure with London Hedge Funds
A group of hedge funds based in London have been restructuring an agreement with Schefenacker, a German vehicle parts company with whom they have investments.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
Many of Schefenacker’s creditors are in London and the group of hedge funds believe it would be easier to organise a speedy restructuring if the company would move its headquarters to the UK. Creditors there can force stakeholders to accept the new plan through a scheme of agreement, which is not possible in Germany.
Schefenacker refinanced $400m after its business came under pressure last year and the bonds and loans were acquired by London and New York hedge funds. Last month, the company issued a dire earnings statement that left rating agencies downgrading its debt to a level that implies the company is close to bankruptcy.
The bonds went from about 80% of face value to 30%, and its loans now trade at about 85% of face value, compared with 103% three weeks ago. Schefenacker said on Monday that there was no formal agreement on such a move yet, and it stressed that any move would not affect its German operations.
Schefenacker has 27 production plants and six engineering centres gobally, employing more than 7,900 people the company supplies to car makers such as DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.
Hedge Funds Involved in Scania/MAN Takeover
The Frankfurter Allgemeine Sonntagszeitung reported that several large hedge funds are buying shares in MAN AG and Scania. Not saying who these hedge funds are, the Frankfurter reports they may now have over 15% of Scania shares. The newspaper also said that hedge funds own a significantly smaller amount of MAN’s shares, without giving a specific percentage.
These numbers may play a role in the decisions made with the 18.7 pct stake in Scania owned by that Volkswagen AG, which is comparable to the hedge fund shares. VW said it would only offer that holding to MAN if the latter’s bid draws commitments from holders of at least 71.3% of Scania’s shares.
Truck maker Scania AB, however is fighting the $12.9 billion bid from rival MAN AG, saying they would pay extra dividend on their shares this year. This special dividend, worth a total of $949 million, makes it more attractive for shareholders to hold on to Scania shares and may force MAN to increase its bid for a second time, analysts say.
Volkswagen, the largest shareholder of both MAN and Scania, wants the two companies to treat the deal as a merger rather than a takeover, asking MAN and Scania to negotiate following MAN’s $10.3bn hostile bid for Scania.
These numbers may play a role in the decisions made with the 18.7 pct stake in Scania owned by that Volkswagen AG, which is comparable to the hedge fund shares. VW said it would only offer that holding to MAN if the latter’s bid draws commitments from holders of at least 71.3% of Scania’s shares.
Truck maker Scania AB, however is fighting the $12.9 billion bid from rival MAN AG, saying they would pay extra dividend on their shares this year. This special dividend, worth a total of $949 million, makes it more attractive for shareholders to hold on to Scania shares and may force MAN to increase its bid for a second time, analysts say.
Volkswagen, the largest shareholder of both MAN and Scania, wants the two companies to treat the deal as a merger rather than a takeover, asking MAN and Scania to negotiate following MAN’s $10.3bn hostile bid for Scania.
Attorney General Creates Hedge Fund Task Force
Connecticut’s attorney general, Richard Blumenthal, is taking a special interest in the “regulatory void” surrounding hedge funds. After the spectacular faliure of the Amaranth Advisors $6 billion hedge fund last month, Blumenthal has used his position to start a task force on hedge funds, although at the moment it’s only an informal group.
Connecticut is home to an estimated $250 billion of the $1.2 trillion under management in hedge funds, according to Chicago’s Hedge Fund Research. Blumenthal says us he’s still in the early stages of studying the issue and would prefer leave it to the federal government rather than taking action himself. “I don’t want to disadvantage Connecticut hedge funds” by imposing excessively burdensome rules, he claims, but “The facts about mammoth losses by Amaranth offer additional powerful and compelling evidence about the need to reform disclosure and oversight requirements.”
It is unclear how hedge fund abuse would play as a political issue as Blumenthal considers running for higher office, but the Wall Street Journal reported last week that 23 of 41 economists surveyed said they think hedge funds need more regulatory oversight. More than once in the past Blumenthal has made statements that suggest he looks at business failure and investing losses as a criminal act.
Connecticut is home to an estimated $250 billion of the $1.2 trillion under management in hedge funds, according to Chicago’s Hedge Fund Research. Blumenthal says us he’s still in the early stages of studying the issue and would prefer leave it to the federal government rather than taking action himself. “I don’t want to disadvantage Connecticut hedge funds” by imposing excessively burdensome rules, he claims, but “The facts about mammoth losses by Amaranth offer additional powerful and compelling evidence about the need to reform disclosure and oversight requirements.”
It is unclear how hedge fund abuse would play as a political issue as Blumenthal considers running for higher office, but the Wall Street Journal reported last week that 23 of 41 economists surveyed said they think hedge funds need more regulatory oversight. More than once in the past Blumenthal has made statements that suggest he looks at business failure and investing losses as a criminal act.
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