Give him a place to stand, and he will move the world

Actually, the title is the name of the picture, it has nothing to do with the story, I just like it. The article is called "Investing: Hedge funds: market angels or demons?"

The article is from Bloomberg, asking whether hedge funds really the disruptive, destabilizing force their critics make them out to be, or do they help make the financial markets run smoother?

It says, "The beauty of hedge funds is their ability, at least in theory, to operate free from the shackles of the usual emotions and psychology of the marketplace."

A measure of cold calculation may be just what is wanted when most investors get caught up in the emotions of a turbulent market. While the herd is stampeding in one direction, nobody is better equipped than hedge funds to get a little movement going the other way.

Interesting poem.

Chapman Hedge Fund Files Against eSpeed Inc.

Activist hedge fund Chapman Capital, filed a 13-D filing with the Securities and Exchange Commission in a bid to put electronic trading network eSpeed Inc. on the market.

Robert Chapman said his hedge fund, which is eSpeed's biggest shareholder with 9.3%, has begun contacting eSpeed’s competitors to gauge interest in the firm, which has suffered a disappointing recent trading performance.

In its SEC filing, the hedge fund wrote; "Chapman Capital announced its demand that eSpeed maximise shareholder value via a change of control transaction." It also asked the SEC to compel the eSpeed board of directors to convert the company's B shares into A shares. Holders of B shares have 10 votes per share, A shares just one vote.

The hedge fund also said it communicated to Howard Lutnick, the chairman, chief executive and president of eSpeed, its "strong assertion" that, given his "demonstrated failure to perform in his capacity as CEO", eSpeed's long-term shareholder value "should be maximised via a full-scale auction" and that "the company’s ownership base has conveyed a nearly uniform desire for eSpeed’s Class A shares to be maximized through a change-of-control transaction."

Chapman Capital is a $300 million dollar L.A. based hedge fund run by Robert Chapman. Chapman is founder of the "13-D filing" that most activist hedge funds use today. Over the past 10 years, Chapman Capital has agitated successfully for the restructuring or sale of over 20 publicly-traded companies.

IceCapital Launches Alternative Fund

IceCapital Fund Management Company Ltd. announced in a press release on Wednesday that it has launched a new non-UCITS mutual fund, IceCapital Alternative Beta, which offers hedge fund like return, in liquid and risk-transparent form. The fund is the first of its kind in Finland and one of the earliest in Europe.

UCITS - Undertakings for Collective Investment in Transferable Securities - is the name given by the European Union (EU) to pan-European investment funds.

The fund is based on latest research on so-called alternative risk premiums. The strategy is to invest in alternative market risk factors, or alternative betas, with which it is possible to form a portfolio that closely tracks the average performance of hedge funds. At the same time the investor receives extra return, or risk premium, as compensation for risk while benefiting from better diversification than in the traditional equity and bond investments.

"The very fast growth of IceCapital's asset management business is due to quick innovativeness. IceCapital Alternative Beta fund is yet another example of that. At the same time, the fund's broad core-satellite range of investments is supplemented with an attractive active investment", says Managing Director, Jyri Viskari.

Mutual Fund IceCapital Alternative Beta starts on 14 March 2007. The minimum investment amount is 100.000 Euros and the fund is open weekly. The portfolio manager of the fund is ICECAPITAL Asset Management Ltd’s Chief Investment Officer Mikael Simonsen.

IceCapital Asset Management and IceCapital Fund Management are part of the independent IceCapital Group, which focuses on investment banking, asset management and private equity. The group currently manages assets reaching 2 billion Euros.

F&C to Launch More Hedge Funds "As the Need Arises"

F&C Asset Management PLC is planning on launching its first private equity fund of funds product for institutional investors. The new fund will invest in event-driven hedge funds, which bet on M&A, share buy-backs and other corporate events.

The new fund will invest in between 20 and 40 hedge funds selected and monitored by F&C Partners. Alain Grisay, F&C's CEO, said at a press conference: "We are near the completion of our first new European private equity limited partnership." The first soft closing for the fund is expected in a couple of weeks and initial institutional commitment could be in the region of E130 million ($173 million).

F&C is also pursuing alternative investments such as hedge funds with a global diversified fixed income products. "Further hedge funds will be launched as and when we identify the right opportunity", he said. This is part of a three-year plan to focus on specialised and high-fee fund management activities such as hedge funds and LDI's (Liability Driven Investments).

Earlier this month a new portable alpha fund was launched using long/short bets on assets, markets and currencies through the use of derivatives.

"We are convinced that this product has the potential to achieve significant scale," Grisay said. The results for the new strategic plan will be visible by 2009, the CEO pledged.

Lehman Brothers buys 20% of Hedge Fund

Lehman Brothers Holdings Inc. announced on Tuesday that it had bought a 20% stake in hedge fund D.E. Shaw Group, which was formed in 1988 and has about $29 billion in aggregate investment capital. The hedge fund has more than 1,000 employees across the United States and internationally.

D.E. Shaw uses computer programs to find discrepancies in prices among securities. It also invests in distressed debt and makes bets on broad economic trends using stocks, bonds, currencies and commodities.

Lehman Brothers, traditionally seen as a bond house, has invested heavily in alternative investments in recent years, they have minority ownership in four other hedge funds, Spinnaker Capital Group, GLG Partners LP, Ospraie Management LP and Marble Bar Asset Management.

Lehman manages $225 billion, including $9 billion in alternative-investment assets such as hedge funds. That doesn't include money at the firms in which it has minority stakes. Last year, the firm generated $1.4 billion in revenue from asset management, or 8% of total revenue.

The price of the stake wasn't disclosed, though the New York-based firms said in a statement today it would be tied to hedge fund D.E. Shaw's performance.

Hedge Fund Index up for Febuary

According to hedge fund index provider Greenwich Alternative Investments LLC., their Global Hedge Fund Index returned +0.61% in February.

The Greenwich Investable Hedge Fund Index closely tracked the Global Index, returning +0.45% in February and +1.79% year to date, within two basis points of the Global Index return of +1.81% for the year.

“Hedge funds’ downside protection, coupled with their ability to capture market upside, continues to translate into superior risk-adjusted returns." says Ben Rossman, general manager of Greenwich, "Long-biased managers were able to mitigate the effects of February’s declining equities to end the month in positive territory," he said in a press release.

By comparison, both Greenwich Hedge Fund Indices are ahead of the major equity and bond indices for 2007: S&P 500, MSCI World Equity Index, and the FTSE 100 posted returns of -1.96% (-0.48% YTD), -0.65% (+0.46% YTD), and -0.51% (-0.79% YTD), while the Lehman Aggregate Bond Index posted +1.54% (+1.50% YTD). Performance was positive across 12 of the 13 hedge fund strategies followed by the Global Index, with 96% of reporting funds outperforming the S&P 500.

During the last five years the Greenwich Global Hedge Fund Index has produced annualized returns of +9.54% with a maximum drawdown of -4.55%, outperforming the S&P 500, MSCI World Equity Index, and FTSE 100 which have had respective annualized returns of +6.81%, +9.13%, and +3.88%, with more severe drawdowns of -20.15%, -17.24%, and -29.40%.”

Greenwich Alternative Investments, LLC (and its affiliates) manages one of the world's largest hedge fund databases and is among the oldest providers of hedge fund indices, asset management services and research to institutional investors worldwide.

Union leaders to Develop International Response to Growth of Hedge Funds

Amid the spectacular growth of hedge funds investments, trade union leaders from more than 20 countries are to meet at OECD Headquarters in Paris on the 16 March to discuss the impact of hedge funds on employees’ job security and pensions.

In recent weeks the unions have had concerns about the employment impact of buy-outs and questions about hedge fund transparency, corporate governance and sustainability.

Concerns have also been raised at the increasing amounts of pension fund money being invested in private equity and in hedge funds and the working women and men whose employment, rights and working conditions may be threatened by the behavior of these funds.

"We are looking at the feasibility of an international response that includes information and consultation rights for workers and appropriate regulation and taxation by governments." said John Evans, General Secretary of the Trade Union Advisory Committee to the OECD, co-organizers of the event.

TUAC said in a press release, "Union concern has mounted at the employment impact of buyouts by what are often shadowy investors using borrowed money. Concerns have also been raised at the increasing amounts of pension fund money being invested in private equity and in hedge funds."

Speakers will include experts from the OECD as well as John Monks, General Secretary of the European Trade Union Confederation and Ron Blackwell, Chief Economist of the American Trade Union Center, the AFL-CIO. The TUAC represents 66 million workers in 56 affiliated trade union organizations in the 30 OECD member countries.

Activist Hedge Fund To Sell Stocks in Gartmore

Activist hedge fund Carrousel Capital had agreed to sell its shares in £386 million ($744.8 million) Gartmore European Investment Trust, refusing the option of a tender offer to close out its position at a tight discount. The hedge fund currently owns 28.03% of Gartmore and is its biggest shareholder.

Carrousel Capital said in informal talks with Gartmore that the hedge fund had plans to buy into the trust, then restructure it into an umbrella fund which could offer a range of investment mandates. However, Gartmore's European shareholders voted against proposals by Carrousel to put three new directors on the board to carry out the plan.

Bruno Sanglé-Ferrière, CEO of Carrousel said in a letter to shareholders, "Carrousel is not seeking, and has never sought, control of the fund. Neither is it seeking to wind-up the fund as has been suggested in some quarters. Carrousel's interest in the fund has already had a beneficial effect. Shareholders have seen the NAV discount narrow from 9% to less than 3% since we invested."

However, after the vote to sell the hedge fund's entire holding he said, "It's not a change of strategy. We tried to put people on the board and we failed. We want to put that behind us and close that chapter."

Judge Orders Hedge Fund Disclosure In Northwest Case

Judge Allan Gropper of the U.S. Bankruptcy Court in New York ordered hedge funds to disclose the details of their holdings in Northwest Airlines. "Any interest that individual committee members may have in keeping this information confidential is overridden."

Gropper's ruling enforces Bankruptcy Rule 2019, which says parties acting as a group must disclose certain information about their holdings. The decision requires the 13 hedge funds on the committee to make public information about trading patterns, holdings and pricing, which hedge funds, as a rule, prefer to keep secret.

The judge denied a request by the hedge fund committee, led by Owl Creek, who argued that forcing sophisticated investors to disclose trade information may hurt the secondary market for trading claims and equity. Gropper gave the funds until Wednesday to publicly state their stakes in Northwest, along with when and at what price they bought the securities.

Northwest Airlines said that it expected to be worth roughly $7 billion when it emerged from bankruptcy later this year and that it would pay unsecured creditors roughly three-quarters of what they were owed. The unsecured creditors also objected to sealing the documents, arguing that the public had a right to know how the hedge funds came to own about $264.7 million in claims, 30% of the airline's stock.

The hedge fund group collectively owns about 23 million Northwest shares, according to a court filing in January.

Hedge Fund Analyst Claims Flaws in SEC Rules

Hedge Fund Analyst Justin Meyer submitted public comments on an SEC Rule Proposal that would change the standards for who could invest in a hedge fund, raising the minimum net worth values.

Meyer is the Senior research analyst for IncreMental Advantage, a Princeton-based best practices think tank that publishes and speaks on breaking developments in issues ranging from hedge funds to water utilities. He said, "The idea behind accredited investors is a good one, but the concept is flawed," said Meyer. "The SEC wants to equate net worth, or investable income with investment acumen. The two simply are not related."

In the existing public comments, there is a frequently-seen criticism of this proposed rule: the idea that investable income is equal to investment ability (or put another way, that money does not equal intelligence.)

Hedge funds are growing more and more sophisticated every day. There is no denying this, Meyer said, "It makes sense for the Commission to want to protect investors who might not be able to make a fully informed decision no matter how much information they are given, to ensure that those who are investing in funds that trade in high-risk ventures are not going to go broke if this investment fails."

Mr. Meyer continued, discussing what really mattered in hedge fund investing, saying that due diligence was the most important thing. "The rule is meant to ensure that someone investing in a 'risky' investment understands that risk and can absorb it if they lose their money."

"However, the key to understanding risk isn't having $5 million or $10 million. It's examining the investment and looking at who you are entrusting your money to, looking at how much risk they are taking on with the investment and how they manage the risk." Meyer said.

Major Shareholder Hedge Fund Buys Company

ValueAct Capital Management, a group of hedge funds based in San Fransisco, announced yesterday that they have agreed to buy Catalina Marketing Corp at $1.7 billion in cash or $32.10 a share, a 7.5% premium over the company's closing price of $29.85.

The hedge fund group also agreed to assume $135-million in debt from the St. Petersburg company known for its printers that dispense coupons and color ads in store checkout counters. ValueAct is also Catalina's biggest shareholder.

ValueAct is known for its activist slant and their strategy is to buy large stakes in undervalued companies and then work with the management to boost performance. Founded in 2000, the hedge fund manages some $1.5 billion on behalf of institutional and wealthy individual investors.

Dick Buell, chief executive officer of Catalina said that going private will allow the company to invest aggressively and grow with long-term goals, without the fear of Wall Street backlash.

The company said it expects the deal to close in the next several months, subject to approval by stockholders. Catalina joins a growing trend of public companies looking to go private.

New Hedge Fund Platform

SuperDerivatives announced the launch of First Cross-Asset, Turnkey Derivatives Platform for Hedge Funds and Asset Managers.

SD-Funds said in a press release that the platform is a breakthrough in hedge-fund technology. It includes all pre-trade and post-trade activities with features specifically designed for hedge fund and asset managers, covering all assets and derivatives classes. Backward testing of strategies allows accurate retroactive performance comparison of alternative derivatives trading strategies, based on detailed historical 12-year market data.

"We've created an extremely rich multi-asset solution for hedge funds and asset managers,..I am certain that SD-Funds will have a huge, positive impact on the hedge fund and asset management industries." said David Gershon, President and CEO of SuperDerivatives.

Hedge Funds To Oust "Grand Theft Auto" CEO

Shares in the makers of the video game "Grand Theft Auto", Take-Two shot up nearly 8%, from $1.34, to $18.95 yesterday. The increase came immediately after investors including Steven Cohen's SAC Capital Advisors LLC and David Shaw's D.E. Shaw & Co., both hedge fund managers, announced the plan to remove the embattled video-game designer's CEO in a regulatory filing.

A group of high-profile hedge funds that collectively control about 46% of Take-Two Interactive Software has launched a proxy battle to "review the employment status" of CEO Paul Eibeler and CFO Karl Winters.

In addition to the management changes, the hedge fund group also is seeking to appoint a total of six board members. They plan to present their nominees at Take-Two's March 23 board meeting. The slate includes media honcho Strauss Zelnick, Benjamin Feder, Jon Moses, Michael Dornemann and Michael James Sheresky.

"Management has sort of lost the faith of the investor community,'' said Todd Mitchell, a Kaufman Brothers LP analyst in New York, in an interview. "A shake up would be a positive thing,'' said Mitchell. The investor group began forming in early February after veteran activist Carl Icahn floated the idea of agitating for change. At one point in 2006, he had 2.8 million shares.

Take-Two also remains the subject of a criminal investigation by the New York district attorney’s office regarding stock options backdating and possibly broader issues. The S.E.C. also has started an informal investigation into the video game company.

Hedge Fund N.I.R. Group Scores Highest %Increase

As combined assets at the largest U.S. hedge funds finally crossed the trillion-dollar mark, some are doing better than others. According to the bi-annual hedge fund survey by industry publication, Absolute Return, N.Y.-based NIR Group scored the biggest increase in raw percentages, a 789% increase.

The firm, run by Corey Ribotsky, manages a handful of Roslyn, N.Y. hedge funds with $630 million under management and approximately $622 million in PIPEinvestments.

Ribotsky also launched a credit opportunities fund last year. Under his direction, the firm raised more than $3 billion for the fund, expanding to $3.62 billion from $407 the previous year earlier, a 789% increase.

Ribotsky, 36, is the Managing Member of N.I.R. Group, LLC, a boutique investment management firm. Mr. Ribotsky has been investing in public companies since 1992. Prior to becoming a member of N.I.R., Mr. Ribotsky was a member of the investment management firm, The Rainmaker Group, LLC located in Red Bank, New Jersey.

The N.I.R. Group has offices in Roslyn, New York. Both R&C Advisors, LLC and R&C Investors, LLC are based in New York.

Hedge Funds Driving Bank Stocks Up 50%

Hedge funds have acquired around 7% in Landesbank Berlin, the hedge funds hope to profit following the sales process, as the new majority stakeholder will be obliged to make minority shareholders a buyout offer, a report said.

The unnamed hedge funds are positioned to profit from the sale regardless of who buys the bank and their acquisitions have pushed the price up more than 50% to €7.57 in the past six months. The price values the bank at €7.6bn ($10bn), far more than its €4bn to €5bn price-tag.

The city state must sell its 81% stake in Landesbank Berlin by the end of this year to conform with EU directives. The sale is being closely watched in the financial sector because Landesbank Berlin owns Berliner Sparkasse and therefore represents the first real opportunity for private banks to enter the previously protected public savings bank sector.

"The free-float is firmly in the hands of hedge funds by now," said one adviser to a potential bidder, who declined to be named.

However, the small free-float, and the lack of liquidity has deterred hedge funds from taking big stakes while political risk has prevented the shares rising higher, according to one hedge fund adviser.

Hedge Fund Citadel Buys Bankrupt Company

Citadel Investment Group has topped Credit Suisse in an auction, agreeing to pay about $180 million for bankrupt ResMAE Mortgage Corp.

Citadel, a $13.4 billion Chicago-based hedge fund, said they will allow ResMAE, the bankrupt subprime mortgage lender, to work as an autonimous unit and allow founders Jack Mayesh and Ed Resendez to stay in control of the company. Subprime loans are offered to borrowers with spotty credit and lower incomes, the sector has descended into crisis as interest rates climbed from record lows.

ResMAE filed for bankruptcy in February, the firm said in the filing that it planned to sell most of its assets to Credit Suisse. However, hedge fund Citadel offered to pay $22.4 million, a break-up fee of up to $1.5 million plus ResMAE loans for 98.5% of their face value, or roughly $160 million.

U.S. Bankruptcy Judge Kevin Carey in Wilmington, Delaware, approved the sale on Monday afternoon, "Our financial support of ResMAE during this reorganization will allow one of the industry's leaders to remain appropriately capitalized to meet the needs of this very important market," Citadel's Ken Griffin said in a statement.

Other hedge funds are also expanding into this area, in July, hedge fund Fortress Investment Group LLC paid $554.3 million for the subprime lending arm of Dallas-based homebuilder Centex Corp. Then in December, Fortress also bought Champion Mortgage's loan- underwriting business from KeyCorp.

Since its founding as a $4.6 million convertible arbitrage fund in 1990, Citadel has grown into a sophisticated alternative investment institution. The hedge fund has seven main areas of focus including equities, fixed income and energy trading.

Survey Shows US Hedge Funds to Hold $1,200 Billion In Assets

The biannual survey of US hedge funds shows that 241 firms, each managing more than $1bn, held a combined total of nearly $1,200bn as of January 1.

According to a new survey conducted by Absolute Return magazine, money continued to flow steadily into alternative investments last year, causing the combined assets of the largest US hedge funds to climb well above the $1,000bn mark.

That is about $215bn more than the top 218 firms were managing this past summer and $347bn more than the top 207 firms were running at the beginning of last year. The huge increases last year came in spite of hedge fund closures, including that of $9.1bn Amaranth Advisors, which erased $35bn from the market.

The biggest new launch of last year, Convexity Capital Management, joined the top-60 US hedge funds in its first year, making it the most successful hedge fund launch in history, raising $6.3bn.

The top 20 firms, which held $258bn last January, now manage nearly $386bn. There are now 29 firms that run more than $10bn, up from 16 last year, and well ahead of the 12 that managed such large huge sums in July 2005.

In the number one spot JPMorgan unseated Goldman Sachs as the world's largest manager of hedge fund assets, with $34bn under management.

Hedge Fund Manager Merger Creates the World's No 2 Visitor Attraction Company

Some of the biggest brand names in the global theme park market today announced a partnership of two rapidly growing businesses, The Tussauds Group and Merlin Entertainments Group, making them the world's second biggest attractions operator after Disney.

Merlin Entertainments Group is known for theme parks such as Legoland, Sealife and several others. The company is controlled by hedge fund manager Blackstone Group.

On the merger with Merlin, international investment company Dubai International Capital LLC said, "Tussauds and Merlin are very complementary businesses and there is an obvious commercial logic in bringing them together."

The Tussauds Group is controlled by Dubai International which is known for its $1.23 billion acquisition of Travelodge, its $1 billion stake in DaimlerChrysler, and the $1.2 billion acquisition of Doncasters Group.

The Blackstone Group has raised a total of more then $67 billion for hedge fund and alternative investments since its formation. The group is currently investing its fifth general private equity fund with commitments of $15.6 billion. Other private equity investments in the leisure sector have included Universal Studios in Orlando, and Six Flags Theme Park.

High Fees Reduce the Attractiveness of Hedge Funds

A recent study on the effect of the fees that hedge funds charge, “Portfolio Efficiency With Performance Fees,” was conducted by Mark Kritzman, president and chief executive of Windham Capital Management, a Boston-based money management firm.

Mr. Kritzman’s study shows that hedge funds’ high fees make it unlikely that investors will improve their long-term performance by putting money into hedge funds. Focusing on the standard fee arrangement in the industry, known as “2 and 20″, which is to charge 2% of assets under management and 20% of profits above a predetermined benchmark, Mr Kritzman found that the combined impact of such fees is so high as to greatly reduce the attractiveness of hedge funds.

In an interview with the New York Times, Mr Kritzman said the fees’ effect on the portfolio was so sizable because of the “asymmetry penalty” resulting from the 20% cut of profits that the hedge funds earn. The funds do not share in investor losses, but they reap a large share of the profits.

The study was similarly disparaging about funds of hedge funds, saying he found it difficult to justify any allocation to funds of hedge funds, because they earn fees above and beyond those earned by the hedge funds in which they invest, typically 1% of funds under management and 10% of profits above a benchmark. The bottom line, Mr. Kritzman told the New York Times, is this: “Because of fees, the optimal allocation to a group of hedge funds is a lot lower than you might think it should be.”

Disclosure Ruling Has Hedge Funds Retreating

Judge Allan Gropper of the U.S. Bankruptcy Court in New York this week ordered a group of hedge funds that were demanding the formation of a shareholders committee to disclose all of their holdings in the airline, when they were purchased and for how much.

Soon after the disclosure ruling the hedge fund shareholders withdrew their motion to have a say in the payment deals after the Northwest Airline Corp reorganization. Hedge funds are known for their fiercely guarded trading secrets and so far have succeeded in resisting regulation.

The shareholder group led by Owl Creek hedge fund has said it holds a total of 30% of Northwest's stock and about $164.7 million in claims. Northwest said shareholders will receive nothing and existing shares will be canceled upon the carrier’s exit from bankruptcy.

Gropper's ruling would enforce Bankruptcy Rule 2019, which says parties in a Chapter 11 case acting as a group must disclose certain information about their holdings. The decision requires the 13 investment funds on the official committee to make public information about trading patterns, holdings and pricing, which hedge funds have labored for decades to keep secret.