Stocks rose on the Tokyo Stock Exchange this week giving the Tokyo market a strong start, catching up with U.S. and other overseas counterparts.
The dollar's upswing versus the yen, which reflects receding expectations for an imminent interest rate cut by the Federal Reserve, provided an additional boost to the market, brokers said.
"The better-than-expected employment data eased worries about the U.S. economic outlook," said Hiroichi Nishi, equity general manager at Nikko Cordial Securities Inc. "But there were few domestic incentives to support the Tokyo market and turnover remained slack. So, many players chose to cash in profits before Japan's fiscal first-half earnings reporting season swings into full gear next week."
Kenichi Hirano, equity general manager at Tachibana Securities Co., pointed out that the market is vulnerable to selling as the recent upturn is providing long-awaited profit-taking opportunities to investors who bought stocks three to six months ago, before the U.S. subprime mortgage market meltdown rattled the global financial markets this summer.
"It will take some time before the market fully absorbs the profit-taking pressure," said Hirano. "But given the improving overseas market environment, the Tokyo market is certain to stay in a long-term uptrend."
Consumer loan companies Promise, Aiful and Takefuji advanced, thanks apparently to short covering by hedge funds.
Meanwhile, Nippon Steel, JFE and Sumitomo Metal Industries slipped, due to speculation that the commercialization of carbon fiber automotive parts may reduce demand for steel. The recent downturn in crude oil prices pushed down Inpex, AOC and Nippon Oil.
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9 Oct 2007
3 Oct 2007
An American Hedge Fund Review
I like the way the book was self published under the "Bull Ship Press" name, I guess Sykes has always been a bit of a madcap entrepreneur. There is a lot of insight and honesty in "An American Hedge Fund", and Sykes has an exciting way of explaining his strategy.
This bit is pretty relevant, "Opportunities come and go. The key is to remain nimble enough to be able to take advantage of situations when they arise."
Besides being the book's official release date, Sykes also announced the closing of the Cilantro fund on October 1st, a day he said, "Will free him from the shackles of SEC regulations he will be able to detail Cilantro's complete trading history- winners and losers."
Rubinstein & Rubinstein Launch Alternative Offshore Fund
Rubinstein & Rubinstein, LLP has launched an offshore alternative investment fund practice which has seen a great deal activity in the past few months.
Taking advantage of a tax treaty between the United States and a foreign government, Rubinstein & Rubinstein established the fund in an offshore jurisdiction, reducing taxation to 1 to 2%. In addition, private placement and foreign registration allowed the fund exemption from S.E.C. and blue sky registration.
One of the fund's highlights being that Asher Rubinstein represented a principal in establishing an international co-investment fund based in New York, London and Dubai. The fund will make investments in private equity buyouts, real estate, aerospace and other sectors. It has also been capitalized by various onshore and offshore investment sources, including "sovereign wealth," i.e., investment by a foreign government.
In addition, Kenneth Rubinstein and Asher Rubinstein represented United States-based principals and foreign- based managers of an investment fund dedicated to investments in the insurance settlement industry.
Kenneth Rubinstein has also developed a proprietary tax strategy to allow tax-free access to offshore deferred compensation assets by hedge fund and private equity fund managers.
The strategy is particularly timely, given the recent calls by members of the United States Congress to increase taxes on the "carried interest" portion of fund managers' compensation. Rubinstein & Rubinstein's tax patent application for this strategy is currently pending before the United States Patent and Trademark Office.
Taking advantage of a tax treaty between the United States and a foreign government, Rubinstein & Rubinstein established the fund in an offshore jurisdiction, reducing taxation to 1 to 2%. In addition, private placement and foreign registration allowed the fund exemption from S.E.C. and blue sky registration.
One of the fund's highlights being that Asher Rubinstein represented a principal in establishing an international co-investment fund based in New York, London and Dubai. The fund will make investments in private equity buyouts, real estate, aerospace and other sectors. It has also been capitalized by various onshore and offshore investment sources, including "sovereign wealth," i.e., investment by a foreign government.
In addition, Kenneth Rubinstein and Asher Rubinstein represented United States-based principals and foreign- based managers of an investment fund dedicated to investments in the insurance settlement industry.
Kenneth Rubinstein has also developed a proprietary tax strategy to allow tax-free access to offshore deferred compensation assets by hedge fund and private equity fund managers.
The strategy is particularly timely, given the recent calls by members of the United States Congress to increase taxes on the "carried interest" portion of fund managers' compensation. Rubinstein & Rubinstein's tax patent application for this strategy is currently pending before the United States Patent and Trademark Office.
Hedge Fund BlackRock Aquisitions Quellos Fund of Funds
Hedge fund investor BlackRock, Inc. today announced that it has completed its acquisition of the fund of funds business of Quellos Group, LLC. BlackRock is calling the combined fund of funds platform BlackRock Alternative Advisors.
Laurence D. Fink, BlackRock’s Chairman and Chief Executive Officer said, “Extreme market volatility over the past couple of months accelerated the opportunity for strategic interactions between our respective investment and risk management professionals and reinforced the value of operating on a unified, global platform."
"In addition, the market environment bolstered our belief that demand for top quality funds of funds and innovative investment solutions will continue to increase. We are excited to welcome our new colleagues and look forward to delivering the tremendous capabilities of BlackRock Alternative Advisors to our clients." Fink said.
BlackRock is one of the world’s largest publicly traded investment management firms. As of June 30, 2007, assets under management were $1.230 trillion. Headquartered in New York City, the firm has approximately 5,000 employees in 18 countries and a major presence in key global markets, including the U.S., Europe, Asia, Australia and the Middle East.
Laurence D. Fink, BlackRock’s Chairman and Chief Executive Officer said, “Extreme market volatility over the past couple of months accelerated the opportunity for strategic interactions between our respective investment and risk management professionals and reinforced the value of operating on a unified, global platform."
"In addition, the market environment bolstered our belief that demand for top quality funds of funds and innovative investment solutions will continue to increase. We are excited to welcome our new colleagues and look forward to delivering the tremendous capabilities of BlackRock Alternative Advisors to our clients." Fink said.
BlackRock is one of the world’s largest publicly traded investment management firms. As of June 30, 2007, assets under management were $1.230 trillion. Headquartered in New York City, the firm has approximately 5,000 employees in 18 countries and a major presence in key global markets, including the U.S., Europe, Asia, Australia and the Middle East.
2 Oct 2007
Alternative Investor Partners With Former Head Currency Trader at Tudor
Alternative investor Last Atlantis Capital Management and Jerry Considine, former head currency trader at Tudor Investment, have partnered to introduce LACM Foreign Exchange, Share Class W within the Last Atlantis Partners Fund.
The share class will be traded by Mr. Considine and seeks to capitalize on near-term opportunities in the global currency futures and foreign exchange markets.
The short-term, largely discretionary methodology was developed by Mr. Considine and has produced consistently non-correlated returns, according to the press release. "It combines fundamental and technical market analysis, sentiment evaluation, crowd psychology assessment, and money management to create a risk-averse investment strategy."
Irwin Berger, managing partner of Last Atlantis said, “Jerry has established an exceptional track record and reputation over the course of his career including stellar turns at Tudor and his own trading firm,.....His currency program adds another quality alternative to our Last Atlantis Partners platform.”
With the launch of this new share class, Mr. Considine continues his nearly 30-year career trading the currency markets.
Last Atlantis Capital Management (St. Thomas, USVI) develops and markets innovative alternative products. Last Atlantis Partners, LLC is master-feeder offering currently providing onshore and offshore investors access to fifteen segregated share classes with individual fund strategies incorporating proprietary and discretionary options, trend following futures, multi-strategy, macro discretionary, credit receivables, real estate financing and others.
The company was founded by managing directors Irwin Berger and Stig Ostgaard, one of the original Richard Dennis “Turtles”, and Last Atlantis Capital, LLC, a professional trading firm with highly-developed systems incubation and trading technology.
The share class will be traded by Mr. Considine and seeks to capitalize on near-term opportunities in the global currency futures and foreign exchange markets.
The short-term, largely discretionary methodology was developed by Mr. Considine and has produced consistently non-correlated returns, according to the press release. "It combines fundamental and technical market analysis, sentiment evaluation, crowd psychology assessment, and money management to create a risk-averse investment strategy."
Irwin Berger, managing partner of Last Atlantis said, “Jerry has established an exceptional track record and reputation over the course of his career including stellar turns at Tudor and his own trading firm,.....His currency program adds another quality alternative to our Last Atlantis Partners platform.”
With the launch of this new share class, Mr. Considine continues his nearly 30-year career trading the currency markets.
Last Atlantis Capital Management (St. Thomas, USVI) develops and markets innovative alternative products. Last Atlantis Partners, LLC is master-feeder offering currently providing onshore and offshore investors access to fifteen segregated share classes with individual fund strategies incorporating proprietary and discretionary options, trend following futures, multi-strategy, macro discretionary, credit receivables, real estate financing and others.
The company was founded by managing directors Irwin Berger and Stig Ostgaard, one of the original Richard Dennis “Turtles”, and Last Atlantis Capital, LLC, a professional trading firm with highly-developed systems incubation and trading technology.
Reuters Hosts Solution for Hedge Fund Trading in Singapore
Reuters and BT announced the launch of the lowest latency Proximity Hosting Solution for hedge funds trading on the Singapore Exchange Limited.
Rama Pillai, Senior Vice President of Intermediaries and Market Access at SGX said, "The Singapore Exchange is seeing an increasing demand for low-latency direct access to our markets by high-frequency traders as well as our traditional customer base. We welcome the Reuters Proximity Hosting Solution."
Edward Haddad, Managing Director, ASEAN, Reuters said, "We recognize the increasing demand for low latency feeds to meet the needs of a growing automated and programmed trading community on the Singapore Exchange. Reuters provides our clients with a complete suite of comprehensive capabilities -- from algorithmic trading tools, such as tick history, tick capture and time-stamped news, to proximity hosting to allow our customers to be first to market."
Demand for trading services that are hosted within close proximity of the exchange is increasing as institutions look to take advantage of low latency data provision and reduced time to trade execution. This enables firms to gain competitive advantage through programmed trading strategies that can consume data and execute trades more quickly.
This proximity hosting solution provides an end-to-end hosted service that is fully managed, and that also allows clients to co-locate their own applications within the Reuters data centre.
Rama Pillai, Senior Vice President of Intermediaries and Market Access at SGX said, "The Singapore Exchange is seeing an increasing demand for low-latency direct access to our markets by high-frequency traders as well as our traditional customer base. We welcome the Reuters Proximity Hosting Solution."
Edward Haddad, Managing Director, ASEAN, Reuters said, "We recognize the increasing demand for low latency feeds to meet the needs of a growing automated and programmed trading community on the Singapore Exchange. Reuters provides our clients with a complete suite of comprehensive capabilities -- from algorithmic trading tools, such as tick history, tick capture and time-stamped news, to proximity hosting to allow our customers to be first to market."
Demand for trading services that are hosted within close proximity of the exchange is increasing as institutions look to take advantage of low latency data provision and reduced time to trade execution. This enables firms to gain competitive advantage through programmed trading strategies that can consume data and execute trades more quickly.
This proximity hosting solution provides an end-to-end hosted service that is fully managed, and that also allows clients to co-locate their own applications within the Reuters data centre.
1 Oct 2007
Growth in IPOs Help European Hedge Funds Gain Ground
According to a press release, the new edition of IFSL's annual report; Financial Market Trends Europe vs. US 2007, shows that in three quarters of indicators, 14 out of 18, financial markets in Europe have been growing faster than those in the US between 2001 and 2006.
The 14 indicators showing improvement in Europe included 8 out of 9 in sectors such as private equity and hedge funds. Funds raised by European private equity companies have moved up from half of funds raised in North America in 2004 to almost equal in 2006.
European hedge fund assets moved up from 12% of US assets in 2001 to 42% in 2006. Growth in European IPOs has been even more dramatic, increasing ten times between 2002 and 2006 and were well ahead of US IPOs in 2005 and 2006.
The short term trend in indicators between 2005 and 2006 was also positive, with business in Europe improving relative to the US in 11 out of 18 activities.
The trend over a number of years demonstrates how London, as the capital for many of Europe's most important wholesale financial markets, is gaining in importance as a global financial center.
The 14 indicators showing improvement in Europe included 8 out of 9 in sectors such as private equity and hedge funds. Funds raised by European private equity companies have moved up from half of funds raised in North America in 2004 to almost equal in 2006.
European hedge fund assets moved up from 12% of US assets in 2001 to 42% in 2006. Growth in European IPOs has been even more dramatic, increasing ten times between 2002 and 2006 and were well ahead of US IPOs in 2005 and 2006.
The short term trend in indicators between 2005 and 2006 was also positive, with business in Europe improving relative to the US in 11 out of 18 activities.
The trend over a number of years demonstrates how London, as the capital for many of Europe's most important wholesale financial markets, is gaining in importance as a global financial center.
28 Sept 2007
FXCM’s Sentiment Aggressive Forex Managed Funds Up Over 25%
After a successful launch, FXCM's Sentiment Aggressive Managed Funds are up over 25% in its first two months since inception.
Clients had requested a more aggressive and highly leveraged version of FXCM's popular Sentiment Fund, so FXCM introduced its Sentiment Aggressive Fund in July of 2007.
These funds are divided into two strategic components, the first leverages FXCM's Speculative Sentiment Index (SSI) which gauges market sentiment to identify break out and trend trading opportunities. The second strategy is an approach that uses sophisticated technical strategies to harvest tops and bottoms in range bound markets.
This type of fund has found favor amongst many investors who are starting to recognize foreign exchange as an alternative asset class in any diversified portfolio.
In September 2006, FXCM held in excess of $215 million in customer funds out of a total of over $770 million held by Forex Dealer Members. While there are approximately 31 active Forex Dealer Members with liabilities to customers of approximately $795 million, FXCM holds approximately 1 out of every 3 dollars of customer funds held by Forex Dealer Members.
The company does warn however, that leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors.
Clients had requested a more aggressive and highly leveraged version of FXCM's popular Sentiment Fund, so FXCM introduced its Sentiment Aggressive Fund in July of 2007.
These funds are divided into two strategic components, the first leverages FXCM's Speculative Sentiment Index (SSI) which gauges market sentiment to identify break out and trend trading opportunities. The second strategy is an approach that uses sophisticated technical strategies to harvest tops and bottoms in range bound markets.
This type of fund has found favor amongst many investors who are starting to recognize foreign exchange as an alternative asset class in any diversified portfolio.
In September 2006, FXCM held in excess of $215 million in customer funds out of a total of over $770 million held by Forex Dealer Members. While there are approximately 31 active Forex Dealer Members with liabilities to customers of approximately $795 million, FXCM holds approximately 1 out of every 3 dollars of customer funds held by Forex Dealer Members.
The company does warn however, that leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors.
Hegde Fund Article Awards
It was announced today in a press release that Lehman Brothers' research on the classification of hedge fund investment styles is one of this year's Martello Award winners for best research article in alternative investments.
Lehman Brothers' research authors Arik Ben Dor, Lev Dynkin, and Anthony Gould showed that there are inconsistencies between the actual and self-proclaimed hedge fund styles. They won the award for Best Practitioner Article, for their article "Style Analysis and Classification of Hedge Funds."
Sharing the honor with Lehman's team for Best Practitioner Article were Ben Branch of the University of Massachusetts Amherst and Taewon Yang of California State University, for their article "Merger Deal Structures and Investment Strategies." The authors found that the level of wealth protection for the target firm's shareholders is likely to improve both the performance of merger/risk arbitrage trading positions and the chance of merger completion.
In the category of Best Academic Article, IXIS Corporate & Investment Bank, a subsidiary of Natixis, took the top award. Florent Pochon and Jérôme Teïletche penned the award-winning article "A Conditional Approach to Hedge Fund Risk." The authors applied a two-step conditional Bayesian approach to hedge fund risk. This approach has several advantages given specific features of hedge funds returns, notably non-linear exposure to standard assets returns and short sample history.
David McCarthy, Managing Partner and Chief Investment Officer of Martello Investment Management L.P., congratulated the recipients, "This year's winners have produced exceptional research that will contribute to investors' understanding of investment strategies and portfolio return and risk characteristics. We wish them continued success."
The annual Martello Award is sponsored by Martello Investment Management L.P., a specialist fund of funds and advisory firm based in Massachusetts. It honors the best research articles published in Institutional Investor, Inc.'s The Journal of Alternative Investments. Winners were chosen by the Editorial Advisory Board of The Journal of Alternative Investments.
Lehman Brothers' research authors Arik Ben Dor, Lev Dynkin, and Anthony Gould showed that there are inconsistencies between the actual and self-proclaimed hedge fund styles. They won the award for Best Practitioner Article, for their article "Style Analysis and Classification of Hedge Funds."
Sharing the honor with Lehman's team for Best Practitioner Article were Ben Branch of the University of Massachusetts Amherst and Taewon Yang of California State University, for their article "Merger Deal Structures and Investment Strategies." The authors found that the level of wealth protection for the target firm's shareholders is likely to improve both the performance of merger/risk arbitrage trading positions and the chance of merger completion.
In the category of Best Academic Article, IXIS Corporate & Investment Bank, a subsidiary of Natixis, took the top award. Florent Pochon and Jérôme Teïletche penned the award-winning article "A Conditional Approach to Hedge Fund Risk." The authors applied a two-step conditional Bayesian approach to hedge fund risk. This approach has several advantages given specific features of hedge funds returns, notably non-linear exposure to standard assets returns and short sample history.
David McCarthy, Managing Partner and Chief Investment Officer of Martello Investment Management L.P., congratulated the recipients, "This year's winners have produced exceptional research that will contribute to investors' understanding of investment strategies and portfolio return and risk characteristics. We wish them continued success."
The annual Martello Award is sponsored by Martello Investment Management L.P., a specialist fund of funds and advisory firm based in Massachusetts. It honors the best research articles published in Institutional Investor, Inc.'s The Journal of Alternative Investments. Winners were chosen by the Editorial Advisory Board of The Journal of Alternative Investments.
27 Sept 2007
600 Energy and Environmental Hedge Funds Now Listed
The Energy Hedge Fund Center, LLC has announced that it is now tracking over 600 energy and Recent trends include the growth of carbon and environmental energy funds and, as the total universe of energy hedge funds has grown and matured funds of hedge funds in the energy and environment sector.
Dr. Gary M. Vasey, co-founder of the Energy Hedge Fund Center, LLC said, "Our breakthrough study of hedge funds in energy issued in late 2004 identified 180 hedge funds, mostly equity long/short and commodity trading vehicles. Since then, the directory has grown three-fold and the types of strategies followed by hedge funds in energy and environment has also grown and matured."
"Today, nothing much has changed in terms of the attractiveness of all aspects of the energy industry for investors and that is reflected in the growing number of hedge funds that operate in the various energy markets and sectors."
Peter C. Fusaro, co-founder of the Energy Hedge Fund Sector and chairman of Global Change Associates in New York said, "We expect more energy commodity and green funds for 2008!.....Despite well publicized energy hedge fund blow ups, we continue to see more investors deploying capital in the energy and environmental sector. We also see the closure to investors of some larger funds and niche strategies which leads to more opportunities for new fund managers in this dynamic sector,"
Since its launch in October 2004, the directory has constantly grown reflecting investor appetite for energy oriented hedge funds.
Dr. Gary M. Vasey, co-founder of the Energy Hedge Fund Center, LLC said, "Our breakthrough study of hedge funds in energy issued in late 2004 identified 180 hedge funds, mostly equity long/short and commodity trading vehicles. Since then, the directory has grown three-fold and the types of strategies followed by hedge funds in energy and environment has also grown and matured."
"Today, nothing much has changed in terms of the attractiveness of all aspects of the energy industry for investors and that is reflected in the growing number of hedge funds that operate in the various energy markets and sectors."
Peter C. Fusaro, co-founder of the Energy Hedge Fund Sector and chairman of Global Change Associates in New York said, "We expect more energy commodity and green funds for 2008!.....Despite well publicized energy hedge fund blow ups, we continue to see more investors deploying capital in the energy and environmental sector. We also see the closure to investors of some larger funds and niche strategies which leads to more opportunities for new fund managers in this dynamic sector,"
Since its launch in October 2004, the directory has constantly grown reflecting investor appetite for energy oriented hedge funds.
26 Sept 2007
Hedge Funds Backup Habitat For Humanity
An initiative by the hedge fund community to provide New York City families with home ownership opportunities through Habitat for Humanity NY, has announced the launch of a campaign called Hedge Funds for Habitat.
Most immediately, this campaign will help Habitat-NYC complete its 41 unit affordable condominium buildings on Atlantic Avenue in Ocean Hill-Brownsville, Brooklyn, a $13 million state-of-the-art green complex and the largest multifamily complex ever constructed by any Habitat affiliate.
Championed by Stuart Feffer, co-chief executive officer of Lacrosse Global Fund Services, Hedge Funds for Habitat NY is calling on supporters from hedge funds, private equity firms and the service provider community who recognize that there are many working families in New York City living in unsafe and overcrowded conditions whose lives will be forever changed with a Habitat home.
“Our initial goal is to help Habitat-NYC give 41 hardworking families a safe place to live, the opportunity to realize their dreams of home ownership and the ability to secure their future,” Feffer said. “Hedge fund professionals know that investing in human capital is key to the success of our industry... and our city. Safe, decent and affordable homes will help New York’s working families to thrive. And that helps all of us flourish.”
“Habitat-NYC is proud to partner with Stuart Feffer, LaCrosse Global Fund Services and New York City’s hedge fund industry,” said Josh Lockwood, acting executive director of Habitat-NYC. “This unique collaboration unites hedge fund leaders.”
Living up to the Habitat motto “we give a hand up, not a handout,” future homeowner families will work alongside volunteers to construct their own simple, decent and affordable homes. The Hedge Funds for Habitat campaign will help underwrite the recruitment, selection and financial literacy training of the 41 first-time home buyers and help enable Habitat-NYC to complete these “green” condominiums.
Designed by Dattner Architects, construction includes energy efficient and environmentally friendly materials and design. The complex is expected to qualify for a LEED rating, which will allow the homeowners to save up to 30% on their energy bills and raise their families in a healthy home.
Most immediately, this campaign will help Habitat-NYC complete its 41 unit affordable condominium buildings on Atlantic Avenue in Ocean Hill-Brownsville, Brooklyn, a $13 million state-of-the-art green complex and the largest multifamily complex ever constructed by any Habitat affiliate.
Championed by Stuart Feffer, co-chief executive officer of Lacrosse Global Fund Services, Hedge Funds for Habitat NY is calling on supporters from hedge funds, private equity firms and the service provider community who recognize that there are many working families in New York City living in unsafe and overcrowded conditions whose lives will be forever changed with a Habitat home.
“Our initial goal is to help Habitat-NYC give 41 hardworking families a safe place to live, the opportunity to realize their dreams of home ownership and the ability to secure their future,” Feffer said. “Hedge fund professionals know that investing in human capital is key to the success of our industry... and our city. Safe, decent and affordable homes will help New York’s working families to thrive. And that helps all of us flourish.”
“Habitat-NYC is proud to partner with Stuart Feffer, LaCrosse Global Fund Services and New York City’s hedge fund industry,” said Josh Lockwood, acting executive director of Habitat-NYC. “This unique collaboration unites hedge fund leaders.”
Living up to the Habitat motto “we give a hand up, not a handout,” future homeowner families will work alongside volunteers to construct their own simple, decent and affordable homes. The Hedge Funds for Habitat campaign will help underwrite the recruitment, selection and financial literacy training of the 41 first-time home buyers and help enable Habitat-NYC to complete these “green” condominiums.
Designed by Dattner Architects, construction includes energy efficient and environmentally friendly materials and design. The complex is expected to qualify for a LEED rating, which will allow the homeowners to save up to 30% on their energy bills and raise their families in a healthy home.
Bear Stearns Hires New Hedge Fund Manager
Bear Stearns today announced new additions to their staff, among others, Douglas C. Stern, a senior managing director and industry veteran who will help manage the prime brokerage sales team focused on the firm’s largest hedge fund relationships.
“Bear Stearns Prime Brokerage Services offers clients the best products and service by top professionals in the business,” said Louis Lebedin, head of Prime Brokerage Services. “These additions to our staff will add terrific value to our franchise and will help us to provide clients with more world-class products and capabilities.” The strength of the prime brokerage franchise contributed to record revenues for Bear Stearns’ Global Clearing Services division for the third quarter of 2007.
Douglas Stern, who has 23 years experience in institutional sales and prime brokerage services, joins from Morgan Stanley’s prime brokerage unit, where for seven years he was responsible for managing relationships and developing business with some of that firm’s largest clients. He also managed a team responsible for newly launched hedge funds. Mr. Stern holds a B.A. in Economics from St. Lawrence University.
In the 2007 Global Custodian Prime Brokerage Survey, Bear Stearns was ranked the No. 3 prime broker globally and was awarded 50 out of a possible 72 “Best in Class” awards. In the latest Lipper HedgeWorld Prime Brokerage survey, Bear Stearns was the leading prime broker by assets for U.S. hedge funds and the No. 2 prime broker for the largest non-US funds.
“Bear Stearns Prime Brokerage Services offers clients the best products and service by top professionals in the business,” said Louis Lebedin, head of Prime Brokerage Services. “These additions to our staff will add terrific value to our franchise and will help us to provide clients with more world-class products and capabilities.” The strength of the prime brokerage franchise contributed to record revenues for Bear Stearns’ Global Clearing Services division for the third quarter of 2007.
Douglas Stern, who has 23 years experience in institutional sales and prime brokerage services, joins from Morgan Stanley’s prime brokerage unit, where for seven years he was responsible for managing relationships and developing business with some of that firm’s largest clients. He also managed a team responsible for newly launched hedge funds. Mr. Stern holds a B.A. in Economics from St. Lawrence University.
In the 2007 Global Custodian Prime Brokerage Survey, Bear Stearns was ranked the No. 3 prime broker globally and was awarded 50 out of a possible 72 “Best in Class” awards. In the latest Lipper HedgeWorld Prime Brokerage survey, Bear Stearns was the leading prime broker by assets for U.S. hedge funds and the No. 2 prime broker for the largest non-US funds.
25 Sept 2007
“Hedge Funds Demystified”
Applied Learning announced today the launch of the “Open Course” Program, the first course being, “Hedge Funds Demystified”. It will run in London on December 4tt offering tutors of outstanding caliber and experience. It will be the first time Applied Learning has opened its courses to institutional clients and (individual) financial professionals.
The one-day course will allow delegates to get an insider’s insight into how hedge funds really work, the different investment strategies and techniques hedge funds employ, who invests in hedge funds, and why. Understanding different hedge fund investment styles will be addressed, as well as the regulation and risk management of the hedge fund sector.
Gerald Ashley, director at Applied Learning says, “ While we do not expect Northern Rock style queues, we are seeing a lot of interest in training in understanding risk and behavioral finance. The current market turmoil is an ideal backdrop for launching this course. Investment professionals need facts, not half- baked opinions and vague rumors about how hedge funds really operate. This course is the right topic, with the right content, with the very best trainer and critically, available at the right time.”
This will be the first time that a wider audience will be able to attend Applied Learning training courses. The training company has established a solid reputation as a high quality provider of professional level training for the world’s major banks and trading institutions. Now it brings innovative and specialized training, which in the past was available only in-house, to financial markets professionals.
Future topics in the Program will include specialist training on credit derivatives, behavioral finance and commodity investment. The Open Courses will be initially available in London with plans to roll out to other financial centers in 2008.
The one-day course will allow delegates to get an insider’s insight into how hedge funds really work, the different investment strategies and techniques hedge funds employ, who invests in hedge funds, and why. Understanding different hedge fund investment styles will be addressed, as well as the regulation and risk management of the hedge fund sector.
Gerald Ashley, director at Applied Learning says, “ While we do not expect Northern Rock style queues, we are seeing a lot of interest in training in understanding risk and behavioral finance. The current market turmoil is an ideal backdrop for launching this course. Investment professionals need facts, not half- baked opinions and vague rumors about how hedge funds really operate. This course is the right topic, with the right content, with the very best trainer and critically, available at the right time.”
This will be the first time that a wider audience will be able to attend Applied Learning training courses. The training company has established a solid reputation as a high quality provider of professional level training for the world’s major banks and trading institutions. Now it brings innovative and specialized training, which in the past was available only in-house, to financial markets professionals.
Future topics in the Program will include specialist training on credit derivatives, behavioral finance and commodity investment. The Open Courses will be initially available in London with plans to roll out to other financial centers in 2008.
24 Sept 2007
AEGON launches the UK's first Ethical Cautious Managed fund
AEGON Asset Management has announced the coming launch of the UK’s first Ethical Cautious Managed fund to the retail market on 1 March 2007.
The Ethical Cautious Managed fund marks another first for AEGON Asset Management, which was also the first to launch an Ethical Corporate Bond fund in April 2000, a move since copied by many of its rivals.
It is one of three new funds AEGON Asset Management is bringing to the market, which also includes a UK Cautious Managed fund and a UK Opportunities fund.
The UK Cautious Managed and Ethical Cautious Managed funds have been launched in response to demand from UK investors and advisers for lower risk managed funds as an alternative to with-profits and cash investments. They aim to provide a relatively safe and steady return through a low volatility investment strategy with a maximum of 60% of the funds held in equities and 40% in fixed income.
Both Cautious Managed funds build on AEGON Asset Management’s recognized capabilities in the UK equity and fixed income sectors. The Ethical Cautious Managed combines AEGON Asset Management’s stringent ethical criteria with a cautious investment philosophy, bringing together the expertise of both its Ethical Equity team and its Ethical Corporate Bond team.
Audrey Ryan will manage the Ethical Cautious Managed fund, supported by Iain Buckle. Audrey also runs AEGON Asset Management’s Ethical Equity fund, which is AA rated by Forsyth-OBSR and has achieved consistent strong top quartile performance over one, three and five years*. Iain Buckle is also the support manager of AEGON Asset Management’s Ethical Corporate Bond Fund, which is AA rated by Forsyth-OBSR.
The Ethical Cautious Managed fund intends to take an unconstrained investment approach, capitalizing on the recognized research capabilities of the UK equity team.
Ryan said, “The Ethical Cautious Managed fund will aim to take advantage of our experience and in-depth knowledge of the UK equities market without any benchmark constraints. It will be a high conviction, stock-picking fund with no sector or stock limits and have an ideal range of 50 to 60 stocks at launch.”
Jon Bennett, AEGON’s director of third party business, said, “We believe there is significant demand from advisers and investors for a real and viable alternative to with-profits and cash investments. At AEGON Asset Management, we are well placed to deliver this alternative, with our recognized strength in the fixed income market and growing reputation for UK equities.
To mark the launch of these new funds, early investors will benefit from a 2.5% discount reducing the initial charge to 3% until 30 April 2007. This means that if the 3% initial commission is rebated there are zero up-front costs for the investor.
AEGON Asset Management UK's assets under management totaled more than £40.4 billion ($8.1 billion). The company's activities are divided into three business areas, Institutional Business, Insured Business and Retail-Fund Business.
The Ethical Cautious Managed fund marks another first for AEGON Asset Management, which was also the first to launch an Ethical Corporate Bond fund in April 2000, a move since copied by many of its rivals.
It is one of three new funds AEGON Asset Management is bringing to the market, which also includes a UK Cautious Managed fund and a UK Opportunities fund.
The UK Cautious Managed and Ethical Cautious Managed funds have been launched in response to demand from UK investors and advisers for lower risk managed funds as an alternative to with-profits and cash investments. They aim to provide a relatively safe and steady return through a low volatility investment strategy with a maximum of 60% of the funds held in equities and 40% in fixed income.
Both Cautious Managed funds build on AEGON Asset Management’s recognized capabilities in the UK equity and fixed income sectors. The Ethical Cautious Managed combines AEGON Asset Management’s stringent ethical criteria with a cautious investment philosophy, bringing together the expertise of both its Ethical Equity team and its Ethical Corporate Bond team.
Audrey Ryan will manage the Ethical Cautious Managed fund, supported by Iain Buckle. Audrey also runs AEGON Asset Management’s Ethical Equity fund, which is AA rated by Forsyth-OBSR and has achieved consistent strong top quartile performance over one, three and five years*. Iain Buckle is also the support manager of AEGON Asset Management’s Ethical Corporate Bond Fund, which is AA rated by Forsyth-OBSR.
The Ethical Cautious Managed fund intends to take an unconstrained investment approach, capitalizing on the recognized research capabilities of the UK equity team.
Ryan said, “The Ethical Cautious Managed fund will aim to take advantage of our experience and in-depth knowledge of the UK equities market without any benchmark constraints. It will be a high conviction, stock-picking fund with no sector or stock limits and have an ideal range of 50 to 60 stocks at launch.”
Jon Bennett, AEGON’s director of third party business, said, “We believe there is significant demand from advisers and investors for a real and viable alternative to with-profits and cash investments. At AEGON Asset Management, we are well placed to deliver this alternative, with our recognized strength in the fixed income market and growing reputation for UK equities.
To mark the launch of these new funds, early investors will benefit from a 2.5% discount reducing the initial charge to 3% until 30 April 2007. This means that if the 3% initial commission is rebated there are zero up-front costs for the investor.
AEGON Asset Management UK's assets under management totaled more than £40.4 billion ($8.1 billion). The company's activities are divided into three business areas, Institutional Business, Insured Business and Retail-Fund Business.
21 Sept 2007
Babylon Admitted To Participate in Iraqi Central Bank T-Bill Auction
Iraqi hedge fund `The Babylon Fund´ announced that today, as the first foreigners, they were admitted by the Iraqi Central Bank to participate in the primary auction of Iraqi-dinar denominated 6 month and 12 month T-bills.
The investment case for T-bills: Annual net yields are running at approx 18% for 6 month T-bills, and the exchange rate is consistently appreciating against the USD via a managed float regime.
The inflation rate is also now quickly falling down from extreme levels. In January it was running at 50%+ , but YTD it's now down to 5%.
Babylon's winning streak continued during July and August, with a rise of 3,8% in the Babylon Fund's NAV-price.
Of the hedge fund's direct Iraqi holdings, bond yields steered higher upon a combination of dried-up flow and risk aversion factors partly based upon the perceived weakened state of the government whose success might be seen as being indirectly linked to the bond payment stream.
On the other hand, in the ISX stock market in Baghdad, prices rose strongly, as did value and volumes traded, as participants positioned themselves ahead of foreigners' entrance into the ISX, which was allowed as of 1st of August.
According to a statement, Babylon's aim is to provide long-term capital growth from an investment portfolio consisting of Iraqi and Iraqi-dependent securities. The investment process is mainly top-down driven, with a mix of fundamental analysis and portfolio diversification characteristics, aiming to be regarded as an easy, safe and efficient Gateway towards investing into the region.
The investment case for T-bills: Annual net yields are running at approx 18% for 6 month T-bills, and the exchange rate is consistently appreciating against the USD via a managed float regime.
The inflation rate is also now quickly falling down from extreme levels. In January it was running at 50%+ , but YTD it's now down to 5%.
Babylon's winning streak continued during July and August, with a rise of 3,8% in the Babylon Fund's NAV-price.
Of the hedge fund's direct Iraqi holdings, bond yields steered higher upon a combination of dried-up flow and risk aversion factors partly based upon the perceived weakened state of the government whose success might be seen as being indirectly linked to the bond payment stream.
On the other hand, in the ISX stock market in Baghdad, prices rose strongly, as did value and volumes traded, as participants positioned themselves ahead of foreigners' entrance into the ISX, which was allowed as of 1st of August.
According to a statement, Babylon's aim is to provide long-term capital growth from an investment portfolio consisting of Iraqi and Iraqi-dependent securities. The investment process is mainly top-down driven, with a mix of fundamental analysis and portfolio diversification characteristics, aiming to be regarded as an easy, safe and efficient Gateway towards investing into the region.
Amanda Invests $7 Million In Finnish Fund
Hedge Fund Amanda Capital Plc announced today in a press release that they have invested five million euros ($7 million) in a Finnish private equity fund, the MB Equity Fund IV.
Equity Fund IV will continue MB Funds' earlier investment strategy by investing in medium-sized companies in Nordic countries.
The Amanda Group is a private equity investment company. Its parent company (Amanda Capital Plc is the first publicly listed private equity fund-of-funds in Scandinavia. The parent company has investments in 24 different private equity funds and in four funds of funds managed by Amanda.
Amanda Group is one of Finland's largest private equity fund investment management companies. The Group manages several private equity fund portfolios under consultancy agreements. It manages also five private equity funds of funds, which have several domestic and international investors.
Amanda Group currently has more than EUR 1.5 billion ($2.1 billion) in assets under management (original
investment commitments) and has made investments in more than 100 private equity funds in Europe, the United States, Asia and Russia.
Equity Fund IV will continue MB Funds' earlier investment strategy by investing in medium-sized companies in Nordic countries.
The Amanda Group is a private equity investment company. Its parent company (Amanda Capital Plc is the first publicly listed private equity fund-of-funds in Scandinavia. The parent company has investments in 24 different private equity funds and in four funds of funds managed by Amanda.
Amanda Group is one of Finland's largest private equity fund investment management companies. The Group manages several private equity fund portfolios under consultancy agreements. It manages also five private equity funds of funds, which have several domestic and international investors.
Amanda Group currently has more than EUR 1.5 billion ($2.1 billion) in assets under management (original
investment commitments) and has made investments in more than 100 private equity funds in Europe, the United States, Asia and Russia.
20 Sept 2007
Asia Value Formula Fund Launched By SAM
Sensible Asset Management today announced the coming launch of the Asia Value Formula Fund. The new hedge fund aims to provide long-term capital growth over an investment horizon of 3 to 5 years, by investing primarily in the constituents of the MSCI Asia ex-Japan Index.
The aims are to outperform the MSCI Asia ex-Japan Index by applying the "Value Formula", an active, systematic and quantitative value based approach to identify undervalued securities comprising the index that will benefit from the upside correction between the market's short-term inefficiency and long-term efficiency.
With a minimum investment of $100,000 and a 5% management fee, the hedge fund aims for a launch date of October 15th of this year. Sensible Asset Management was founded in December 2004 with the aim of offering a broad range of products and solutions.
The aims are to outperform the MSCI Asia ex-Japan Index by applying the "Value Formula", an active, systematic and quantitative value based approach to identify undervalued securities comprising the index that will benefit from the upside correction between the market's short-term inefficiency and long-term efficiency.
With a minimum investment of $100,000 and a 5% management fee, the hedge fund aims for a launch date of October 15th of this year. Sensible Asset Management was founded in December 2004 with the aim of offering a broad range of products and solutions.
19 Sept 2007
MPC Samsara Hedge Fund Launch
The MPC Samsara Team announced the launch of a new hedge fund, the MPC Samsara Fund. The hedge fund will be run by Ajay Gambhir and he will follow the same successful strategy as the JPMorgan Europe Dynamic Long Short hedge fund of which Ajay was the sole portfolio manager.
This hedge fund returned, net of fees, 31.5% in 2005 and 40.2% in 2006. The Fund won the Eurohedge Best European Equities Hedge Fund 2006 award (under $500m) with a fund size of $400m (as at February 2007). Over the three years to end 2006 the Europe Dynamic Long Short hedge fund returned 104.7% with a sharpe ratio of 3.1.
MPC Samsara has a directional long short strategy with the ability to be net short of the market. Therefore it is able to vary its exposure to the market and thus profit even in poor stock market environments. Ajay will manage the hedge fund with precisely the same approach as he has used at JP Morgan which was bottom-up stock-picking fund with a top down overlay, using rigorous fundamental analysis and an active approach to stock selection.
Ajay was previously Managing Director and Head of the European High Alpha Team at JPMorgan Asset Management, running over $8bn of assets. Ajay himself personally managed $6bn of assets all of which was in either absolute return or unconstrained vehicles.
MPC Investors is an independent asset manager of both alternative and traditional assets for predominantly institutional clients across the world.
This hedge fund returned, net of fees, 31.5% in 2005 and 40.2% in 2006. The Fund won the Eurohedge Best European Equities Hedge Fund 2006 award (under $500m) with a fund size of $400m (as at February 2007). Over the three years to end 2006 the Europe Dynamic Long Short hedge fund returned 104.7% with a sharpe ratio of 3.1.
MPC Samsara has a directional long short strategy with the ability to be net short of the market. Therefore it is able to vary its exposure to the market and thus profit even in poor stock market environments. Ajay will manage the hedge fund with precisely the same approach as he has used at JP Morgan which was bottom-up stock-picking fund with a top down overlay, using rigorous fundamental analysis and an active approach to stock selection.
Ajay was previously Managing Director and Head of the European High Alpha Team at JPMorgan Asset Management, running over $8bn of assets. Ajay himself personally managed $6bn of assets all of which was in either absolute return or unconstrained vehicles.
MPC Investors is an independent asset manager of both alternative and traditional assets for predominantly institutional clients across the world.
Middle East Hedge Fund Summit to Take Place In Bahrain
The third annual Middle East summit taking place on 5-7 th November at the Ritz-Carlton Hotel in Manama, is the first hedge fund specific event to take place in the Kingdom of Bahrain. Developed in close conjunction with event partners, Bahrain Financial Services Development (BFSD), part of the Economic Development Board, and global alternative asset manager Investcorp, the summit will attract major investors from across the GCC region, with leading fund managers from MENA, Europe, Asia and the US discussing innovative alternative investment strategies.
The hedge fund summit will focus on areas including the recent legislative developments in the region, an overview of its current hedge funds market, panel discussions on emerging markets, advice on how to successfully set up and market a hedge fund and case studies on the most effective investment strategies.
The summit, according to the announcement will also explore various strategies to overcome Shariah compliance in the rapidly growing Middle East market. "The hedge funds market in the Gulf region is set for a period of unprecedented growth," said Jane Dellar, managing director of the Bahrain Financial Services Development (BFSD).
"The recent revision of the collective investment undertakings by the CBB introduces an exempt fund category, enabling hedge funds and other alternative investments. This is yet another prime example of Bahrain's dominance in leading the region's funds development," she said.
Rasheed Mohammed Al-Maraj, Governor of the Central Bank of Bahrain, will attend the inaugural session of the event.
Gary Long, Investcorp's Chief Operating Officer, said: "It is very appropriate for Investcorp to sponsor this event. Not only is it taking place in Bahrain , where Investcorp has such strong ties, but we have a ten-year track record of investing in hedge funds and with $6.4 billion in assets under management, Investcorp is one of the leading global players in this asset class."
The hedge fund summit will focus on areas including the recent legislative developments in the region, an overview of its current hedge funds market, panel discussions on emerging markets, advice on how to successfully set up and market a hedge fund and case studies on the most effective investment strategies.
The summit, according to the announcement will also explore various strategies to overcome Shariah compliance in the rapidly growing Middle East market. "The hedge funds market in the Gulf region is set for a period of unprecedented growth," said Jane Dellar, managing director of the Bahrain Financial Services Development (BFSD).
"The recent revision of the collective investment undertakings by the CBB introduces an exempt fund category, enabling hedge funds and other alternative investments. This is yet another prime example of Bahrain's dominance in leading the region's funds development," she said.
Rasheed Mohammed Al-Maraj, Governor of the Central Bank of Bahrain, will attend the inaugural session of the event.
Gary Long, Investcorp's Chief Operating Officer, said: "It is very appropriate for Investcorp to sponsor this event. Not only is it taking place in Bahrain , where Investcorp has such strong ties, but we have a ten-year track record of investing in hedge funds and with $6.4 billion in assets under management, Investcorp is one of the leading global players in this asset class."
17 Sept 2007
Carbon Hedge Fund Growth, Explained
Daniel Butler, the Trade Director for Czech carbon asset fund manager Blackstone Global Ventures sent us at HedgeCo this much needed Carbon Market simplification;
It could be said that when the average man on the street hears about a new Environmental Fund or Climate Change Funds its easy to imaging the observer visualizing a member of Greenpeace flogging and IPO prospectus on Wall Street. Perhaps destined to be a most undersubscribed offering.
In reality many of these carbon fund raisings are employing tried-and-true investment principals such as: origination of new stock, arbitration of differing instruments, the capture of significant discounts, all to ultimately return a capital gain to the investor. But how could this possible considering Climate Change-Global Warming is a greenie issue? Hardly the type of thing that would interest the professional financial markets community, an observer might opine.
In reality it is not too far fetched to imagine the near future where even investors lacking a renewable energy brief (or an environmental conscience) might consider the world of carbon trading simply a new commodities type market where variables such as the supply of the existing underlying, new origination efforts, and even a tight relation to the energy markets, will be enough to consider before investing.
But wait; did someone just explain the carbon market without spending multiple paragraphs on the issues causing Global Warming, the long process of negotiations between green house gas emitting countries and the acceptance of many said governments to curtail their harmful emissions to the detriment of their gross national product? Isn't that a bit too brief?
Well, that is why it is, for many, still in unexplored and unfathomable territory. Many would-be investors never read through those paragraphs because, while the basis for this new market is a paradigm of inter-governmental coordination and mother of all surprises - an 'agreement' between the majority of nations (the Kyoto Protocol) - the concepts employed tend to be explained in excruciatingly painful detail.
If however, the market of carbon instruments is explained from a different approach, an inside-out approach, perhaps investors would see how it works first and learn the why’s later.
The European market (yes, there are many locality based variables) market can be explained as a place where the right to emit greenhouse gases is securitized into ‘permissions’ or ‘allowances’ to emit, where less of these allowance credits are issued over time in a concept not unlike musical chairs; a simple concept for a serious issue whereby fewer emission allowance credits in circulation means less greenhouse gases actually emitted into the atmosphere. To police this, the participants “governments and companies face severe fines for ‘non-compliance’. These participants can, however, buy cheaper, newly created credits.
This next concept of newly created or ‘originated’ credits is the one that forms the basis for the lion’s share of new carbon funds and unfortunately becomes a bit wordier. This involves the principal of originating new credits based on causing the reductions of GHG emissions in places around the world were it would be much less expensive.*
After all, implementing reductions, (cleaning up, capturing), elsewhere in the world benefits the globe as a whole. And the agent implementing the reduction is then awarded a carbon credit that is usually shared with the site where the emissions were reduced (the factory, the installation, etc).
This is quite frankly not unlike a new IPO offering or the mining of a new commodity. And the effort and expertise expended to bring the new security to market is recouped by the agent because the origination might take place at prices much lower than where the agent can sell them on the world market. Now it should be clear that with the capture of sizeable discounts, there is in fact room for larger financing. And with the growing surge of climate change understanding, the resultant political willpower, the sheer power of the financial market is brought to the cause. This power should be compared to other attempts at taxation where the application is usually up to individual governments and subject to changes as governments change; not nearly as affective as the financial incentive.
It must be made clear, however, that an investor to a fund that captures discounts in the generation of greenhouse gas emissions must be cognizant of important issues such as the risks involved in the creation of new credits: the lengthy and tedious administrative processes to establishing a carbon credit-worthy project, the verification and validation of real emission reductions, as well as the more obvious macro components affecting the supply and demand and ultimately the prices of credits. And also the investor must critically judge the fund manager (agent) to navigate the by-ways of the new credit approval process.
Indeed, perhaps it is here that the investor might best value a the fund since profitability mostly relies on the abilities of the manager to source discounted projects, manage the extraction process from the identification up to perhaps 5 years later when credits are issued: the fund manager must be a master of the carbon credit origination process.
Of course there is criticism. A cynic might say that with all those financial types involved, banks that need to earn large margins to stay afloat, it seems that the real greenhouse gas reductions may take a lesser import. On the other hand, many other previous attempts to apply environmental remedies have fallen short of their goals because the free market was not involved.
The carbon market now however, seems to have surpassed this criticism and is now firmly established as its own financial market. The carbon market and pricing is related closely to energy movements, subject to international acceptance (USA and Australia have not signed the Kyoto Protocol), and even another important factor when it comes to industrial prices. It is nevertheless a growing market confirmed by the appetite for growing fund investment.
*These less expensive locations (countries where emissions reductions are cheaper to implement, might have accepted emissions limits such as the Ukraine or Romania, or possess no limits at all such as in India or China; they benefit in the long run since the creation of new credits benefit the installation ‘host’ and host government implicitly, since they share in the sale of new credits.
Daniel Butler is the Trade Director for carbon asset fund manager Blackstone Global Ventures, a.s. in Prague, Czech Reublic.
For more information, contact;
Alex Akesson
Editor for HedgeCo.Net
Email: alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
It could be said that when the average man on the street hears about a new Environmental Fund or Climate Change Funds its easy to imaging the observer visualizing a member of Greenpeace flogging and IPO prospectus on Wall Street. Perhaps destined to be a most undersubscribed offering.
In reality many of these carbon fund raisings are employing tried-and-true investment principals such as: origination of new stock, arbitration of differing instruments, the capture of significant discounts, all to ultimately return a capital gain to the investor. But how could this possible considering Climate Change-Global Warming is a greenie issue? Hardly the type of thing that would interest the professional financial markets community, an observer might opine.
In reality it is not too far fetched to imagine the near future where even investors lacking a renewable energy brief (or an environmental conscience) might consider the world of carbon trading simply a new commodities type market where variables such as the supply of the existing underlying, new origination efforts, and even a tight relation to the energy markets, will be enough to consider before investing.
But wait; did someone just explain the carbon market without spending multiple paragraphs on the issues causing Global Warming, the long process of negotiations between green house gas emitting countries and the acceptance of many said governments to curtail their harmful emissions to the detriment of their gross national product? Isn't that a bit too brief?
Well, that is why it is, for many, still in unexplored and unfathomable territory. Many would-be investors never read through those paragraphs because, while the basis for this new market is a paradigm of inter-governmental coordination and mother of all surprises - an 'agreement' between the majority of nations (the Kyoto Protocol) - the concepts employed tend to be explained in excruciatingly painful detail.
If however, the market of carbon instruments is explained from a different approach, an inside-out approach, perhaps investors would see how it works first and learn the why’s later.
The European market (yes, there are many locality based variables) market can be explained as a place where the right to emit greenhouse gases is securitized into ‘permissions’ or ‘allowances’ to emit, where less of these allowance credits are issued over time in a concept not unlike musical chairs; a simple concept for a serious issue whereby fewer emission allowance credits in circulation means less greenhouse gases actually emitted into the atmosphere. To police this, the participants “governments and companies face severe fines for ‘non-compliance’. These participants can, however, buy cheaper, newly created credits.
This next concept of newly created or ‘originated’ credits is the one that forms the basis for the lion’s share of new carbon funds and unfortunately becomes a bit wordier. This involves the principal of originating new credits based on causing the reductions of GHG emissions in places around the world were it would be much less expensive.*
After all, implementing reductions, (cleaning up, capturing), elsewhere in the world benefits the globe as a whole. And the agent implementing the reduction is then awarded a carbon credit that is usually shared with the site where the emissions were reduced (the factory, the installation, etc).
This is quite frankly not unlike a new IPO offering or the mining of a new commodity. And the effort and expertise expended to bring the new security to market is recouped by the agent because the origination might take place at prices much lower than where the agent can sell them on the world market. Now it should be clear that with the capture of sizeable discounts, there is in fact room for larger financing. And with the growing surge of climate change understanding, the resultant political willpower, the sheer power of the financial market is brought to the cause. This power should be compared to other attempts at taxation where the application is usually up to individual governments and subject to changes as governments change; not nearly as affective as the financial incentive.
It must be made clear, however, that an investor to a fund that captures discounts in the generation of greenhouse gas emissions must be cognizant of important issues such as the risks involved in the creation of new credits: the lengthy and tedious administrative processes to establishing a carbon credit-worthy project, the verification and validation of real emission reductions, as well as the more obvious macro components affecting the supply and demand and ultimately the prices of credits. And also the investor must critically judge the fund manager (agent) to navigate the by-ways of the new credit approval process.
Indeed, perhaps it is here that the investor might best value a the fund since profitability mostly relies on the abilities of the manager to source discounted projects, manage the extraction process from the identification up to perhaps 5 years later when credits are issued: the fund manager must be a master of the carbon credit origination process.
Of course there is criticism. A cynic might say that with all those financial types involved, banks that need to earn large margins to stay afloat, it seems that the real greenhouse gas reductions may take a lesser import. On the other hand, many other previous attempts to apply environmental remedies have fallen short of their goals because the free market was not involved.
The carbon market now however, seems to have surpassed this criticism and is now firmly established as its own financial market. The carbon market and pricing is related closely to energy movements, subject to international acceptance (USA and Australia have not signed the Kyoto Protocol), and even another important factor when it comes to industrial prices. It is nevertheless a growing market confirmed by the appetite for growing fund investment.
*These less expensive locations (countries where emissions reductions are cheaper to implement, might have accepted emissions limits such as the Ukraine or Romania, or possess no limits at all such as in India or China; they benefit in the long run since the creation of new credits benefit the installation ‘host’ and host government implicitly, since they share in the sale of new credits.
Daniel Butler is the Trade Director for carbon asset fund manager Blackstone Global Ventures, a.s. in Prague, Czech Reublic.
For more information, contact;
Alex Akesson
Editor for HedgeCo.Net
Email: alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
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