HedgeCo Archives - The total amount of Securities Investor Protection Corporation (SIPC) advances committed to customers in the Securities Investor Protection Act (SIPA) liquidation proceeding for Bernard L. Madoff Investment Securities LLC (BLMIS) has topped half a billion dollars ($534.25 million), with a total of 2,861 direct customer claims determined to date, according to BLMIS Trustee Irving H. Picard, who is a partner of Baker & Hostetler LLP.
In another major milestone: Securities Investor Protection Corporation President Stephen Harbeck announced that the SIPC advances committed in the Madoff proceeding now exceeds the total of all advances made in the 321 prior liquidations handled under SIPA since the act creating the Securities Investor Protection Corporation (SIPC) was passed by Congress in 1970.
"The fact that one liquidation proceeding has now involved more in advances from SIPC's reserve than all 321 of the liquidations that preceded it is a testament to both the wisdom of those who created this safety net for investors and the resiliency of the safety net itself." SIPC President Harbeck said.
"I am pleased to report that we have made significant headway in recent months in the processing of BLMIS customer claims under what have been very challenging circumstances." BLMIS Trustee Irving H. Picard said, "With more than $4.43 billion in customer claims already allowed and advances of over half a billion dollars committed by SIPC, the Trustee's office is working tirelessly to ensure that every BLMIS customer with a valid claim is given full consideration and handled as expeditiously as possible. That will continue to be our focus in the coming weeks and months."
At a briefing, Picard and Harbeck said that as of noon EDT on October 27, 2009, SIPC committed advances to Madoff customers now totals $534,250,113.22. In SIPC's previous liquidations of brokerage firms from 1970 up to the time of the Madoff case, a total of $520 million has been advanced to pay customers and for the expenses of those cases.
SIPC maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms.
For more information about SIPC liquidation proceedings, see "The Investor's Guide to Brokerage Firm Liquidations".
29 Oct 2009
BNY Mellon Wins HFMWeek Hedge Fund Award
HedgeCo Archives - BNY Mellon was one of eight industry-leading companies to be nominated for the honor as part of HFMWeek's 2009 U.S. Service Provider Awards, which were presented in New York on October 22. BNY Mellon's Alternative Investment Services (AIS) group received the 'best single manager administrator' award.
"BNY Mellon stood out in this category; a truly global administrator which has increased its market share and boasts substantial single manager assets," said HFMWeek's panel of judges.
"Recognition like this is noteworthy because it validates and reinforces our commitment to clients and the investments we're making to better serve them," said Brian Ruane, executive vice president and head of global client management North America at BNY Mellon. "It also speaks to the talent and collaboration of our global team to receive this honor from HFMWeek."
BNY Mellon Alternative Investment Services has more than $200 billion in assets under administration and an extensive global presence, including locations in Bermuda, Cayman Islands, Hong Kong, Ireland, Luxembourg, Singapore and the United Kingdom, as well as US offices in California, Florida, Massachusetts, New Jersey, New York, Pennsylvania and Texas. In addition to administration the company offers a wide range of accounting, cash management, collateral management, custody, corporate trust, asset management and wealth management services to the hedge fund industry.
HFMWeek's U.S. Service Provider Awards are designed to recognize companies that have outperformed their peer group over the course of 2008 and 2009. BNY Mellon AIS captured the best single manager administrator award as a result of its robust technology platform, range of value-added fund services, and overall client service excellence.
"BNY Mellon stood out in this category; a truly global administrator which has increased its market share and boasts substantial single manager assets," said HFMWeek's panel of judges.
"Recognition like this is noteworthy because it validates and reinforces our commitment to clients and the investments we're making to better serve them," said Brian Ruane, executive vice president and head of global client management North America at BNY Mellon. "It also speaks to the talent and collaboration of our global team to receive this honor from HFMWeek."
BNY Mellon Alternative Investment Services has more than $200 billion in assets under administration and an extensive global presence, including locations in Bermuda, Cayman Islands, Hong Kong, Ireland, Luxembourg, Singapore and the United Kingdom, as well as US offices in California, Florida, Massachusetts, New Jersey, New York, Pennsylvania and Texas. In addition to administration the company offers a wide range of accounting, cash management, collateral management, custody, corporate trust, asset management and wealth management services to the hedge fund industry.
HFMWeek's U.S. Service Provider Awards are designed to recognize companies that have outperformed their peer group over the course of 2008 and 2009. BNY Mellon AIS captured the best single manager administrator award as a result of its robust technology platform, range of value-added fund services, and overall client service excellence.
28 Oct 2009
OakRun Hedge Fund Registers in Singapore
Hedgeco Archives - Hedge fund manager OakRun Capital celebrated their one year anniversary at the same time as registering its flag ship fund OakRun Income Plus Fund with Monetary Authority of Singapore (MAS). Through a distribution partnership in Asia, OakRun plans to make the fund available to investors in Singapore, Japan, China, and other areas of the region.
The OakRun Income Plus Fund charges a 1% management fee and a 10% incentive fee with a $1MM minimum investment requirement, it returned 0.73% (9.26% Annual Yield) for September 2009 and paid out its fourth quarterly dividend of 2.25%.
“The flagship OakRun Income Plus Fund has received incredible initial feedback from institutions. The fund is invested in highly liquid instruments with substantially higher yields than comparable investments with duration of less than 45 days,” Portfolio Manager, Arturo Neto, CFA, said.
The fund is an actively managed receivables re-factoring fund born out of demand for a low risk, income generating investment. The fund strategy is to purchase commercial receivables (obligations) of highly rated companies. The fund insures a high proportion of portfolio holdings and strives to maintain a short term investment grade weighted average credit quality of A1/P1. OakRun Capital performs a rigorous due diligence process which includes the firms detailed proprietary research and selection method, leading independent third party investment ratings (Moody’s, S&P, Fitch) and credit and payment history (Dun & Bradstreet).
The OakRun Income Plus Fund charges a 1% management fee and a 10% incentive fee with a $1MM minimum investment requirement, it returned 0.73% (9.26% Annual Yield) for September 2009 and paid out its fourth quarterly dividend of 2.25%.
“The flagship OakRun Income Plus Fund has received incredible initial feedback from institutions. The fund is invested in highly liquid instruments with substantially higher yields than comparable investments with duration of less than 45 days,” Portfolio Manager, Arturo Neto, CFA, said.
The fund is an actively managed receivables re-factoring fund born out of demand for a low risk, income generating investment. The fund strategy is to purchase commercial receivables (obligations) of highly rated companies. The fund insures a high proportion of portfolio holdings and strives to maintain a short term investment grade weighted average credit quality of A1/P1. OakRun Capital performs a rigorous due diligence process which includes the firms detailed proprietary research and selection method, leading independent third party investment ratings (Moody’s, S&P, Fitch) and credit and payment history (Dun & Bradstreet).
Proposed EU Directive on Alternative Investment Fund Managers - Answers from Michael G. Tannenbaum
HedgeCo Blogs - This outline addresses the European Commission’s (the “EU”) proposal for a Directive meant to establish an EU framework for the authorization and operation of alternative investment fund managers (“AIFM”). Of particular focus are non EU domiciled managers and funds and EU managers seeking investors for non EU domiciled funds.
On April 30, 2009, the Commission of the European Communities (“EU Commission”) published a “Proposal for a Directive of the European Parliament and the Council on Alternative Investment Fund Managers.” The Directive relates to activity within the EU Member States. Jurisdictions outside of the EU are referred to as Third Countries.
Who is affected? What is an AIF? AIFM?
Virtually all investment managers and “collective investment undertakings” are covered by the Directive. As drafted, the Directive applies to any natural or legal person established in the EU who manages one or more AIFs and which provides management services to one or more AIFs regardless of its domicile. The Directive in current form affects:
1. Hedge funds, private equity funds, venture capital funds, and real estate funds (collectively referred to as “Alternative Investment Funds” or “AIFs” in the Directive)
2. Persons or entities rendering “management services” to AIFs. These are referred to as “Alternative Investment Fund Managers” or “AIFMs” in the Directive and include:
a. Investment advisers and managers of any of the above
b. Administrators
3. Custodians
4. Valuation agents and appraisers
5. Delegates of the above (sub-advisers, sub-custodians etc.)
The Directive by its terms exempts UCITS from coverage.
In general terms, what is prohibited?
The Directive generally prohibits any AIFM which is not authorized by a Member State of the EU from providing management services to any AIF domiciled in the EU and prohibits a non EU domiciled AIFM from “soliciting” investors in the EU. Note that the focus of the Directive is on the AIFM and not the AIF itself. This is similar in approach to the United States requirement to register the AIFM (if certain conditions are satisfied) and not the AIF itself.
What is definition of “management services”?
The term “management services” is defined as “managing and administering” but the Directive does not go into any detail as to what “managing” means or what “administering” means. It would appear to include investment management, risk management and other services.
Are there operating conditions imposed for AIFMs?
The Directive imposes a number of business requirements on AIFMs including, without limitation, a duty to:
1. act honestly, with due care, skill and diligence and fairly in conducting its activities;
2. act in the best interests of the AIF it manages, its investors and the integrity of the market;
3. act in a manner that treats investors fairly;
4. identify the conflicts, and manage those conflicts;
5. operate its organization effectively; and
6. structure its internal organization such that risk and portfolio management
are separated.
UCITS are essentially mutual funds designed for retail investor consumption. They are established under the Undertakings for Collective Investments in Transferable Securities Directive (the “UCITS Directive.”)
Many of the conditions seem obvious, but some raise issues. For example, is it always possible for an AIFM to act in the best interest of the AIF, the best interest of the investors and preserve market integrity all at the same time?
How are “side letters” affected?
No investor can receive beneficial treatment unless disclosed to all investors in the AIF. Accordingly, the Directive would essentially require all side letter arrangements disclosed to all investors.
1. Whether or not material.
2. Investors’ identity would be disclosed.
What standards would be imposed by the Directive?
1. Risk Management. The Directive mandates that there be a separation between risk management and portfolio management.
2. Short sales. There is a specific concern with and focus on short selling. The EU Commission is to set forth rules with regard to short sales.
3. Liquidity management. The AIFM must adopt procedures and implement appropriate liquidity management policies to ensure that its liquidity profile is consistent with its investment strategies.
a. Regular stress testing is required.
b. AIF redemption policies need to be consistent with liquidity management policies, and vice versa.
4. Leverage. Disclosure to investors and regulators on a quarterly basis. The EU
Commission is authorized to establish standards.
5. Independent valuator is required.
6. Independent Administrator is required.
7. Independent Depositary is required and must be a credit institution authorized in the EU.
What AIFMs are exempted under the Directive?
Under the Directive, the following AIFMs are exempt from seeking authorization:
1. AIFs that use leverage: Any AIFM with assets under management (in the aggregate) of €100 million or more.
2. For AIFs that do not use leverage, the threshold is raised to €500 million provided. The AIF has no redemption right that is exercisable during a 5 year period following the start up of the AIF.
3. Certain banks, insurance companies, pension funds, etc.
4. AIFMs that render services only to UCITS.
Are there minimum capital requirements being proposed?
Yes. Each AIFM must maintain at least €125,000 in regulatory capital. Where the aggregate value of the AIFs exceeds €250,000 then the AIFM must maintain additional capital of .02% of the excess over €250,000.
Can an EU domiciled manager hire a non EU sub-manager? Can a non EU AIFM hire an EU AIFM? How is delegation handled?
This kind of delegation is virtually impossible because under the Directive a sub-manager or delegate with regard to portfolio management services or risk management functions for an EU AIFM would need to be able to provide that service in its own right in the EU, i.e. would need to meet the requirements of the Directive itself. This would seem to prohibit delegations, sub-advisory agreements and even parent subsidiary relationships to AIFMs who do not meet the requirements of the Directive.
How are administrators and other service providers affected?
An EU AIFM would need to seek authorization from its home Member State before a third party service provider can be appointed for the AIF.
Authorization
Presumably there will be some procedure established by which an AIFM can become authorized in its Member State to render services to an EU AIF. But as to non EU domiciled AIFMs, the Directive does not permit such AIFMs from even seeking
authorization under the Directive to manage an EU AIF. One possible alternative is for the non EU AIFM to establish a subsidiary in the EU and seek approval from there but in light of the strict delegation rules (described below) it is doubtful whether this type of strategy will be practical.
How is marketing, even to sophisticated and high net worth investors, affected?
1. Non EU AIFM marketing to EU investors is generally not permitted.
a. After a three year waiting period following the effective date of the
Directive, a non EU AIFM would be permitted to apply for authorization to market to “professional clients” if:
i. The EU Commission has determined that the Third Country has adopted “prudential regulation and ongoing supervision” equivalent to the regulations set forth in the Directive as to management, administration, custodian, valuators, leverage, liquidity management etc. This is a subjective standard and may be difficult, if not impossible, to attain.
ii. The AIFM’s Third Country has agreed to reciprocal arrangements as to marketing and grants comparable market access to EU AIFMs.
iii. Cooperation agreement in place as to information sharing with regard to market stability.
iv. Tax protocol adopted by Third Country that is consistent with the Model Tax Convention of the EU (e.g. as to tax data information sharing.)
2. EU AIFMs marketing EU AIFs to EU investors. This is permitted once the Member State regulator is notified (similar to the “Blue Sky” filing requirements imposed within the United States.)
3. EU AIFMs marketing non EU AIFs to EU investors. After the three year waiting period, such marketing is permitted to professional clients but only if:
a. The AIF is domiciled in a country that that has signed a tax protocol agreement that complies with the EU Model Tax Convention, which provides, inter alia, for an effective exchange of information.
4. Unclear what happens during the 3 year period. No authorization is allowable under the Directive but presumably each Member state will decide on its own.
Can AIFs taking control positions in issuers?
Yes, however control positions in excess of 30% of the voting shares of an issuer require disclosure under the Directive.
What confidential information is required to be disclosed under the Directive?
While reporting is required by various provisions of the Directive, it is silent on the protection of legitimate confidential data.
What is a “professional client”?
A client (in this context, an investor) that meets at least 2 of the following 3 conditions:
1. It has carried out transactions in significant size on the relevant market at an average frequency of 10 such transactions per quarter over the previous 4 quarters.
2. It has a portfolio of financial instruments (including cash) exceeding €500,000.
3. It works for or has worked in the financial sector for at least one year in a professional capacity which requires knowledge of the transaction or services to be rendered.
There are also per se professional clients which include banks, regulated financial institutions, pension funds, among others.
What about existing deals?
No information has been made available; on this issue the Directive is silent.
Michael G. Tannenbaum is a founding partner of Tannenbaum Helpern Syracuse and Hirschtritt LLP, where he heads the Firm's Financial Services, Hedge Funds and Capital Markets Group. For close to 30 years, he has concentrated on U.S. and non-U.S. based hedge funds, funds-of-funds, investment partnerships, investment adviser and SEC, NFA, NASD and CFTC regulations, venture capital and private equity matters, futures, swaps, derivatives, structured finance deals and corporate and securities law and regulation. He regularly advises clients as to registrations of advisers, operating agreements and business combinations in the hedge fund and investment adviser space, and represents funds, advisers and sponsors as part of his global practice.
Hedge Funds Given One Year To Register With SEC
HedgeCo Archives - The House Financial Services Committee on Tuesday said that hedge-fund managers and private-equity managers would be given a one-year transitional period before being required to register with the SEC and be subject to disclosure requirements to investors and creditors. They also would have to maintain records and potentially open their books to federal inspection.
The bill received broad bipartisan support in a 67-1 vote. Rep. Susan Kosmas, D-Fla., the drafter of the measure, said a one-year transition period for registration is necessary because both the SEC and fund managers will need time to organize themselves, news source MarketWatch said.
"The SEC will need time to prepare for the additional responsibilities that will come from the registration of potentially thousands of new managers," said Kosmas. She added that managers will need time to set up formal compliance programs, hire chief compliance officers, all of which is required by the legislation.
The bill received broad bipartisan support in a 67-1 vote. Rep. Susan Kosmas, D-Fla., the drafter of the measure, said a one-year transition period for registration is necessary because both the SEC and fund managers will need time to organize themselves, news source MarketWatch said.
"The SEC will need time to prepare for the additional responsibilities that will come from the registration of potentially thousands of new managers," said Kosmas. She added that managers will need time to set up formal compliance programs, hire chief compliance officers, all of which is required by the legislation.
27 Oct 2009
5fth Annual Hedge Funds Care Hosts Art Auction - Picasso, Dali, Matisse and Chagall
HedgeCo Archives - Hedge Funds Care is holding its fifth London black tie event in Whitehall, London, on 3 December 2009. Esther Rantzen CBE, veteran journalist and TV presenter as well as founder of ChildLine has agreed to become Patron of the charity and will be attending the December event.
The fifth annual fundraising gala will include a live auction conducted by Lord Jeffrey Archer. Items on auction will include a hand-signed Salvador Dali etching donated by the Broad Gallery and a dinner for 10 cooked by Chef Tom Aiken in your home. The evening will also feature a spectacular silent auction of limited edition works of art by some of the 20th century's most celebrated artists, including Picasso, Dali, Matisse and Chagall.
"We are very proud to be in the position to hold a second fundraising event in 2009, despite the less favourable conditions for philanthropy over the past year." Robert Mirsky, Chairman, Hedge Funds Care UK, said, "Our support from the hedge fund industry continues to grow and allows us to help prevent and treat child abuse in the UK."
Since it was established in 2006, the UK chapter of Hedge Funds Care has raised over US$1.4 million through its three annual fundraising events and a summer event held earlier this year. To date, Hedge Funds Care UK has pledged funds to numerous charities, all focusing on improving the lives of children and families that have suffered the trauma of abuse. Recent beneficiaries include: Barnado's (Young Women's Service), CSV(Volunteers in Child Protection) and Family Action (Building Bridges Newham).
Hedge Funds Care was founded in 1998 with the mission of raising funds to support activities focused on the prevention and treatment of child abuse and neglect. Funds are raised through Open Your Heart to the Children benefits in the United States, Canada, Cayman Islands and the UK. Hedge Funds Care UK is registered with the Charities Commission in the United Kingdom.
The fifth annual fundraising gala will include a live auction conducted by Lord Jeffrey Archer. Items on auction will include a hand-signed Salvador Dali etching donated by the Broad Gallery and a dinner for 10 cooked by Chef Tom Aiken in your home. The evening will also feature a spectacular silent auction of limited edition works of art by some of the 20th century's most celebrated artists, including Picasso, Dali, Matisse and Chagall.
"We are very proud to be in the position to hold a second fundraising event in 2009, despite the less favourable conditions for philanthropy over the past year." Robert Mirsky, Chairman, Hedge Funds Care UK, said, "Our support from the hedge fund industry continues to grow and allows us to help prevent and treat child abuse in the UK."
Since it was established in 2006, the UK chapter of Hedge Funds Care has raised over US$1.4 million through its three annual fundraising events and a summer event held earlier this year. To date, Hedge Funds Care UK has pledged funds to numerous charities, all focusing on improving the lives of children and families that have suffered the trauma of abuse. Recent beneficiaries include: Barnado's (Young Women's Service), CSV(Volunteers in Child Protection) and Family Action (Building Bridges Newham).
Hedge Funds Care was founded in 1998 with the mission of raising funds to support activities focused on the prevention and treatment of child abuse and neglect. Funds are raised through Open Your Heart to the Children benefits in the United States, Canada, Cayman Islands and the UK. Hedge Funds Care UK is registered with the Charities Commission in the United Kingdom.
26 Oct 2009
Hedge Fund Shareholder Appointed To Legg Mason's Board Of Directors
HedgeCo Archives - $703 billion global asset management firm, Legg Mason, announced today that an outstanding shareholder, hedge fund manager Nelson Peltz, will be elected to the Company’s Board of Directors,
Peltz is Chief Executive Officer and a founding partner of hedge fund Trian Fund Management, L.P., which owns 6,946,756 shares, or approximately 4.3% of Legg Mason’s outstanding common stock.
"Over the past several months, my colleagues and I have been engaged in constructive dialogue with Mark Fetting and other members of the Legg Mason management team." Peltz commented, "We share their view that Legg Mason’s recent strategic initiatives are improving the Company’s operating performance and I look forward to contributing as a Board member and working with the management team and the Board to help this great company achieve its full potential.”
The addition of Mr. Peltz to the Board reflects an agreement between Legg Mason and Trian Fund Management, L.P., certain funds managed by it and certain of its affiliates. In addition, pursuant to the agreement, Trian Partners has agreed to vote its shares in favor of Legg Mason’s director nominees as provided in the agreement and made certain other commitments.
Peltz is Chief Executive Officer and a founding partner of hedge fund Trian Fund Management, L.P., which owns 6,946,756 shares, or approximately 4.3% of Legg Mason’s outstanding common stock.
"Over the past several months, my colleagues and I have been engaged in constructive dialogue with Mark Fetting and other members of the Legg Mason management team." Peltz commented, "We share their view that Legg Mason’s recent strategic initiatives are improving the Company’s operating performance and I look forward to contributing as a Board member and working with the management team and the Board to help this great company achieve its full potential.”
The addition of Mr. Peltz to the Board reflects an agreement between Legg Mason and Trian Fund Management, L.P., certain funds managed by it and certain of its affiliates. In addition, pursuant to the agreement, Trian Partners has agreed to vote its shares in favor of Legg Mason’s director nominees as provided in the agreement and made certain other commitments.
UPDATE: New Hedge Fund To Benefit From Offshore Tax Changes
HedgeCo Archives - Two UK hedge fund managers have timed the launch of their new hedge fund so that investors subscribing before 1 December will see their returns subject to Capital Gains Tax rather than income tax ahead of the changes to the taxation of offshore funds currently being drafted.
Launched by UK hedge fund managers, Aramid Asset Management and Thomas Funds, the long and short multi-asset hedge fund, which will invest across equities, bonds and commodities, will be jointly managed by Aramid co-founder Sean Flanagan and Thomas Funds’ Glen Cremer.
"Our first step is to set up a target for maximum loss that we can tolerate in the next 30 to 60 days on which we base our allocation to each asset class and the level of hedges." Cremer says.
"We also hedge at all times because we believe market timing is almost impossible to achieve. There is no free lunch – you can only make money by taking residual market, credit or liquidity risk. The key is to identify that residual risk and minimise it using risk management overlay."
The Cayman Islands-domiciled fund can be accessed through both a closed-ended Jersey feeder fund, the Aramid All Asset Capital Preservation Fund Limited or a Cayman- domiciled open-ended feeder fund, the Aramid/Thomas All Asset Preservation fund.
Launched by UK hedge fund managers, Aramid Asset Management and Thomas Funds, the long and short multi-asset hedge fund, which will invest across equities, bonds and commodities, will be jointly managed by Aramid co-founder Sean Flanagan and Thomas Funds’ Glen Cremer.
"Our first step is to set up a target for maximum loss that we can tolerate in the next 30 to 60 days on which we base our allocation to each asset class and the level of hedges." Cremer says.
"We also hedge at all times because we believe market timing is almost impossible to achieve. There is no free lunch – you can only make money by taking residual market, credit or liquidity risk. The key is to identify that residual risk and minimise it using risk management overlay."
The Cayman Islands-domiciled fund can be accessed through both a closed-ended Jersey feeder fund, the Aramid All Asset Capital Preservation Fund Limited or a Cayman- domiciled open-ended feeder fund, the Aramid/Thomas All Asset Preservation fund.
22 Oct 2009
Event Driven Hedge Funds Rebound - Brighton House Q3 Report Summary
HedgeCo Blogs Archive - Buoyed by a strong equity-market rally, hedge funds performed well during the past quarter, according to the Brighton House Q3 report. Investors gravitated towards event-driven hedge funds throughout the third quarter, 2009, primarily in the merger/risk arbitrage and distressed fixed-income areas.
Brighton House Associates (BHA) is an alternative investment research firm that speaks to investors across the globe about their current interest and activity in alternative investment funds. Brighton House works with a network of over 100 fund managers and assists in indentifying qualified investors for their internal marketing campaigns.
Global Equity
The rebound in global equity markets during the first three quarters, along with successful capital-raising campaigns by large financial institutions, created a favorable environment for catalyst events. The announcements of acquisitions by well-known companies such as Xerox, Walt Disney, and Kraft Foods are only a few examples of the flurry of corporate activity that took place in a variety of sectors during the third quarter.
Dealogic reported that banks and financial institutions sold more than $11 billion in non-government guaranteed bonds in September alone, an increase of more than $6 billion over August.
A senior investment analyst at a southern U.S. university with approximately 30 percent of its endowment dedicated to alternative investments expressed substantial interest in distressed corporate credit and senior bank loans.
As the year winds down and markets continue to stabilize, BHA expects event-driven strategies to present considerable options for attractive returns. York Capital Management, for example, a New York-based firm with over $9 billion under management, recently partnered with Bank of America Merrill Lynch and launched a UCITS III-compliant event-driven fund. Capitalizing on market conditions, the fund has reportedly raised $100 million in assets.3 Furthermore, M&A activity is poised for a flurry of activity particularly in the biotechnology and pharmaceutical sectors.
Long/short equity hedge funds steadily gained momentum in the third quarter, continuing a trend that began in the second quarter.
Many investors turned to funds of funds during this quarter for the same reasons they invested before the economic downturn: superior manager selection, enhanced risk management, diversification, and consistent returns. Funds that offered these benefits attracted investor attention.
Although some investors mentioned interest in single-strategy funds of funds—the most popular being CTA/managed futures, credit, distressed debt, global macro, and long/short equity—81 percent of investors were focused on multi-strategy funds of funds.
During the last six to eight weeks of the quarter, many funds of funds reported that investors were becoming more serious and detailed in their research. This is a key indicator that commitments are beginning to flow back into the industry. BHA sees this as another sign that funds of funds will continue their rebound.
BHA saw a steady increase in demand for technology-focused funds among private equity investors. During the third quarter, the percentage of investors looking for technology-focused funds in the private equity space increased 11.2 percent. Year to date, the technology sector has been popular with approximately 18 percent of investors researching private equity funds.
Hedge fund investors also expressed increased interest in the technology sector. In the first quarter of 2009, of the top five sectors, the technology sector garnered 20.1 percent of overall market share in the hedge fund space.
During the second quarter, this percentage increased slightly. These numbers indicate that hedge funds increased the amount of capital allocated to technology-related opportunities. Separately, of the hedge fund investors BHA analysts interviewed in the third quarter, the percentage that were looking for technology-focused funds rose to 11 percent.
Both in the hedge fund and in the private equity fund space, increased interest in the technology sector is largely due to industry consolidation and company restructurings, both of which help to eliminate inefficiencies and increase profit margins, leading to solid returns for managers and investors.
Private Equity Funds
During the third quarter, investor interest in private equity funds remained strong and originated from a wide array of different investors. Although funds of private equity funds are statistically the forerunner in the search for private equity funds, BHA’s data suggest that this quarter’s interest came from an even broader source of investors.
Wealth advisors, government pension plans, family offices, and insurance companies all showed considerable interest in speaking with private equity fund managers.
Funds of private equity funds showed the most interest in single-manager private equity funds.
One reason for this diversified interest is that investors from across the globe were, once again, beginning to express interest in capitalizing on opportunities that have emerged in the wake of the financial crisis.
Summary
The continued thaw of credit markets and the resurgence of equity markets led to a sense of optimism in the alternative investment community during the third quarter. Investors reassessed their portfolios and found opportunities abounding in hedge funds and private equity and real estate space. Investors looked to capitalize on distressed situations through event-driven and merger/risk arbitrage hedge funds, they recognized the significant growth potential of the early stage private equity space, and they targeted emerging market real estate investments that could be poised to rebound over the next several years.
Investors took the time to reevaluate their positions, and focused on making strategic allocations to address specific shortcomings or potential opportunities, such as the ones that they found in the technology sector. Institutional investors sought to make savvy investments that do more than satisfy a percentage of a diversified portfolio. They looked for specific fund managers that have an expertise and a track record of success.
If these statistics are an indication of future trends in the alternative industry than BHA expects the optimism that has driven the equity markets back up to continue to ripple into the alternative investment space. BHA data suggests that the strategies and sectors that are poised for explosive growth in the event of an economic recovery will continue to be the focus of alternative investors throughout the remainder of 2009.
Editing By Alex Akesson
Brighton House Associates (BHA) is an alternative investment research firm that speaks to investors across the globe about their current interest and activity in alternative investment funds. Brighton House works with a network of over 100 fund managers and assists in indentifying qualified investors for their internal marketing campaigns.
Global Equity
The rebound in global equity markets during the first three quarters, along with successful capital-raising campaigns by large financial institutions, created a favorable environment for catalyst events. The announcements of acquisitions by well-known companies such as Xerox, Walt Disney, and Kraft Foods are only a few examples of the flurry of corporate activity that took place in a variety of sectors during the third quarter.
Dealogic reported that banks and financial institutions sold more than $11 billion in non-government guaranteed bonds in September alone, an increase of more than $6 billion over August.
A senior investment analyst at a southern U.S. university with approximately 30 percent of its endowment dedicated to alternative investments expressed substantial interest in distressed corporate credit and senior bank loans.
As the year winds down and markets continue to stabilize, BHA expects event-driven strategies to present considerable options for attractive returns. York Capital Management, for example, a New York-based firm with over $9 billion under management, recently partnered with Bank of America Merrill Lynch and launched a UCITS III-compliant event-driven fund. Capitalizing on market conditions, the fund has reportedly raised $100 million in assets.3 Furthermore, M&A activity is poised for a flurry of activity particularly in the biotechnology and pharmaceutical sectors.
Long/short equity hedge funds steadily gained momentum in the third quarter, continuing a trend that began in the second quarter.
Many investors turned to funds of funds during this quarter for the same reasons they invested before the economic downturn: superior manager selection, enhanced risk management, diversification, and consistent returns. Funds that offered these benefits attracted investor attention.
Although some investors mentioned interest in single-strategy funds of funds—the most popular being CTA/managed futures, credit, distressed debt, global macro, and long/short equity—81 percent of investors were focused on multi-strategy funds of funds.
During the last six to eight weeks of the quarter, many funds of funds reported that investors were becoming more serious and detailed in their research. This is a key indicator that commitments are beginning to flow back into the industry. BHA sees this as another sign that funds of funds will continue their rebound.
BHA saw a steady increase in demand for technology-focused funds among private equity investors. During the third quarter, the percentage of investors looking for technology-focused funds in the private equity space increased 11.2 percent. Year to date, the technology sector has been popular with approximately 18 percent of investors researching private equity funds.
Hedge fund investors also expressed increased interest in the technology sector. In the first quarter of 2009, of the top five sectors, the technology sector garnered 20.1 percent of overall market share in the hedge fund space.
During the second quarter, this percentage increased slightly. These numbers indicate that hedge funds increased the amount of capital allocated to technology-related opportunities. Separately, of the hedge fund investors BHA analysts interviewed in the third quarter, the percentage that were looking for technology-focused funds rose to 11 percent.
Both in the hedge fund and in the private equity fund space, increased interest in the technology sector is largely due to industry consolidation and company restructurings, both of which help to eliminate inefficiencies and increase profit margins, leading to solid returns for managers and investors.
Private Equity Funds
During the third quarter, investor interest in private equity funds remained strong and originated from a wide array of different investors. Although funds of private equity funds are statistically the forerunner in the search for private equity funds, BHA’s data suggest that this quarter’s interest came from an even broader source of investors.
Wealth advisors, government pension plans, family offices, and insurance companies all showed considerable interest in speaking with private equity fund managers.
Funds of private equity funds showed the most interest in single-manager private equity funds.
One reason for this diversified interest is that investors from across the globe were, once again, beginning to express interest in capitalizing on opportunities that have emerged in the wake of the financial crisis.
Summary
The continued thaw of credit markets and the resurgence of equity markets led to a sense of optimism in the alternative investment community during the third quarter. Investors reassessed their portfolios and found opportunities abounding in hedge funds and private equity and real estate space. Investors looked to capitalize on distressed situations through event-driven and merger/risk arbitrage hedge funds, they recognized the significant growth potential of the early stage private equity space, and they targeted emerging market real estate investments that could be poised to rebound over the next several years.
Investors took the time to reevaluate their positions, and focused on making strategic allocations to address specific shortcomings or potential opportunities, such as the ones that they found in the technology sector. Institutional investors sought to make savvy investments that do more than satisfy a percentage of a diversified portfolio. They looked for specific fund managers that have an expertise and a track record of success.
If these statistics are an indication of future trends in the alternative industry than BHA expects the optimism that has driven the equity markets back up to continue to ripple into the alternative investment space. BHA data suggests that the strategies and sectors that are poised for explosive growth in the event of an economic recovery will continue to be the focus of alternative investors throughout the remainder of 2009.
Editing By Alex Akesson
Hedge Fund Broker Dealer Expands With Hires of Jennifer Bloom and Catherine Wagner
HedgeCo Archive - Broker dealer BTIG LLC, has expanded its Capital Introduction team with the addition of Jennifer Bloom and Catherine Wagner as Vice Presidents to help drive the firm’s services to its Prime Brokerage and Outsource Trading clients.
The Capital Introduction team, which is led by Peter Tarrant, Managing Director and Head of Business Development at BTIG, works with a wide range of managers and has a particular expertise in new and emerging hedge fund managers. Through the firm’s network and existing client base of over 1,200 institutional clients, the Capital Introduction team looks to provide clients with effective and targeted introductions.
“Our ability to offer our Prime Brokerage and Outsource Trading clients an enhanced capital introduction team is an important move in BTIG’s strategic growth plan,” said Justin Press, Managing Director and Co-Head of Prime Brokerage at BTIG. “We are a client-led business and strive to provide added value at every stage of the client’s relationship with us.”
Ms. Bloom joins BTIG from Credit Suisse’s Private Fund Group where she was an Analyst. Prior to Credit Suisse, she was with Merrill Lynch’s Real Estate Investment Banking team. Ms. Bloom is responsible for capital introduction on the East Coast and across Europe. She is a graduate of Yale University.
Ms. Wagner joins BTIG from UBS where she was an Associate Director in the Prime Brokerage Sales team. Prior to UBS, she was an Investment Analyst for FirstWorthing. At BTIG, Ms. Wagner is responsible for delivering capital introduction coverage for the Western United States region. She is a graduate of The University of Texas at Austin.
“Our strong network of senior level executives across the hedge fund industry and with institutional investors means that we can provide our clients with the most appropriate, high quality introductions to help further their growth,” added Tarrant.
The Capital Introduction team, which is led by Peter Tarrant, Managing Director and Head of Business Development at BTIG, works with a wide range of managers and has a particular expertise in new and emerging hedge fund managers. Through the firm’s network and existing client base of over 1,200 institutional clients, the Capital Introduction team looks to provide clients with effective and targeted introductions.
“Our ability to offer our Prime Brokerage and Outsource Trading clients an enhanced capital introduction team is an important move in BTIG’s strategic growth plan,” said Justin Press, Managing Director and Co-Head of Prime Brokerage at BTIG. “We are a client-led business and strive to provide added value at every stage of the client’s relationship with us.”
Ms. Bloom joins BTIG from Credit Suisse’s Private Fund Group where she was an Analyst. Prior to Credit Suisse, she was with Merrill Lynch’s Real Estate Investment Banking team. Ms. Bloom is responsible for capital introduction on the East Coast and across Europe. She is a graduate of Yale University.
Ms. Wagner joins BTIG from UBS where she was an Associate Director in the Prime Brokerage Sales team. Prior to UBS, she was an Investment Analyst for FirstWorthing. At BTIG, Ms. Wagner is responsible for delivering capital introduction coverage for the Western United States region. She is a graduate of The University of Texas at Austin.
“Our strong network of senior level executives across the hedge fund industry and with institutional investors means that we can provide our clients with the most appropriate, high quality introductions to help further their growth,” added Tarrant.
Rajaratnam Out On Bail, Winds Down Hedge Funds In Letter to Clients
HedgeCo Archives - In a letter to Galleon employees and clients, Raj Rajaratnam, who has been released on bail, said "I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business."
His bail was set at $100 million. He also said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
"The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital." Rajartnam concluded.
His bail was set at $100 million. He also said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
"The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital." Rajartnam concluded.
21 Oct 2009
Speculation Over Hedge Fund Manager's Downfall In Full Swing
HedgeCo Archives - The Galleon scandal is raging full force, with Raj Rajaratnam's global hedge funds under a microscope. Supervising the case is U.S. District Court Judge Jed S. Rakoff, who's ruling on the Merrill Lynch/BofA case, earned him the nickname 'Judge Dread' on Wall Street, according to The Post.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA's largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA's largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
Silk Road Income Fund Launch
HedgeCo Blogs - Baldwin Berges, Head of Business Development at Silk Invest, announced the launch of a new fronteir hedge fund which invests in sovereign and corporate debt securities across Africa, The Middle East and Central Asia.
"It very likely that we are at the advent of what could be dubbed “The mother of all carry trades” and this time it is not only coming from Asia but also from Europe and the USA." Berges said, "Developed world government debt yields are too low and commodities are looking mighty expensive."
"We have already seen this trade unfolding in the corporate bond arena, investors will likely continue to venture out further into the wilderness of frontier markets in search of high yields. There is very little consumer and/or corporate debt. The local banking system is reluctant to lend money or lack the experience required to evaluate the risk and therefore capital adequacy ratios in the financial sector tend to be very solid."
Hedge Fund Highlights:
Current average Yield to Maturity above 16%
Average duration of 3.4 years
High diversification: currently 65 holdings, 27 countries, 17 currencies
Luxembourg UCITSIII Fund offering weekly liquidity
"It very likely that we are at the advent of what could be dubbed “The mother of all carry trades” and this time it is not only coming from Asia but also from Europe and the USA." Berges said, "Developed world government debt yields are too low and commodities are looking mighty expensive."
"We have already seen this trade unfolding in the corporate bond arena, investors will likely continue to venture out further into the wilderness of frontier markets in search of high yields. There is very little consumer and/or corporate debt. The local banking system is reluctant to lend money or lack the experience required to evaluate the risk and therefore capital adequacy ratios in the financial sector tend to be very solid."
Hedge Fund Highlights:
Current average Yield to Maturity above 16%
Average duration of 3.4 years
High diversification: currently 65 holdings, 27 countries, 17 currencies
Luxembourg UCITSIII Fund offering weekly liquidity
Morningstar's Prelininary Third Quarter Hedge Fund Performance Report
Hedge funds are recovering rapidly in 2009, Morningstar reported in their preliminary hedge fund performance study for the third quarter of 2009 and asset flows through August 2009.
"Paced by an exceptionally strong September, hedge funds began to regain their swagger in the third quarter," said Nadia Papagiannis, Morningstar alternative investments strategist. "The road to recovery for hedge funds was paved by strong performance in riskier asset classes such as emerging markets, distressed, and small-cap securities."
But hedge funds overall haven't yet returned to their October 2007 peaks, the Morningstar 1000 Hedge Fund Index declined 25.2% through February 2009, and has only recovered 20% in the last seven months, with 11.4% to go.
Certain hedge fund strategies have set new highs, however. In September, hedge funds following global macro-economic strategies, fully recovered from 2008 losses, despite lagging the performance of other category indexes this year.
"Paced by an exceptionally strong September, hedge funds began to regain their swagger in the third quarter," said Nadia Papagiannis, Morningstar alternative investments strategist. "The road to recovery for hedge funds was paved by strong performance in riskier asset classes such as emerging markets, distressed, and small-cap securities."
But hedge funds overall haven't yet returned to their October 2007 peaks, the Morningstar 1000 Hedge Fund Index declined 25.2% through February 2009, and has only recovered 20% in the last seven months, with 11.4% to go.
Certain hedge fund strategies have set new highs, however. In September, hedge funds following global macro-economic strategies, fully recovered from 2008 losses, despite lagging the performance of other category indexes this year.
20 Oct 2009
Global Custodian Chosen For Capula Hedge Fund
London-based government fixed-income specialist firm, Capula Investment Management LLP, has appointed BNY Mellon as provider of global hedge fund custody services for their flagship hedge fund, the Capula Global Relative Value Master Fund Limited.
“We selected BNY Mellon as a global custodian as in the current economic environment it is important - to both the firm and to its clients - to have a provider with the financial stability to ensure the safekeeping of our assets. Neil McCallum, chief operating officer at the $4 billion Capula Investment Management LLP, said.
“BNY Mellon is committed to helping our hedge fund clients reduce their counterparty risks. Our appointment gives Capula an additional custody option with a custodian of recognized quality.”David Aldrich, managing director and head of alternative investment services EMEA, at BNY Mellon said.
“We selected BNY Mellon as a global custodian as in the current economic environment it is important - to both the firm and to its clients - to have a provider with the financial stability to ensure the safekeeping of our assets. Neil McCallum, chief operating officer at the $4 billion Capula Investment Management LLP, said.
“BNY Mellon is committed to helping our hedge fund clients reduce their counterparty risks. Our appointment gives Capula an additional custody option with a custodian of recognized quality.”David Aldrich, managing director and head of alternative investment services EMEA, at BNY Mellon said.
19 Oct 2009
Salus Alpha’s perspective on UCITS III Hedge Funds
HedgeCo Archives - Salus Alpha issued a statement regarding the reinvention of the hedge fund sector since last year’s crisis. “UCITS Hedge Funds” are known as a new and innovative concept, but the strategy actually goes back to 2002 when the first hedge fund was implemented under UCITS I.
The UCITS directive was established in 1986 but it took 16 years for asset managers to take notice of the opportunities the directive provided, Salus Alpha states. Only few tried to structure innovative hedge fund products within the UCITS directive and only one was able to successfully launch the first UCITS I Hedge Fund and expand the product range significantly under UCITS III.
"From the beginning it was clear to us that transparency, liquidity and risk management were the most important factors to secure our success in inventing UCITS Hedge Funds. We recognized the potential of UCITS Hedge Funds in 2002 and despite the complicated regulations we were able to offer the first regulated Hedge Funds already under UCITS I in 2003." Salus Alpha explained.
Now after the financial crisis has wreaked havoc on the market everyone wants to be part of the UCITS Hedge Fund world.
"We strongly believe in investing in alpha therefore it’s a mystery to us why the majority of the market invests in beta. It is becoming clearer that the interval between crises will get shorter since the global markets are more volatile than the markets of just one country. Therefore investing in products independent from this market volatility will become more important as markets get closer connected."
The UCITS directive was established in 1986 but it took 16 years for asset managers to take notice of the opportunities the directive provided, Salus Alpha states. Only few tried to structure innovative hedge fund products within the UCITS directive and only one was able to successfully launch the first UCITS I Hedge Fund and expand the product range significantly under UCITS III.
"From the beginning it was clear to us that transparency, liquidity and risk management were the most important factors to secure our success in inventing UCITS Hedge Funds. We recognized the potential of UCITS Hedge Funds in 2002 and despite the complicated regulations we were able to offer the first regulated Hedge Funds already under UCITS I in 2003." Salus Alpha explained.
Now after the financial crisis has wreaked havoc on the market everyone wants to be part of the UCITS Hedge Fund world.
"We strongly believe in investing in alpha therefore it’s a mystery to us why the majority of the market invests in beta. It is becoming clearer that the interval between crises will get shorter since the global markets are more volatile than the markets of just one country. Therefore investing in products independent from this market volatility will become more important as markets get closer connected."
Hedge Fund Billionaire Probed Through Wiretapping And An Unidentified Informant
The SEC's case against Raj Rajaratnam and his hedge fund Galleon Management LP, is sending ripples throughout the industry, as the use of wiretapping and its effects are emerging.
According to Bloomberg, an unidentified informant began setting up interviews and taping the conversations, leading to the uncovering of the alleged massive insider trading scheme that generated more than $25 million in illicit gains.
The SEC also charged six other hedge fund managers with insider trading, including senior executives at major companies IBM, Intel and McKinsey & Company.
“This complaint describes a web of fraud that has been unraveled,” said SEC Chairman Mary L. Schapiro.
“What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be." said Robert Khuzami, Director of the SEC’s Division of Enforcement. “He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity.”
According to Bloomberg, an unidentified informant began setting up interviews and taping the conversations, leading to the uncovering of the alleged massive insider trading scheme that generated more than $25 million in illicit gains.
The SEC also charged six other hedge fund managers with insider trading, including senior executives at major companies IBM, Intel and McKinsey & Company.
“This complaint describes a web of fraud that has been unraveled,” said SEC Chairman Mary L. Schapiro.
“What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be." said Robert Khuzami, Director of the SEC’s Division of Enforcement. “He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity.”
15 Oct 2009
Missing UK Hedge Fund Manager Sought
HedgeCo Archives - The London Metropolitan police are considering launching an investigation into the whereabouts of Nicholas Levene, who is being accused by investors of disappearing with their money.
The Guardian reports that at least £70 million ($114 million) is owed. Others say the hedge fund manager is not on the run, but in a hospital receiving care. His lawyers would neither confirm nor deny, the Guardian said.
The questions started when Levene failed to appear at crucial court hearings to defend himself, prompting the court to freeze assets and demand he surrender his passport. A spread betting firm also alleges that Levene has racked up gambling debts.
"Levene is known to be a generous family man with an extravagant lifestyle. One leading city broker described him as a man who 'lived the dream' and had a private jet on call," the Guardian reported.
"Last week certain information was passed to the fraud squad." the police said in a statement, "Detectives are now assessing the matter to determine what action if any is necessary. At this time no decision has yet been reached whether an inquiry should be conducted."
The Guardian reports that at least £70 million ($114 million) is owed. Others say the hedge fund manager is not on the run, but in a hospital receiving care. His lawyers would neither confirm nor deny, the Guardian said.
The questions started when Levene failed to appear at crucial court hearings to defend himself, prompting the court to freeze assets and demand he surrender his passport. A spread betting firm also alleges that Levene has racked up gambling debts.
"Levene is known to be a generous family man with an extravagant lifestyle. One leading city broker described him as a man who 'lived the dream' and had a private jet on call," the Guardian reported.
"Last week certain information was passed to the fraud squad." the police said in a statement, "Detectives are now assessing the matter to determine what action if any is necessary. At this time no decision has yet been reached whether an inquiry should be conducted."
Starting A Hedge Fund In The Post-Madoff Era
HedgeCo Archives - At a seminar held yesterday, 'Starting A Hedge Fund In The Post-Madoff Era', organized by Andrew Schneider and Hedgeco Networks, 220 managers, investors and service providers came together at the U.S. Trust Building to hear Joe Goldstein and Ron Geffner, among others, discuss the future of startups in the hedge fund industry.
"As a presenter I was very happy to see many start up funds in the audience as well as investors and service providers." Joe Goldstein from G&S Fund Services said, "I think it was a good environment for someone looking for the right information to plan and succeed in establishing a a start up hedge fund. It is typical that in post-Madoff period fund managers embrace the importance of a good infrastructure in gaining investor confidence and building a good fund."
After the speeches were drinks and networking, the general feeling among investors at the event was the the importance of knowing top of the line service providers, ones that stand out and have a prominent reputation.
"After the collapse of Bernie Madoff's ponzi scheme, hedge fund infrastructure has come to the forefront in the industry." Andrew Schneider, founder and co-principal of HedgeCo Networks said, "Investors are performing in-depth due diligence and looking for robust infrastructure before committing their capital. This is especially true for new hedge funds. Potential investors are relying heavily on the reputations of a hedge fund service providers including third-party administrators, auditing firms, prime brokerage houses, and legal counsel to prevent fraud and massive failures like never before."
"As a presenter I was very happy to see many start up funds in the audience as well as investors and service providers." Joe Goldstein from G&S Fund Services said, "I think it was a good environment for someone looking for the right information to plan and succeed in establishing a a start up hedge fund. It is typical that in post-Madoff period fund managers embrace the importance of a good infrastructure in gaining investor confidence and building a good fund."
After the speeches were drinks and networking, the general feeling among investors at the event was the the importance of knowing top of the line service providers, ones that stand out and have a prominent reputation.
"After the collapse of Bernie Madoff's ponzi scheme, hedge fund infrastructure has come to the forefront in the industry." Andrew Schneider, founder and co-principal of HedgeCo Networks said, "Investors are performing in-depth due diligence and looking for robust infrastructure before committing their capital. This is especially true for new hedge funds. Potential investors are relying heavily on the reputations of a hedge fund service providers including third-party administrators, auditing firms, prime brokerage houses, and legal counsel to prevent fraud and massive failures like never before."
14 Oct 2009
Hedge Fund Speculator Extraordinaire Buys Health Insurance
Hedge fund manager Paulson will own 9.9% of private health insurance company Conseco’s common stock after a private share sale, buying $77.9 million in stock and warrants.
Paulson & Co. Inc., on behalf of several hedge funds and accounts he manages will also have certain registration rights in connection with its acquisition of the common stock and warrants.
“This is a bold move,” said Andrew Schneider, founder and co-principal of HedgeCo Networks. “With the current healthcare debate in full swing, the timing is everything. But then, this is the kinds of risk we've come to expect from Paulson." Paulson made $2.5 billion last year, hedging against the U.S. housing market.
Paulson’s warrants will also convert to common stock at $6.50 a share. Conseco rose 78 cents, or 16%, to $5.77 at 7:47 p.m. in late New York trading. The shares have dropped about 68% in the past two years.
Conseco, run by Chief Executive Officer James Prieur, will also file for a public offering of $200 million in new common stock and will sell $293 million in convertible notes. The bond proceeds will be used to repurchase existing notes, the company said. The new debt, due in 2016, will pay investors 7%.
Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 %, compared with a loss of 19% for hedge funds on average.
Paulson & Co. Inc., on behalf of several hedge funds and accounts he manages will also have certain registration rights in connection with its acquisition of the common stock and warrants.
“This is a bold move,” said Andrew Schneider, founder and co-principal of HedgeCo Networks. “With the current healthcare debate in full swing, the timing is everything. But then, this is the kinds of risk we've come to expect from Paulson." Paulson made $2.5 billion last year, hedging against the U.S. housing market.
Paulson’s warrants will also convert to common stock at $6.50 a share. Conseco rose 78 cents, or 16%, to $5.77 at 7:47 p.m. in late New York trading. The shares have dropped about 68% in the past two years.
Conseco, run by Chief Executive Officer James Prieur, will also file for a public offering of $200 million in new common stock and will sell $293 million in convertible notes. The bond proceeds will be used to repurchase existing notes, the company said. The new debt, due in 2016, will pay investors 7%.
Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 %, compared with a loss of 19% for hedge funds on average.
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