It’s that time of year again - firm registration renewals are due by December 11, 2009.
Other important upcoming dates:
* December 24, 2009 - Deadline to submit any form filings for 2009.
* December 25, 2009 to January 3, 2010 - Both the IARD and CRD systems will be unavailable between these dates.
* January 1, 2010 - FINRA’s new fee hikes on the Gross Income Assessment schedule take effect. See Regulatory Notice 09-68
* February 5, 2010 - Deadline to submit any renewal changes or final payments on delinquent accounts.
* March 31, 2010 - Deadline for Form ADV and Form BD amendments.
5 Dec 2009
AIMA Expresses Concern Over Proposed Threshhold For U.S Systemic Resolution Fund
Blogger - “The Alternative Investment Management Association, as the global hedge fund industry association, supports the efforts of policymakers in the U.S. to tackle systemic risk. We support the reporting of systemically relevant information by larger hedge fund managers to the national authorities in the interests of financial stability.”
“However we do wish to express our concern over a measure contained in the proposed Financial Stability Improvement Act of 2009, which was just approved by the House Committee on Financial Services, whereby the hedge fund industry would be subject to more onerous requirements than other financial institutions.” Under this proposal, the asset threshold for firms required to contribute to the Systemic Resolution Fund – a pool of capital that would be used to rescue firms deemed too big to fail – would be set at $10 billion for hedge funds yet $50 billion for all other financial institutions.
The result of this would be to impose disproportionately high costs on hedge fund managers who do not themselves pose systemic risk. “We hope this proposed measure is reconsidered before it becomes law and look forward to working with policymakers on a proportionate and workable outcome.”
“However we do wish to express our concern over a measure contained in the proposed Financial Stability Improvement Act of 2009, which was just approved by the House Committee on Financial Services, whereby the hedge fund industry would be subject to more onerous requirements than other financial institutions.” Under this proposal, the asset threshold for firms required to contribute to the Systemic Resolution Fund – a pool of capital that would be used to rescue firms deemed too big to fail – would be set at $10 billion for hedge funds yet $50 billion for all other financial institutions.
The result of this would be to impose disproportionately high costs on hedge fund managers who do not themselves pose systemic risk. “We hope this proposed measure is reconsidered before it becomes law and look forward to working with policymakers on a proportionate and workable outcome.”
4 Dec 2009
Hedge Funds Settle Deutsche Bank Suit
HedgeCo News Archives - Three hedge funds managed by $24.8 billion Highland Capital Management, L.P. have agreed on a settlement with Deutsche Bank AG. The hedge funds' had filed suit against Deutsche Bank and Deutsche Bank against the hedge funds. The suit was filed in October and November of 2008.
"We are pleased that we were able to come to a mutually satisfactory agreement with Deutsche Bank regarding this dispute. As a staunch advocate of our investors' interests, we reached a mutually beneficial financial resolution for our funds." said Jim Dondero, President.
The terms of the settlement remain confidential.
Galleon Hedge Fund Founder Investigated 10 Years Ago
HedgeCo News Archive - Hedge fund founder Raj Rajaratnam was investigated by federal prosecutors ten years ago according to legal filings obtained by The Wall Street Journal. The paper reported that the prosecutors were unable to prove their suspicions at the time.
The investigation started with suspicions in the 1990s when chip maker Intel Corp alleged that Rajaratnam was receiving tips from an Intel insider. The investigation was based on a witness who had first entered into a plea agreement with the United States before she began to cooperate in an investigation into Rajaratnam's practices.
Rajaratnam was taken into custody in New York on Oct. 16, 2009 in the USA's largest hedge fund insider-trading scheme. His bail was set at $100 million, Rajaratnam said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
3 Dec 2009
Alternative Investor LeapFrog Invests $6 Million in AllLife
HedgeCo News Archives - LeapFrog Investments has announced a ZAR 50 million (over $6 million) investment in AllLife, one of Africa's most innovative insurance businesses. The announcement took place after World AIDS Day.
Launched with President Bill Clinton in 2008, LeapFrog has raised $47 million to date from leading banks, funds, and microfinance and insurance investors. Its profit-with-purpose investment approach has been hailed by many global leaders as a new frontier for alternative investment and microfinance.
"AllLife has developed a distinctive and profitable business model, reaching customers that other insurers have been unable to access," says Gary Herbert, a LeapFrog Principal. "LeapFrog is providing AllLife's team with support to grow their client base by several multiples, and expertise to help management cascade their unique systems into new products and markets."
AllLife, a pioneer in continuous underwriting, links insurance products to an adherence management program. The program ensures clients manage their health appropriately, routinely alerting them to potential health concerns and helping them take action to maintain their wellbeing - such as regularly testing and taking anti-retroviral medications. As a result, AllLife offers more competitively priced products, and covers people whom the insurance industry has often regarded as uninsurable.
"No one who is willing to manage their disease appropriately should be denied life insurance," says Ross Beerman, Managing Director of AllLife. "These are potential policyholders, willing to pay for reasonably priced insurance, and willing to take steps to manage their disease so that they lead long and productive lives. From a business risk and profitability perspective, of course they're insurable - we simply had to invent systems to monitor and support them in the right ways."
AllLife's world-class team and strong strategic plan position it to continue a rapid growth trajectory - its client base grew by 250% last year. AllLife targets reaching 50,000 HIV+ and diabetic policyholders in just a few years, generating strong profits and significant social impact.
In total, 250,000 policyholders and dependents will enjoy the financial security that insurance provides. Most have been unable to obtain insurance or could do so at very high cost - preventing them from taking out home loans, starting businesses, or engaging in other economic activities requiring insurance. Access to insurance has also been shown to reduce stigma associated with HIV, and measurably improve health outcomes. According to Beerman, the company sees an average 15% improvement in clients' health, just from having an AllLife insurance policy.
"We saw in this extraordinary company an opportunity to generate meaningful profits for investors while ending the exclusion of thousands of families from life insurance and participation in the economy," says Ingo Weber, an Investment Committee Member of LeapFrog and a former Managing Director at Swiss Re. LeapFrog's Founder and President, Andrew Kuper, concluded: "For anyone wondering if it's possible to do well by doing good, today that question is answered."
Long/Short Equity Hedge Fund Sector Fell Short in November - Credit Suisse
HedgeCo News Archive - Based on November performance for the Credit Suisse Long/Short Equity Liquid Index (LAB Long/Short Equity Liquid Index), Long/Short Equity funds did not fully capitalize on November's equity market rally since many funds are maintaining more conservative positions in anticipation of year-end, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
"Long/Short Equity hedge funds underperformed most global equity markets as managers maintained relatively neutral exposure to equity markets and many began to lock in profits before the end of the year." Dr. Drachman noted, "Global Macro hedge funds experienced positive performance this month as managers capitalized on increased macro-economic activity. The LAB Long/Short Equity Liquid Index was down -0.75% (net) for the month, while the Credit Suisse Global Macro Liquid Index (LAB Global Macro Liquid Index) finished up 2.23% (net) in the same period."
LAB (formerly known as Alternative Index Replication or AIR) is a series of indices that seek to replicate the aggregate return profiles of alternative investment strategies using liquid, tradable instruments. The LAB umbrella currently includes the Long/Short Equity Liquid Index and the Global Macro Liquid Index which enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index.
2 Dec 2009
Update2: State Street Buys $170 Billion UK Fund Management Company
New York (HedgeCo.net) – State Street Corporation is expanding its global servicing capabilities with an agreement to acquire alternative fund manager Mourant International Finance Administration in a cash transaction. The UK fund is headquartered in Jersey in the Channel Islands with approximately $170 billion in assets under administration.
“As alternative asset classes have become more mainstream, our institutional customers plan to continue to expand their use of this asset class,” said Jay Hooley, president and chief operating officer of State Street.
State Street has been expanding its capabilities in alternative investments over the last seven years. In 2002, the company acquired International Fund Services (IFS), a leading provider of hedge fund administration services and in 2007 State Street significantly expanded its leadership in this market with its acquisitions of both Investors Financial Services Corp. and Palmeri Fund Administrators.
State Street’s Alternative Investment Solutions (AIS) team has more than $420 billion in alternative assets under administration as of September 30, 2009. The acquisition will bring the total to $600 billion, ranking the combined State Street and MIFA businesses No. 1 in alternative asset, private equity and real estate asset servicing globally and No. 2 in hedge fund servicing globally, based on industry survey data. The transaction is expected to close in the first quarter of 2010.
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Merlin Securities Launches 24-Hour International and Domestic Trade Coverage
Merlin Securities has expanded its trading capabilities to include 24-hour international and domestic coverage. Hedge fund experts Troy Prince and John Perna will oversee the expanded trading desk.
“Our clients increasingly seek to trade around the clock and around the globe. We have launched our 24-hour international and domestic desk to provide comprehensive access to the world’s markets,” said Eric Morgan , senior partner and head of trading at Merlin Securities. “Our clients now have the capability to execute in 96 countries across six continents – a level of access that has historically been provided only by the largest prime brokers to the largest hedge funds. The trading team at Merlin takes great pride in our outstanding trading capabilities, services and technology that clients cannot find elsewhere. We welcome Troy and John to the firm as we launch this new level of coverage.”
Troy Prince was most recently a U.S. and Asian equity trader with RBC Capital Markets, where he was the primary trader for a discretionary global equity long/short fund. Prior to that he was a Japanese and global equity execution trader for Barclays, based in Tokyo. Previously, Prince spent five years with ETG, LLC – an affiliate of Spear, Leeds & Kellogg – where he served as a global equity proprietary trader based in New York and Madrid. Earlier in his career Prince was a Japanese equity and convertible bond sales trader with Diawa Securities in Tokyo as well as a portfolio trader with O.G. Williams Capital. He holds a bachelors degree from the Stern School of Business at New York University.
John Perna was most recently a vice president and international equities sales trader at J.P. Morgan and, prior to that, an associate director and international trader for Bear Stearns. In these roles he gained extensive experience trading in Asian, European and Latin American markets, executing customer orders using DMA, DOT and various types of algorithms. Perna holds a bachelors degree in economics from Duke University.
“Our clients increasingly seek to trade around the clock and around the globe. We have launched our 24-hour international and domestic desk to provide comprehensive access to the world’s markets,” said Eric Morgan , senior partner and head of trading at Merlin Securities. “Our clients now have the capability to execute in 96 countries across six continents – a level of access that has historically been provided only by the largest prime brokers to the largest hedge funds. The trading team at Merlin takes great pride in our outstanding trading capabilities, services and technology that clients cannot find elsewhere. We welcome Troy and John to the firm as we launch this new level of coverage.”
Troy Prince was most recently a U.S. and Asian equity trader with RBC Capital Markets, where he was the primary trader for a discretionary global equity long/short fund. Prior to that he was a Japanese and global equity execution trader for Barclays, based in Tokyo. Previously, Prince spent five years with ETG, LLC – an affiliate of Spear, Leeds & Kellogg – where he served as a global equity proprietary trader based in New York and Madrid. Earlier in his career Prince was a Japanese equity and convertible bond sales trader with Diawa Securities in Tokyo as well as a portfolio trader with O.G. Williams Capital. He holds a bachelors degree from the Stern School of Business at New York University.
John Perna was most recently a vice president and international equities sales trader at J.P. Morgan and, prior to that, an associate director and international trader for Bear Stearns. In these roles he gained extensive experience trading in Asian, European and Latin American markets, executing customer orders using DMA, DOT and various types of algorithms. Perna holds a bachelors degree in economics from Duke University.
Old Lane Founders Launch $300 Million Equities Hedge Fund
HedgeCo News Archives - In one of the years biggest US hedge fund launches, the Wall Street Journal reports that four of the founders of the now defunct Citigroup hedge fund, Old Lane, have a new start up hedge fund, Meru Capital Group.
The hedge fund has some $300 million in capital, the Wall Street Journal reports. Meru started trading on December 1st with a large chunk of the partner's own funds, up to $75 million, according to some reports.
The New York based hedge fund invests in derivatives, equities, fixed-income, and currencies. It plans to move in and out of positions quickly, with no single investment accounting for more than 5% of the fund’s assets, the Wall Street Journal reported this morning.
The hedge fund has some $300 million in capital, the Wall Street Journal reports. Meru started trading on December 1st with a large chunk of the partner's own funds, up to $75 million, according to some reports.
The New York based hedge fund invests in derivatives, equities, fixed-income, and currencies. It plans to move in and out of positions quickly, with no single investment accounting for more than 5% of the fund’s assets, the Wall Street Journal reported this morning.
1 Dec 2009
HedgeCo Hedge Fund Capital Introduction Event
Hedge funds are well positioned for a good year in 2010 and are likely to continue their momentum into the end of the year, which will lead to additional gains for investors during the month of December, Hennessee research shows. Because of this optimistic forecast, hedge fund managers are ramping up their fund raising efforts.
In an effort to match up investors with hedge funds looking for new allocations, HedgeCo held the Fall 2009 Capital Introduction Round Tables. The event attracted 65 investors and 6 hedge fund managers. The investors were separated into 6 groups, while the hedge fund managers rotated at 20 minute intervals, enabling the investors to address each manager individually.
"Unlike other capital introduction events where the ratio of managers to investors is small, we take pride that our events have a substantial qualified investor turnout." Evan Rapoport, Co-Founder of HedgeCo Networks, said, "As a result of our conferences, investors have reported notable asset increases."
"I've been to a lot of capital introduction events and as a veteran Hedge Fund manager I can say that this has been the best event so far." Kurt Hovan, manager of Hovan Capital Management, said of the event, "The HedgeCo team did a terrific job in putting together a group of high quality investors, and giving the managers a format which enabled direct interaction with every investor. I look forward to attending future events."
The next event will be held mid-to-late January in NYC, it will also be a Round Table format and HedgeCo is currently accepting applications for new managers to present their funds to members of the alternative investment community.
“We hope to continue having these events and keeping the hedge fund community well networked.” Andrew Schneider, co-founder of HedgeCo Networks, said, “Networking is especially important as the economy continues to change, knowing what is going on in the hedge fund community and having connections in the industry is all-important.”
Recognized as having the largest attendance for any type of event in the hedge fund industry, the HedgeCo Networking Events have quickly become the top destination for generating new business and meeting new industry contacts.
In an effort to match up investors with hedge funds looking for new allocations, HedgeCo held the Fall 2009 Capital Introduction Round Tables. The event attracted 65 investors and 6 hedge fund managers. The investors were separated into 6 groups, while the hedge fund managers rotated at 20 minute intervals, enabling the investors to address each manager individually.
"Unlike other capital introduction events where the ratio of managers to investors is small, we take pride that our events have a substantial qualified investor turnout." Evan Rapoport, Co-Founder of HedgeCo Networks, said, "As a result of our conferences, investors have reported notable asset increases."
"I've been to a lot of capital introduction events and as a veteran Hedge Fund manager I can say that this has been the best event so far." Kurt Hovan, manager of Hovan Capital Management, said of the event, "The HedgeCo team did a terrific job in putting together a group of high quality investors, and giving the managers a format which enabled direct interaction with every investor. I look forward to attending future events."
The next event will be held mid-to-late January in NYC, it will also be a Round Table format and HedgeCo is currently accepting applications for new managers to present their funds to members of the alternative investment community.
“We hope to continue having these events and keeping the hedge fund community well networked.” Andrew Schneider, co-founder of HedgeCo Networks, said, “Networking is especially important as the economy continues to change, knowing what is going on in the hedge fund community and having connections in the industry is all-important.”
Recognized as having the largest attendance for any type of event in the hedge fund industry, the HedgeCo Networking Events have quickly become the top destination for generating new business and meeting new industry contacts.
Regulations Increase Need For Hedge Fund Administration And Law Firms
HedgeCo News Archive - New regulations and laws, including the recently enacted anti-money laundering and know-your-client laws are making the outsourcing of hedge fund administration more and more common, according to G&S Fund Services, who said "When administrating their own fund, many fund managers find they are in over their head."
"Last week there were expansions, as back and middle office service providers globally, caught up with the trend." Andrew Schneider, founder and co-principal of hedge fund research and services firm, HedgeCo Networks, said.
Privately owned hedge fund administration company, Opus Fund Services, today opened a Chicago office, appointing Stephen Giannone as the firms President. He has previously worked in senior management positions at Bear Stearns and Deutsche Bank and most recently at hedge fund administrators Spectrum and Omnium (formerly Citadel Solutions). Opus Fund Services is headquartered in Bermuda and has offices in New York, the United Kingdom, and the Cayman Islands.
And also in the off-shore news, hedge fund law firm, Conyers Dill & Pearman, announced an expansion into Cyprus. Conyers will launch its Cyprus practice out of its Moscow office and will advise on all aspects of Cyprus corporate law.
Cypriot law firm Antis Triantafyllides & Sons LLC (ATS) has entered into an arrangement with Conyers for mutual co-operation on Cyprus, Bermuda, British Virgin Islands, Cayman Islands and Mauritius work, and will assign a lawyer from their Cyprus office to Conyers' Moscow office.
"Last week there were expansions, as back and middle office service providers globally, caught up with the trend." Andrew Schneider, founder and co-principal of hedge fund research and services firm, HedgeCo Networks, said.
Privately owned hedge fund administration company, Opus Fund Services, today opened a Chicago office, appointing Stephen Giannone as the firms President. He has previously worked in senior management positions at Bear Stearns and Deutsche Bank and most recently at hedge fund administrators Spectrum and Omnium (formerly Citadel Solutions). Opus Fund Services is headquartered in Bermuda and has offices in New York, the United Kingdom, and the Cayman Islands.
And also in the off-shore news, hedge fund law firm, Conyers Dill & Pearman, announced an expansion into Cyprus. Conyers will launch its Cyprus practice out of its Moscow office and will advise on all aspects of Cyprus corporate law.
Cypriot law firm Antis Triantafyllides & Sons LLC (ATS) has entered into an arrangement with Conyers for mutual co-operation on Cyprus, Bermuda, British Virgin Islands, Cayman Islands and Mauritius work, and will assign a lawyer from their Cyprus office to Conyers' Moscow office.
30 Nov 2009
Positive December for Equities and Hedge Funds Predicted
Hedgeco Archives - Hedge funds and equity markets are likely to continue their momentum heading into the end of the year and lead to additional gains for investors during the month of December, hedge fund advisor Hennessee Group LLC, believes.
Charles Gradante, Co-Founder of the Hennessee Group, stated “We believe the ‘December Effect, whereby investors choose to defer paying taxes on equity market gains until the following year, will provide additional support to the equity markets as we close out the year. And historical data seems to support this thesis as the equity markets have experienced gains during the final month of the year 70% of the time when positive through the month of November.”
Gradante added, “In addition, hedge funds have experienced gains in December 100% of the time during these same calendar year periods.”
Hennessee Group recently conducted a brief study examining the historical performance of the equity markets and hedge funds when entering the final month of the year with positive year-to-date gains. Hennessee Group focused on the calendar year periods dating back to 1995; using the S&P 500 Index and the Hennessee Hedge Fund Index as proxies.
Dating back to 1995, the S&P 500 Index has generated positive returns through November in ten calendar year periods and experienced additional gains in December 70% of the time. In comparison, hedge funds managed to generate gains in nine of the calendar year periods the S&P 500 Index was positive through November and experienced gains in December 100% of the time.
Gradante stated, “The data supports the ‘December Effect Theory’ and bodes well for investors as we close out 2009. Hennessee Research indicates that when the equity markets were positive through November, they gained on average +2.1% in December while hedge funds gained +1.9%.”
While the Hennessee Group is optimistic for both the equity markets and hedge funds heading into the final month of the year due to the “December Effect”, we are more optimistic that hedge funds are well positioned for a good year on a relative basis in 2010.
In addition, the equity markets are likely to trade in a range as opposed to trend in one particular direction in 2010. The Hennessee Group believes such an environment should favor hedge funds relative to their traditional counterparts as they will have the opportunity to generate alpha on the both the long and short side of their portfolios while not having to rely on market direction or beta for returns.
Charles Gradante, Co-Founder of the Hennessee Group, stated “We believe the ‘December Effect, whereby investors choose to defer paying taxes on equity market gains until the following year, will provide additional support to the equity markets as we close out the year. And historical data seems to support this thesis as the equity markets have experienced gains during the final month of the year 70% of the time when positive through the month of November.”
Gradante added, “In addition, hedge funds have experienced gains in December 100% of the time during these same calendar year periods.”
Hennessee Group recently conducted a brief study examining the historical performance of the equity markets and hedge funds when entering the final month of the year with positive year-to-date gains. Hennessee Group focused on the calendar year periods dating back to 1995; using the S&P 500 Index and the Hennessee Hedge Fund Index as proxies.
Dating back to 1995, the S&P 500 Index has generated positive returns through November in ten calendar year periods and experienced additional gains in December 70% of the time. In comparison, hedge funds managed to generate gains in nine of the calendar year periods the S&P 500 Index was positive through November and experienced gains in December 100% of the time.
Gradante stated, “The data supports the ‘December Effect Theory’ and bodes well for investors as we close out 2009. Hennessee Research indicates that when the equity markets were positive through November, they gained on average +2.1% in December while hedge funds gained +1.9%.”
While the Hennessee Group is optimistic for both the equity markets and hedge funds heading into the final month of the year due to the “December Effect”, we are more optimistic that hedge funds are well positioned for a good year on a relative basis in 2010.
In addition, the equity markets are likely to trade in a range as opposed to trend in one particular direction in 2010. The Hennessee Group believes such an environment should favor hedge funds relative to their traditional counterparts as they will have the opportunity to generate alpha on the both the long and short side of their portfolios while not having to rely on market direction or beta for returns.
Hedge funds set to leave London for lower taxes
HedgeCo Archives - Some hedge funds are considering a move to Switzerland or Asia as the European Union doles out new taxes and regulations. The hedge fund industry is worth over $377 billion in Europe, the Associated Press reports.
"There was bound to be a reaction of some sort, when these kind of changes are made," Andrew Schneider, co-founder of HedgeCo, said, "The industry as a whole has bounced back in dramatic fashion. If the EU commission wants to set up a watchdog system for hedge funds, investors and markets, there is sure to be an opening for competition from emerging markets and countries with lower taxes."
When HSBC disclosed that it was reviewing the placement of its headquarters, it fuelled fears of an exodus of leading companies. Three FTSE250 firms disclosed in October that they were leaving London. Among key tax concerns include government proposals to begin taxing "non-domiciled" foreign staff.
European Union lawmakers have also said that hedge fund managers in the UK may be subject to the same kind of restrictions and bonuses currently being imposed on regular banks to limit rewards for short-term success.
"There was bound to be a reaction of some sort, when these kind of changes are made," Andrew Schneider, co-founder of HedgeCo, said, "The industry as a whole has bounced back in dramatic fashion. If the EU commission wants to set up a watchdog system for hedge funds, investors and markets, there is sure to be an opening for competition from emerging markets and countries with lower taxes."
When HSBC disclosed that it was reviewing the placement of its headquarters, it fuelled fears of an exodus of leading companies. Three FTSE250 firms disclosed in October that they were leaving London. Among key tax concerns include government proposals to begin taxing "non-domiciled" foreign staff.
European Union lawmakers have also said that hedge fund managers in the UK may be subject to the same kind of restrictions and bonuses currently being imposed on regular banks to limit rewards for short-term success.
25 Nov 2009
Rajaratnam Says Government Case Against His Hedge Fund Is Unconstitutional
New York (HedgeCo.net) - The billionaire hedge fund manager is arguing that authorities violated his constitutional rights by taping telephone conversations between Rajaratnam and his clients, the Wall Street Journal reports.
Hedge fund managers and stock traders have been closely following the Government's case, as wiretapping is a common tactic for investigations into organized crime, terrorism, and drug running. This case is the first insider-trading prosecution based on Government wiretaps.
The Wall street Journal reported that Rajaratnam’s lawyers argued that wiretaps were used without first demonstrating that conventional investigative techniques were inadequate, as required under the Wiretap Act of 1968.
Hedge fund managers and stock traders have been closely following the Government's case, as wiretapping is a common tactic for investigations into organized crime, terrorism, and drug running. This case is the first insider-trading prosecution based on Government wiretaps.
The Wall street Journal reported that Rajaratnam’s lawyers argued that wiretaps were used without first demonstrating that conventional investigative techniques were inadequate, as required under the Wiretap Act of 1968.
23 Nov 2009
Asia Private Equity Hedge Funds To Recieve $200 Million From Texas Retirement Fund
New York (HedgeCo.net) – The seventh-largest U.S. public pension fund is reported to be investing $200 million in Asia private equity hedge funds.
Bloomberg reported this morning that the Teachers Retirement System of Texas fund has assigned $100 million each to hedge fund firms Squadron Capital and Morgan Creek Capital Management LLC to help it invest with private-equity firms that focus on emerging markets.
According to the Asian Venture Capital Journal, Asia private-equity investments in have reached $25 billion since July, overtaking the $22.4 billion total for the first half.
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Insparo Expands Africa Emerging Markets Fund
UK-based emerging markets hedge fund firm, Insparo Asset Management has expanded their Africa & Middle East Fund with the appointment of Jamie Allsopp.
Jamie has a strong background in fund management and African markets, garnered during eight years with New Star Asset Management. Jamie joined New Star in 2001 as an equity analyst. Over the next five years, Jamie served as portfolio manager to two of New Star’s high profile funds. Part of his responsibility in this role was marketing the fund to a cross-section of international investors.
In 2007, Jamie launched the New Star Heart of Africa Fund, which invested in Sub Saharan equities. As portfolio manager of the fund, Jamie developed a deep knowledge of African markets, as well as first-hand experience of the region through extensive trips to the Sub Saharan region. He was responsible for raising £90m of new investment into the fund through a global marketing campaign.
Jamie’s appointment is the latest step in Insparo’s efforts to ramp up the marketing of the fund. The firm recently announced plans to increase the scope of the fund’s marketing to target investors in the US, Europe, South Africa and the Middle East.
His appointment also represents the third hire made by Insparo in as many months, as the firm has looked to build on the success of its first year by increasing its investment, operational and marketing personnel. The Insparo Africa and Middle East Fund has now returned 31% YTD.
“Jamie is a very significant hire for the firm." Mohammed Hanif, Chief Investment Officer at Insparo, said ,"His experience of managing and capital raising for a major African-focussed fund positions him perfectly for the role we’re asking him to take on. By hiring a specialist of the calibre of Jamie, who also has hands on fund management experience, we believe we are able to provide our current and future investors with a superior and well rounded service that we feel is appropriate for a frontier market product.”
The Insparo Africa and Middle East Fund currently has US$160 million of assets under management. Investors include IPGL Limited, a private holding company in which Michael Spencer, CEO of ICAP plc, together with his wife and family trusts, are majority shareholders; and South African entrepreneur Mark Shuttleworth’s Here Be Dragons. It targets traditional hedge fund and institutional investors such as funds of hedge funds, private banks, family offices, HNWIs and pension funds.
The success of the fund in its first year saw the firm awarded the Emerging Markets (excl Asia) Asset Manager of the Year Award at the recent Global Investor Awards.
Insparo Asset Management, founded in July 2007 is a UK-based limited liability company, whose investment team has collectively 40 years of emerging markets experience, focused on esoteric investments.
Jamie has a strong background in fund management and African markets, garnered during eight years with New Star Asset Management. Jamie joined New Star in 2001 as an equity analyst. Over the next five years, Jamie served as portfolio manager to two of New Star’s high profile funds. Part of his responsibility in this role was marketing the fund to a cross-section of international investors.
In 2007, Jamie launched the New Star Heart of Africa Fund, which invested in Sub Saharan equities. As portfolio manager of the fund, Jamie developed a deep knowledge of African markets, as well as first-hand experience of the region through extensive trips to the Sub Saharan region. He was responsible for raising £90m of new investment into the fund through a global marketing campaign.
Jamie’s appointment is the latest step in Insparo’s efforts to ramp up the marketing of the fund. The firm recently announced plans to increase the scope of the fund’s marketing to target investors in the US, Europe, South Africa and the Middle East.
His appointment also represents the third hire made by Insparo in as many months, as the firm has looked to build on the success of its first year by increasing its investment, operational and marketing personnel. The Insparo Africa and Middle East Fund has now returned 31% YTD.
“Jamie is a very significant hire for the firm." Mohammed Hanif, Chief Investment Officer at Insparo, said ,"His experience of managing and capital raising for a major African-focussed fund positions him perfectly for the role we’re asking him to take on. By hiring a specialist of the calibre of Jamie, who also has hands on fund management experience, we believe we are able to provide our current and future investors with a superior and well rounded service that we feel is appropriate for a frontier market product.”
The Insparo Africa and Middle East Fund currently has US$160 million of assets under management. Investors include IPGL Limited, a private holding company in which Michael Spencer, CEO of ICAP plc, together with his wife and family trusts, are majority shareholders; and South African entrepreneur Mark Shuttleworth’s Here Be Dragons. It targets traditional hedge fund and institutional investors such as funds of hedge funds, private banks, family offices, HNWIs and pension funds.
The success of the fund in its first year saw the firm awarded the Emerging Markets (excl Asia) Asset Manager of the Year Award at the recent Global Investor Awards.
Insparo Asset Management, founded in July 2007 is a UK-based limited liability company, whose investment team has collectively 40 years of emerging markets experience, focused on esoteric investments.
20 Nov 2009
Financial Regulatory Reform: A New Foundation
I. PROMOTE ROBUST SUPERVISION AND REGULATION OF FINANCIAL FIRMS
A. Create a Financial Services Oversight Council
1. We propose the creation of a Financial Services Oversight Council to facilitate information sharing and coordination, identify emerging risks, advise the Federal Reserve on the identification of firms whose failure could pose a threat to financial stability due to their combination of size, leverage, and interconnectedness (hereafter referred to as a Tier 1 FHC), and provide a forum for resolving jurisdictional disputes between regulators.
a. The membership of the Council should include
(i) the Secretary of the Treasury, who shall serve as the Chairman;
(ii) the Chairman of the Board of Governors of the Federal Reserve System;
(iii) the Director of the National Bank Supervisor;
(iv) the Director of the Consumer Financial Protection Agency;
(v) the Chairman of the SEC;
(vi) the Chairman of the CFTC;
(vii) the Chairman of the FDIC; and
(viii) the Director of the Federal Housing Finance Agency (FHFA).
b. The Council should be supported by a permanent, full-time expert staff at Treasury. The staff should be responsible for providing the Council with the information and resources it needs to fulfill its responsibilities.
2. Our legislation will propose to give the Council the authority to gather information from any financial firm and the responsibility for referring emerging risks to the attention of regulators with the authority to respond.
B. Implement Heightened Consolidated Supervision and Regulation of All Large,
Interconnected Financial Firms
1. Any financial firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed (Tier 1 FHC) should be subject to robust consolidated supervision and regulation, regardless of whether the firm owns an insured depository institution.
2. The Federal Reserve Board should have the authority and accountability for consolidated supervision and regulation of Tier 1 FHCs.
3. Our legislation will propose criteria that the Federal Reserve must consider in identifying Tier 1 FHCs.
4. The prudential standards for Tier 1 FHCs – including capital, liquidity and risk management standards – should be stricter and more conservative than those applicable to other financial firms to account for the greater risks that their potential failure would impose on the financial system.
5. Consolidated supervision of a Tier 1 FHC should extend to the parent company and to all of its subsidiaries – regulated and unregulated, U.S. and
foreign. Functionally regulated and depository institution subsidiaries of a Tier 1 FHC should continue to be supervised and regulated primarily by their functional or bank regulator, as the case may be. The constraints that the Gramm-Leach-Bliley Act (GLB Act) introduced on the Federal Reserve’s ability to require reports from, examine, or impose higher prudential requirements or more stringent activity restrictions on the functionally regulated or depository institution subsidiaries of FHCs should be removed.
6. Consolidated supervision of a Tier 1 FHC should be macroprudential in focus. That is, it should consider risk to the system as a whole.
7. The Federal Reserve, in consultation with Treasury and external experts, should propose recommendations by October 1, 2009 to better align its structure and governance with its authorities and responsibilities.
C. Strengthen Capital and Other Prudential Standards For All Banks and BHCs
1. Treasury will lead a working group, with participation by federal financial regulatory agencies and outside experts that will conduct a fundamental reassessment of existing regulatory capital requirements for banks and BHCs, including new Tier 1 FHCs. The working group will issue a report with its conclusions by December 31, 2009.
2. Treasury will lead a working group, with participation by federal financial regulatory agencies and outside experts, that will conduct a fundamental reassessment of the supervision of banks and BHCs. The working group will issue a report with its conclusions by October 1, 2009.
3. Federal regulators should issue standards and guidelines to better align executive compensation practices of financial firms with long-term shareholder value and to prevent compensation practices from providing incentives that could threaten the safety and soundness of supervised institutions. In addition, we will support legislation requiring all public companies to hold non-binding shareholder resolutions on the compensation packages of senior executive officers, as well as new requirements to make compensation committees more independent.
4. Capital and management requirements for FHC status should not be limited to the subsidiary depository institution. All FHCs should be required to meet the capital and management requirements on a consolidated basis as well.
5. The accounting standard setters (the FASB, the IASB, and the SEC) should review accounting standards to determine how financial firms should be required to employ more forward-looking loan loss provisioning practices that incorporate a broader range of available credit information. Fair value accounting rules also should be reviewed with the goal of identifying changes that could provide users of financial reports with both fair value information and greater transparency regarding the cash flows management expects to receive by holding investments.
6. Firewalls between banks and their affiliates should be strengthened to protect the federal safety net that supports banks and to better prevent spread of the subsidy inherent in the federal safety net to bank affiliates.
D. Close Loopholes in Bank Regulation
1. We propose the creation of a new federal government agency, the National Bank Supervisor (NBS), to conduct prudential supervision and regulation of all federally chartered depository institutions, and all federal branches and agencies of foreign banks.
2. We propose to eliminate the federal thrift charter, but to preserve its interstate
branching rules and apply them to state and national banks.
3. All companies that control an insured depository institution, however organized, should be subject to robust consolidated supervision and regulation at the federal level by the Federal Reserve and should be subject to the nonbanking activity restrictions of the BHC Act. The policy of separating banking from commerce should be re-affirmed and strengthened. We must close loopholes in the BHC Act for thrift holding companies, industrial loan companies, credit card banks, trust companies, and grandfathered “nonbank” banks.
E. Eliminate the SEC’s Programs for Consolidated Supervision
The SEC has ended its Consolidated Supervised Entity Program, under which it had been the holding company supervisor for companies such as Lehman Brothers and Bear Stearns. We propose also eliminating the SEC’s Supervised Investment Bank Holding Company program. Investment banking firms that seek consolidated supervision by a U.S. regulator should be subject to supervision and regulation by the Federal Reserve.
F. Require Hedge Funds and Other Private Pools of Capital to Register
All advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) whose assets under management exceed some modest threshold should be required to register with the SEC under the Investment Advisers Act. The advisers should be required to report information on the funds they manage that is sufficient to assess whether any fund poses a threat to financial stability.
G. Reduce the Susceptibility of Money Market Mutual Funds (MMFs) to Runs
The SEC should move forward with its plans to strengthen the regulatory framework around MMFs to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs. The President’s Working Group on Financial Markets should prepare a report assessing whether more fundamental changes are necessary to further reduce the MMF industry’s susceptibility to runs, such as eliminating the ability
of a MMF to use a stable net asset value or requiring MMFs to obtain access to
reliable emergency liquidity facilities from private sources.
H. Enhance Oversight of the Insurance Sector
Our legislation will propose the establishment of the Office of National Insurance within Treasury to gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector. Treasury will support proposals to modernize and improve our system of insurance regulation in accordance with six principles outlined in the body of the report.
I. Determine the Future Role of the Government Sponsored Enterprises (GSEs)
Treasury and the Department of Housing and Urban Development, in consultation with other government agencies, will engage in a wide-ranging initiative to develop recommendations on the future of Fannie Mae and Freddie Mac, and the Federal Home Loan Bank system. We need to maintain the continued stability and strength of the GSEs during these difficult financial times.
We will report to the Congress and the American public at the time of the President’s 2011 Budget release.
II. ESTABLISH COMPREHENSIVE REGULATION OF FINANCIAL MARKETS
A. Strengthen Supervision and Regulation of Securitization Markets
1. Federal banking agencies should promulgate regulations that require originators or sponsors to retain an economic interest in a material portion of the credit risk of securitized credit exposures.
2. Regulators should promulgate additional regulations to align compensation of market participants with longer term performance of the underlying loans.
3. The SEC should continue its efforts to increase the transparency and standardization of securitization markets and be given clear authority to require robust reporting by issuers of asset backed securities (ABS).
4. The SEC should continue its efforts to strengthen the regulation of credit rating agencies, including measures to promote robust policies and procedures that manage and disclose conflicts of interest, differentiate between structured and other products, and otherwise strengthen the integrity of the ratings process.
5. Regulators should reduce their use of credit ratings in regulations and supervisory practices, wherever possible.
B. Create Comprehensive Regulation of All OTC Derivatives, Including Credit
Default Swaps (CDS)
All OTC derivatives markets, including CDS markets, should be subject to comprehensive regulation that addresses relevant public policy objectives:
(1) preventing activities in those markets from posing risk to the financial system;
(2) promoting the efficiency and transparency of those markets; (3) preventing market manipulation, fraud, and other market abuses; and (4) ensuring that OTC derivatives are not marketed inappropriately to unsophisticated parties.
C. Harmonize Futures and Securities Regulation
The CFTC and the SEC should make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities.
D. Strengthen Oversight of Systemically Important Payment, Clearing, and Settlement Systems and Related Activities
We propose that the Federal Reserve have the responsibility and authority to conduct oversight of systemically important payment, clearing and settlement systems, and activities of financial firms.
E. Strengthen Settlement Capabilities and Liquidity Resources of Systemically Important Payment, Clearing, and Settlement Systems
We propose that the Federal Reserve have authority to provide systemically important payment, clearing, and settlement systems access to Reserve Bank accounts, financial services, and the discount window.
III. PROTECT CONSUMERS AND INVESTORS FROM FINANCIAL ABUSE
A. Create a New Consumer Financial Protection Agency
1. We propose to create a single primary federal consumer protection supervisor to protect consumers of credit, savings, payment, and other consumer financial products and services, and to regulate providers of such products and services.
2. The CFPA should have broad jurisdiction to protect consumers in consumer financial products and services such as credit, savings, and payment products.
3. The CFPA should be an independent agency with stable, robust funding.
4. The CFPA should have sole rule-making authority for consumer financial protection statutes, as well as the ability to fill gaps through rule-making.
5. The CFPA should have supervisory and enforcement authority and jurisdiction over all persons covered by the statutes that it implements, including both insured depositories and the range of other firms not previously subject to comprehensive federal supervision, and it should work with the Department of Justice to enforce the statutes under its jurisdiction in
federal court.
6. The CFPA should pursue measures to promote effective regulation, including conducting periodic reviews of regulations, an outside advisory council, and coordination with the Council.
7. The CFPA’s strong rules would serve as a floor, not a ceiling. The states should have the ability to adopt and enforce stricter laws for institutions of all types, regardless of charter, and to enforce federal law concurrently with respect to institutions of all types, also regardless of charter.
8. The CFPA should coordinate enforcement efforts with the states.
9. The CFPA should have a wide variety of tools to enable it to perform its functions effectively.
10. The Federal Trade Commission should also be given better tools and additional resources to protect consumers.
B. Reform Consumer Protection
1. Transparency. We propose a new proactive approach to disclosure. The CFPA will be authorized to require that all disclosures and other communications with consumers be reasonable: balanced in their presentation of benefits, and clear and conspicuous in their identification of costs, penalties, and risks.
2. Simplicity. We propose that the regulator be authorized to define standards for “plain vanilla” products that are simpler and have straightforward pricing. The CFPA should be authorized to require all providers and intermediaries to offer these products prominently, alongside whatever other lawful products they choose to offer.
3. Fairness. Where efforts to improve transparency and simplicity prove inadequate to prevent unfair treatment and abuse, we propose that the CFPA be authorized to place tailored restrictions on product terms and provider practices, if the benefits outweigh the costs. Moreover, we propose to authorize the Agency to impose appropriate duties of care on financial
intermediaries.
4. Access. The Agency should enforce fair lending laws and the Community Reinvestment Act and otherwise seek to ensure that underserved consumers and communities have access to prudent financial services, lending, and investment.
C. Strengthen Investor Protection
1. The SEC should be given expanded authority to promote transparency in investor disclosures.
2. The SEC should be given new tools to increase fairness for investors by establishing a fiduciary duty for broker-dealers offering investment advice and harmonizing the regulation of investment advisers and broker-dealers.
3. Financial firms and public companies should be accountable to their clients and investors by expanding protections for whistleblowers, expanding sanctions available for enforcement, and requiring non-binding shareholder votes on executive pay plans.
4. Under the leadership of the Financial Services Oversight Council, we propose the establishment of a Financial Consumer Coordinating Council with a broad membership of federal and state consumer protection agencies, and a permanent role for the SEC’s Investor Advisory Committee.
5. Promote retirement security for all Americans by strengthening employmentbased and private retirement plans and encouraging adequate savings.
IV. PROVIDE THE GOVERNMENT WITH THE TOOLS IT NEEDS TO MANAGE FINANCIAL CRISES
A. Create a Resolution Regime for Failing BHCs, Including Tier 1 FHCs
We recommend the creation of a resolution regime to avoid the disorderly resolution of failing BHCs, including Tier 1 FHCs, if a disorderly resolution would have serious adverse effects on the financial system or the economy. The regime would supplement (rather than replace) and be modeled on to the existing resolution regime for insured depository institutions under the Federal Deposit Insurance Act.
B. Amend the Federal Reserve’s Emergency Lending Authority
We will propose legislation to amend Section 13(3) of the Federal Reserve Act to require the prior written approval of the Secretary of the Treasury for any extensions of credit by the Federal Reserve to individuals, partnerships, or corporations in “unusual and exigent circumstances.”
V. RAISE INTERNATIONAL REGULATORY STANDARDS AND IMPROVE
INTERNATIONAL COOPERATION
A. Strengthen the International Capital Framework
We recommend that the Basel Committee on Banking Supervision (BCBS) continue to modify and improve Basel II by refining the risk weights applicable to the trading book and securitized products, introducing a supplemental leverage ratio, and improving the definition of capital by the end of 2009. We also urge the BCBS to complete an in-depth review of the Basel II framework to mitigate its procyclical effects.
B. Improve the Oversight of Global Financial Markets
We urge national authorities to promote the standardization and improved oversight of credit derivative and other OTC derivative markets, in particular through the use of central counterparties, along the lines of the G-20 commitment, and to advance these goals through international coordination and cooperation.
C. Enhance Supervision of Internationally Active Financial Firms
We recommend that the Financial Stability Board (FSB) and national authorities implement G-20 commitments to strengthen arrangements for international cooperation on supervision of global financial firms through establishment and continued operational development of supervisory colleges.
D. Reform Crisis Prevention and Management Authorities and Procedures
We recommend that the BCBS expedite its work to improve cross-border resolution of global financial firms and develop recommendations by the end of 2009. We further urge national authorities to improve information-sharing arrangements and implement the FSB principles for cross-border crisis management.
E. Strengthen the Financial Stability Board
We recommend that the FSB complete its restructuring and institutionalize its new mandate to promote global financial stability by September 2009.
F. Strengthen Prudential Regulations
We recommend that the BCBS take steps to improve liquidity risk management standards for financial firms and that the FSB work with the Bank for International Settlements (BIS) and standard setters to develop macroprudential tools.
G. Expand the Scope of Regulation
1. Determine the appropriate Tier 1 FHC definition and application of requirements for foreign financial firms.
2. We urge national authorities to implement by the end of 2009 the G-20 commitment to require hedge funds or their managers to register and disclose appropriate information necessary to assess the systemic risk they pose individually or collectively
H. Introduce Better Compensation Practices
In line with G-20 commitments, we urge each national authority to put guidelines in place to align compensation with long-term shareholder value and to promote compensation structures do not provide incentives for excessive risk taking. We recommend that the BCBS expediently integrate the FSB principles on compensation into its risk management guidance by the end of 2009.
I. Promote Stronger Standards in the Prudential Regulation, Money
Laundering/Terrorist Financing, and Tax Information Exchange Areas
1. We urge the FSB to expeditiously establish and coordinate peer reviews to assess compliance and implementation of international regulatory standards, with priority attention on the international cooperation elements of prudential regulatory standards.
2. The United States will work to implement the updated International Cooperation Review Group (ICRG) peer review process and work with partners in the Financial Action Task Force (FATF) to address jurisdictions not complying with international anti-money laundering/terrorist financing (AML/CFT) standards.
J. Improve Accounting Standards
1. We recommend that the accounting standard setters clarify and make consistent the application of fair value accounting standards, including the impairment of financial instruments, by the end of 2009.
2. We recommend that the accounting standard setters improve accounting standards for loan loss provisioning by the end of 2009 that would make it more forward looking, as long as the transparency of financial statements is not compromised.
3. We recommend that the accounting standard setters make substantial progress by the end of 2009 toward development of a single set of high quality global accounting standards.
K. Tighten Oversight of Credit Rating Agencies
We urge national authorities to enhance their regulatory regimes to effectively oversee credit rating agencies (CRAs), consistent with international standards and the G-20 Leaders’ recommendations.
A. Create a Financial Services Oversight Council
1. We propose the creation of a Financial Services Oversight Council to facilitate information sharing and coordination, identify emerging risks, advise the Federal Reserve on the identification of firms whose failure could pose a threat to financial stability due to their combination of size, leverage, and interconnectedness (hereafter referred to as a Tier 1 FHC), and provide a forum for resolving jurisdictional disputes between regulators.
a. The membership of the Council should include
(i) the Secretary of the Treasury, who shall serve as the Chairman;
(ii) the Chairman of the Board of Governors of the Federal Reserve System;
(iii) the Director of the National Bank Supervisor;
(iv) the Director of the Consumer Financial Protection Agency;
(v) the Chairman of the SEC;
(vi) the Chairman of the CFTC;
(vii) the Chairman of the FDIC; and
(viii) the Director of the Federal Housing Finance Agency (FHFA).
b. The Council should be supported by a permanent, full-time expert staff at Treasury. The staff should be responsible for providing the Council with the information and resources it needs to fulfill its responsibilities.
2. Our legislation will propose to give the Council the authority to gather information from any financial firm and the responsibility for referring emerging risks to the attention of regulators with the authority to respond.
B. Implement Heightened Consolidated Supervision and Regulation of All Large,
Interconnected Financial Firms
1. Any financial firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed (Tier 1 FHC) should be subject to robust consolidated supervision and regulation, regardless of whether the firm owns an insured depository institution.
2. The Federal Reserve Board should have the authority and accountability for consolidated supervision and regulation of Tier 1 FHCs.
3. Our legislation will propose criteria that the Federal Reserve must consider in identifying Tier 1 FHCs.
4. The prudential standards for Tier 1 FHCs – including capital, liquidity and risk management standards – should be stricter and more conservative than those applicable to other financial firms to account for the greater risks that their potential failure would impose on the financial system.
5. Consolidated supervision of a Tier 1 FHC should extend to the parent company and to all of its subsidiaries – regulated and unregulated, U.S. and
foreign. Functionally regulated and depository institution subsidiaries of a Tier 1 FHC should continue to be supervised and regulated primarily by their functional or bank regulator, as the case may be. The constraints that the Gramm-Leach-Bliley Act (GLB Act) introduced on the Federal Reserve’s ability to require reports from, examine, or impose higher prudential requirements or more stringent activity restrictions on the functionally regulated or depository institution subsidiaries of FHCs should be removed.
6. Consolidated supervision of a Tier 1 FHC should be macroprudential in focus. That is, it should consider risk to the system as a whole.
7. The Federal Reserve, in consultation with Treasury and external experts, should propose recommendations by October 1, 2009 to better align its structure and governance with its authorities and responsibilities.
C. Strengthen Capital and Other Prudential Standards For All Banks and BHCs
1. Treasury will lead a working group, with participation by federal financial regulatory agencies and outside experts that will conduct a fundamental reassessment of existing regulatory capital requirements for banks and BHCs, including new Tier 1 FHCs. The working group will issue a report with its conclusions by December 31, 2009.
2. Treasury will lead a working group, with participation by federal financial regulatory agencies and outside experts, that will conduct a fundamental reassessment of the supervision of banks and BHCs. The working group will issue a report with its conclusions by October 1, 2009.
3. Federal regulators should issue standards and guidelines to better align executive compensation practices of financial firms with long-term shareholder value and to prevent compensation practices from providing incentives that could threaten the safety and soundness of supervised institutions. In addition, we will support legislation requiring all public companies to hold non-binding shareholder resolutions on the compensation packages of senior executive officers, as well as new requirements to make compensation committees more independent.
4. Capital and management requirements for FHC status should not be limited to the subsidiary depository institution. All FHCs should be required to meet the capital and management requirements on a consolidated basis as well.
5. The accounting standard setters (the FASB, the IASB, and the SEC) should review accounting standards to determine how financial firms should be required to employ more forward-looking loan loss provisioning practices that incorporate a broader range of available credit information. Fair value accounting rules also should be reviewed with the goal of identifying changes that could provide users of financial reports with both fair value information and greater transparency regarding the cash flows management expects to receive by holding investments.
6. Firewalls between banks and their affiliates should be strengthened to protect the federal safety net that supports banks and to better prevent spread of the subsidy inherent in the federal safety net to bank affiliates.
D. Close Loopholes in Bank Regulation
1. We propose the creation of a new federal government agency, the National Bank Supervisor (NBS), to conduct prudential supervision and regulation of all federally chartered depository institutions, and all federal branches and agencies of foreign banks.
2. We propose to eliminate the federal thrift charter, but to preserve its interstate
branching rules and apply them to state and national banks.
3. All companies that control an insured depository institution, however organized, should be subject to robust consolidated supervision and regulation at the federal level by the Federal Reserve and should be subject to the nonbanking activity restrictions of the BHC Act. The policy of separating banking from commerce should be re-affirmed and strengthened. We must close loopholes in the BHC Act for thrift holding companies, industrial loan companies, credit card banks, trust companies, and grandfathered “nonbank” banks.
E. Eliminate the SEC’s Programs for Consolidated Supervision
The SEC has ended its Consolidated Supervised Entity Program, under which it had been the holding company supervisor for companies such as Lehman Brothers and Bear Stearns. We propose also eliminating the SEC’s Supervised Investment Bank Holding Company program. Investment banking firms that seek consolidated supervision by a U.S. regulator should be subject to supervision and regulation by the Federal Reserve.
F. Require Hedge Funds and Other Private Pools of Capital to Register
All advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) whose assets under management exceed some modest threshold should be required to register with the SEC under the Investment Advisers Act. The advisers should be required to report information on the funds they manage that is sufficient to assess whether any fund poses a threat to financial stability.
G. Reduce the Susceptibility of Money Market Mutual Funds (MMFs) to Runs
The SEC should move forward with its plans to strengthen the regulatory framework around MMFs to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs. The President’s Working Group on Financial Markets should prepare a report assessing whether more fundamental changes are necessary to further reduce the MMF industry’s susceptibility to runs, such as eliminating the ability
of a MMF to use a stable net asset value or requiring MMFs to obtain access to
reliable emergency liquidity facilities from private sources.
H. Enhance Oversight of the Insurance Sector
Our legislation will propose the establishment of the Office of National Insurance within Treasury to gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector. Treasury will support proposals to modernize and improve our system of insurance regulation in accordance with six principles outlined in the body of the report.
I. Determine the Future Role of the Government Sponsored Enterprises (GSEs)
Treasury and the Department of Housing and Urban Development, in consultation with other government agencies, will engage in a wide-ranging initiative to develop recommendations on the future of Fannie Mae and Freddie Mac, and the Federal Home Loan Bank system. We need to maintain the continued stability and strength of the GSEs during these difficult financial times.
We will report to the Congress and the American public at the time of the President’s 2011 Budget release.
II. ESTABLISH COMPREHENSIVE REGULATION OF FINANCIAL MARKETS
A. Strengthen Supervision and Regulation of Securitization Markets
1. Federal banking agencies should promulgate regulations that require originators or sponsors to retain an economic interest in a material portion of the credit risk of securitized credit exposures.
2. Regulators should promulgate additional regulations to align compensation of market participants with longer term performance of the underlying loans.
3. The SEC should continue its efforts to increase the transparency and standardization of securitization markets and be given clear authority to require robust reporting by issuers of asset backed securities (ABS).
4. The SEC should continue its efforts to strengthen the regulation of credit rating agencies, including measures to promote robust policies and procedures that manage and disclose conflicts of interest, differentiate between structured and other products, and otherwise strengthen the integrity of the ratings process.
5. Regulators should reduce their use of credit ratings in regulations and supervisory practices, wherever possible.
B. Create Comprehensive Regulation of All OTC Derivatives, Including Credit
Default Swaps (CDS)
All OTC derivatives markets, including CDS markets, should be subject to comprehensive regulation that addresses relevant public policy objectives:
(1) preventing activities in those markets from posing risk to the financial system;
(2) promoting the efficiency and transparency of those markets; (3) preventing market manipulation, fraud, and other market abuses; and (4) ensuring that OTC derivatives are not marketed inappropriately to unsophisticated parties.
C. Harmonize Futures and Securities Regulation
The CFTC and the SEC should make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities.
D. Strengthen Oversight of Systemically Important Payment, Clearing, and Settlement Systems and Related Activities
We propose that the Federal Reserve have the responsibility and authority to conduct oversight of systemically important payment, clearing and settlement systems, and activities of financial firms.
E. Strengthen Settlement Capabilities and Liquidity Resources of Systemically Important Payment, Clearing, and Settlement Systems
We propose that the Federal Reserve have authority to provide systemically important payment, clearing, and settlement systems access to Reserve Bank accounts, financial services, and the discount window.
III. PROTECT CONSUMERS AND INVESTORS FROM FINANCIAL ABUSE
A. Create a New Consumer Financial Protection Agency
1. We propose to create a single primary federal consumer protection supervisor to protect consumers of credit, savings, payment, and other consumer financial products and services, and to regulate providers of such products and services.
2. The CFPA should have broad jurisdiction to protect consumers in consumer financial products and services such as credit, savings, and payment products.
3. The CFPA should be an independent agency with stable, robust funding.
4. The CFPA should have sole rule-making authority for consumer financial protection statutes, as well as the ability to fill gaps through rule-making.
5. The CFPA should have supervisory and enforcement authority and jurisdiction over all persons covered by the statutes that it implements, including both insured depositories and the range of other firms not previously subject to comprehensive federal supervision, and it should work with the Department of Justice to enforce the statutes under its jurisdiction in
federal court.
6. The CFPA should pursue measures to promote effective regulation, including conducting periodic reviews of regulations, an outside advisory council, and coordination with the Council.
7. The CFPA’s strong rules would serve as a floor, not a ceiling. The states should have the ability to adopt and enforce stricter laws for institutions of all types, regardless of charter, and to enforce federal law concurrently with respect to institutions of all types, also regardless of charter.
8. The CFPA should coordinate enforcement efforts with the states.
9. The CFPA should have a wide variety of tools to enable it to perform its functions effectively.
10. The Federal Trade Commission should also be given better tools and additional resources to protect consumers.
B. Reform Consumer Protection
1. Transparency. We propose a new proactive approach to disclosure. The CFPA will be authorized to require that all disclosures and other communications with consumers be reasonable: balanced in their presentation of benefits, and clear and conspicuous in their identification of costs, penalties, and risks.
2. Simplicity. We propose that the regulator be authorized to define standards for “plain vanilla” products that are simpler and have straightforward pricing. The CFPA should be authorized to require all providers and intermediaries to offer these products prominently, alongside whatever other lawful products they choose to offer.
3. Fairness. Where efforts to improve transparency and simplicity prove inadequate to prevent unfair treatment and abuse, we propose that the CFPA be authorized to place tailored restrictions on product terms and provider practices, if the benefits outweigh the costs. Moreover, we propose to authorize the Agency to impose appropriate duties of care on financial
intermediaries.
4. Access. The Agency should enforce fair lending laws and the Community Reinvestment Act and otherwise seek to ensure that underserved consumers and communities have access to prudent financial services, lending, and investment.
C. Strengthen Investor Protection
1. The SEC should be given expanded authority to promote transparency in investor disclosures.
2. The SEC should be given new tools to increase fairness for investors by establishing a fiduciary duty for broker-dealers offering investment advice and harmonizing the regulation of investment advisers and broker-dealers.
3. Financial firms and public companies should be accountable to their clients and investors by expanding protections for whistleblowers, expanding sanctions available for enforcement, and requiring non-binding shareholder votes on executive pay plans.
4. Under the leadership of the Financial Services Oversight Council, we propose the establishment of a Financial Consumer Coordinating Council with a broad membership of federal and state consumer protection agencies, and a permanent role for the SEC’s Investor Advisory Committee.
5. Promote retirement security for all Americans by strengthening employmentbased and private retirement plans and encouraging adequate savings.
IV. PROVIDE THE GOVERNMENT WITH THE TOOLS IT NEEDS TO MANAGE FINANCIAL CRISES
A. Create a Resolution Regime for Failing BHCs, Including Tier 1 FHCs
We recommend the creation of a resolution regime to avoid the disorderly resolution of failing BHCs, including Tier 1 FHCs, if a disorderly resolution would have serious adverse effects on the financial system or the economy. The regime would supplement (rather than replace) and be modeled on to the existing resolution regime for insured depository institutions under the Federal Deposit Insurance Act.
B. Amend the Federal Reserve’s Emergency Lending Authority
We will propose legislation to amend Section 13(3) of the Federal Reserve Act to require the prior written approval of the Secretary of the Treasury for any extensions of credit by the Federal Reserve to individuals, partnerships, or corporations in “unusual and exigent circumstances.”
V. RAISE INTERNATIONAL REGULATORY STANDARDS AND IMPROVE
INTERNATIONAL COOPERATION
A. Strengthen the International Capital Framework
We recommend that the Basel Committee on Banking Supervision (BCBS) continue to modify and improve Basel II by refining the risk weights applicable to the trading book and securitized products, introducing a supplemental leverage ratio, and improving the definition of capital by the end of 2009. We also urge the BCBS to complete an in-depth review of the Basel II framework to mitigate its procyclical effects.
B. Improve the Oversight of Global Financial Markets
We urge national authorities to promote the standardization and improved oversight of credit derivative and other OTC derivative markets, in particular through the use of central counterparties, along the lines of the G-20 commitment, and to advance these goals through international coordination and cooperation.
C. Enhance Supervision of Internationally Active Financial Firms
We recommend that the Financial Stability Board (FSB) and national authorities implement G-20 commitments to strengthen arrangements for international cooperation on supervision of global financial firms through establishment and continued operational development of supervisory colleges.
D. Reform Crisis Prevention and Management Authorities and Procedures
We recommend that the BCBS expedite its work to improve cross-border resolution of global financial firms and develop recommendations by the end of 2009. We further urge national authorities to improve information-sharing arrangements and implement the FSB principles for cross-border crisis management.
E. Strengthen the Financial Stability Board
We recommend that the FSB complete its restructuring and institutionalize its new mandate to promote global financial stability by September 2009.
F. Strengthen Prudential Regulations
We recommend that the BCBS take steps to improve liquidity risk management standards for financial firms and that the FSB work with the Bank for International Settlements (BIS) and standard setters to develop macroprudential tools.
G. Expand the Scope of Regulation
1. Determine the appropriate Tier 1 FHC definition and application of requirements for foreign financial firms.
2. We urge national authorities to implement by the end of 2009 the G-20 commitment to require hedge funds or their managers to register and disclose appropriate information necessary to assess the systemic risk they pose individually or collectively
H. Introduce Better Compensation Practices
In line with G-20 commitments, we urge each national authority to put guidelines in place to align compensation with long-term shareholder value and to promote compensation structures do not provide incentives for excessive risk taking. We recommend that the BCBS expediently integrate the FSB principles on compensation into its risk management guidance by the end of 2009.
I. Promote Stronger Standards in the Prudential Regulation, Money
Laundering/Terrorist Financing, and Tax Information Exchange Areas
1. We urge the FSB to expeditiously establish and coordinate peer reviews to assess compliance and implementation of international regulatory standards, with priority attention on the international cooperation elements of prudential regulatory standards.
2. The United States will work to implement the updated International Cooperation Review Group (ICRG) peer review process and work with partners in the Financial Action Task Force (FATF) to address jurisdictions not complying with international anti-money laundering/terrorist financing (AML/CFT) standards.
J. Improve Accounting Standards
1. We recommend that the accounting standard setters clarify and make consistent the application of fair value accounting standards, including the impairment of financial instruments, by the end of 2009.
2. We recommend that the accounting standard setters improve accounting standards for loan loss provisioning by the end of 2009 that would make it more forward looking, as long as the transparency of financial statements is not compromised.
3. We recommend that the accounting standard setters make substantial progress by the end of 2009 toward development of a single set of high quality global accounting standards.
K. Tighten Oversight of Credit Rating Agencies
We urge national authorities to enhance their regulatory regimes to effectively oversee credit rating agencies (CRAs), consistent with international standards and the G-20 Leaders’ recommendations.
19 Nov 2009
Hedge Funds Benefit From Appreciaton Of Gold/Emerging Markets/Europe
HedgeCo News Archives -
New York (HedgeCo.net) – “Hedge funds performed as advertised in October—they hedged,” said Nadia Papagiannis, Morningstar alternative investment strategist. “Though the economy may be recovering, hedge fund managers appear positioned for a reversal.”
However, hedge funds in the Morningstar Europe Equity hedge fund category had inflows of $847 million.
Hedge funds following arbitrage strategies and buying distressed securities have enjoyed a tremendous year, as they continue to profit from assets acquired at fire-sale prices in late 2008. Profits are starting to narrow, however, as the discounts on assets are diminishing.
Certain emerging market countries, such as China and Russia, posted significant gains, the performance of emerging market hedge funds depended on country allocation. In developed markets, European and Asian equity markets declined less than the U.S. equity market, but this did not carry over to hedge funds.
Hedge funds that make make macro-economic bets in equities, fixed-income, currencies, and commodities benefited from the appreciation of gold, which reached record highs in October, moves in the Australian dollar versus the U.S. dollar, and price trends in global government bonds. Price-trend-following funds were hit by a reversal in the trends in equity and currency markets in late October, though, resulting in overall losses.
Meanwhile, Eurekahedge reported global hedge fund inflows totaling $10.2 billion for October, while performance-based losses were $2.4 billion. Total hedge fund assets under management (AUM) have increased by $7.8 billion in October, bringing hedge fund AUM to a total of $1.45 trillion.
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Two-Tiered Hedge Fund Market - Hedgebay
HedgeCo Blog Archives - The October edition of Hedgebay Trading Corporation’s monthly index has shown that the purchase of hedge fund assets is being driven by two prevailing sentiments among investors, creating a two-tier hedge fund market.
The Hedgebay Global Hedge Fund Secondary Market Index reveals a wide discrepancy between the highest and lowest prices at which secondary market users were willing to trade at.
The highest trade took place at NAV, the second time in the last three months that this watermark has been reached. This is symptomatic of confidence returning to some sections of the industry. However, the number of trades occurring at the lower end of the scale, the lowest of which took place at only 40% of NAV, shows that the search for liquidity and the cleaning-up of unwanted positions is still taking place.
“The trade at 100% of NAV shows that investors are increasingly willing to pay top dollar for high quality and hard to come by funds." Elias Tueta, co-founder of Hedgebay, commented, "More and more we will see trades reaching, and maybe even exceeding, NAV as investors increasingly put their faith in these high end assets. However, in the other extreme, the trade at 40% of NAV, and the volume of trades at a similar level, still shows that riskier, less liquid assets –notably side-pockets -are increasingly overvalued. Sellers currently still have to offload these kinds of assets at whatever price they can get”
Though the disparity in the valuation of assets suggests a continuing lack of conviction among hedge fund investors, the index also provides signs of encouragement for the industry. The average price (in terms of percent of NAV) rose to 87% - the first time in five months that the average price of assets being traded has risen. While the rise in the average price is a reason for optimism, Hedgebay has indicated that hedge funds’ portfolios have not yet been fully cleaned-up:
“During a month of heavy trading volume, the average price is up almost 400 basis points from September. This, perhaps even more than the trade at 100% of NAV, is a sign of increasing optimism, but it is not yet conclusive. When we start to see a substantial amount of trades being done at around the 95% level, then we might begin to say that the hedge fund market is almost back to normal.”
The Hedgebay Global Hedge Fund Secondary Market Index, launched in September, provides hedge fund investors with statistics on the key aspects of the secondary market. Most notably it offers the average discount or premium to Net Asset Value (NAV) of hedge fund shares traded during the month.
The Hedgebay Global Hedge Fund Secondary Market Index reveals a wide discrepancy between the highest and lowest prices at which secondary market users were willing to trade at.
The highest trade took place at NAV, the second time in the last three months that this watermark has been reached. This is symptomatic of confidence returning to some sections of the industry. However, the number of trades occurring at the lower end of the scale, the lowest of which took place at only 40% of NAV, shows that the search for liquidity and the cleaning-up of unwanted positions is still taking place.
“The trade at 100% of NAV shows that investors are increasingly willing to pay top dollar for high quality and hard to come by funds." Elias Tueta, co-founder of Hedgebay, commented, "More and more we will see trades reaching, and maybe even exceeding, NAV as investors increasingly put their faith in these high end assets. However, in the other extreme, the trade at 40% of NAV, and the volume of trades at a similar level, still shows that riskier, less liquid assets –notably side-pockets -are increasingly overvalued. Sellers currently still have to offload these kinds of assets at whatever price they can get”
Though the disparity in the valuation of assets suggests a continuing lack of conviction among hedge fund investors, the index also provides signs of encouragement for the industry. The average price (in terms of percent of NAV) rose to 87% - the first time in five months that the average price of assets being traded has risen. While the rise in the average price is a reason for optimism, Hedgebay has indicated that hedge funds’ portfolios have not yet been fully cleaned-up:
“During a month of heavy trading volume, the average price is up almost 400 basis points from September. This, perhaps even more than the trade at 100% of NAV, is a sign of increasing optimism, but it is not yet conclusive. When we start to see a substantial amount of trades being done at around the 95% level, then we might begin to say that the hedge fund market is almost back to normal.”
The Hedgebay Global Hedge Fund Secondary Market Index, launched in September, provides hedge fund investors with statistics on the key aspects of the secondary market. Most notably it offers the average discount or premium to Net Asset Value (NAV) of hedge fund shares traded during the month.
Hedge Fund Billionaire John Paulson To Launch Gold Fund
HedgeCo News Archives - According to investors, hedge fund manager John Paulson, who through Paulson& Co., has raised over $1 billion for clients, has plans to launch a fund dedicated to buying up shares of bullion-related investments.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
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