Obama was clearly not happy with certain unnamed hedge funds refusal to make sacrafices prior to Chrysler's "orderly" bankruptcy. Though the President did not name which funds were not cooperative, he noted that the vast majority of financial institutions did come to the table to work constructively. Apparently several hedge funds did not.
Below is a direct quote from President Obama's speech this morning:
"While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices."
Obama also praised Robert Nardelli, the now former CEO of Chrysler,
"...Chrysler's management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process."
You can also read the entire speech here:
Hedge Fund Information, Hedge Fund Performance, Hedge Fund Lists, Hedge Fund Jobs, Hedge Fund Returns,regulation of Hedge Funds Hedge Fund Performance, and Fund of Funds, and Fund of Hedge Funds
4.29.2009
Fortress to Take Over $2.5b in DB Zwirn & Co. Hedge Fund Assets
Fortress Investment Group will take over the $2.5 billion hedge fund assets of D.B. Zwirn Co., according to people supposedly familiar with the situation. Headquartered in New York, Fortress manages almost $30 billion in assets and is one of the largest US based hedge funds.
Zwirn’s board and some of its biggest investors chose Fortress, a New York-based private equity and hedge-fund manager, to liquidate the assets. Fortress was picked from nine candidates including a group headed by Desmond Dermot.
D.B. Zwirn Special Opportunities Fund fund makes loans to companies including those that have trouble getting financing elsewhere. Zwirn decided to close the fund when investors asked to withdraw more than $2 billion after a delay in the release of the fund’s 2006 financial audit.
Hedge Fund Manager Fined and Banned for Mismarking Positions
UK Hedge Fund Manager Fined and Banned by Financial Services Authority for Mismarking Positions
The U.K.'s financial regulator Wednesday said it had banned and fined hedge fund manager, Loic Montserret of BlueCrest Capital Management, for mismarking trading positions as he tried to hide losses and keep his job. Monteserret is the first individual to be both banned and fined for mismarking trade positions by the Financial Services Authority. At one point, his mismarking resulted in the fund being overvalued by $8.6 million.
Montserret was banned from the securities industry for 15 years and fined GBP35,000.
Monteserret, manager of the BlueCrest Multi Strategy Credit Fund, was responsible for managing about $60 million of BlueCrest Capital Management's $12 billion in assets under management and is one of the UK's largest hedge funds.
The U.K.'s financial regulator Wednesday said it had banned and fined hedge fund manager, Loic Montserret of BlueCrest Capital Management, for mismarking trading positions as he tried to hide losses and keep his job. Monteserret is the first individual to be both banned and fined for mismarking trade positions by the Financial Services Authority. At one point, his mismarking resulted in the fund being overvalued by $8.6 million.
Montserret was banned from the securities industry for 15 years and fined GBP35,000.
Monteserret, manager of the BlueCrest Multi Strategy Credit Fund, was responsible for managing about $60 million of BlueCrest Capital Management's $12 billion in assets under management and is one of the UK's largest hedge funds.
Loic Albert Antoine Montserrat, now a former hedge fund manager manager at BlueCrest Capital Management Ltd., is the first individual to be both banned and fined for mismarking trade positions by the Financial Services Authority.
SEC Wants Greater Hedge Fund Authority
Schapiro Seeks Larger Staff, Greater Regulatory Control, for Hedge Funds
SEC Chairman Mary Schapiro said today that the SEC "needs" the authority to require hedge funds to register with the agency. Additionally, Schapiro wants the SEC to have the power to examine hedge funds' book. Schapiro also noted that registration without significant oversight and authority "would not be sufficient". "It would be good to have rulemaking authority," she said. "It's good to have flexibility to respond to crises as they emerge."
Schapiro also wants additional funding to provide adequate hedge fund oversight. "With over 30,000 regulated entities and a staff of 3,600 people, we cannot add a couple thousand more hedge funds and get the job done under any circumstance," she said.
SEC Chairman Mary Schapiro said today that the SEC "needs" the authority to require hedge funds to register with the agency. Additionally, Schapiro wants the SEC to have the power to examine hedge funds' book. Schapiro also noted that registration without significant oversight and authority "would not be sufficient". "It would be good to have rulemaking authority," she said. "It's good to have flexibility to respond to crises as they emerge."
Schapiro also wants additional funding to provide adequate hedge fund oversight. "With over 30,000 regulated entities and a staff of 3,600 people, we cannot add a couple thousand more hedge funds and get the job done under any circumstance," she said.
European Union Imposes Hedge Fund Regulations
EU Imposes New Hedge Fund Regulations
The European Union is proposing new rules extending oversight for the European hedge fund industry which has close to $1 trillion in assets by some estimates. The European Commission Wednesday proposed new disclosure requirements for hedge funds and private equity firms managing more than EUR100 million in assets. Many had expected, upon release of an early draft, that the AUM cutoff for firms would be as high as EUR250 million. This cutoff means only 3% of funds (accounting for 10% of assets), will be regulated under the proposal.
Germany and France in recent years have railed against hedge funds while the U.K., home to Europe's largest financial center has taken the opposite position. Germany and France, for example, believe certain derivatives and other aspects of financial markets have evolved to become beyond regulators' understanding and oversight. The U.K. for their part, believes stricter regulations will only push hedge funds and other alternative managers to locales with less stringent requirements.
Under the plan, firms exceeding the cutoff will have to register with regulators and provide information on their holdings, fees and the amount of money they borrow to boost their potential returns.
The commission's proposal still needs approval from E.U. governments and the European Parliament. Officials expect continued argument about how to manage the sector.
The European Union is proposing new rules extending oversight for the European hedge fund industry which has close to $1 trillion in assets by some estimates. The European Commission Wednesday proposed new disclosure requirements for hedge funds and private equity firms managing more than EUR100 million in assets. Many had expected, upon release of an early draft, that the AUM cutoff for firms would be as high as EUR250 million. This cutoff means only 3% of funds (accounting for 10% of assets), will be regulated under the proposal.
Germany and France in recent years have railed against hedge funds while the U.K., home to Europe's largest financial center has taken the opposite position. Germany and France, for example, believe certain derivatives and other aspects of financial markets have evolved to become beyond regulators' understanding and oversight. The U.K. for their part, believes stricter regulations will only push hedge funds and other alternative managers to locales with less stringent requirements.
Under the plan, firms exceeding the cutoff will have to register with regulators and provide information on their holdings, fees and the amount of money they borrow to boost their potential returns.
The commission's proposal still needs approval from E.U. governments and the European Parliament. Officials expect continued argument about how to manage the sector.
4.21.2009
Quant Funds Underperform Value Funds
Value based hedge funds have been outperforming their quantitative counterparts this year as highly levered out of favor companies performed well in the first part of 2009. Meanwhile, momentum based quant funds have been hit hard as the biggest losers in recent months, banks and other financials, actually outperformed. In fact, quant momentum funds posted their worst returns in 15 years in March, losing more than 25%.
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Turkey Lanuches New Hedge Fund
Though it seems that far more hedge funds are closing than opening, and one might think this pattern would be especially true in hard hit emerging market economies, a Turkish bank is starting a new hedge fund. Garanti Bankasi, Turkey's second-biggest bank by market value, said on Monday it was launching a hedge fund with a registered capital of 500 million lira ($306 million) within a month.
Hedge Funds Even for Q1 2009
Hedge funds either gained .5% in the first quarter of 2009, or lost .1%, depending on which index you follow. Hedge Fund Research showed a .5% first quarter gain, while Morningstar's 1000 Hedge Fund Index posted a miniscule .1% decline. Total hedge fund industry capital fell to $1.33 billion, $600 billion below its peak.
4.15.2009
Hedge Fund Redemptions Slow in March
Hedge fund assets under management fell in March by 1% despite an average 2% performance during the same period, according to HedgeFund.net. Roughly speaking, actual redemptions in March amounted to 3% of hedge fund assets. This is seemingly large monthly decline, but it is minor in comparison to the declines in hedge fund assets earlier in the year and in 2008. Hedge fund asset declines for March were about $18 billion compared with declines in December of more than $180 billion.
Hedge Fund Alson Capital Closes Amid Redemptions
Amid massive redemptions, hedge fund Alson Capital is closing its doors. The $800 million fund performed poorly in a difficult market. The fund once manages as much as $3.5 billion. Alson Capital was founded 11 years ago by Neil Barsky, a former Wall Street Journal employee who went on to work with Morgan Stanely before creating his fund.
According to Barsky: “I likely will never again manage a hedge fund,” he wrote to investors. He did pronounce himself “young enough and energetic enough to purse new initiatives either in the fields of business, government or philanthropy.”
According to Barsky: “I likely will never again manage a hedge fund,” he wrote to investors. He did pronounce himself “young enough and energetic enough to purse new initiatives either in the fields of business, government or philanthropy.”
4.13.2009
Why Hedge Funds are NOT "Too Big To Fail"
Relative to Other Financial Institutions, Hedge Funds are Actually "Too Small NOT To Fail"
Timothy Geithner and other public officials have argued that large hedge funds are "too big to fail". Their collapse, they argue, could have widespread systemic impacts on the global financial system. However, their are legitimate questions as to whether the argument that hedge funds are too big to fail has any credible weight. In fact, relative to their regulated counterparts such as banking and insurance giants, hedge funds are actually too small not to fail.
Why Hedge Funds Are NOT "To Big to Fail":
1. The largest hedge fund (Bridgewater at under $40 billion in AUM) has less than 2% of the assets of Citigroup (Citi had 2008 assets of $2.2 trillion).
- The entire hedge fund industry is estimated at about $1 trillion. By comparison, Citi had $1.1 trillion, in off-balance sheet assets alone. These off-balance SIVs often consisted of now toxic CDOs and other structured debt pools.
2. Hedge Funds Actually Operate with Less Leverage than Most Banks
- Here are the 2008 leverage ratios for the largest US Banks: Citigroup (19.2x), JP Morgan (12.7x), Wells Fargo (12x), Bank od America (11.7X).
- According to the Merrill Lynch Hedge Fund Manager Survey, 70% of hedge funds operated with less than 2x leverage in 2007. And 2007 was the most levered hedge funds had been in almost 10 years.
- Currently, the average hedge fund has net leverage of less than 1.
3. Hedge Fund Collapse Does Not Markedly Effect Broader Markets
- While a hedge fund collapse may have some detrimental effects on the financial markets in which the fund(s) operated, it is not likely to lead to widespread economic malaise.
- By contrast, the failure of a large bank leads to tens of thousands of job losses (at least 35,000 from B of A a lone), massive decreases in consumer and business lending, and general liquidity issues.
4. Hedge Fund Failures are Just a Blip Compared to Regulated Financial Institutions
- AIG losses in 2008 ($98 billion) were greater than all the hedge fund failures in history.
- At the time of Lehman's bankruptcy, it still declared $639 billion in assets. This represents assets equal to more than half of the entire hedge fund industry and more than 10x larger than Madoff's fund. If Lehman can be permitted to fail, what logical rationale could be proposed for bailing out a hedge fund?
Hedge funds are not too big to fail. The entire industry represents fewer assets than individual global banks. Additionally, protecting hedge funds from failure creates an unnecessary moral hazard. Funds might be encouraged to take more risk, particularly risks with systemic impact, if they feel their size and breadth makes them impervious to failure.
Unfortunately, we have recently created such a moral hazard with the bailout of banks. However, the impact of moral hazard was deemed modest in comparision to the potential failure of the entire economic system. Given the much slighter impact posed by hedge funds, considering hedge funds to be too big to fail carries negative implications as well.
This is not to say hedge fund regulation can't be helpful; it can. However, considering hedge funds to be as dangerous as massive financial institutions is purely asinine.
4.08.2009
"Chinese Warren Buffett" Sued by SEC for Ponzi Scheme
Hedge Fund Manager, Weizhen Tang, 50, of WinWin Capital Management, has been sued by the SEC for running what authorities are calling a Ponzi Scheme. According to authorities, Tang managed about $75 million in assets (barely 1/10 of 1% of Maddoff's fund) and didn't reveal losses of over $15 million in 2007 to investors.
A federal court judge in Dallas agreed to freeze assets and appoint a receiver to recover clients’ money, the SEC said. The agency wants him to forfeit profits and pay unspecified fines.
More interestingly, Tang supposedly referred to himself as the "Chinese Warren Buffett", a claim he denies using until others started calling him by that name.
A federal court judge in Dallas agreed to freeze assets and appoint a receiver to recover clients’ money, the SEC said. The agency wants him to forfeit profits and pay unspecified fines.
More interestingly, Tang supposedly referred to himself as the "Chinese Warren Buffett", a claim he denies using until others started calling him by that name.
For years, Weizhen Tang was considered an investment guru in much of the Chinese community in North America. He could supposedly generate a 1-per-cent weekly return.
But Mr. Tang's reputation was dealt a stunning setback during the week of Jan. 26, 2009. That was when he held a public demonstration of his investment strategy in his Toronto office and couldn't match the reported results of his funds.
"Unfortunately the public demo failed," Mr. Tang wrote in an e-mail to investors a few days after the event. "I apologize. I don't want to find any excuses. I need more hard work."
By 2009, Oversea Chinese and WinWin had attracted more than 200 investors who invested roughly $75-million (U.S.) in total, according to court filings. The minimum investment was $150,000 (Canadian) in Oversea Chinese and $250,000 (U.S.) in WinWin. Mr. Tang did not charge a fee on the first 6 per cent of profit, but he took a 25-per-cent cut of any additional profit, according to court filings.Hennessee Hedge Fund Returns for 2009
As hedge fund indeces have different makeups and calculations we are providing a variety of hedge fund performance charts.
Hennessee Hedge Fund Index April 2009
Hennessee Hedge Fund Index April 2009
2009 (Net) | YTD | YTD RANK | JAN | FEB | MAR |
| Hennessee Hedge Fund Index | 1.09% | - | 0.69% | -0.95% | 1.37% |
| Long/Short Equity Index | 1.01% | - | 0.68% | -1.25% | 1.60% |
| Arbitrage/Event Driven Index | 3.38% | - | 2.14% | -0.12% | 1.34% |
| Global/Macro Index | -1.36% | - | -0.82% | -1.28% | 0.74% |
| Asia-Pacific Index | -3.40% | 23 | -2.49% | -1.30% | 0.37% |
| Convertible Arbitrage Index | 9.52% | 1 | 4.15% | 1.80% | 3.30% |
| Distressed Index | -0.64% | 17 | 1.35% | -2.59% | 0.64% |
| Emerging Markets Index | 1.94% | 10 | -0.56% | -0.02% | 2.53% |
| Europe Index | -1.84% | 21 | -1.47% | -1.16% | 0.80% |
| Event Driven Index | 1.07% | 13 | 0.73% | -1.28% | 1.64% |
| Financial Equities Index | 3.68% | 6 | 2.04% | 1.38% | 0.22% |
| Fixed Income Index | 4.75% | 2 | 2.60% | 1.11% | 0.97% |
| Growth Index | 0.01% | 16 | 0.00% | -1.93% | 1.98% |
| Healthcare and Biotech Index | 0.53% | 15 | 0.95% | -3.22% | 2.89% |
| High Yield Index | 2.41% | 8 | 1.45% | 0.11% | 0.83% |
| International Index | -2.82% | 22 | -0.58% | -2.73% | 0.49% |
| Latin America Index | -0.98% | 19 | 1.96% | -2.30% | -0.60% |
| Macro Index | -0.80% | 18 | 0.47% | -1.18% | -0.08% |
| Market Neutral Index | 1.55% | 12 | 1.05% | 0.00% | 0.50% |
| Merger Arbitrage Index | 0.96% | 14 | 0.32% | 0.00% | 0.63% |
| Multiple Arbitrage Index | 4.74% | 3 | 3.64% | 0.45% | 0.61% |
| Opportunistic Index | 3.62% | 7 | 2.83% | -1.44% | 2.23% |
| Pipes/Private Financing Index | 1.58% | 11 | 0.57% | -0.44% | 1.45% |
| Short Biased Index | 1.94% | 9 | 3.78% | 3.73% | -5.31% |
| Technology Index | 3.89% | 5 | 0.47% | -0.49% | 3.91% |
| Telecom and Media Index | 4.53% | 4 | 2.35% | 1.64% | 0.67% |
| Value Index | -1.37% | 20 | -0.48% | -2.47% | 1.62% |
| Dow Jones Industrial Average | -13.30% | - | -8.84% | -11.72% | 7.73% |
| Barclays Aggregate Bond Index | 0.12% | - | -0.88% | -0.38% | 3.31% |
| MSCI EAFE (USD) Price Index | -14.64% | - | -9.88% | -10.54% | 5.87% |
| NASDAQ | -3.07% | - | -6.38% | -6.68% | 10.94% |
| Russell 2000 | -15.36% | - | -11.20% | -12.23% | 8.67% |
| S&P 500 Index | -11.67% | - | -8.57% | -10.99% | 8.54% |
Hedge Fund Returns for January and February 2009
Hedge fund returns January and February 2009
Credit Suisse/Tremont Hedge Fund Index
Credit Suisse/Tremont Hedge Fund Index
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Hedge Fund Returns Positive in March, Q1 2009
Hedge Funds Returned 1.8% in March, 2009 and were up fractionally for the first quarter of 2009.
Hedge fund returns for March were up 1.8%, led by returns from equity funds which were up more than 3% on average, according to Hedge Fund Research. Hedge funds were up .5% for the entire first quarter of 2009.
Though hedge funds certainly could use a positive month of returns, the 1.8% gain didn't come close to matching the 8% + return of the S&P 500 in March. However, the modest gain for hedge funds in Q1 was far better than the 11% decline posted by the S&P during that time.
Hedge fund returns for March were up 1.8%, led by returns from equity funds which were up more than 3% on average, according to Hedge Fund Research. Hedge funds were up .5% for the entire first quarter of 2009.
Though hedge funds certainly could use a positive month of returns, the 1.8% gain didn't come close to matching the 8% + return of the S&P 500 in March. However, the modest gain for hedge funds in Q1 was far better than the 11% decline posted by the S&P during that time.
4.06.2009
Obama Adviser Received $5 Million from Hedge Funds in 2008
Obama Adviser Has Close Ties To Giant Hedge FundAccording to White House records released on Friday, Obama's top economic adviser, Lawrence Summers, received more than $5 million from a single hedge fund last year. The hedge fund making the payments was D.E. Shaw, one of the world's largest hedge funds. It should be noted that these payments come because Summers was recently a managing director at the firm.
Summers who is Chairman of the Council of Economic Advisers also received money from other financial institutions for speaking engagements including 67,500 from JP Morgan, $45,000 from Citigroup, $135,000 from Goldman Sachs and $67,500 from Lehman Brothers, all of whom run hedge funds of their own.
Summers is an integral part of Obama's economic team which is attempting to place additional regulations on hedge funds. It will be interesting to see how Summers' hedge fund background influences the administrations tactics and approach to regulating hedge funds.
4.02.2009
Fairfield Greenwich Group Misled Investors Re: Madoff Oversight
Madoff Feeder Fund, Fairfield Greenwich Group, Misled Investors about Due Diligence
Fairfield Greenwich Group, a Connecticut based hedge fund and one of Madoff's largest investors, is being accused of misleading its investors about the due diligence performed on Madoff's hedge fund. This is according to Massachusetts Secretary of State, William Galvin.
According to Galvin, there was a “profound disparity between the due diligence that Fairfield represented to its investors that it would conduct with respect to Bernard L. Madoff Investment Securities [BMIS] and the due diligence it actually conducted . . . [We] attempted to discern how Fairfield possibly could not have discovered the fraud during their 18-year relationship [with Madoff]. The answer is that they were blinded by fees, did not engage in meaningful due diligence and turned a blind eye to any fact that would have burst their lucrative bubble.”
Fairfield Greenwich Group investors were told the firm was conducting daily monitoring of Madoff Securities, when in fact they were getting that data 3-5 days later. However, it is unclear how important real-time trade data would have been considering Madoff was not actually placing any trades at all and was in fact running a massive Ponzi Scheme.
Fairfield Greenwich Group, a Connecticut based hedge fund and one of Madoff's largest investors, is being accused of misleading its investors about the due diligence performed on Madoff's hedge fund. This is according to Massachusetts Secretary of State, William Galvin.
According to Galvin, there was a “profound disparity between the due diligence that Fairfield represented to its investors that it would conduct with respect to Bernard L. Madoff Investment Securities [BMIS] and the due diligence it actually conducted . . . [We] attempted to discern how Fairfield possibly could not have discovered the fraud during their 18-year relationship [with Madoff]. The answer is that they were blinded by fees, did not engage in meaningful due diligence and turned a blind eye to any fact that would have burst their lucrative bubble.”
Fairfield Greenwich Group investors were told the firm was conducting daily monitoring of Madoff Securities, when in fact they were getting that data 3-5 days later. However, it is unclear how important real-time trade data would have been considering Madoff was not actually placing any trades at all and was in fact running a massive Ponzi Scheme.
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