SEC Uses Risk Analystics to Charge Hedge Funds

The SEC has announced several lawsuits against hedge fund managers including LeadDog Capital Markets, Solaris Management, and Millennium Global Investments.

According to the SEC enforcement chief Robert Khuzami, these civil charges are a result of using " risk analytics and unconventional methods to help achieve the holy grail of securities law enforcement—early detection and prevention. This approach, especially in the absence of a tip or complaint, minimizes both the number of victims and the amount of loss while increasing the chance of recovering funds and charging the perpetrators."


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Large Hedge Funds Down Big in 2011

Altis and Paulson Run Funds Underperform in 2011

Large hedge funds run by hedge fund giants like Altis Partners and Paulson & Co. are down big in 2011. While the average hedge fund is down 3.76%, just about .5% worse than the -3.1% return posted by the S&P 500 (Hedge Fund Research), there are a number of large hedge funds down over 20% in 2011. Some of the biggest hedge fund losers in 2011 include Altis Fund, Altima Global Special Situations Fund, Paulson Advantage Fund, MLM Macro Fund, and CRM Windringe, according to the returns from Lyxor Managed Account Platform Data.

As of September 1, 2011, Altis has $1.38 billion in AUM, Altima Partners has $1.6 billion in AUM, Paulson & Co. has $35.5 billion in AUM, Mount Lucas Management (MLM) has $1.7 billion in AUM, and Cramer Rosenthal Mcglynn (CRM) has $14.2 billion in assets under management, according to The Blue Heron Group.

Hedge Funds Can't Hedge August Volatility

Some like to think high volatility provides opportunity for astute money managers like hedge funds to provide real alpha. Yet despite the wild swings in equity and commodity markets this month, hedge funds have lostm ore than 4% in August, 2011 according to Hedge Fund Research.


Equity hedge funds lost more than 6%, only narrowly beating the S&P 500. So have hedge fund managers lost their ability to hedge?

Hedge Funds in Texas

From The Economist
FOR a state more closely associated with cattle and cowboys, Texas is home to a surprisingly big herd of hedge funds. They manage around $40 billion, making Texas the fifth-largest US state for hedge-fund assets (after New York, Connecticut, Massachusetts and California), according to the Blue Heron Group, a research firm. Some of the industry’s biggest names, like Lee Ainslie of Maverick Capital and Eddie Lampert of ESL Investments, have ties to the state or Texan investors.
Many Texans like to trace the industry’s vibrancy to the state’s risk-taking traditions. A century ago “wildcatters” put everything they had on the line to drill oil wells, hoping to discover a gusher. Some made millions; others lost everything.

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Hedge Fund Assets Under Management Reach $2 Trillion

Hedge Fund Assets Surpass $2 Trillion in 2011

Hedge fund assets under management (AUM) reached $2 trillion USD as of June 30, 2011. This is according to Hedge Fund Research (HFR). Assets surged past $2 trillion with $62 billion in net inflows for January 1 - June 30, 2011.  Most of these net inflows went to large hedge funds in excess of $5 billion, but with such large hedge funds accounting for 62% of overall hedge fund assets, the inflows were shared relatively equally by large and small hedge funds alike.

John Paulson Hedge Fund Loses 20%

Billionaire hedge fund manager John Paulson is well known for his highly successful bets against mortgage backed securities and US financial institutions in 2008. But now, Paulson's $9bn Advantage Plus is down almost 20% in 2011 in part due to bad bets on US financial institutions like Citi and Bank of America.

Over the last few years, Paulson's company, Paulson & Co. has become one of the world's largest and most followed hedge funds. Paulson himself reportedly made more than $5 billion in 2010.

10 Largest Hedge Funds 2011

The Top 10 Hedge Funds, 2011

Here are the Top 10 Biggest Hedge Funds as of 2011*:
Note: See the updated list of the Top 250 Hedge Funds 2017
 

 Firm                                                        AUM

1  Bridgewater Associates                    $59.1 billion

2  JP Morgan Asset Management          $46.2 billion

3  Paulson & Co.                                  $37.1 billion

4  Brevan Howard Asset Management   $28.0 billion

5  Soros Fund Mgmt.                           $27 billion

6  Man Investments                             $25.3 billion

7  Blackrock Global                             $24 billion

8  Och-Ziff                                           $23 billion

9  Baupost Group                                 $23.4 billion

10 Farallon Capital Mgmt.                     $21 billion

* 2011 Assets Under Management (AUM)

Note that the top hedge funds in 2011 are not too dissimilar from the biggest hedge funds the year before. Bridgewater Associates surpassed JP Morgan Asset Management as the world's largest hedge fund. We will update the Top 10 hedge funds of 2011 throughout the year.

Source: HedgeLists

Hedge Funds Follow Market in March - Flat

Hedge Funds Flat
Hedge fund indexes were flat in March of 2011, following in the footsteps of the S&P500 and other equity markets. The largest hedge funds in Morningstar's database were up just .1%. The S&P was up .04%

Following the financial meltdown in 2007 and beyond, hedge funds as a group had returns just about as disappointing as the broader market, making many question just how "hedged" the average fund is. In March anyway, hedge funds continued their lockstep performance with the markets.

Hedge Fund Launches Increase

Hedge Fund Launches Increased in 2010
There were more than 1100 new hedge fund launches in 2010, more than 50% more than in 2009. Better economic conditions and rising market prices probably account for the increase as investors begin to regain confidence. Also, many managers that could had to face prohibitively high water marks after the market crash have opted instead to open new hedge funds.

2010: A Banner Year for Hedge Funds

Hedge funds had an incredible 2010 in terms of performance. The group averaged a return of just under 20% for the industries best year since 1996.


Hedge funds' strong performance in 2010 is a result of several factors including a strong equity market, low volatility, and the self-selection process that has eliminated weaker hedge funds over the last couple of years.

If the equity and commodity markets are able to continue their bullish run (and there is certainly no guarantee of this) 2011 could be another great year for hedge fund performance.

Hedge Funds Increasing Leverage in 2011

In January of 2011 hedge funds increased their leverage to levels not seen since 2007, according to Bloomberg.


Though hedge funds seem to be increasing leverage in tandem with the rising market, it is not necessarily the case that record amounts of hedge fund leverage in 2011 indicate increased risk taking overall - available cash and margin available also increased.


Its also not unusual to see hedge funds lever into bullish (appearing) markets. It will be interesting to see how a moderate decline in the equity indexes will affect hedge fund leverage.