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5.15.2009
Hedge Funds Skeptical of Uncle Sam
According to Reuters, many hedge fund managers are leery of US intervention in the capital markets, from banking bailouts to Chrysler and the automakers.
According to Sean Mathis of New Centurion Capital Partners,"When you have government intervention at the scale we have, you do something the markets abhor: you create uncertainty. We have uncertainty where markets are going and what the rules of the road will be."
Even more drastic are statements like those of Gary Kaminsky, former Managing Director at Neuberger Berman "You have to assume the government will be involved. You have to assume the free market is not as free as it was in the past and won't be for the next 20 years," Kaminsky said.
Of course what is not being said is that hedge funds have benefited from the bailout in countless ways. Many of the prime brokers to hedge funds could have been at risk had large financial institutions not received bailout money. Most hedge funds with a long-bias have also benefited from the massive injection of money into the system and the support of the financial sector.
According to Sean Mathis of New Centurion Capital Partners,"When you have government intervention at the scale we have, you do something the markets abhor: you create uncertainty. We have uncertainty where markets are going and what the rules of the road will be."
Even more drastic are statements like those of Gary Kaminsky, former Managing Director at Neuberger Berman "You have to assume the government will be involved. You have to assume the free market is not as free as it was in the past and won't be for the next 20 years," Kaminsky said.
Of course what is not being said is that hedge funds have benefited from the bailout in countless ways. Many of the prime brokers to hedge funds could have been at risk had large financial institutions not received bailout money. Most hedge funds with a long-bias have also benefited from the massive injection of money into the system and the support of the financial sector.
5.13.2009
5.12.2009
Hedge Fund, Satellite Asset Management, to Close
New York based hedge fund Satellite Asset Management is closing its doors six months after suspending redemptions.
The firm, with $2.8 billion in AUM, has begun returning money to investors in its three funds, Bloomberg News reported. The three funds being liquidated are the Satellite Overseas Fund, Satellite Fund II and its largest fund, the Satellite Credit Opportunities fund. In late 2008, Satellite reported its $2billion Credit Opportunities Fund was down as much as 35% and was facinf large redemption requests.
The firm, founded by a trio of Soros Fund Management veterans a decade ago (Lief Rosenblatt, Gabe Nechamkin, and Mark Sonnino) managed as much as $7 billion as recently as the end of 2007. It lost some 35% last year, and was forced to halt withdrawals in November.
Manhattan Lawyer Pleads Guilty to Hedge Fund Fraud
Marc Dreier, 59, has plead guilty to using fake documents and impersonations to defraud hedge funds out of about $400 million. Despite the objections of prosecutors, Dreier was allowed to remain free on bail until his July 13 sentencing.
Dreier had founded Dreier LLC, a law firm employing as many as 250. He also lived a lavish lifestyle including a personal yacht and tens of millions in artwork.
Read the full article here
Dreier had founded Dreier LLC, a law firm employing as many as 250. He also lived a lavish lifestyle including a personal yacht and tens of millions in artwork.
Read the full article here
4.30.2009
Obama Slams Hedge Fund Holdouts on Chrysler Deal
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:
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:
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.”
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