Hedge Funds Assets on the Rise in 2009 | Video

Hedge funds have continued to do well through August, surprising some analysts.  The following video is an update of the industry and how hedge fund assets have risen in August.  Kenneth Heinz of Hedge Fund Research talks about the success of various strategies, how fees may be lowering and where hedge funds are investing.  Newsletter subscribers can watch this video here.

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Tags: hedge funds assets, assets, investing, hedge funds, hedge fund news, Kenneth Heinz of Hedge Fund Research, hedge fund assets under management, aum

Hedge Funds Suffering after Racking up Losses from Loans

Hedge funds are struggling to make up big losses after the US financial sector’s losses on large loans exploded in 2009.  Many lenders were hedge funds and at least “one in three dollars lent by non-bank institutions such as hedge funds, securitisation vehicles and pension funds went sour” which is much more than the 11.5% in the traditional banking sector.

The results will increase fears that, in spite of a recovery in the shares and balance sheets of many banks, the epicentre of the crisis has moved to the hedge funds and investors that gorged on cheap credit in the run-up to the turmoil.

The importance of these non-bank institutions was underlined by the review’s finding that they held 47 per cent of problem loans in spite of accounting for only 21.2 per cent of the total loan pool.  Overall, the US financial sector’s losses on loans in early 2009 reached a record of $53bn, nearly triple the previous high in 2002.

The number of loans edging into the danger zone has also surged. Some 15 per cent of the $2,900bn SNC portfolio was classified as “substandard” – the second of the four categories used by regulators – and worse, up from 5.8 per cent in 2008.  Read more..

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Tags: Hedge Funds Loan Losses, Hedge Funds Lending, hedge fund losses, hedge funds loans, hedge fund lending losses, hedge funds, investment banking

Number of New Hedge Fund Launches Increases

The number of new hedge funds is increasing finally and that’s great news for the third party marketing industry as more potential clients enter the industry.  With 2,100 hedge funds closed during the credit crisis, few expected a rise in new hedge fund launches this year.  But if new hedge funds continue to launch at this year’s pace, the industry may see the first year since 2005 of annual growth in new fund formations.  Hedge funds appear to be back with renewed investor confidence and new and experienced hedge fund managers ready to try it again.  Hedge fund launches have been consistently falling from 2073 in 2005 to 659 last year but this trend appears to be reversing.

It might also be that funds that had posted huge losses closed down so that the managers could start with fresh records, resetting high-water marks so that they can collect performance bonuses without making up the money lost in 2008.

When Hedge Fund Research unveiled its second-quarter data earlier this month, all eyes were focused on the slowing number of hedge fund liquidations. What was little noticed were the hedge fund launches. Since 2005, they have been falling steadily from a peak of 2073 in 2005 to 659 last year. The slide appeared to be continuing in the first quarter when 148 new hedge funds were launched. But, in the second quarter, 182 new hedge funds were launched, just as the equities markets bottomed.

The rising launches are a “constructive development,” says Ken Heinz president of Chicago-based Hedge Fund Research. “You are continuing to see risk tolerance and risk appetite improving from the historical lows at the end of 2008. ” To be sure, there are still more hedge funds shuttering their doors than opening them, with 292 going out of business in the second quarter alone, according to Hedge Fund Research. But there have been some notable launches.  Source

Tags: hedge funds, new hedge fund launches, hedge fund startups, hedge fund industry, new clients, finding hedge funds, finding new clients, hedge fund startup, hedge funds in 2009

What Are the Rules for Marketing a Fund to Investors

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer series covering the establishment of a hedge fund and laws related to hedge funds.

Question:  What are the rules regarding marketing the fund to potential investors?

Answers: Interests in a hedge fund are generally sold pursuant to a private placement exemption and should be marketed very carefully without using any general advertising or solicitation. Generally speaking, the manager should have a pre-existing relationship with everyone who is offered interests in the fund. Furthermore, to remain exempt from registration as an investment advisor at the
state or federal level, a manager cannot hold himself out “publicly” as an investment advisor. Promotional activities involving the use of websites and providing information to organizations that track hedge funds should not be engaged in without the advice of counsel.

Guest author: Brent S. Gillett, partner at the Investment Law Group. To find more information about the Investment Law Group follow this link.

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Tags: What are the rules for marketing, hedge funds, hedge fund marketing, laws for marketing a hedge fund, hedge fund marketing, hedge funds legal questions, legal q and a, investment law marketing

What Goals Fund Administration Can Achieve

A couple months ago I sat down with Eric Warshal of Fund Associates in Atlanta to talk about the fund administration business and the hedge fund industry. Here is one question I asked him and his response:

Question: I know that many hedge fund managers are focused on three things, keeping costs relatively low, raising capital and performing well.  Can the services your firm offers or that fund administration firms in general offer help funds achieve any of these three goals?

Answer: Yes, our firm can certainly assist the managers with all of those items that are of value to them. From a “keeping costs low” perspective, because Fund Associates focuses on the needs of the emerging manger, we are keenly aware of their cost sensitivity with respect to expenses. As such, we typically price our services based on flat monthly fees as opposed to basis points of AUM pricing. We also offer discounted tired pricing schedules based on AUM when funds are just starting to help with expenses. We’ve found that this helps the manager by having a “fixed” cost structure, coupled with a “reasonable” overall cost for administration services. Fund administration firms as whole tend to lower overall costs by allowing the fund manager to outsource what could otherwise be a costly endeavor for the manager to accomplish on his own.  Raising capital is inherently, after the trading itself, what most fund managers tend to focus on. In today’s environment, the chances of funds being able to successfully raise money from sophisticated investors if they self-administer is nearly zero. Almost all of the largest hedge fund frauds have been committed by groups that self-administer.

Although fund administration firms do not, typically, serve as third party marketing (TPM) firms they typically are associated with or have strategic alliances with TPMs who can help raise the capital that fund managers are often seeking. 

By virtue of the fact that when the entire administrative component of the fund is not resting on the fund manager’s shoulders and those efforts and stresses are removed from his plate, the manager fundamentally is able to perform more effectively for his investors.

Eric Warshal will be answering more of my questions on fund administration in the future.

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Tags: fund administration, fund administration question and answer, fund admin, fund administrator, administration, hedge fund administration, hedge funds, administrate

Fortitude Capital Australian Hedge Fund of the Year

The financial crisis kept most hedge funds from posting positive returns but Fortitude Capital managed to have a positive return every month in 2008, earning the award of Australian Hedge Fund of this year.  The following video highlights Fortitude Capital’s achievements:

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Tags: australian hedge fund of the year, australian hedge fund, hedge funds, fortune capital, australian investments, hedge funds in australia

Costs of EU’s Directive on Alternative Fund Managers

European hedge funds are facing tough regulation and stiff taxes from the UK and European Union.  Last month, the UK announced that it will begin taxing individuals earning more £150,000 (about $247,000) a year at a rate of 51%.  This decision led many hedge funds to leave the UK for more business-friendly countries, namely Switzerland.

Now, the European Union is considering a law that will effect not only private equity and hedge funds but also EU tax revenues.  The proposed rules are estimated to cost almost $3 billion in its first year and about $1.5 billion each following year.  The Directive on Alternative Investment Fund Managers seeks to regulate and impose capital requirements on funds managing more than 100 million euros.

A significant cost may fall on the hedge funds and private equity firms which will shoulder a major burden in compliance costs.  A recent survey estimates that compliance expenses will rise by about a third from the directive. 

London, home to at least 80 percent of Europe’s estimated $400 billion in hedge-fund assets and about 60 percent of Europe’s private-equity firms, may suffer as funds decide that leaving is easier than complying with new regulations, the survey authors said.

“Thousands of jobs and millions of pounds in tax revenues could be at stake,” according to a report by Mats Persson, research director at Open Europe. “There would be little incentive for fund managers to remain in the EU at all.” The survey showed 2 percent of investors in the funds support the proposal, while 46 percent oppose it.

Britain’s Financial Services Authority last week organized a one-day conference in London about the costs and consequences of the directive, which Paul Myners, the U.K. treasury minister called “flawed.” Poul Nyrup Rasmussen, the Danish former prime minister whose Socialist Party president introduced the legislation, said this month that the proposal may need “tightening.” source

Read about the UK Hedge Funds Tax

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Tags: Directive on Alternative Fund Managers, Directive on Alternative investment Fund Managers, eu hedge fund regulation, european union, hedge funds, private equity, uk tax laws, investments

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Below is a short excerpt about Tony Chedraoui starting a new hedge fund this year.  The Telegraph was nice enough to say that Tony is starting a $500M hedge fund, but as Fintag pointed out this morning typically these types of announcements mean that the fund hopes to launch soon and hopes to attract something near $500M.  This may seem like a small detail to professionals outside of the industry but those who have raised capital for new funds know how challenging this is process can be.  

Tony Chedraoui, who used to run the The Deephaven European Event Fund, has started up Tyrus Capital, a global hedge fund that will focus on trading events, such as merger deals.


Mr Chedraoui is expected to attract strong interest from backers and investors, said investment advisers. This is because the Deephaven European Event Fund, which last year won the EuroHedge award for best performance in 2008, managed to weather the financial crisis to rise by around 17.31pc. The average event-driven fund was down 14.91pc in 2008, according to the HSBC index. Source

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