Prime Brokerage News

Prime Brokerage News | Large Banks Win Business

(PrimeBrokerageGuide.com) Recently hedge funds have been moving some assets away from investment banks which specialize in providing a relatively narrow number of products to broader diversified banks which are more secure in earn money in hundreds of different ways. These larger banks often make money by catering to both institutional and retail clients and are less likely to fail. Some of these firms to recently benefit have been BNP Paribas, Fidelity, Credit Suisse, and Deutsche Bank (view our list of prime brokers on the right hand side of PrimeBrokerageGuide.com).

As counterparty risk management and multi-prime bokerage both grow in popularity this trend will only increase. The list of top prime brokers by the end of 2009 could look very different than it did just this last year. Here is a recent article on this topic:

Broker-dealers such as Morgan Stanley and Goldman Sachs are losing out in the battle for hedge funds’ dwindling pool of assets, as funds seek out banks with diverse sources of funding in a major shake-up of prime broking.

The collapse of investment bank Lehman Brothers (LEHMQ.PK) in September shocked hedge funds, as those with accounts at Lehman when it sought bankruptcy protection had those assets frozen and risked being unable to close trades.

“The Lehman bankruptcy … led many hedge funds to flee the two largest prime brokers, Morgan Stanley and Goldman, for the perceived safety of the universal banks,” said BersteinResearch analyst Brad Hintz in a note.

Prime brokers make money by charging hedge funds fees for providing financing for trading and settlement of trades.

Credit Suisse (CSGN.VX), whose operations include a large wealth management unit as well as prime broking, saw balances in its prime brokerage unit grow 50-60 percent last year compared with 2007, a source familiar with the business said.

Roy Martins, the bank’s head of international prime services, said: “There was a peak in terms of business in September and October. All the clients we took on had existing relationships and dialogues with us as they were clients we had been targeting anyway.”

Deutsche Bank (DBKGn.DE), backed up by its big retail bank, has also benefited from an influx of business in its prime brokerage in the last six months, a source close to the bank said. source

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Prime Brokerage News

Prime Brokerage News | Large Banks Win Business

(HedgeFundBlogger.com) Recently hedge funds have been moving some assets away from investment banks which specialize in providing a relatively narrow number of products to placing their assets with broader diversified banks which are more secure in earn money in hundreds of different ways. These larger banks often make money by catering to both institutional and retail clients and have generally have lower percentage chances of failing.

Some of these firms to recently benefit have been BNP Paribas, Fidelity, Credit Suisse, and Deutsche Bank (view our list of prime brokers by clicking here).

As counterparty risk management and multi-prime bokerage both grow in popularity this trend will only increase. The list of top prime brokers by the end of 2009 could look very different than it did just this last year. Here is a recent article on this topic:

Broker-dealers such as Morgan Stanley and Goldman Sachs are losing out in the battle for hedge funds’ dwindling pool of assets, as funds seek out banks with diverse sources of funding in a major shake-up of prime broking.

The collapse of investment bank Lehman Brothers (LEHMQ.PK) in September shocked hedge funds, as those with accounts at Lehman when it sought bankruptcy protection had those assets frozen and risked being unable to close trades.

“The Lehman bankruptcy … led many hedge funds to flee the two largest prime brokers, Morgan Stanley and Goldman, for the perceived safety of the universal banks,” said BersteinResearch analyst Brad Hintz in a note.

Prime brokers make money by charging hedge funds fees for providing financing for trading and settlement of trades.

Credit Suisse (CSGN.VX), whose operations include a large wealth management unit as well as prime broking, saw balances in its prime brokerage unit grow 50-60 percent last year compared with 2007, a source familiar with the business said.

Roy Martins, the bank’s head of international prime services, said: “There was a peak in terms of business in September and October. All the clients we took on had existing relationships and dialogues with us as they were clients we had been targeting anyway.”

Deutsche Bank (DBKGn.DE), backed up by its big retail bank, has also benefited from an influx of business in its prime brokerage in the last six months, a source close to the bank said. source

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Top 3 Technology Trends

3 Technology Trends for Hedge Funds in 2009

Below is a short guest post by Peter Curley of Nirvana Solutions:

The turmoil that hedge funds have experienced in the last few months will ultimately have a significant impact on the technology and the infrastructure supporting this industry. The trends we will witness in 2009 will primarily be the result of the following drivers:

• Increased cost consciousness – This will be true for both new and more established funds.
• The new requirements of the next generation of hedge funds – These funds will be smaller, more opportunistic, and less likely to focus on any one strategy or asset class.
• Market volitility – All indications are that 2009 will continue to be as volitile as the latter half of 2008.

Three technology trends for 2009:

1 – Outsourcing – Historically hedge funds have resisted efforts to outsource. Funds preferred to build out their own middle- and back-office functions citing concerns around flexibility and privacy. Now, for many funds, the need to aggressively cut costs will trump these concerns and force outsourcing. Interestingly, taking a step back we can see that there has always existed incredible duplication of effort across the hedge fund eco-system. In many cases hedge funds, prime brokers, and fund admins, all conduct the same processes using the same legacy “T+1″ portfolio management systems. The industry can no longer support this duplication. All hedge funds, except the very largest, will begin to look to third-parties to offload this operational burden.

2 – Restructuring of the industry’s service providers. The biggest news here will be rise of the mini-primes. The leading primes can no longer be profitable in this new world of multi-custodial relationships. With the demise of the captive single prime model we are now seeing the top-tier primes retreat up-market to focus their efforts on servicing funds with greater than $1 billion under management. This leaves the lower-cost-structure mini-primes ideally positioned to fill the void. The new mini-prime offering is still evolving but will likely offer a complete multi-prime brokerage service platform that in some cases will also include hedge fund administration. These all-in-one multi-prime service platforms will be especially critical to the regeneration of our industry because they will act as the entry point for 100′s of the new spin-off funds that are expected to form in 2009.

3 – Real-Time systems – In this new world of opportunistic alpha, hedge fund managers can no longer afford to rely on systems that offer “T+1″ reporting. As noted earlier, legacy technology that can only offer this type of end-of-day and end-of-month reporting will become less relevant and ultimately be outsourced to third-parties. Hedge fund’s instead will focus their resources on real-time systems that can aggregate risk and return across multiple prime relationships and multiple asset classes. Increasingly we will see the desktop of a hedge fund trader/portfolio manager feature only 2 types of real-time FIX based systems: 1/ Those connected to implementing the investment decision (i.e. execution management systems), and 2/ systems, that once an investment decision has been implemented, can offer a real-time understanding of risk and return (i.e. real-time portfolio management systems and risk management systems).

Article contributed by Peter Curley of Nirvana Solutions. Founded in 2006, Nirvana Solutions is a San Francisco based software company that provides real-time portfolio management solutions to multi-prime hedge funds and prime brokers.

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Top 3 Technology Trends

3 Technology Trends for Hedge Funds in 2009

Below is a short guest post by Peter Curley of Nirvana Solutions:

The turmoil that hedge funds have experienced in the last few months will ultimately have a significant impact on the technology and the infrastructure supporting this industry. The trends we will witness in 2009 will primarily be the result of the following drivers:

• Increased cost consciousness – This will be true for both new and more established funds.
• The new requirements of the next generation of hedge funds – These funds will be smaller, more opportunistic, and less likely to focus on any one strategy or asset class.
• Market volitility – All indications are that 2009 will continue to be as volitile as the latter half of 2008.

Three technology trends for 2009:

1 – Outsourcing – Historically hedge funds have resisted efforts to outsource. Funds preferred to build out their own middle- and back-office functions citing concerns around flexibility and privacy. Now, for many funds, the need to aggressively cut costs will trump these concerns and force outsourcing. Interestingly, taking a step back we can see that there has always existed incredible duplication of effort across the hedge fund eco-system. In many cases hedge funds, prime brokers, and fund admins, all conduct the same processes using the same legacy “T+1″ portfolio management systems. The industry can no longer support this duplication. All hedge funds, except the very largest, will begin to look to third-parties to offload this operational burden.

2 – Restructuring of the industry’s service providers. The biggest news here will be rise of the mini-primes. The leading primes can no longer be profitable in this new world of multi-custodial relationships. With the demise of the captive single prime model we are now seeing the top-tier primes retreat up-market to focus their efforts on servicing funds with greater than $1 billion under management. This leaves the lower-cost-structure mini-primes ideally positioned to fill the void. The new mini-prime offering is still evolving but will likely offer a complete multi-prime brokerage service platform that in some cases will also include hedge fund administration. These all-in-one multi-prime service platforms will be especially critical to the regeneration of our industry because they will act as the entry point for 100′s of the new spin-off funds that are expected to form in 2009.

3 – Real-Time systems – In this new world of opportunistic alpha, hedge fund managers can no longer afford to rely on systems that offer “T+1″ reporting. As noted earlier, legacy technology that can only offer this type of end-of-day and end-of-month reporting will become less relevant and ultimately be outsourced to third-parties. Hedge fund’s instead will focus their resources on real-time systems that can aggregate risk and return across multiple prime relationships and multiple asset classes. Increasingly we will see the desktop of a hedge fund trader/portfolio manager feature only 2 types of real-time FIX based systems: 1/ Those connected to implementing the investment decision (i.e. execution management systems), and 2/ systems, that once an investment decision has been implemented, can offer a real-time understanding of risk and return (i.e. real-time portfolio management systems and risk management systems).

Article contributed by Peter Curley of Nirvana Solutions.

Peter is a founding managing partner at Nirvana Solutions. His areas of responsibility include managing all of Nirvana’s marketing activities as well heading their west coast sales team.

Prior to joining Nirvana Solutions, Peter was the product manager for Advent Software’s order managment system (OMS), Moxy. He oversaw all the product marketing activities for Moxy, which is used worldwide by over 800 firms. He had a special emphasis on trading and hedge funds and has authored a number of articles and whitepapers on these subjects.

After business school Peter joined IBM’s Strategy and Change group as a strategy consultant. He was attached to IBM’s Financial Services arm and completed a number of strategy assignments at major Wall Street firms as well as smaller start-ups.

Peter began his career as a registered representive at Charles Schwab and was a team lead for the introduction of Schwab’s innovative e.Schwab electronic brokerage offering. He later was involved in the development of Schwab’s active trader application, Velocity, which was merged with CyberTrader.

Peter holds a bachelor’s degree in economics from University College Dublin, a Master’s from University of Exeter and an MBA from Columbia Business School.

email: peter.curley@nirvanasolutions.com

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Christmas Eve Linkfest

Christmas Eve Hedge Fund Linkfest

For those of you like me who always want to stay on the ball but can’t work 10 hours/day over the holidays, here is a concise run down on recent hedge fund events and stories in the industry:

1. A former stockbroker who was fined $350,000 in 2006 for his role in a Ponzi scheme allegedly conspired with New York lawyer Marc Dreier to defraud hedge funds out of more than $100 million, according to a criminal complaint unsealed Tuesday. source
2. Rene-Thierry Magon de la Villehuchet, a founder of the hedge fund Access International Advisors, was found dead Tuesday in his office in Manhattan. His fund reportedly lost as much as $1.4 billion that had been invested with Bernard L. Madoff, the money manager accused of running a $50 billion Ponzi scheme. source
3. The property market collapse still has two years to run and will not bottom out until prices are 35% below their peak, a leading City forecaster warned today. source
4. Blackstone Group LP (BX.N) said on Tuesday it plans to liquidate two hedge funds as a lack of outside investing amid tight credit markets will prevent them from getting big enough to be meaningful to the company.

   The private equity firm plans to consolidate its distressed securities fund with GSO Capital Partners, a hedge fund manager it acquired in March for $10 billion. source

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Benefits of Hedge Funds

List of 4 Hedge Fund Benefits

In the midst of 200 articles on the Bernard Madoff fraud case which you can read about here, I spotted an article by Alphaville spelling out the top 9 ways in which hedge funds add value to the investment industry. Here is a short version of the list:

1. Providing liquidity
2. Bursting bubbles
3. Restore confidence during risky investment periods
4. Survival of the fittest models

Here is the full article.

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Hedge Fund Advertising

Hedge Fund Advertising & Marketing Ideas

(http://HedgeFundBlogger.com)There are many restrictions on hedge fund advertising and marketing. Due to the broad mandates and relatively lenient registration and disclosure rules hedge funds in the United States are only allowed to accept investments from accredited investors and institutions.

While this means hedge funds cannot take out TV or radio commercials there are many more gray areas where many hedge funds are now “promoting” or “branding” themselves. I never provide financial advice on HedgeFundBlogger.com and this is surely not a recommended or list of “safe” ways to market your fund. No matter what you hear from a consultant or at a conference always check with your own compliance officer or legal counsel before taking any action. Here is a list of ways in which funds are currently marketing their strategies:

• Websites – Many funds have websites describing their firm and investment strategy. Some go as far as to explain what their strategy is in detail along with their current assets under management and who is on their portfolio management team. These websites may cost between $1,000 and $25,000 to create and generally $30-500/month to maintain. A few hedge fund managers even run blogs.

• Public Relations Professionals – Many hedge funds actively engage public relations firms to help increase the number of quotes or in-story mentions their fund’s executives get placed within mainstream media outlets. These consultants may work on some one-off crisis management projects for a premium but generally prefer $2-12k/month retainers instead.

• Book Publishing – One of the many ways which hedge fund managers are promoting their businesses is through publishing books on the topic of hedge funds. These books may be on industry trends, portfolio management theories or one’s experience in the industry. Many professionals within the wealth management space are hungry to learn more about hedge funds and books which bridge the gap between what can be learned within editorial articles versus an educational book. Some niche publishers will publish books by hedge fund managers but most avoid publishing anyone who doesn’t have a marketing network or a real “media brand” behind their name which has been built up for several years. Due to this fact some hedge fund managers self-publish their own books through programs such as Lulu.com.

• Conferences – One of the ways in which hedge fund managers market themselves each week is by speaking at conferences and events within the industry. These events could discuss marketing and sales, hedge funds in general or be on niche subjects related to family offices or activist investing. This strategy can be highly effective because it can support and serve as a direct marketing arm for the strategies mentioned above. Most speaking engagements do not pay, but many firms will at least cover your expenses and display your logo and name prominently at the event. Broker dealer conferences can also be productive events for hedge fund managers to attend. If you can gain a distribution agreement with HNW-focused broker-dealer and obtain a speaking engagement or booth at their event it can be a great way to get your foot in the door with some new face-to-face relationships with HNW advisors with the specific broker-deal group holding the conference.

• External Consultants – While not technically advertising, thousands of funds choose to use the help of external consultants to help market their hedge funds. These consultants could be experts within raising capital within a specific channel, creating marketing materials or creating a marketing message. Those consultants who take on whole or partial responsibility for raising assets on behalf of the hedge fund manager are often referred to as third party marketers. To read my past articles on these types of marketers please click here or see my website dedicated to this subject – http://ThirdPartyMarketing.com. Naturally, it is important to complete thorough due diligence upon any groups which you ask to represent you in the market for both effectiveness and compliance reasons. Do not simply sign-up with someone to represent your hedge fund simply because they promise that they can raise the assets which you have been looking to raise.

There are many other ways to market and grow your hedge fund which are not related to advertising or traditional marketing but most of these fall under more traditional means or external consultants. If you have any unique ideas or have heard of any other effective methods that fast growing hedge funds have used, please send them in by email or simply leave a comment below.

Read over 50 additional articles within our Hedge Fund Marketing Tips section by clicking here.

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Hedge Fund Tracker Updates

Hedge Fund Tracker Notes | Updates

Our team has recently updated the Hedge Fund Tracker Notes on these hedge funds:

• Arcanum Capital Management
• Fortis Investments Hedge Fund
• Ramius Capital Group LLC
• RAB Capital Plc
• Bridgewater Capital
• Veritas Asset Management

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Video on Hedge Funds

What to Know About Hedge Funds

Here is a short video on hedge funds, the attention they are getting in the media and on short selling. What is nice about this movie is that in plain English it explains why most of what is going on is not new and how short selling is not evil. To view this video via my daily hedge fund newsletter please click here, otherwise please see below.

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Hedge Fund Statistics

Video Interview on Closures & Redemptions

Here is a short video interview with a Yale professor who is an expert on hedge funds. He estimates that the industry will shrink by another 25% next year due to poor markets, volatility and low liquidity across many asset classes. He also discusses hedge fund redemption rates and how many institutions need to raise cash and many have lost some faith in hedge funds. This means that many hedge funds have had to restrict the securities which they own so they can meet redemption requests. The reporter also discusses how many hedge funds have been slashing fees to attract more investors.

If you are viewing this article via our daily hedge fund newsletter please click here to view the video now.

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The Truth

The Truth About Hede Funds

“All Truth passes through Three Stages: First, it is Ridiculed…
Second, it is Violently Opposed…
Third, it is Accepted as being Self-Evident.”

- Arthur Schopenhauer (1778-1860)

I believe by 2012-2015 that the value of hedge funds will be self-evident. We are living through the ridicule and violent opposition but in the end there is a place for hedge funds and there will always be investors in hedge funds.

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Hedge Fund Maguire

Hedge Fund Maguire | Letter to Hedge Funds

(http://HedgeFundBlogger.com) Below is a short excerpt from the NY Post and their comments on a letter which Sandra Manzke sent out earlier this week regarding the recent actions of many desperate hedge fund managers. If anyone has the full version of this letter please shoot it over or post it below. For now here is an excerpt of the review article:

Fed up with misbehavior in the hedge-fund industry, respected hedge fund investor Sandra Manzke is fighting back.

A pioneer in hedge-fund investing and best known for founding Tremont Capital Management, Manzke sent an angry missive to hundreds of her peers earlier this week, calling on them to join together to push for reform in the $1.5 trillion industry.

“I am appalled and disgusted by the activities of a number of hedge-fund managers,” said the letter, which raises a fist against what Manzke sees as a general degradation of ethics in the industry.

The letter, reminiscent of the way in which Tom Cruise’s Hollywood agent character penned a manifesto blasting his cutthroat industry in the hit movie “Jerry Maguire,” comes amid a historic shakeout of this once-lucrative business. Hedge funds are battling the double blows of poor performance – down an average of 20 percent so far this year – and billions in investor withdrawals, known as redemptions. Read more…

Here is the actual letter:

MAXAM Capital Management LLC
RE: AN IMPORTANT LETTER TO HEDGE FUND INVESTORS
Dear Sir/Madam:

I was one of the earliest investors in hedge funds. I made my first investment in 1985 when the industry was exclusive to the United States and there were only 68 funds in existence. As such, I have watched the industry grow from a small private investment club to its current state managing in excess of a trillion dollars with more than 10,000 funds. I was an early proponent of the fund of funds business which enabled smaller investors the ability to access the talent pool, and gain diversification with lower minimum investment. I once was proud of the industry, now I am concerned.

While we all recognize the difficulties of the current market environment, I am appalled and disgusted by the activities of a number of hedge fund managers. The increased use of gating, side pocketing, suspension of redemptions, failure to post an NAV, fund liquidations that favor management are just a few of activities that are giving this industry a bad name. Worse, there are managers who are attempting to get their money out ahead of investors, attempts to eliminate high water marks, asking investors to increase fees to pay for fund expenses, receiving fees on liquidating funds, receiving fees on illiquid securities, and mispricing their books.

We have seen funds which claimed to have no leverage, in fact, facing margin calls that wipe out capital. And managers who have received millions of dollars in incentive fees, walking away and leaving investors with nothing. Further, management fees have crept up to outrageous levels and hedge fund organizations are paying employees lucrative wages, while investors are bearing these costs, unjustified by mounting losses.

I was in favor of SEC registration and oversight and 2008 is certainly a poster child for the need for better regulation. Now, I feel that investors need to form an organization to protect against the egregious hedge fund manager. Hedge fund managers do not disclose their investors and we are each operating in a vacuum. We should be able to unite to change how this industry operates. I am proposing that we form the “Hedge Fund Investors United Forum” to propose reform in the industry that would protect our clients’ and our own interests.

Carl Icahn has started his shareholders group to change the behavior of corporate America. I urge everyone to go to his blog and join, because corporate America has lost its way. Corporate management needs to get back to running companies to make money for shareholders, not for personal gain. We need to get hedge fund managers to work for their investors and not for their personal gain.

As a group we can influence the future of the industry. We can start to define neutrally beneficial terms, not punitive investor terms. If we want to survive, we have to restore confidence and reshape the industry. I am not saying everyone out there is a bad apple, but there are too many bad apples for my taste and it only takes a few to bring the industry to its knees.

If you are interested in joining with me to bring reform to this industry, please email me and together we can start the process.

With great concern,
Sandra L. Manzke
Chief Executive Officer

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Hedge Fund Connection

The Hedge Fund Connection | Why They Work

Mark Cuban recently published a post on what is currently wrong with how hedge funds operate. In short he believes that hedge funds are not setup to benefit investors because they are paid on an annual basis where as investors are looking for long term 3, 5 and 7 year returns. to read his full post please click here.

Here is a quote from the article: “Those who give money to hedge funds rarely if ever have a 1 year investment term. In fact, the contracts for investment do everything possible to lock up your money for as long as possible. vs. Hedge Fund Managers pay themselves on an annual basis.

That is a huge disconnect and there in lies the rub. While it is true that the managers are paid on a performance basis (plus their 2pct of assets) and some even have clawback provisions, that is not enough. If a fund can get big enough, all they have to do is max out in a single year and the managers are set for life. They put hundreds of millions of dollars EACH in their pocket.”

I disagree with his assessment on many levels. Here is why:

Hedge Funds align their interests with investors more closely than mutual funds and corporations. Hedge funds earn their large profits by taking a percentage of the profits generated for their investors. Why aren’t CEOs, mutual fund managers and ETF managers compensated in this way? Why don’t corporate CEOs have high water marks written into their compensation plans? I think that hedge funds are the answer to the broad misalignment of interests in the marketplace, not the problem.

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Financial Crisis of 2008

Financial Crisis & Hedge Fund Performance

(http://HedgeFundBlogger.coM) Interesting article below looking at recent hedge fund performance vs. the S & P 500. Many hedge funds may have been dragged down farther than they would ever have liked, but I still believe when the market does correct hedge funds will be in place to outperform everyone else in the market once again. The biggest worry I have heard lately is that it may take 4-6 years for the market to to turn again.

Hedge funds as measured by both the Greenwich Global Hedge Fund Index (“GGHFI”) and the Greenwich Composite Investable Index (“GI2″) declined marginally when compared with global equity returns during the month of October.

The GGHFI and GI2 posted declines of -5.06% and -8.53% on the month compared to global equity returns in the S&P 500 Total Return (-16.79%), MSCI World Equity (-19.05%), and FTSE 100 (-10.71%) equity indices. Year-to-date, the GGHFI and the GI2 have shed -14.29% and -16.60%, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -32.84%, -39.75%, and -32.21%, correspondingly. 36% of constituent funds in the GGHFI ended the month with gains.

“October’s returns are the result of similar market conditions that impacted hedge funds in September. Although long/short equity funds were notably lower, other event driven and arbitrage funds that trade in more illiquid securities were also negatively affected due to redemptions and forced selling. ” notes Margaret Gilbert, Managing Director.
Long/Short Equity managers experienced roughly half the losses of global equity markets during October, losing -7.88% on average. Source

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Improvement

HedgeFundBlogger.com Improvement

If you have a minute I would like to collect additional feedback from visitors of HedgeFundBlogger.com to understand:

1. Why you visit HedgeFundBlogger.com
2. What do you wish was here or somewhere online which you can never find?

Please leave your answers below within the comment form. Thank you in advance for the feedback.

What Makes us Unique?

What Makes HedgeFundBlogger.com Unique?

I was on the phone today with a potential guest contributor and we were discussing the differences between my site and other top online hedge fund portals. Here are the top 5 differences:

1. We dont’ simply regurgitate press releases or report whatever everyone else is reporting. There are 20 websites doing this because and that does not add any value to the conversation. Anyone can subscribe to Google News or Google Alerts and get the same content delivered daily VIA email each day.
2. We offer over 500 “how to” articles and educational guides to help hedge fund managers and others in the industry grow their businesses. And we don’t charge $1,000- $3,000 a year to access this information.
3. We offer a variety of content formats including articles, videos, manager profiles, audio clips, and interviews.
4. We get more traffic. HedgeFundBlogger.com is now a top 3 hedge fund portal – getting more traffic than HedgeWorld, Albourne Village, HedgeWeek, Hedge Fund Center, All About Alpha, Institutional Investor.com, Fintag, HedgeFund.net Hedge Fund Research and HedgeFundsReview.
5. We are not journalists and we are not structured as a traditional corporation. As part of the Hedge Fund Consulting Group, we operate as a consulting/networking team publishing pertinent facts and helpful tools for the hedge fund industry. On the surface, this may seem like a small detail but we believe it is the reason why our site has become popular. We are not publishing to drive premium subscription sales to the really valuable content, meet article deadlines, or impress our boss. We are writing to facilitate the sharing of relevant information which in turn fosters a better understanding of the hedge fund industry.

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DJ Hedge Fund Indexes

Dow Jones Hedge Fund Indexes

(http://HedgeFundBlogger.com) I thought this article on how Dow Jones was suspending the publication of over 1/3rd of their hedge fund strategy index benchmarks was interesting. I have never heard of this occurring before and I’m not sure this helps build faith in their product going forward. Here is the article excerpt:

Dow Jones Hedge Fund Indexes Inc. said Monday [Nov. 3] that it had temporarily halted daily publication of one-third of its hedge fund strategy benchmarks as the investment manager of the managed account platform worked to “reduce the risk profile of some of its underlying hedge fund managers.”

Effective Oct. 31, daily publication of the long/short equity and equity market neutral strategy benchmarks was suspended. Publication of the Dow Jones Hedge Fund Balanced Portfolio Indexes was also suspended, according to the company.

Dow Jones Hedge Fund Indexes referred questions about the investment manager’s action to the manager, which it did not name. The manager did not immediately respond to an inquiry passed along by Dow Jones Indexes/STOXX press office.

The long/short equity and equity market neutral indexes are among six strategy benchmarks tracked by Dow Jones Hedge Fund Indexes. The other strategies are convertible arbitrage, distressed securities , event driven and merger arbitrage. Daily publication of those strategy benchmarks will continue, according to Dow Jones Indexes. Read more…

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HedgeFundBlogger.com

HedgeFundBlogger.com | Kaizen

First off thank you for the support from everything, the emails, story submissions, linked resources and offers of help are appreciated. We hope to continue to build out our unique hedge fund tools, tracking services, marketing resources and career tips each week over the next few years. We will publish a hedge fund horse races post sometime in the next week showing how much traffic our site gets compared to others in the industry.

We are making several changes to HedgeFundBlogger.com. Once thing that many visitors have asked for in the past are comment forms available below posts such as this. We have tried this in the past and have received too many spam submissions. We are now trying it out again with a new spam filter.

Please feel free to post comments on any of the articles you now read on the site and we will do our best to publish anything value-adding to the conversation. Your own opinion, insight and resources are all encouraged.

For example do you have any feedback for us? How could we improve the site? Please comment below. If you are viewing this post on the front page of HedgeFundBlogger.com you may have to click on the title of the blog post to view this entry as a single post before being able to post your comment. – Thank you in advance.

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Hedge Fund Fight Night

Hedge Fund Fight Night | Charity Fundraiser

(http://HedgeFundBlogger.com) I had to read this headline twice before I believed it:

At 5-foot-4 and 48 years, Nissim “The Miracle” Tse is the shortest and oldest of 34 boxers signed up for this year’s Hong Kong Hedge Fund Fight Nite.

Calling himself “a financial warrior,” Tse likens boxing to his daytime job as a co-founder and head of trading for Hong Kong-based Pi Investment Management Ltd., a unit of London hedge fund manager RAB Capital Plc.

“It’s mental, it’s physical, it’s crazy, it’s stressful,” Tse said in an interview. “But it all happens very quickly, just like you are managing a hedge fund.”

The annual charity fight tonight, in its second year, takes place amid the most severe financial crisis since the 1930s and with the hedge fund industry bracing for its biggest annual loss since Hedge Fund Research Inc. started to keep data in 1990. The fight night aims to raise HK$1 million ($129,000) to repair children’s facial deformities and combat crime and juvenile delinquency in low-income and immigrant communities. The event beat the same target last year.

The world’s largest banks and securities firms have been saddled with more than $670 billion of losses and writedowns, with the crisis costing more than 149,000 financial industry jobs globally, according to data compiled by Bloomberg.

“This is the worst bear market I hope I will see in a lifetime,” added Tse, a 20-year hedge fund veteran who practices karate and plays golf and tennis.

All the more reason for a diversion, according to the fighters.

Graham “The Real Deal” McNeill, a 35-year-old partner at EC Harris LLP, said “therapeutic” lunchtime sessions were a release. “You completely forget about the rigors of the morning and focus on not getting your head knocked off,” he said. Read more…

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Hedge Funds & Financial Markets

Hedge Funds & Financial Markets | Insights

Since 99% of all hedge fund press is negative right now I couldn’t help but publish this piece from an industry spokesperson in London. Here is an excerpt from the article:
________________

Chief executive of Aima in London, Florence Lombard, thinks hedge funds are being unfairly bashed for the recent stock market falls and that short selling will ultimately be exonerated.

Florence Lombard is the chief executive of the London-based Alternative Investment Management Association (Aima). During a visit to Hong Kong, she spoke to AsianInvestor.

What effect is the current state of the markets having on hedge funds?

Different levels of impact in different parts of the world, with the majority of the direct negative impact being experienced in Europe and in America, particularly as a consequence of the various short selling bans which have had a negative effect on hedge fund performance.

Here in Asia, the landscape appears to look better at this point, but when you are faced with these kinds of extreme and erratic conditions, institutional investors do need liquidity and may redeem their investments in hedge funds in order to plug holes.

What was your reaction to the shorting bans?

We understand the severity of the problems arising in the banking sector, and why ‘circuit breakers’ might have been perceived as a temporary measure. From what they were seeing, the regulators believed that short selling was partly to blame for the downward movement in shares. However, shares have continued to fall even when short selling wasn’t available, so we know now that you cannot explain the severe drop in value as being solely attributable to shorting. Also, even in cases when shorting was allowed, the data available suggests that the number of shares available for borrowing in certain stocks, for example HBOS, can’t account for the extent of that stock’s price fall. Read more…

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Index Performance

Hedge Fund Index Performance

(http://hedgefundblogger.com) Pasted below is a recent hedge fund index performance chart showing which strategies are hurting most during this crisis:

The Credit Suisse/Tremont Hedge Fund Index was down 6.55% in September, according to Oliver Schupp, President of Credit Suisse Index Co., Inc.

Mr. Schupp said, “September was a difficult month for hedge funds across strategies, and the Credit Suisse/Tremont Hedge Fund Index will finish down 6.55% for the month.” Mr. Schupp went on to say “Convertible Arbitrage was the worst performing sector, finishing down 12.26%, while Managed Futures was down only slightly for the month, losing 0.57%. Managed Futures continues to be the best performing sector, and is currently up 6.70% year to date.”

Performance for the Credit Suisse/Tremont Hedge Fund Index and its ten sub-strategies is calculated monthly. September, August and 2008 year-to-date returns for all categories are listed below and are available at HedgeIndex.com.

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There was an article out today in the FT about low stock market trading volume. I have heard this directly from prime brokerage firms, I’ve also heard that managers are holding more cash than usual, taking more cautious trading positions than usual. The exception to this seem to be those few funds which thrive during this type of market volatility, but as the index figures which published this morning show – most funds are working within negative territory for 2008. Here is the story:

Some of the steepest sell-offs and gains witnessed in an especially volatile few weeks for Wall Street could have been exacerbated by relatively low trading volumes as frightened hedge funds sat on the sidelines.

This decoupling of volume and volatility in equity markets is just another example of the reluctance of traders to speculate against a backdrop of uncertainty over the global banking system and economy, say analysts.On October 15, for example, when the S&P 500, Wall Street’s benchmark equity index, dropped 9.9 per cent, its largest one-day drop in more than 60 years, volume was only 11.5bn shares. This was the third lowest volume day that month, with only October 1 and 2, when the ban on short-selling financials was still in effect, having lower trading levels. Indeed volume was only 58 per cent of the record reported on October 10 when the S&P 500 fell just 1.2 per cent. Source

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Low Trading Volume

Low Stock Market Trading Volume

There was an article out today in the FT about low stock market trading volume. I have heard this directly from prime brokerage firms, I’ve also heard that managers are holding more cash than usual, taking more cautious trading positions than usual. The exception to this seem to be those few funds which thrive during this type of market volatility, but as the index figures which published this morning show – most funds are working within negative territory for 2008. Here is the story:

Some of the steepest sell-offs and gains witnessed in an especially volatile few weeks for Wall Street could have been exacerbated by relatively low trading volumes as frightened hedge funds sat on the sidelines.

This decoupling of volume and volatility in equity markets is just another example of the reluctance of traders to speculate against a backdrop of uncertainty over the global banking system and economy, say analysts.On October 15, for example, when the S&P 500, Wall Street’s benchmark equity index, dropped 9.9 per cent, its largest one-day drop in more than 60 years, volume was only 11.5bn shares. This was the third lowest volume day that month, with only October 1 and 2, when the ban on short-selling financials was still in effect, having lower trading levels. Indeed volume was only 58 per cent of the record reported on October 10 when the S&P 500 fell just 1.2 per cent. Source

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HF Quote of the Year

“Kill The Bad Funds & Regulate the Rest”

Interesting post over at the FT – discussing the regulations of hedge funds within both the UK and US. Hedge Funds are taking much of the blame for recent market activity and new regulations will probably continue to roll out over the next 18 months. My take – there will be more regulation but far more on banks than hedge funds. I believe hedge funds will come out of this crises stronger than ever as more easily defined banks are tied to ever tightening capital requirements and oversight. Here is an excerpt from the article mentioned above:

______________________

“…kill the bad Hedge Funds + heavily regulate the rest.”

That’s Dick Fuld, recounting the position of the US Treasury towards hedge funds. The phrase comes from an email between Fuld and Lehman’s general counsel, Thomas Russo, made public by congress last Monday.

It’s breathtaking not because it shows just how fixated and narrow-minded Lehman’s management were when it came to blaming all their woes on hedge funds – a fact already well known – but because it seems to show the US Treasury were thinking the same way too.

Little wonder, one supposes, when you think about it.

Paulson is as much the product of a sclerotic, class-ridden and arrogant banking fraternity as Fuld was. The US Treasury – just like Lehman – has spent months holding onto the mantra that the banks are not to blame. Fear and fear alone was causing trouble for the banks, was the parroted line. The whole wrong-headed architecture of the Tarp was prefaced on the same worldview: more liquidity and more confidence was needed, not more capital. As Felix Salmon at Market Movers writes:

“America’s banks — and the world’s, for that matter — have had de facto unlimited access to very cheap Fed liquidity for many months now. That hasn’t induced them to lend.“

It has taken Paulson two long weeks to come around to the idea that the banks need recapitalising. That’s two painful weeks to face up to the fact that actually, the banks’ problems were not mere fictions conjured by the scurrilous iconoclasts of Greenwich, CT, but were real, palpable, and destabilising.

And yet, it seems, the hedge funds are still in the target sights of regulators. Read More…

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Hedge Fund Industry

Hedge Fund Industry | US Economy

Here is a short piece reviewing what has happened to hedge funds within 2008:

They preached to the rich that they had the answers – philosophically-driven investment vehicles for the rich. Some crawled and leaped into emerging markets (high-growth but unstable developing countries), a few financed movies while others created and plied the infamous derivative trade – many packaging subprime mortgages, rating them in tranches and either holding them or selling them as high-yield instruments to institutions like Bear Stearns, AIG and Lehman Bros. A lot of billionaires were born and made in those deals.

Today, even the federal bailout has excluded investing in these funds, as hedge funds are pulling their investments out of emerging markets as fast as they can, tanking the local currencies against a rising dollar and yen. Investors are pulling their money, when they can, out of hedge funds themselves (literally dumping their investments in the already volatile marketplace), and that is a big shoe rapidly slipping off the foot ready to drop. The New York Times today: “Hedge funds lost an estimated $180 billion during the last three months and some are near collapse. Investors are demanding their money back, and Wall Street is bracing for a shake-out in the $1.7 trillion industry.” Source

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