Large Hedge Funds

Large Hedge Funds See Assets Move

Unfortunately with current rules against hedge fund marketing or certain types of performance related announcements many hedge funds cannot report on their performance and this sometimes leads to a misunderstanding in their overall success or failure. There have been numerous reports within mainstream media regarding the performance of large hedge funds. The most notable stories have focused on the multi-billion dollar funds ran by some of the most well known professionals in the industry. Many of these funds get tagged within articles as having -25% performance, – 40% performance, etc. While this may very well be true within a few of their funds many of these large managers run 8-10 portfolios, all with $250M+ in assets. Many are able to weather these types of storms due to this built in diversification.

Here’s a short article about performance seen from some well known hedge funds:
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Hedge fund managers, after enduring the industry’s worst month in a decade, are seeking to explain to investors what went wrong and what they are doing about it.

“We clearly underestimated several things, most importantly the tsunami of redemptions that are being delivered to hedge funds as investors line up to get out of these funds as well as record outflows from equity mutual funds,” Jeffrey Gendell, who runs Greenwich, Connecticut-based Tontine Associates LLC, wrote in an Oct. 1 letter to clients.

“I am not a nervous person by nature, but should have been under the circumstances,” wrote Gendell, whose Tontine Partners LP fund plunged 59 percent in September, leaving it down 67 percent for the year, according to investors. Gendell, 49, had expected shares of steel, engineering, airline and chemical companies to appreciate because of falling oil prices. Instead they plummeted.

Hedge funds, which endeavor to make money whether markets rise or fall, lost an average of 4.7 percent in September, the biggest monthly decline since August 1998, according to data compiled by Hedge Fund Research Inc. Funds fell 17 percent this year through Oct. 9, compared with the 38 percent decline by the MSCI World Index of stocks. It was the worst performance by the lightly regulated private pools of capital since the Chicago- based firm began collecting data. Read more…

Related to Large Hedge Funds See Assets Move:

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Spain Hedge Fund Guide

1 Page Guide to Hedge Funds in Spain

Here is a short collection of articles on the hedge fund industry in Spain. I am always looking for more valuable online tools and resources to add to these geographical hedge fund guides to the hedge fund industry. If you have a white paper or PowerPoint that I can include here please send me an email and I will post it for everyone’s benefit.

• Spain will authorize domestic sales of hedge funds this year, provided they publish trading prices at least every six months and meet other requirements, the Economy Ministry said Wednesday. A ministry spokeswoman, who declined to be identified, said an initial investment of at least $50,000 or $60,000 will also be mandatory and fund managers must be based in one of the 30 nations in the Organization for Economic Cooperation and Development, a group of market-oriented countries.
• With the approval of Circular by the Spanish regulator, the CNMV, the regulation on hedge funds has been finalized after prior approval of the Regulation on Collective Investment Institutions. Once this regulation is approved, Spanish management companies would be able to file for the license to manage hedge funds, which would be the prior step for the first product to be launched.
• As Spain’s Comisión Nacional del Mercado de Valores becomes the latest European regulator to implement a regime for fund of hedge fund managers looking to tap retail interest, market participants are divided over its impact on the market for hedge fund-linked products
• Vulture funds are finally saying debt from Spanish retailer Cortefiel is now cheap enough to buy, after waiting for months to see prices of the struggling company’s debt fall further. The funds, which have raised billions of dollars to invest on the hopes that a worsening global economy will depress debt prices, are closely monitoring the Spanish group whose debt trades at about 42 percent of its face value.
• Great introduction article about hedge funds and other assets in Spain.
• Very in depth and thorough Hedge Week guide to everything hedge fund related in Spain.
• Regulation governing Spain’s hedge fund market is set to be finalized this month, following more than a year of uncertainty. The rules, expected to be approved by the Spanish parliament within the next few weeks, will provide a massive boost to the country’s hedge fund industry, say market participants.
• Overcoming Spain’s natural conservatism headline
• Rarely has the approval of a financial product in Spain generated such controversy as the decision to allow sales of domestic hedge funds. After lengthy and intense discussion involving politicians, regulators and those working in the financial sector, the first such fund was registered with the stock market commission on November 8, 2006. But one year on, demand for hedge funds has fallen short of expectations.
• U.S. retail investors have had a growing appetite for hedge funds, and now European investors will get the chance to test the waters in these high-return, sometimes risky investments, as Spain is the first European country to introduce retail investors to hedge funds, according to Boston-based consultancy firm Aite Group.
• Madrid, Spain-based Altex Partners Group has won approval from Spanish regulators for a new fund of hedge funds promoted in partnership with GLG Partners. Altex GLG becomes the 35th fund of hedge fund authorized by Spain. Altex GLG Fund will only invest in funds managed by U.K.-based GLG Partners, one of the biggest hedge fund managers in the world, with over US$26 billion of asset under management.
• Great must read article about regulations in the Spanish hedge fund market.
• Sometimes it’s the most innocuous-looking headlines that spell the most trouble. With most papers leading on “here comes the recession”-type stories, it would be very easy to overlook the report on page five of yesterday’s FT that the “ECB is to tackle abuse of liquidity aid”. And no wonder. The story sounds either a) very technical or b) something about the financial equivalent of binge drinking. But there’s a bombshell being delivered here – the European Central Bank is about to stop bailing out eurozone commercial banks. And that could mean another big lender going ‘bust’.
• The failure of the Spanish property firm, Martinsa Fadesa, is a sign that hedge funds are stepping up efforts to wring profit out of ailing companies, in moves that might prompt more Spanish insolvencies. Hedge funds which bought Martinsa Fadesa debt at discounts of as much as 50 percent of its value could now profit from its administration process because an expected sale of assets might pay them back at a price closer to face value.
• Spanish finance lawyers have been busy working on the launch early in 2007 of the country’s first domiciled Hedge Funds, amid debate over which law firms are best placed to advise on these new investment vehicles. The stock exchange regulator, CNMV, has already approved for trading the first fund managers, and a rapid buildup in the number of authorizations and products is expected as “H-day” approaches.
• Another great in depth guide to regulations of hedge funds in Spain and Europe.
• Spanish hedge funds move closer to reality.
• Spain’s newly-approved hedge funds must now prove they have what it takes to attract business. At the end of 2006 and after months of anticipation, the first Spanish-registered hedge funds were launched with the approval of the Comisión Nacional del Mercado de Valores (CNMV), the country’s securities market regulator.
• Valorica Global FIL, one of Spain’s first onshore hedge funds, has implemented Insight, a sophisticated portfolio management and accounting system developed by specialist hedge fund technology provider, Tradar. Valorica Global FIL, which was launched on 28th September 2007, following approval from the Comisión Nacional del Mercado de Valores (CNMV), manages three investment vehicles.
• The Swiss banking group SYZ & CO and the Madrid-based asset management company A&G Fondos, Asesores y Gestores Financieros Fondos have announced the imminent launch of two Spanish-regulated funds of hedge funds. SYZ & CO and A&G are thus among the first institutions to benefit from new Spanish legislation authorizing the marketing of alternative investment funds.
• Some background and introductory material taken from the Hedge Funds World Espana 2007 Event

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• Dubai Hedge Fund Guide
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Tags: Hedge Funds in Spain, Hedge Fund, hedge fund, hedge funds, stock market, investments, stock markets, real estate, Spain Hedge Fund, Spain Hedge Funds, Madrid, Barcelona

Hedge Fund Meltdown?

Hedge Fund Meltdown? | 30% Decline in AUM?

One of the most frequent questions I keep receiving is, “What does this (the financial crisis) all mean for the hedge fund industry as a whole?” It is relatively straight forward to predict the short-mid-term consequences, but over the long-term I disagree with many. Some experts are predicting a 30% decrease in total assets under management within the hedge fund industry, others have been predicting for some time that the industry will disappear altogether. I believe with banks less able to take on the types of risks which hedge funds get paid to take, hedge funds will recover what has been lost and come out only stronger within 3 years of today. There will be funds closed, as they are always are, someone new will go to jail, and some investors will feel the pain of gating clauses but in the end hedge funds as a group are more diversified than banks, private equity firms or sovereign wealth funds. They will survive and thrive over the long-run.

Here’s an excerpt from a recent story predicting a 30% decline in AUM within the industry:

In happier times, the bronzes in the window of WH Patterson’s gallery in London’s Mayfair would have been quickly snapped up. Their titles — Lioness Attacking, Lioness Stalking and Cheetah I and II — would have appealed to the hedge-fund managers who work in the area and fancy themselves as financial-market predators.

To them, the asking price of £10,000-plus would have been little more than small change; but those days have gone and the hunters are rapidly becoming the hunted.

A handful of managers in London and New York were forced last week to liquidate funds, including the flagship funds at MKM Longboat and Powe Capital, as investors demanded their money back. It is only the beginning.

Experts are predicting a 30% reduction in the hedge-fund industry — there are roughly 10,000 funds worldwide, and the industry is worth approximately $2 trillion. One broker said: “Small firms are bleeding. Assets are being sold off, investors are redeeming money and the managers are scuttling off to work somewhere else.” Read more…

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Tags: Hedge Fund Meltdown, Hedge Fund Collapse, Hedge Fund Asset Losses, hedge funds, hedge fund, stock market, stock markets, investments, Decline of Hedge Fund Industry, Hedge Fund Performance Figures, Low Hedge Fund performance

Letters to Investors

Hedge Fund Letters to Investors

Below are a series of hedge fund letters as I have seen them posted on other websites such as Dealbreaker and Naked Shorts.

Updated

• Andrew Lahde | Hedge Fund Closure Letter to Investors
• TPG Axon
• Tontine Partners
• Cerberus
• Greenlight Capital
• Richard Perry’s Perry Partners
• Tosca Asset Management
• Maverick Capital
• Colony Capital
• Oaktree Capital Management
• Hayman Advisors LP
• Balyasny Asset Management LP
• Baupost Group
• Perry Capital

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Investing Guide

Investing Guide | Hedge Funds

I get emails from HNW investors looking for more information on hedge funds. This page will serve as the long-term destination for hedge fund investing information for High Net Worth Investors. It is not a recommendation to invest in anything, follow any strategy or rely on advice found here. These are simply high-level introductions at a high level and no investments should ever be made without seeking competent licensed assistance from a wealth management professional and/or legal counsel.

Without further disclosure details here are the first few investor oriented resources which we have made available:

• Hedge Fund Due Diligence Tips
• What is a Hedge Fund? (Video Introduction)
• How To Invest In Hedge Funds
• Hedge Fund Investments (A Video Overview)
• Who Can Invest in Hedge Funds?

Please also feel free to download my free book on hedge funds by clicking here.

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http://richard-wilson.blogspot.com/2008/10/guide-to-investing-tips-research-online.html

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Hedge Fund News

Hedge Fund Video Notes

Here is a short video on recent hedge fund developments related to A to B Capital, The Children’s Investmetn Fund and Avenue Capital. If you are reading this via my daily hedge fund newsletter please click here to watch the video now.

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Tags: A to B Capital, Childrens Hedge Fund, Avenue Capital, hedge fund, hedge fund manager

Hedge Fund Blowups

Hedge Fund Vs. Bank Blowups

Last week a member of a hedge fund professionals networking group on LinkedIn asked a question about why we have seen more investment bank blow ups than hedge funds.

In the past 2 years there have, of course, been hedge fund blow ups starting with Amaranth in September 2006. Unlike troubled investment banks not all hedge funds suffering losses and closing downs receive press coverage. We have seen a few notable names, such as hedge funds managed by Bear Stearns, Sowood, Peloton and a few others mentioned in the papers. Many more troubled hedge funds managed to avoid major headlines. It’s not necessarily clear what exactly constitutes a hedge fund blow up. For the names mentioned above the loss was sudden and quick and resulted in eventual termination of the funds. Amaranth lost close to six billion dollars in just one week. Peloton earned a spectacular return of almost 90% in 2007 just two months before the blow up. These, however, are extreme cases. Many hedge funds suffer the slow death as they enter into periods of large draw downs. In this study we tried to identify hedge funds that have terminated since January 2008.

To analyze the rate of failure among hedge funds this year, we ran the analysis on the universe of hedge funds, fund o funds and CTA that report to Barclay’s Global Data Feeder database. To identify the blown up funds we first looked at the funds that stopped reporting performance to the database. We realize that there may be various reasons why a hedge fund would stop reporting to the database, but we believe that primary reason would be a significant drop in performance. To avoid double counting we focused primarily on the “On Shore” funds reporting performance in United States Dollars. There were 3,998 funds that reported performance at the beginning of the year. Of these funds 366 have not reported their performance since May 31, 2008. Chart 1 shows the distribution of the cumulative return of these funds since January 2007 (or later if the funds launched after January 2007).

Out of the 364 funds -156 funds or (43%) have had negative cumulative performance through their last reported date. Chart 2 shows the distribution of Maximum draw down achieved during the same period.

As we mentioned above we cannot be sure whether or not the funds that stopped reporting to Barclay’s database have indeed blown up. We do, however, consider it likely that hedge funds that stopped reporting after experiencing an extreme drawdown are in a “blow up” situation. Chart 2 shows that almost a third of the funds have experienced a drawdown of 15% or higher. This brings our estimate of defaulted funds to 2.5% or (100 out of 4,000).

Given the current market environment the estimate seems low. One factor that may account for relatively low blow up rate is the hedge fund liquidity. As an asset class, hedge funds enjoy the benefit of providing relatively stable asset base that is protected by long lock ups, strict redemption schedule, and withdrawal fees. Given these restrictions hedge funds that experience large losses are able to survive longer. It’s generally expected that the industry will experience significant redemptions at the end of the year, which may bring to the run on many hedge funds and lead to higher blow up rate. In the future issues of this newsletter we will attempt to examine the factors that may be helpful in identifying potential blow ups.

Guest post by Aleksey Matiychenko of Risk-AL, LLC

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Hedge Fund Holdings

Top Hedge Fund Holdings Research

As of July 1st 2008, it appears that hedge funds poured money into the technology and service sectors. According to TickerSpy.com, the 20 most tracked hedge funds on the site had 27.9% of all holdings within those two sectors. The quarter-over-quarter results presented by TickerSpy.com showed holdings and changes in holdings as of July 1st 2008, as compared to the quarter earlier. These holdings are based on TickerSpy’s data, which shows the top 15 holdings of each hedge fund quarter-over-quarter.

Total equity holdings of the 20 most tracked hedge funds amassed to $91.4 billion dollars, up from the previous quarter by $9.76 billion or 12%. New positions in equities totaled $9.54 billion, while existing positions saw a net inflow of just $219 million (net inflow: all money flowing into existing positions less all money flowing out of existing positions).

Companies or indices that saw the largest net inflows were Yahoo! and Philip Morris, with the SPY (SPDR tracking index for the S&P 500) and Google seeing the largest net outflows. The top eight in each category were (in millions):

Of the over 200 top holdings of hedge funds, nearly $25.5 billion or 27.9% were in either the technology or services sector. Which stocks? Below is a chart detailing the top 25 holdings by dollar amount that were seen in the portfolios, as well as a pie chart showing the top twelve stocks that made up over one-third of total fund holdings.

However, some companies such as Icahn Enterprise are held by only one fund (Icahn Associates) and the large dollar amount slightly skews the accuracy of the holding data. So I also compiled the 14 most widely held securities, determined by the number of funds that held them, as well as the dollar amount of the holdings.

To review our Hedge Fund Tracker research please click here. To review our 13F Hedge Fund Securities Analysis work please click here.

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Tags: Top Hedge Fund Holdings, Top Holdings of Hedge Funds, Top Holdings of Hedge Fund managers, hedge fund, hedge funds, investments, holdings, stock market, markets
Securities discussed above include: Icahn Enterprise (IEP), ABB Ltd (ABB), AK Steel Holding (AKS), Alpha Natural Resources (ANR), Apple Inc (AAPL), AT&T (T), Bank of America (BAC), Calpine Corporation (CPN), Cisco Systems (CSCO), Cleveland-Cliffs (CLF), Conoco Philips (COP), Exxon Mobil (XOM), Fairchild Semiconductor International (FCS), General Electric (GE), Google (GOOG), Hess Corp (HES), iShares Russell 2000 (IWM), JPMorgan Chase (JPM), MasterCard (MA), Microsoft (MSFT), Motorola (MOT), Occidental Petroleum (OXY), Peabody Energy (BTU), Pfizer (PFE), Potash (POT), Qualcomm (QCOM), Research in Motion (RIMM), SPDR Trust (SPY), Target Corporation (TGT), Wal-Mart Stores (WMT), Weatherford International (WFT), Yahoo! (YHOO)

Investment Marketing

Investment Marketing Hurdles for Hedge Funds

I just read an interesting article on AllAboutAlpha discussing the challenges today in marketing hedge funds to new potential investors. Within the piece AAA discusses how the US has one of the most restrictive regulatory regimes in the world when it comes to the hedge fund industry. The countries of Australia, Canada, Japan and China are all less restrictive.

Here’s a short excerpt from the article:

An article in this month’s Journal of Financial Transformation illustrates why this is. The piece, titled “Hedge fund marketing in an era of regulatory uncertainty” covers many of the issues faced by those trying to raise money in the US. It’s a great update on the ebb and flow of SEC edicts over the past year and was co-authored by hedge fund personality James Hedges. Here’s some of what Hedges suggests:

• Avoid speaking to the media about your funds – even if you’re not actively selling, but just “conditioning the market”.
• Avoid “print, radio and television advertisements or solicitations regarding funding or investment matters”.
• When giving presentations, “address the risks associated with hedge funds in general as well as the specific risks associated with the hedge fund being offered.”
• When your fund has a great year, make sure you “disclose the reasons for extraordinary performance…”
• No “mass mailings” except to “individual investors, or a discrete group of accredited investors”.

Click here to read the full article.

Permanent Link: Investment Marketing
Tags: Marketing for Investments, Investment Marketing, Hedge Fund Marketing tips, Investment Marketing tips, Investment Marketing Regulations, Investment Marketing Group

Link Fest

Hedge Fund Link Fest

In case you have been reading up on bank failures and bail outs all week and missed much of the news on the hedge fund industry here is a link fest out to many of the events which recently occurred in the industry:

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Paulson & Co.Positions

John Paulson Hedge Fund Positions

The following piece on Highbridge Capital Management LLC (co-founder Henry Swieca pictured left) is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool.

One hedge fund we’re seeing some short positions from is John Paulson’s Paulson & Co. Paulson is famous for the fortune he made by betting against subprime at the beginning of the crisis. And, now, it looks as if he’s ready to turn his focus to some UK financials. Taken from StreetInsider, we get a solid breakdown of what Paulson is shorting: “Paulson & Co. yesterday disclosed short positions in four of the five largest British banks.

The bet now makes Paulson the largest short seller of UK banks. According to the filing, Paulson’s hedge fund has taken a $650 million bet against shares of Barclays (BCS), a $542 million bet against Royal Bank of Scotland (RBS), and a $483 million bet against Lloyds TSB (LYG).”

Sources: WSJ, StreetInsider, & investEgate

Guest post by Market Folly

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Tags: John Paulson Hedge fund, Paulson Capital Hedge Fund, Positions and Holdings Analysis of John Paulson’s hedge fund

Short Selling Ban

Short Selling Ban – How it has impacted Funds

The Boston Globe recently released an article on the short selling ban – it covers how different funds are being affected by the recent ban on the short selling of some securities.

While these are times when events seem to happen daily which should only happen bi-centennially I’m still surprised by how “business as usual” many professionals I work with and speak to in the industry seem to be. Even though many funds do have negative performance, often the worst since inception – I believe that many groups are confident that the losses may soon be regained. Many hedge fund marketers, consultants and niche service providers seem to be weathering the storm without too much pain yet.

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How to Study – CFA

How to Study for the CFA Exam

I recently interviewed a Chartered Financial Analyst (CFA) Charter Holder to gain some insight into how to best study or prepare for a CFA exam. Here is what he told me:
______________________________________

1. Start early – CFA program tests are designed to test your breadth of your knowledge as opposed to the depth. Study guide provided by Chartered Financial Analyst Institute (the textbook you receive when you register) is over 2000 pages long. So, give your self good 6 months of preparation if you are currently working or going to school.

2. Get support- Create study group. Get support and motivation. Three years of dedication takes lots of patients and motivation, so get together with your fellow test takers and pull each other through this tough journey.

3. Study each book thoroughly- Every single page of it counts. No, every single paragraph counts. It seems CFA loves to test you on topics that majority of people think it is less than important. As you progress towards level II and III this principal becomes more significant.

4. Do lots of practice questions- Purchase question banks. Search online for past exams.
Just as SAT and GMAT, being smart and knowing material doesn’t necessarily lead to higher score. Practice tons of questions and be a good test taker.

5. Find balance between your life and CFA preparation- Everyone knows preparation for CFA designation is extremely time consuming. I’ve heard people complaining that they can’t find anytime for their family or leisure. Although, it is important challenge, it is never worth it if this challenge compromises quality of your life.

What CFA study materials do you use and why?

There has been many discussions about which materials are best to use. General opinion is that since most of publications are sufficient enough to get you through the program. However, third party publication such as Schweser and Stella are more consice and easier to digest compared to official CFAI textbook which is provided to you with your registration for free. Rule of thumb is to study with whatever you feel comfortable with, but make sure you do questions on CFAI textbooks and mock exams that is available on CFA website few weeks prior to test date, because it is better reflection of what real test will look like.

__________________________________________

Disclosure: I am part of the group who runs the Certified Hedge Fund Professional (CHP) Designation Program.

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Tags: How to Study for the CFA Exam, How to Study for CFA Level 1 2 3, How Long To Study For the CFA Exam, How Much Should I Study For the CFA, How To Prepare for the CFA Exams

Hedge Fund Industry

Hedge Fund Industry Survival Notes

Here is a short article on the hedge fund industry business model and my comments in red.
______________________________________________________

I have thought for a while that the hedge fund business model was breaking down. In fact I turned down an offer to raise capital in a hedge fund format a few weeks ago. This summer it appears that the soft white underbelly of hedge funds is being exposed as the four legs of hedge funds are being kicked out right from under the industry:

• Leverage – hedge funds need leverage to generate excess alpha and non-correlated returns. Leverage is being removed from the system like never before for hedge funds. I’m not sure what the difference is between “excess alpha” and alpha but a fair number of hedge funds use no leverage. Both the prime brokers and use of leverage will survive these times.

• Manipulative Short Selling – short selling is a good thing. Manipulative short selling is illegal and against the interest of shareholders. That is now going to be enforced and put to an end. Next we will have the reinstatement of the up-tick rule. It worked for 70 years but failed us in the last year. Hedge funds provide liquidity and as someone else recently noted in the news – often the short sellers are the guys in white hats which come down on bad companies.

• Performance Fees – many funds are closing up because the managers won’t earn performance fees. This resulted in massive liquidations which are still continuing. There will always be liquidations and poor performance. Now that both are higher than usual it will hopefully rid the industry of the extra 30% of hedge fund managers who have a dream but not the right team and skills to produce long-term risk adjusted returns.

• Lack of Transparency – The SEC took the first step in requiring hedge funds to report short positions over certain limits. Mutual Funds have to file reports with the SEC and provide shareholders with a quarterly report which is part of the SEC filing. The wall of transparency will be brought down. I don’t believe it will, even if the US takes a radical stance on this issue many other countries are happy to go their own ways when it comes to regulating hedge funds. Many areas of the world are more than happy to cater to the business the United States creates for them through our strict tax and regulatory regime.

So what will happen? Eventually we will see assets flow back to more traditional forms of investment – managed accounts, mutual funds and self directed investments. I disagree – the pendulum my swing back and forth but alternative investments and hedge funds are here to stay. I believe eventually there will be less reports on the death of the industry as a whole.

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CFA Study Guide

CFA Study Guide – Exclusive Notes

I have been receiving dozens of emails regarding the Chartered Financial Analyst (CFA), Certified Hedge Fund Professional (CHP), and Chartered Alternative Investment Analyst (CAIA) designations so I’ve had a guest blogger put together this one page CFA study guide for those looking for straight and simple answers on this topic. Hope this helps:
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The CFA institute does not specifically provide a CFA Study Guide; the study information for each exam of the CFA, including study sessions, assigned readings, and practice problems, are included in the program curriculum. The CFA also provides additional study materials for the candidate.

The study material for each level of the CFA exam comes from the Candidate Book of Knowledge (CBOK). The CBOK’s content comes from real world practice; thousands of current CFA professionals weigh in on the skills needed to succeed within the investment world. The surveys the CFA collects from these charter holders provide the framework for the study material and for the exams.

The curriculum for the study material for each level of the CFA exam is divided in multiple sections. Each section will contain assigned readings drawn from textbooks, journals, cases, and analyst reports. Learning Outcome Statements (LOS) are also another section of the study material for each level of the exam. A LOS is a description of knowledge, skills, and abilities (KSA) that each candidate should master before taking the CFA examination.

The main purpose of not having a CFA Study Guide is to teach each CFA candidate that the value of the test lies in its application to real world scenarios. The CBOK is drawn from surveys of charter holders to determine the knowledge, skill sets, and abilities, which are most relevant to the profession. These surveys also help determine what the appropriate weighting for each topic on the examination should be. A committee of practicing charter holders along with the CFA institute designs the curriculum for each level of the exam. The exams themselves are also written by charter holders, which further emphasizes the amount of study time that should be devoted to the practical application of the knowledge learned from the assigned readings and LOS’s.

The CFA does provide candidates with various tools to help their course of study for the examinations. These tools include sample questions, CBOK topic outlines, exam topic area weights, and the curriculum itself. Within the Curriculum, there are the learning outcome statements as well as sample and mock exams. For a more traditional CFA study guide, a candidate can use an outside study source such as Kaplan or Schweser, which will provide a more traditional approach to preparing for the examinations.

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• CFA Institute | Exams, Books, Resources & Standards
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Tags: CFA Study Guide, CFA Study Guides, CFA Studying, Study Guide Notes for the CFA Exam, Chartered Financial Analyst (CFA) Study Guide, Study Guides for the CFA Program

Here is a short list of prime brokerage services:

• Lending Securities
• Hedge Fund Startup Services
• Accessing local shares abroad
• Cash Management
• Capital Introductions – Asset Raising
• Real Estate Identification or Office Space – Hedge Fund hotels
• Access to Hedge Fund Lawyers focussing on hedge fund clients
• Headhunting & talent identification to help build portfolio management teams
• Third Party Marketing Due Diligence
• Clearance & Custody of Assets
• Portfolio Reporting
• Branding & Marketing
• IT Consultations
• Compliance & Risk Management

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Tags: Prime Brokerage Services, prime broker services, what services does a prime broker provide?

Avenue Capital Hedge Fund

Avenue Capital Group – Hedge Fund Notes

There are over 50,000 websites containing details on Avenue Capital Group’s hedge fund portfolios. Here are a dozen of the most interesting publicly available resources. The following piece on Avenue Capital Group is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool.

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Resource #1: (6.1.09) Hedge-fund manager Marc Lasry’s Avenue Capital Group decided not to sell its high-yield loan unit as the market recovers, according to three people with knowledge of the decision.

The New York-based investment firm, with $16.5 billion in assets, ended talks to sell the division as loan prices have risen more than 20 percent on average the past two months as measured by the S&P/LSTA U.S. Leveraged Loan 100 Index, said the people, who declined to be identified because the discussions were private. Avenue is now stepping up its efforts to buy other high-yield loan funds.

Avenue originally decided to sell the unit, which manages collateralized loan obligations valued at $2.8 billion as of Feb. 28, as defaults were rising and the value of the loans were dropping. CLOs pool loans and slice them into securities of varying risk and ratings. source

Resource #2: (4.20.09) Billionaire hedge-fund manager Marc Lasry’s Avenue Capital Group is in talks to sell a division that oversees high-yield, high-risk loans, according to four people familiar with the situation.

Avenue Capital, which manages $2.8 billion of leveraged loans in its collateralized debt obligation business, may sell the unit within the next two months, the people said, who declined to be identified because the discussions are private. source

Resource #3: (12.3.08) Financial assets have become so cheap because of the credit crisis that now is a good time to scoop up bargains, the head of one of the world’s biggest hedge funds, Avenue Capital, said on Wednesday.

“Now is a phenomenal time to buy, assuming you think we’re not in a depression,” Marc Lasry, chairman and CEO of the company, said at the 2008 Clinton Global Initiative meeting in Hong Kong. “We’re looking at valuations we think are extremely low. Unless the unthinkable happens, you’ll be fine,” he said, referring to the investment environment. Lasry said the fund is holding around $7 billion in cash. Of that capital, Avenue is investing 10 percent a month, he said. source

10 Additional Resources:

• This document from PSERS Private Investment Program is a recommendation for their company to invest with Avenue Capital. It talks at length about the background of the firm and the strategies they use to generate returns. The fund uses a combination of “distressed/stressed acquisitions” and “highly structured direct investments”.
• Profile of Avenue Capital founder and managing partner Marc Lasry. His firm has $9 billion in assets and focuses on investing in distressed assets. He talks about his current efforts in China and also the nature of distressed debt.
• This resource is from Avenue Capital’s home page. They have pages for their strategies for each region and each type of fund. Also have pages for their investment approach and investment team. Very detailed and thorough explanations.
• Again from PSERS Private Investment Program, this is a recommendation for their company to invest in Avenue Capital Real Estate Fund. The fund will invest in real estate or related businesses through a number of possible ways. 1)”acquisition of direct interests” 2) Forming joint ventures to acquire real estate assets. 3) acquire or organize “real estate backed indebtedness” 4) invest in public or private real estate trusts
• A 2005 New York Times article about Lasry, in which he discusses distressed securities. He talks about some of his investments abroad in Europe and Asia. He mentions that distressed assets perform particularly well when the market is performing poorly and companies are going bankrupt because he buys their debt.
• The 100 Women in Hedge Fund organization have honored avenue Capital’s co-founder and managing partner Sonia Gardner with the 2008 Leadership Award. This honor “recognizes individuals whose professional dedication, innovation, passion and ethics set a standard of excellence for the industry.”
• Avenue Capital has teamed with Pegasus Capital Advisors to oversee Avenue’s debt and equity investing strategy. Marc Lasry says the move “adds a dimension to Avenue which I believe is extremely important – a private equity practice.”
• Chelsea Clinton, daughter of Bill and Hilary Clinton now works for Avenue Capital Management. Lasry has been active in donating to the Clinton campaigns in the past.
• In 2006 Morgan Stanley purchased roughly a 20% stake in Avenue Capital for about $280 million. Avenue Capital remains an independent firm and the proceeds from the sale will be investing back into the company’s hedge funds.
• In 2006 the International Finance Corporation made a $50 million investment in Avenue Capital’s “Avenue Asia Special Situations Fund.” This fund targets “nonperforming debt or debt-related securities of companies in financial distress,” primarily in China and India.
• These two articles (article 1 / article 2) talk about Avenue Capital’s most recent purchase. Avenue Capital acquired a 6.5% stake in Premier Start GmbH in 2008. Premier is the top pay TV provider in Austria and Germany with about 170,000 subscribers in its 1 year of operation.
• In 2007 Avenue acquired a 15% stke in Morepen Laboratories a company based in India. Morepen Labs has significant debt and the article discussed the details of how Avenue deal will work.

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Tags: Avenue Capital Group Hedge Fund Notes, Hedge Funds managed by Avenue Capital Group, Avenue Capital Group Contact Details Address Website, Avenue Capital Group Holdings Management History

Hedge Fund Loans

Corporations Seeking Capital From Hedge Funds

I’ve noticed a marked increase in the number of news stories, email inquiries and conversations over the past 4 months regarding private firms including corporations, patent portfolio companies and real estate groups seeking capital from hedge funds. This is for obvious reasons but is interesting none the less as many hedge funds may continue to pursue this “bank-like” strategy long after the dust settles. Small companies are always hungry for capital and many will agree to very aggressive terms in order to get to the next level. Here’s a short piece on this trend:

Smaller companies on the junior Alternative Investment Market (AIM) are being forced to borrow cash from hedge funds at “usury rates” in order to survive, Square Mile insiders have warned.

Some cash-rich fund managers are avoiding volatile equity and bond markets and instead lending to AIM firms, lured in by the prospect of earning giant fees.

“The kinds of costs involved in borrowing from some of these guys are huge,” said one city chief executive. “But they have no alternative in many cases because traditional bank lending has dried up. It’s like you or me being desperate enough to go and borrow from the local thug with a baseball bat.” The practice is thought to have crept in over the past few months as companies have suffered at the hands of the credit crunch during the summer. Read more…

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San Diego Hedge Funds

San Diego Hedge Funds – Networking Events

I was recently approached by a few hedge funds in San Diego that would like to start getting together for networking events and local meetings. If you are also interested in participating please send me an email at Richard@HedgeFundGroup.org.

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Prime Brokerage Boston

Prime Brokerage Boston – Meeting Notes

Yesterday I had a lunch meeting with two prime brokerage professionals in downtown Boston and the conversation quickly turned to the high demand for cap intro services for hedge funds.

The main problem with capital introductions being made by prime brokerage firms is that many hedge funds are not competitive enough to market. Many managers with negative or sub-par performance would still like to grow their business but the fact is most investors won’t consider hedge fund managers who are both relatively small and have mediocre or poor performance, there is nothing engaging enough that will convince investors to look past those two facts, they hear hundreds of stories and see as many teams pitching their outlook on the markets each year.

This leaves prime brokerage firms with two choices – offer capital introduction services knowing that there is almost no chance of raising assets or tell the hedge fund manager that they will not be able to market their strategy. The best prime brokers will often help with pre-marketing activities such as operational and risk assessments, marketing material scrubbing, newsletter development, etc.

This may seem straightforward but it is often an unsaid thorn in the side of prime brokerage firms offering capital introductions for hedge fund managers. They want to provide this service to everyone possible but by nature only 10-25% of all clients really qualify for the service.

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Pequot Capital

Pequot Capital Management

The following piece on Pequot Capital Management is being published as part of our daily effort to track hedge fund events and managers in the industry. To review other hedge fund related announcements and manager notes please see our Hedge Fund Tracker Tool.
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Resource #1 (5.26.09) Arthur Samberg, among the best-known hedge-fund managers, is closing down his firm amid an ongoing investigation into possible insider trading.

“Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction,” Mr. Samberg wrote in a letter that was sent to investors of his Pequot Capital Management Inc source

Resource #2: (12.9.08) Documents filed in a Connecticut divorce case disclose that Pequot Capital Management C.E.O. Arthur J. Samberg or his hedge fund is making so-far-unexplained payments of $2.1 million to a former Microsoft employee who figured in a now-closed insider-trading investigation of Samberg.

The Securities and Exchange Commission closed its investigation of Samberg in 2006 without filing any charges, although the Senate Judiciary Committee a year later faulted the S.E.C. for the way it conducted the investigation and allegations that a related case had been influenced by politics.

Records obtained from Connecticut Superior Court in Stamford show that Samberg or his firm has paid the former employee, David Zilkha, $1.4 million in two equal installments since April 30, 2007, and has promised an additional $700,000 in April 2009. source

More Resources

• In 2004, Pequot expanded its upper management team. “Employee-owned, Pequot Capital offers funds that focus on technology, health care services, and small-cap firms to institutional investors and wealthy individuals.”
• Pequot Management’s venture capital arm, “Pequot Ventures” split from the company and formed “FirstMark Capital”. The move was described as “the next logical step” for both Pequot Capital and Pequot Ventures. The move does not appear to effect Pequot Capital’s Hedge Funds since Pequot Ventures was run separately from the rest of the firm.
• Pequot Capital Management’s Chief Investment Strategist shares his ideas during a Financial Round Table Discussion in January 2008. He believes the current market condition and credit crisis are more serious than most people believe. He also thinks that many investors under estimate the seriousness of the energy situation as well.
• A Congressional report came out that the SEC made a mistake in its dealings with Pequot Capital Management. Pequot was suspected of insider trading. The report says the SEC mishandled the case by making a series of mistakes to compromise the investigation. The SEC closed its investigation of Pequot without taking any action against the firm.
• Pequot Capital is the majority shareholder of Midwest Air Group Inc. (8.8%) Midwest Air considered pursuing a “$16 per share all-cash proposal from a private equity firm and its consortium.” Pequot Capital Management wrote a letter to the company claiming that this proposal is not in the best interest of the shareholders and that a cash and stock deal would be better. The article contains a copy of the letter sent to Midwest Air.
• Pequot Capital Management’s chief investment strategist Byron Wien’s August 2008 market commentary focuses on South America. He specifically mentions how Brazil has become a hot bed for growth and the country has seen a huge inflow from US investors. He also discusses why Argentina, Brazil’s neighbor, has remained relatively stagnant.
• New development at Pequot Capital Management called the “Emerging Manager Program” The idea is a pool of capital run by 13 managers using 12 different strategies. The article talks extensively about the firm and its global strategies and risk management.
• Byron Wien’s top 10 surprises of 2007. He predicts oil and gold prices will rise despite a world wide economic slowdown. He thinks Asian emerging markets will peak, and focus will shift to Latin America.
• Byron Wein’s predictions for the top surprises of 2008. He predicted a US recession, a surge in commodity prices, and rising inflation. He also thinks Obama will be elected president in the upcoming election.
• Pequot Capital recently launched a global long/short fund in April 2008, its second new Hedge Fund of the year. The “Pequot New Vision Fund” contains $18.1 million is assets. The Fund will attempt to earn “attractive returns with consistent alpha by identifying global emerging growth opportunities that are fundamentally mispriced by the market”
• Provides a brief snapshot of Pequot Capital Management. Contains descriptions of the firm’s overall strategies and tendencies. Also mentions the company directors and where the offices are located.
• From Dec 2007, the article talks about the firm’s Short Credit Fund up 18% YTD. The fund placed bets on rising mortgage defaults that paid off big with the current credit and sub prime mortgage crises.
• Dated Nov. 2007. Talks about the Global Core Fund, the “flagship fund” with $2.6 billion in assets has gained 37% YTD under the management of founder Art Samberg and Mike Corasaniti. The firm also decided to close 3 poor performing funds and move the money into other core funds.
• Talks about the plan for Pequot Ventures to break away from the firm and become an independent private equity firm known as FirstMark Capital. Pequot will still be affiliated with the newly independent firm. . One of the major reasons for this potential split is that the Hedge Fund has decreased its interest in the technology sector, while the VC branch still focuses primarily on tech.
• Pequot teams with Pangaea Capital in Singapore. The firm’s focus in Asia has become “distressed assets” instead of “publicly traded stocks” Pequot has made a strong push into Asia, as the firm traditionally invested in US equities. Pequot’s was seeking $300 million for its Pequot/Pangaea Asia Opportunities Fund.
• This pdf file is an interview with an employee at Pequot Ventures, the VC arm of Pequot Capital Management. He talks about what the firm looks for in their employees. He also discusses the investing strategy of the firm.

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Hedge Funds Explained

Hedge Funds Explained – Multiple Resources

I often get emails asking about hedge funds, asking for explanations on what hedge funds do, how they earn returns for investors and how they differ from mutual funds. Below please find several resources which help explain what hedge funds are:

• A short video answering the question: What is a Hedge Fund?
• A short Hedge Funds FAQ on HedgeFundBlogger.com: Hedge Funds FAQ
• A collection of over 30 videos related to the hedge fund industry: Hedge Fund Videos
• The free Hedge Fund Blog Book – online at http://HedgeFundsBook.com
• Free Educational Daily Hedge Fund Newsletter: Hedge Fund Newsletter

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• Financial Certification
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Public Relations Strategies

Public Relations Strategies & Tips

I read a recent article by Bill Blasé within the Emerging Manager Monthly Newsletter. Here are the tips that I gleaned from this article:

• TV viewers and interviewers love contrarians, conflicting views make for interesting television
• Take a pass on issues where you are not an expert and don’t have any value-added insight on the issue
• Media appearances might not bring in a windfall of new business but a well coordinated PR plan combined with grass roots relationship develop and an online presence can be very effective
• Maintain eye contact with the interviewer and not the camera
• Speak slowly and match the interviewers tone and pace
• Short brief 30 second sound bites are ideal for TV appearances
• Michael Barron who is the CEO of Knott Capital Management commented in the article, “Everyone knows the Fidelitys, the Putnams and the rest of the larger firms in our industry. For some of the smaller firms, this is away you can build recognition and credibility
• Ignore the monitor and the audience, imagine speaking to a single viewer

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Future of Hedge Funds

Q & A: Future of Hedge Funds

Reporter Question: With both hedge funds and the large investment banks providing prime services to them both failing what do you think the future of the hedge fund industry looks like?

Answer: While times like this are painful for many investors and managers of hedge funds this type of “weeding out” is needed, at least some level for the hedge fund industry. Major databases report that there are between 7 and 10,000 hedge funds in existence. The number of hedge funds in existence is far greater than any of the databases report. There are thousands of hedge funds in Europe and America who have no need to register with a database, are seeding strategies or simply don’t have the man power or knowledge to know that they should be listed within these databases.

As the number of hedge funds in the industry has increased over the past 7 years institutional investors have raised the bar in terms of minimum assets, track record and risk management checks which all must be in place. Naturally it has become more challenging to raise assets as there are more fund fighting to raise capital. This competitiveness along with the current volatility in the markets has lead to a constant push to create new investment models and strategies. During a bull market these strategies seem to perform well but it is not until times like these in which these new ideas and many old are re-tested.

These markets and the recent downfall of some hedge funds will do many things to the future of the hedge fund industry:

1. Weed out the hedge funds started by those with minimal trading experienced based on momentum trades made during bull markets
2. Remind us all of the importance of risk management procedures at both the business and portfolio management levels
3. Encourage more hedge fund seeding and track record building before any active marketing is completed
4. Shift more due diligence focus from general risk management questions to potentially more pointed questions, including worst case scenarios which have been played out through Bear Stearns and now Lehman Brothers

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Brotman Capital Managment

Brotman Capital Management Hedge Fund

While this story below notes that Brotman Capital Management was launched during the hedge fund industry’s worst performance in over 10 years, it may be a great time to start a fund. Investors often place more weight on producing moderately positive returns during volatile market periods than they might on over performance through bullish market periods. If you can come out of the gates with a year or two of decent performance during a time while most funds fell on the sword that can be an advantage.

The following piece on Brotman Capital Management is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool.
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Randy Brotman, a Schonfeld Securities Trading Group alumnus, has founded Brotman Capital Management and launched an eponymous market-timing hedge fund during the worst year for hedge funds in over a decade.

The fund, Boca Raton, Florida based Brotman Capital Partners, began trading in January and employs a trend-timing model that dictates when it should be long, short or stay in cash. Read more…

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