Posts Tagged ‘markets’
admin | Wednesday, December 3rd, 2008 | No Comments »
Wealth Management Mergers
Family offices & Wealth Management Mergers
Below is a short piece on a recent family office merger. I believe these will increase in frequency as highly profitable leaders within this industry look to re-invest cash in smaller family offices. In many cases smaller family offices could use best practice processes, centralized due diligence and manager selection services of the larger family offices. Here is the article excerpt:
Multi-family office Stonehage Group has announced the merger of TriAlpha, its asset management arm, with ACP Partners to create a combined business owned 50:50 by the two groups that will be known initially as ACP TriAlpha and has some USD2.5bn in assets under management.
Founded in 1997, TriAlpha is an asset management house with an absolute return bias that manages a range of multi-manager hedge funds, multi-asset class funds and direct securities products for clients including institutions and high net worth families.
London-based ACP was founded in 2001 by Joseph Sassoon, former founder and head of Goldman Sachs’ European private wealth management business, and Alok Oberoi, who was head of Goldman’s Asian private wealth management business and subsequently chief operating officer of global private wealth management in New York. Brett Lankester, the former head of private wealth management for Goldman in the UK, joined ACP in 2007. source
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admin | Friday, October 17th, 2008 | No Comments »
Australian Short Selling
Australia Drafts Short Selling Regulation
The Australian Treasury are seeking comments on their short selling exposure draft. The current legislation around short selling is complex and unclear and the absence of reporting covered short selling has heightened uncertainty about its real impact and contributed to a 30 day temporary ban being imposed on 21 September 2008.
I believe that concerns about the impact of short selling on the general level of sharemarkets is overstated, and that while there are benefits in producing clearer legislation in the area, it will do little to address the current difficulties facing the Australian and global financial systems.
I am concerned that para 14 says “The Bill will replace ASIC’s interim reporting requirements for covered short sales …” If the temporary ban on short selling remains in place until the Bill becomes an Act, then the Australian financial system will be seriously impacted in the meantime.
Notwithstanding these high level comments, the draft is well balanced and shows a good understanding of the issues. I note para 16 in particular which says that “The Government is not seeking to prohibit or discourage covered short selling activity.” That’s good.
The draft distinguishes between naked and covered short sales. This distinction is relevant in relation to the current interpretation of the reporting requirement for short sales. Beyond that, a short sale is a short sale and the economic impact of being naked or covered is not relevant. This is a red herring in the argument.
Para 16 uses stock lending activity to estimate an upper limit of short selling in Australian listed securities of 4%. It notes that stock lending can be used for other purposes than short selling. However, there is no discussion of the likelihood that stock lending transactions may pass through many hands (it is a deep and liquid market) before it finally reaches a short seller. I have no evidence to support this, but typically a fund manager will ask their prime broker for stock availability. The prime broker may draw the stock from their own/their client’s inventory or go to the market to borrow the stock for the manager. To the extent this occurs, stock lending activity will further overestimate short selling.
Para 22 argues that the absence of transparency in short selling may adversely impact investor confidence and market integrity, increasing the cost of capital and reducing investment activity. I would argue that the absence of short selling brought about by the temporary ban will also have this impact.
Para 23 discusses objectives. The first two points are side benefits to investors, but are inappropriate as objectives for any legislation. Providing information that is hard earned by one set of participants freely to others is unfair and unbalanced. In the case of the first point, “to provide a signal that individual securities may be overvalued”, assumes that short sellers are better judges of share value than other investors ie those holding the investments long. This is not necessarily the case. If it is the case, then why should legislation be introduced that makes it easier for poorer judges of value?
The discussion of gross or net reporting of short sales is not relevant. Only net short selling will have an economic impact.
The main weakness of option two (para 26) is that reporting will be made on a trade basis. This implies a significant accounting requirement to follow through the impact of the sale on existing positions and to correct for any trade failures etc. Is the position opening a new short sale, extending an existing, reducing an existing ie a purchase.
It will be more straight forward to report positions and not trades at designated points of time. This information should be published from the source of truth, which is not the trade advice received by the broker. Typically brokers do not carry a record of holdings for their clients and investors may use multiple brokers to achieve a desired position.
I believe the best source of this information is held by the investor or as is generally the case, the investor’s agent, the custodian or sub-custodian. Custodian’s that carry short positions on behalf of clients already capture, settle and report this data daily on a traded and settled basis. Positions will also include off-market transactions for which they act as custodian. There are fewer custodians, than either investors or brokers. This alternative was not mentioned at all in the exposure draft, but is likely to be the preferred route and impose lowest regulatory cost.
Also not mentioned is that Short Interest has been captured in other markets for some time. In the US, Short Interest is published by major exchanges fortnightly eg http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=MSFT&selected=MSFT shows Microsoft’s Short Interest history. What is the process employed in these markets? Can it be applied in Australia?
Will there be areas of activity not captured by using custodians? Offshore investors will presumably use sub-custodians. Users of direct market access systems will report trades to their custodian for setlement. Broker’s principal positions? Anything else?
Para 34 discusses the problem of different trading desk activity in the same firm. Using the custodian approach, each account will be aggregated across every security. The fact that some houses will have offsetting long positions is not relevant. The fact that one group in the house has borrowed stock (or sold in advance of borrowing stock or settling) as principal or for a client is what is required to be captured, and will be captured using this approach.
Para 34 also discusses whether short sale reporting should be delayed. The concern presently is that the data should be provided frequently and quickly as it is believed to be materially important. However, international experience is that data provided fortnightly serves the market well. In fact, there is little movement from one fortnight to the next. But where there is a commercial advantage for short sellers in those markets, I believe it is sufficiently preserved with this level of periodic reporting.
In summary, the use of brokers to collect short sale trade information at the point of the trade is not the most effective way of achieving the desired outcome. Periodic position reporting by custodians, and investors that do not have custodians, is likely to provide adequate transparency of short selling in Australian securities.
Guest post by Rick Steele
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admin | Monday, September 29th, 2008 | No Comments »
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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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)
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admin | Saturday, September 27th, 2008 | No Comments »
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.
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Tags: Marketing for Investments, Investment Marketing, Hedge Fund Marketing tips, Investment Marketing tips, Investment Marketing Regulations, Investment Marketing Group
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admin | Thursday, September 25th, 2008 | No Comments »
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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admin | Thursday, September 25th, 2008 | No Comments »
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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admin | Thursday, September 25th, 2008 | No Comments »
Run on Hedge Funds
Looming Run on Hedge Funds?
I just read this article on how part of this financial crises will involve a run on hedge funds. Any time industry performance is low there will be some redemptions, but I don’t think there will be any massive industry-changing run on individual hedge fund managers. What are you seeing?
Here’s the article:
The next stage will be a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds can redeem their investments on a quarterly basis; thus a bank-like run on hedge funds is highly possible. Hundreds of smaller, younger funds that have taken excessive risks with high leverage and are poorly managed may collapse. A massive shake-out of the bloated hedge fund industry is likely in the next two years. Source
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admin | Monday, September 22nd, 2008 | No Comments »
Hedge Fund 13F Analysis Tool
This Hedge Fund Holdings Tool is being developed to provide insight which investment securities hedge funds are holding. This is done using publicly available 13F and other filings. All of this information is looking back in time and what hedge funds have disclosed as holding, by nature it is a historical look at holdings and these are not in any way a recommendation for or claim of support for any individual security, hedge fund manager or investing strategy.
Please check here next week for some further analysis on specific holdings of leading hedge funds.
Q1 2009
Q2 & Q3 2008
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admin | Monday, September 15th, 2008 | No Comments »
Fortis Investments
Fortis Investments & Hedge Fund Closures
While these closures might have come during a period when many people are questioning the future of hedge funds, they surely not the results of Fortis wanting to pull out of the hedge fund business because of the industry’s downfall. It looks like a specific case of bad performance and not enough talent to go around to market all of the firm’s products effectively. The end of hedge funds has been predicted at least 20 times since this HedgeFundBlogger.com was started.
The following piece on Psigma Investment 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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Fortis has closed three small hedge funds following its takeover of part of ABN Amro and merger of the Belgian and Dutch banks’ asset management businesses. Fortis Investments said it had shut down half of its stable of six hedge funds due to personnel changes, the need to switch staff to the enlarged long-only business and, in one case, poor performance. The closures were first reported by HFM Week.
The closures – two of which took place at the end of June, and the third at the end of last year – come amid widespread predictions that poor performance and withdrawals by investors will lead to a shrinkage of the industry after a decade-long boom.
Fortis said it planned to set up new funds as and when it spotted opportunities and staff, and would seed launches with its own money. The Fortis European long/short fund, at €120m ($167m) the largest of the three, is being shut after the decision to bring in the ABN European equity team, headed by Andrew King. Mr King did not want to run a hedge fund, Fortis said. The fund was down about 4 per cent so far this year when it was shut, about in line with the average equity hedge fund.
More……
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admin | Monday, September 8th, 2008 | No Comments »
Capital Campaign Fundraising
Capital Campaign Fundraising Best Practices
I grew up around capital campaign consulting and now working in hedge fund marketing and it amazes me how similar the two types of work are.
Both capital campaign fundraising and hedge fund marketing:
- Relies heavily on relationship cultivation
- Requires using the 80/20 rule to focus on the best prospects at hand
- Requires a multi-stage marketing/sales process to effectively move through the “marketing” campaign
- Demands an ability to sell the intangible. In one case you are selling the good feelings and community benefits of a large donation, in another the hopefully secure or proper management of your capital.
Some lessons that hedge fund marketers could probably learn from capital campaign fundraising consultants might be:
- Use internal champions to help ask for new investments. Using testimonials from a current investor or creating an environment which includes a few of your more supportive current investors with potential investors may be effective. Many times capital campaign consultants get volunteers from within the hospital or university they are raising money for to go out and help ask for gifts or in the case of hedge funds – investments.
- Stage your marketing campaign – Many capital campaign fundraising endeavors are managed a staged 3-4 step project helping the organization systematically develop close relationships with dozens of even hundreds of well qualified donors. Some hedge funds may take this same approach to marketing to a channel, such as family offices…but most that I have come in contact with do not. There are efficiencies in doing things in batches, so if your hedge fund marketing team consists of only 2-3 individuals it may help to try this approach.
- Market Research – Many development offices conduct thorough market research on their potential donors (investors). In the hedge fund marketing arena there is always a balance that must be struck between knowing who you are approaching for compliance and selling effectiveness reasons while not “wasting time” by spending hours researching a potential target investor. This is because many “targets” may not be searching for your strategy or may have minimum AUM requirements your fund does not meet and some research time could be wasted on these contacts. That said, many times no research is done on prospects in the hedge fund industry – and groups are simply cold called through directories, databases, and internal Sales CRM systems with no long of what the firm does besides their type of business.
Here is a site on capital campaign fundraising – Major Gifts Guru.
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admin | Friday, September 5th, 2008 | No Comments »
Emerging Markets
Emerging Markets – Investments
Emerging market investing started to take off when in the mid-1980s when the International Finance Corporation (IFC) set up the first mutual fund that invested solely in securities from emerging markets with a seed capital of around $50 million. Since 2002, assets managed by emerging market hedge funds have increased fourfold and in the first quarter of 2008, they managed approximately $110 billion, according to HFR.
Emerging market hedge funds are defined by the markets they operate in and not the strategies they follow. Thus, these funds are quite heterogeneous and adopt a variety of strategies such as equity long/short, event driven, global macro and fixed income arbitrage.
Emerging markets are defined quite broadly. Morgan Stanley describes an emerging market, as a country that is in the process of building a market-based economy. Others include ideas of large productivity gains from technological or political change. However, since the 1997-98 Asian financial crisis, the core characteristics of many emerging nations have changed fundamentally. Once, net importers of capital, emerging markets have now become net exporters of capital. Once heavily indebted, many emerging market governments have begun to reduce levels of external debt. These changes have contributed to the recent success and slightly lower volatility of many emerging market hedge funds. They have also resulted in the creation of entities such as sovereign wealth funds and have had a strong impact on international financial markets.
Emerging Markets Interview – Emerging Markets Research
Books Related to Emerging Markets
De Brouwer, Gordon. Hedge Funds in Emerging Markets. United Kingdom: Cambridge University Press, November, 2001.
- This book tries to understand the role hedge funds played in exacerbating the Asian Financial Crisis of 1997 and 1998. While this question may not be interesting to most market players, the book also contains several case studies of how the financial crisis unfolded. These give some insight into the strategies hedge funds deployed in Asia during this period. However, the book is not a fun read and if you are interested in hedge fund strategies rather than the market risk posed by hedge funds, you have to carefully sift through the book for information.
Lhabitant, Francoise-Serge. Handbook of Hedge Funds. West Sussex: John Wiley & Sons, Ltd., 2006.
- This is an excellent guide to the industry, with concise and informative descriptions on all of the major hedge fund strategies and primary methods to measure their risk and performance. Lhabitant also includes an overview of the legal environment of hedge funds and their organizational structure, while ending with a short guide to investing in them.
Emerging Market White Papers
Global Derivatives. Overview of Hedge Fund Strategies, November 2003.
Quick and dirty description of all major hedge fund strategies.
Odonnat, Ivan and Rahmouni, Imene. “Do Emerging Market Economies Still Constitute a Homogenous Asset Class?” Financial Stability Review, No. 9, Banque de France, December 2006
- This paper provides a good synopsis on how the current and capital accounts of emerging markets have changed since the 1990s and describes how the composition of emerging market debt holders has changed. It also argues that while investors show increased signs of differentiating between emerging economies when considering portfolio allocations, disruptions may still cause a contagion effect due to the narrowness of the emerging markets and their dependence on the decisions of non-resident investors.
Strömqvist, Maria. “Do Emerging Market Hedge Fund Mangers Lack Skills?” Stockholm School of Economics, October 2006.
- Strömqvist examines hedge fund returns from 1994 to 2004 and finds that emerging market hedge funds have underperformed non-emerging market hedge funds in terms of total and absolute return, while providing no diversification effects. The data is slightly outdated and includes the 1997-98 financial crisis, which significantly affects the results of the study. However, it provides an interesting statistics-based perspective on investing emerging market hedge funds.
Strömqvist, Maria. “Should You Invest in Emerging Market Hedge Funds?” Stockholm School of Economics, September 2007.
- In this more recent paper, Strömqvist uses a the same data set from 1994 to 2004 to find that hedge funds were able to generate risk-adjusted return in the latter part of the period under study. She also finds that there is some differentiation in returns at the fund level, with successful funds continuing to generate above-average returns. However, she also finds that this does not result in increased capital inflows.
Information Sources
Emerging Markets Monitor
- The Emerging Markets Monitor covers the latest events in emerging economies across fixed income, FX, commodity and equity asset classes, with short pieces that include analysis, forecasts and trade ideas.
Financial Crisis in Emerging Markets, NBER
- Run by the National Bureau of Economic Research, this project examines the causes of currency crises in emerging market economies. As such, it contains a large selection of white papers that may be helpful to people interested in learning more about the financial markets in emerging economies.
HFR Emerging Markets Industry Report
The Institute of International Finance
Created in 1983, in response to the international debt crisis, the Institute of International Finance Inc is a global association of financial institutions. It collects a variety of data related to emerging markets and also generates independent research on the subject. Subscription is available only through registered member institutions and is not open to individuals.
The Journal of Emerging Market Finance, Sage Publications
This journal contains scholarly articles that cover practical and theoretical issues related to emerging markets.
Networking Events
Terrapin hosts an annual emerging market hedge fund conference
Tracking Tools
Credit Suisse Tremont Hedge Fund Index
- CS/Tremont tracks provides registered users with historical data on the performance of variety of hedge fund strategies.
Short List of Emerging Market Hedge Funds
- Axiom Investment Management (Hong Kong) – emerging markets hedge fund focused on Asia.
- Farallon Capital Management
- Horseman Capital Management
- Marathon Asset Management
- Moon Capital Management
- Moore Capital Management – Moore Emerging Markets
- Sloane Robinson – SR Global Fund Emerging Markets, SR Vista Emerging Markets
- Thames River Capital (United Kingdom)
- Tudor Investment
Guest Post by Sharini Kulasinghe
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admin | Wednesday, September 3rd, 2008 | No Comments »
Atticus Capital
Atticus Capital Hedge Fund Notes
Record losses is not exactly what most hedge funds are seeking to be known for right now. Anyone keeping up with manager developments right now know that many managers are struggling. Some reports say 2008 is shaping up to be the hedge fund industry’s worst performance in 18 years. On some level this is needed, just as recently as last month many hedge funds are still touting their positive performance with barely mentioning their portfolio or business risk controls – over the long-term you must pay attention to more than a goal to return 16+% a year. I’m not saying Atticus is one of these firms, with their size they surely have many controls in place. In general though, I believe the industry needs a shakeout every 7-9 years.
The following piece on Atticus Capital 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.
Story #1: Atticus Closes Two Funds, Barakett Bids Farewell
Atticus Capital has shut down is reducing its operations by closing two of its funds. After receiving less than 5% of redemptions from investors, Timothy Barakett, the founder of Atticus Global, decided to shut down Atticus Global, Ltd. and Atticus Global, LP. Barakett founded Atticus with $6 million and expanding to roughly $20 billion in assets under management in 2007. He is returning $3 billion back to his investors, in a letter to his investors he explained his decision:
I have used the market’s recent strength to begin liquidating a significant amount of our holdings. We currently expect that the portfolio will be fully liquidated by September 30th and that we will be in a position to return approximately 95% of your capital in early October. The balance of investor capital will be returned after the final audit is completed, which should be later this year….
Read Story
Story #2:
Atticus Capital, the hedge fund manager co-chaired by Nathaniel Rothschild, will be reduced to bare bones after announcing plans to return $4 billion to investors.
Timothy Barakett, the 44-year-old Canadian who founded Atticus with $6 million in start-up cash in 1995, wrote to investors today to tell them that he would close two of his funds – Atticus Global, worth $3.4 billion, and $600 million Atticus Trading.
Just one fund, Atticus European, worth $1.1 billion and managed by Mr Barakett’s partner David Slager, will continue to operate.
Atticus’s downsizing is another sign that the era high-profile, aggressive hedge funds, that publicly berated companies’ management and flaunted their connections to the rich and famous, has ended.
At its height in 2007, Atticus was worth $20 billion but in the year to the end of July returned a negative 13.3 per cent, under-performing the widely-recognised Credit Suisse Tremont Hedge Fund Index, which showed a –9.3 per cent return over the same period.
Mr Barakett is best known in the UK for attempting to scupper Barclays’ $64 billion offer for ABN Amro, for which he argued Barclays’ was offering too much. Read more…
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Story #3:
Atticus Capital, one of New York’s most powerful hedge funds, has lost more than $5bn (€3.4bn) this year, as its record as one of the world’s top performing money managers was damaged by the credit crunch.
The firm’s two flagship funds fell by a quarter and almost a third by the end of August, marking among the biggest losses in dollar terms ever recorded by a hedge fund. This was as a result of its strategy of taking large, concentrated bets and using few “short” positions betting on a fall in prices to lower risk. Atticus had $14bn under management at the end of July, according to letters to investors, down from a peak of more than $20bn last year.
The losses reflect widespread difficulties for Event Driven Hedge Funds, which aim to buy cheap stocks in the expectation of a catalyst that will boost their value. Atticus, co-chaired by Nathaniel Rothschild, son of Lord Jacob Rothschild, has been closely involved in several of the highest-profile deals of recent years, helping scuttle Deutsche Börse’s bid for the London Stock Exchange and Barclays’ bid for ABN Amro, among other activism.
The Event Driven Hedge Funds Sector – which includes activist investors – was among the most popular with hedge fund investors last year but has seen a race for the exit as investors switch to strategies seen as more likely to prosper during a bear market. Read more…
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Story #4:
According to a media report, Atticus Capital, one of New York’s most powerful activist hedge fund the largest investor in Deutsche Börse, has put its entire stake in the German exchange into a special limited vehicle to block redemptions by clients and boost its negotiating strength with management.
According to the report published by the FT.com, the stake of just over 11 per cent held through shares and derivatives, made up almost a fifth of Atticus’s funds under management at the start of the year but has since halved in value.
According to the report, the losses have caused concern among some Atticus clients, who have expressed concern about such a liquid stock being put into a “side pocket.” The report says that Atticus argues that it wants to be able to represent themselves as solid investors in the German exchange, but the decision has not gone down to well with some of the hedge fund’s clients. Read more…
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Story Update #4:
NEW YORK (Reuters) – Hedge fund company Atticus Capital denied market rumors it was liquidating its positions and closing down and said it had a large net capital position and was looking for investment opportunities, the Wall Street Journal reported on Thursday.
Atticus’s two main hedge funds have been hit with losses of between 25 percent and 32 percent this year through August, but investors are largely sticking with it, according to unnamed investors cited by the Journal. Read more…
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admin | Wednesday, September 3rd, 2008 | No Comments »
Single Family Office
Single Family Offices in Dubai
I just found this article about how Dubai’s DIFC is positioning itself as a center for single family offices. They seem to be very skilled at positioning themselves for new money to come in so I’m sure they will be successful in this area. The country is trying to build many legs to stand on – as they take advantage of their oil and tourism based wealth. Here is the article…
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New regulations provide platform for setting up family holding companies at DIFC
The Dubai International Financial Centre (DIFC) today announced new regulations to encourage family businesses to establish Single Family Offices (SFOs) at DIFC.
Created in consultation with the DFSA, the DIFC Single Family Office (SFO) Regulations specifically address the needs of family-run institutions and create a platform for wealthy families to set up holding companies at DIFC to manage private family wealth and family structures anywhere in the world.
HE Dr. Omar Bin Sulaiman, Governor of the DIFC said: “In recent times, family offices have become highly significant on the global economic landscape. In the Middle East, where family-run businesses make up over 75 per cent of firms and have total assets in excess of US$1 trillion, the need for a specialised legal and regulatory framework is especially acute.”
“In contrast to conventional financial institutions, Single Family Offices (SFOs) have no direct public liability as all their shareholders are bloodline descendants of a common ancestor. As such, their regulatory requirements differ significantly. By establishing the new Regulations, DIFC is once again reaffirming its commitment to family businesses and the development of DIFC into a hub for local, regional and international family offices.”
The enactment of the Regulations follows a period of consultation where companies were invited to comment on the proposed Regulations. Having received highly positive feedback, the new Regulations will come into effect on 2 September 2008.
Central to the new Regulations are changes to the DIFC Single Family Offices (SFO) platform and consequential amendments to other DIFC and DFSA regulations such as the DFSA’s General Module and Glossary Module.
The Regulations offer distinct benefits to Single Family Offices (SFOs) as they exclude them from many of the regulatory constraints placed on conventional organisations located at DIFC. Read more…
- Richard
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admin | Wednesday, September 3rd, 2008 | No Comments »
Active Management
Active Investment Management
Active management is a strategy in which an investment manager selects investments that he believes will outperform the market index. Active management implies that the investment manager uses discretion to choose investments that will perform better than the index, and thus the fund will have high returns. A passive manager, on the other hand, will make investments that follow the market index.
Read dozens of additional articles like this within the guide to Hedge Fund Definitions and Terms.
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admin | Tuesday, September 2nd, 2008 | No Comments »
Private Banking and Wealth Management
Private Banking and Wealth Management Trends
Below is a short excerpt from a recent article I wrote for Investopedia on family offices, private banking and wealth management trends:
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Family offices are private wealth management advisory firms that serve ultra-high-net-worth clients. There are more than 3,500 family offices based in the United States. By offering a complete outsourced solution to managing finances and investments, including budgeting, insurance, charitable giving, family-owned business, and wealth transfer and tax services, these offices set themselves apart from traditional wealth management firms. Although they vary in their level of service, most typically invest heavily in consultants, databases and analytical tools that help them conduct due diligence on money managers or optimize a portfolio of investments for tax purposes.
In this article, we’ll review the top three trends affecting family offices, including the rapid growth of the family office industry, the types of family office services provided, and the increasingly sophisticated use of hedge funds and alternative investments by both single and multifamily offices.
Family Office Facts
There are two types of family offices: single-family offices (SFOs) and multifamily offices (MFOs). Single family offices serve one wealthy family, while multifamily offices operate more like traditional private wealth management practices with multiple clients. Multifamily offices are much more common because they can spread heavy investments in technology and consultants among several high-net-worth clients instead of a single individual or family.
Tackling the Trends
Prominent trends fueling the growth of family offices include:
- There is a growing number of high-net-worth and ultra-high-net-worth classes around the world. In most developed nations, the wealthy are accumulating assets more rapidly than the middle class. At the same time, many emerging economies are thriving, with annual growth rates of 4-8%. Many experts have noted that by 2015-2020, China’s upper class will be larger than America’s middle class. Growth in countries such as China, Brazil, India and Russia will ensure that the family office format of wealth management services continues to grow in popularity over the next five to seven years. (To learn more about emerging economies, see What Is An Emerging Market Economy? and Demographic Trends And The Implications For Investment.)
- Profitability is a growing challenge for family offices. As populations amass greater wealth, large wealth management firms are competing on a cost basis and moving a larger portion of their core services online. While the average person might appreciate saving hundreds or even thousands of dollars in fees each year, many affluent individuals would much rather spend $20,000 to $100,000 a year to ensure that experienced professionals are managing their investments and taxes to fit their specific financial goals and risk tolerances. Read more…
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Prime Brokerage + Administration
Prime Brokerage & Hedge Fund Administration
More prime brokerage firms are adding on administration services to help attract and retain clients. I wasn’t sure how widespread of a trend this was but saw this mentioned within an article yesterday as noted below. I would be interested in discussing this further with hedge fund managers reading this article – if you have some insight – Richard@HedgeFundGroup.org.
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In recent years, the custodian banks that have acquired hedge fund administrators have sought to adjust client lists in favor of larger and more profitable hedge fund and fund of funds groups interested in a broader array of services. At the same time, prime brokers have recognized that providing administration services can help attract and retain clients and counter the shift among hedge fund managers towards multiple prime brokerage.
“It would be surprising if the hedge fund administration industry continues to support such a large number of providers, and there is now evidence that a renewed round of consolidation is in the offing,” says Dominic Hobson. “However, the appetite to sell may be offset as well as encouraged by the depressed prices available. In any event, the buyers are likely to be different from the banks which dominated the acquisition process in the early years of this century.” Read more…
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Prime Brokerage + Administration
Prime Brokerage & Hedge Fund Administration
More prime brokerage firms are adding on administration services to help attract and retain clients. I wasn’t sure how widespread of a trend this was but saw this mentioned within an article yesterday as noted below.
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In recent years, the custodian banks that have acquired hedge fund administrators have sought to adjust client lists in favor of larger and more profitable hedge fund and fund of funds groups interested in a broader array of services. At the same time, prime brokers have recognized that providing administration services can help attract and retain clients and counter the shift among hedge fund managers towards multiple prime brokerage.
“It would be surprising if the hedge fund administration industry continues to support such a large number of providers, and there is now evidence that a renewed round of consolidation is in the offing,” says Dominic Hobson. “However, the appetite to sell may be offset as well as encouraged by the depressed prices available. In any event, the buyers are likely to be different from the banks which dominated the acquisition process in the early years of this century.” Read more…
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admin | Tuesday, September 2nd, 2008 | No Comments »
Asian Prime Broker
Asian Prime Broker Growth Trend
Quick Link: List of Hedge Fund Prime Brokers
Here is an interesting article about the growth of prime brokerage services in Asia. I didn’t know that growth was so strong for these groups right now…
Citigroup expects the amount of assets serviced by its Asia Pacific prime brokerage arm to grow by more than 30 percent annually over the next three to five years, as more global hedge funds set up shop in the region.
Even with tumbling stock markets hammering Asia’s hedge fund industry, many large international managers are doing more business in the region, drawn by its long-term potential, said Hannah Goodwin, head of Prime Finance, Asia Pacific for the U.S. banking giant.
“We’re looking at a 30 to 50 percent growth every year,” she told Reuters in an interview. “That’s how aggressive we want to be with this business and how well we think this business is going to develop for us.” Read more…
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admin | Tuesday, September 2nd, 2008 | No Comments »
Asian Prime Broker
Asian Prime Broker Growth Trend
Here is an interesting article about the growth of prime brokerage services in Asia. I didn’t know that growth was so strong for these groups right now…
Citigroup expects the amount of assets serviced by its Asia Pacific prime brokerage arm to grow by more than 30 percent annually over the next three to five years, as more global hedge funds set up shop in the region.
Even with tumbling stock markets hammering Asia’s hedge fund industry, many large international managers are doing more business in the region, drawn by its long-term potential, said Hannah Goodwin, head of Prime Finance, Asia Pacific for the U.S. banking giant.
“We’re looking at a 30 to 50 percent growth every year,” she told Reuters in an interview. “That’s how aggressive we want to be with this business and how well we think this business is going to develop for us.” Read more…
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admin | Monday, September 1st, 2008 | No Comments »
FIN 48
FIN 48 + Implementation & Disclosures
A growing chorus of hedge fund and private equity groups has asked FASB for an exemption from FIN 48, a FASB interpretation of a standard on accounting for income taxes. In a letter to FASB, the Managed Funds Association said that the sophisticated investors that invest in hedge funds do not need the enhanced disclosures that FIN 48 was designed to provide. In its letter, the Private Company Financial Reporting Committee stated that private company financial statement users find the accounting matters and disclosures encompassed by FIN 48 to be largely irrelevant to their decision making. The committee’s also noted that FASB and the IASB are working on a convergence project on accounting for income taxes and that this may significantly affect FIN 48. Thus, if FASB is unwilling to grant hedge funds an exemption from FIN 48, the private fund groups ask that the Board at least postpone the effective date of FIN 48 pending completion of the convergence project.
FIN 48 was adopted to provide for increased relevance and comparability in financial reporting of income taxes and to provide enhanced disclosures of information about the uncertainty in income tax assets and liabilities. The genesis of FIN 48 is FASB Statement No. 109, which established financial accountants and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. It requires an asset and liability approach to financial accounting and reporting for income taxes
While acknowledging the need for FIN 48-type disclosures in the case of companies offering securities to the investing public, the MFA pointed out that the institutions and individuals that invest in private investment funds do not fall within this category. Hedge fund investors typically conduct extensive due diligence assisted by their own lawyers, accountants and other advisers, noted the MFA, and they often request, and receive, additional information, including tax information, if they believe that such information is material to their investment decision.
Moreover, private investment funds with U.S. investors are treated as partnerships for Federal income tax purposes. As a result, a private investment fund is not itself a taxpayer. It files an annual information return with the IRS, said the MFA, and each investor in the fund pays tax on its pro-rata share of the income of the fund. Thus, while fund personnel have historically focused substantive attention on issues surrounding the proper allocation of taxable items in a partnership environment, explained the MFA, it has been unnecessary for them to devote substantial time to traditional FAS 109 accruals.
For this reason, private investment funds are incurring significant costs in preparing to comply with, and complying with, FIN 48. Even more, many private investment funds make investments outside the United States, said the MFA, and FIN 48 will require them to make an additional layer of judgments concerning uncertainties in the tax laws of other countries.
Finally, the MFA noted that hedge funds need to determine NAV with reasonable frequency, both to establish a price for investments and redemptions, and also for other purposes. As a result of the fiduciary nature of the NAV calculation, and economic fairness to investors that subscribe and redeem at that amount, the MFA believes there are substantial questions whether FIN 48 analyses should be reflected in the NAV of a private investment fund.
The MFA is aware that SEC has concluded that FIN 48 analyses should be reflected in NAV in order to give investors more disclosure. Significantly, however, the SEC said its guidance was limited to assessing tax positions reflected in NAV calculations subject to the Investment Company Act and should not be applied by analogy in other cases.
The MFA believes that there are differences between public and private investment companies that warrant a different conclusion with respect to private investment funds. The MFA stands ready to make a more comprehensive submission on this point if the FASB believes that it would be of assistance.
Guest post by Jim Hamilton
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Sustainable Investing
Sustainable Investing & Hedge Funds
Socially responsible investing or SRI as it is sometimes called is set to be much more than a blip on the radar screen of high net worth and institutional investors alike. Just earlier this week there was a new green hedge fund launched.
Another article on this appeared in the FT this week. Here’s a quick excerpt:
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Wealthy people increasingly want to invest their money without harming the environment, possibly heralding the mainstream take-up of such investment principles.
“Even those who aren’t actually doing it are talking about it,” said Matt Christensen, executive director of the European Social Investment Forum, which has surveyed both rich individuals and the wealth managers who look after their money about the topic of sustainability.
Nearly three-quarters of respondents have seen an increase in interest in sustainable investing in the last 12 months, according to the Eurosif survey, which also forecasts more than €1,000bn (£805bn, $1,473bn) of rich people’s money will be in sustainable investments by 2012. This represents a near doubling of the absolute levels in 2007, and a proportionate increase from 8 per cent to 12 per cent of rich people’s wealth.
New money, either from people who have recently become wealthy, or new flows from established investors, is driving the flows into sustainable investment strategies or instruments.
“Successful entrepreneurs of today are not the industrialists of yesterday,” said one survey respondent. “They are younger and more interested in sustainable investments.”
Historically, rich people have led the way in investment trends, taking up hedge funds and private equity before these asset classes became generally popular. Read more…
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Gottex Hedge Fund
Gottex Fund Management – William Landes
Products as the one below are interesting to watch grow, or not as they try to sometimes sell products to groups which traditionally have build their own portfolio’s in-house with the aide of consultants.
The following piece on Gottex Fund 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: (5.10.09) Swiss fund of hedge funds shop Gottex Fund Management has taken a controlling stake in U.S-based firm SJC Capital Partners.
The U.S. asset management firm, which was founded last year by Stephen Czech, specializes in provided secured loans to middle market companies that are unable to obtain loans from traditional sources due to the credit crisis.
Gottex is banking on the direct lending market, which its expects to continue to be “a very attractive investment space in the years to come as traditional financing sources for the middle market continue to contract or exit this market segment.” source
Resource #2: Swiss funds-of-funds firm Gottex Fund Management is launching a fund that will emulate the investment principles of U.S. “super endowments.” The new fund will emulate the investment principles of successful U.S. university endowment funds, such as Harvard and Princeton. It will allocate about 65% to alternative investments.
The alternative part of the portfolio will cut across all asset classes: hedge funds, private equity, commodities, long-only equity, fixed income, real estate and other real assets. Harvard Management, long the model for university endowment funds currently with about $35 billion in assets, increased more than 20% year over year in 2007.
William Landes is helming the new fund. Landes joined Gottex from Boston-based 2100 Capital, his hedge fund specialty firm that Old Mutual Asset Management bought in 2005. Before that Landes was a money manager at Putnam Investments, which helped incubate 2100 Capital. Landes’ experience with broad-based funds was part of what led him to Gottex, he told HedgeFund.net.
“This is something I’ve been doing for over 15 years,” Landes said. “So when Joe Gottschalk [CEO of Gottex] and I began talking about the possibility of me coming over, we started talking about ways to provide sophisticated investment for high net worth investors.” In preparation for the new fund launch, Landes said his team determined that a 65% exposure to alternative investments combined with traditional investments did the best in the long term. Read more…
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Asset Management Finance
Asset Management Finance (AMF) Corporation
The following piece on Asset Management Finance Corp 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.
This story is about how Credit Suisse purchasing Asset Management Finance Corp. which provides funding to early stage hedge funds in exchange for revenue sharing on future fund earnings. It will be interesting to see if Credit Suisse significantly alters AMF’s due diligence process while looking at funds, or presses them to fund Credit Suisse associated groups…
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Credit Suisse Group AG, Switzerland’s second-biggest bank, bought New York-based Asset Management Finance Corp. for $384 million to provide financing to investment firms.
Credit Suisse paid stock for more than 80 percent of the firm, founded by former Putnam Investments chief Norton Reamer in 2003, from a unit of National Bank of Canada. Reamer, 72, who also ran Boston-based United Asset Management Corp., will stay on, the bank said today in a statement.
AMF, which provides capital to money managers including hedge funds in exchange for a slice of revenue, will benefit from Credit Suisse’s global reach, said Brian Finn, chairman of the Zurich-based company’s alternative-asset business. The unit, which manages $167 billion, holds a minority stake in hedge-fund firm Ospraie Mangement LLC and has started joint investing ventures with Abu Dhabi and General Electric Co.
AMF “is a platform with a leadership team and an investment approach in which we see enormous growth opportunities,” Finn said in an interview. Read more…
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The Spanish River Group
Spanish River Group – Hedge Fund Profile
Another example of how even in a tough market when many funds are closing there are others launching hedge funds who come from large hedge fund shops with experience in the industry. Many times the launch of the hedge fund has been in the making for 1-2.5 years before doors are fully opened so current market conditions don’t have a large effect on those taking a serious approach to the business.
The following piece on The Spanish River 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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Veteran hedge fund professional Stephen Hansen has gone into business for himself. Hansen, who has worked for fund-of-fund Common Sense Investment Management, Fullerton Capital and Drakes Landing, started The Spanish River Group in May.
Based in Florida, The Spanish River Group or TSRG is a long-short equity strategy with a bottom-up approach to stock picking. The hedge fund has no sector bias. Hansen characterized TRSG as using value and momentum investing.
TSRG launched with $900,000 in capital and has a 1.5% management fee and a 20% performance fee as well as a $250,000 minimum investment. Piedmont is the administrator. Harb, Levy & Weiland is the auditors. North Point Trading is the prime broker. Hansen said he wanted TRSG to amass $1 million in its first year. Read more…
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Eurasia Capital Management
Eurasia Capital Management – Hedge Fund Press Bio
Below is a press bio on Eurasia, they are the first group to offer a Mongolia-centric hedge fund product. I expect these types of announcements to greatly increase as the barriers to trading in countries such as this drop, hedge funds look for a distinct advantage and traditional “emerging” countries such as China and Brazil fully emerge.
The following piece on Eurasia 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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Eurasia Capital Management plans to increase the world’s first Mongolia-focused fund fivefold to $100 million to tap economic growth fueled by the nation’s mining industry.
Eurasia’s hedge funds, which have about $200 million of investments across Central Asia, also expect to sell shares on London’s Alternative Investment Market or Deutsche Boerse AG by next June, said Alisher Djumanov, managing partner of the Singapore-based firm. Proceeds would be used to start private- equity and property funds, and expand in Central Asia, he said.
Mining in Mongolia, which has reserves of coal, copper, gold and uranium, will spur “double-digit” economic growth rates over the next 10 years as commodity prices remain high, Djumanov said in an interview. Mining accounted for about two- thirds of Mongolia’s exports last year, and foreign direct investment in the country rose more than 33 percent.
“The spillover effect from the mining sector will be significant,” Djumanov, 35, said. “We’re investing in companies that are expected to grow significantly on the back of this strong economic growth.” Read more…
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