“Most people and most businesses are devoted to doing the right thing. They are trying to deal with their customers, their vendors, their community, the environment, their investors and lenders all in a fair and ethical manner. If that’s true how come all we ever hear about are the Enrons and Adelphias? And how come TV shows, movies and literature always depict business as a dog-eat-dog world?

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Tags: business, money, ethical, ethics, making

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

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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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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System Absolute Return

SAR Launches Volatility FoFs

The following piece on System Absolute Return 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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Zurich, Switzerland-based System Absolute Return has launched a segregated portfolio with exposure to two volatility arbitrage strategies. The SAR Four Seasons SP will invest in two hedge funds: One manager has applied a split/strike conversion strategy and the other has applied a short strangle strategy , protected via a long position in the volatility index, according to the firm. The two strategies are managed separately by a U.S.-registered investment advisor and by a broker/dealer, respectively.

“With one underlying fund closed to new investments and the other quickly approaching that point, SAR’s feeder not only provides access, but also 1:1 leverage on these investments,” said the firm. “The underlying hedge fund managers are truly legends in their fields and this SP provides a unique opportunity to gain exposure to their strategies.” Read more…

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Financial Advisor Marketing

Financial Advisor Marketing Differences Q & A

Today I received this question from a New York based hedge fund marketer.

Question:When marketing to financial advisors for your hedge fund, what necessary steps do you need to take dealing with these guys? Is it any different that dealing with family offices?

Answer: Marketing to financial advisors is much different than marketing to single and multi-family offices. Here are the main differences between the two that I have noticed:

• Family ffices have more established due diligence procedures, often involving consultants or internal analysts which do nothing but look at hedge funds or alternative investment products.
• Financial advisors have lower minimum asset levels for what they will consider investing. 90% of family offices only seriously consider investing in hedge funds with at least $75M-$100M, and many require $250-$300M or even $1B in assets under management.
• Family offices are more tight lipped. It will take more effort to develop a relationship, meet in person and get clear feedback on why or why a hedge fund is a good fit for what they are looking for.
• Family offices are harder to identify in the first place. Financial advisors are easier to find, there are more of them and they advertise more openly. Some family offices advertise but many stay below the radar and some purposefully don’t even have a website.
• While family offices service to high net worth investors almost exclusively many financial advisors work with a broad spectrum of client types – this might require more caution by them and your fund in marketing products to them. It might also mean sorting through more financial advisors to find one with several HNW clients.
• In my experience financial advisors seem much more sensitive and motivated by how they will earn a commission or income from the transaction whereas many family offices charge rich enough fees that this is less of an issue.
• While some financial advisors may take 16-24 months to really get “on board” with a relevant hedge fund manager, understand your investment process and possibly invest most will come to terms a bit before then. Family offices on the other hand often take 18-24 months just to complete their due diligence and committee meetings, it is a very long sales process.
• Both family offices and financial advisors require genuine relationship-building efforts and tenacity
• From a legal standpoint there may be other precautions your fund should take but I am not a legal expert so I can’t provide any guidance within that space.

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Socially Responsible Investing

Guide to Socially Responsible Investing

Socially responsible (SR) hedge funds integrate social and environmental criteria into their investment decision making process. Within this general framework socially responsible hedge funds follow a variety of investment strategies such as equity long/short, merger arbitrage and fixed income arbitrage.

The approach of socially responsible investors (SRI) generally fall under three primary categories: screening, community investing and shareholder activism. The screening approach involves both avoiding companies that do not uphold social and environmental standards (negative screens) and investing only in companies that uphold strict social and environmental standards (positive screens). Community investing targets companies and industries that have explicit social and/or environmental objectives. Carbon trading, renewable energy credit trading, ethanol trading and emissions trading are popular strategies, as are socially motivated industries like alternative emerging, microfinance and public healthcare. On the other hand, socially responsible shareholder activists leverage their role as shareholders to motivate change in social and/or environmental impact of the company.

Over the last few years, SRI has emerging from a niche market to become a potentially important player in the investment space. According to GreenMoney Journal’s 2007 report on SRI trends in the US, total assets under management of SR funds grew 13% between 2005 and 2007, a significant chunk of which was driven by the alternative investment space. All indicators point to a continued increase. Most of this is driven by investor demand, as more and more investors align their investment portfolios with their personal values and try to motivate social and environmental change through their investment strategy. However, a small and growing movement in the SRI space has been arguing that an analysis of a company’s environmental, social and governance (ESG) performance provides an effective measure of the management’s strength and therefore the company’s long-term financial performance.

White papers and reports related to socially responsible investing

• Global Change Associates has several excellent reports on hedge fund activity and trading strategies in energy and ‘green’ sectors.
• Goldman Sachs, “Introducing GS Sustain.” June 2007.In this report Goldman Sachs describes its proprietary framework that incorporates ESG analysis into long-term analysis of industry themes and cash returns valuation to pick stock and emerging industries. This PowerPoint presentation summarizes the performance of GS Sustain.
• Lydenber, Steven D. “Envisioning Socially Responsible Investing: A Model for 2006” Domini Social Investments, USA, Autumn 2002. Written in 2002, this article lays out what major initiatives must take place in the corporate, institutional and financial communities for SRI to become an important player in social, economic and political debates.
• Nocera, Joe. “The trouble with socially responsible investing.” International Herald Tribunal, April 2007.Nocera looks at the difficulties involved in evaluating a company’s social and environmental standards. In doing so, he also questions the value of relying on independent agencies like KLD Research to decide which companies socially responsible investors should consider and avoid.
• Standard and Poor’s, “S&P ESG India Index: Index Methodology.” January 2008. In this report S&P briefly outlines the eligibility criteria, index construction and index maintenance it uses in selecting companies for its S&P ESG India Index.
• Woll, Lisa. “The 2007 Report on Socially Responsible Investing Trends in the United States.” Green Money Journal, Summer 2008. This report is published every two years, and synthesizes the major trends in the SRI industry. In the process, it also provides a very good introduction to SRI.
• Yegnasubramanian, Anu. “Environmental, Social and Governance: Moving to Mainstream Investing?” Business for Social Responsibility, June 2008. Several major financial institutions have been developing analytical frameworks that include ESG criteria as part of their fundamental financial analysis results in better investment decisions. This report looks at the challenges behind the mainstream adoption of ESG criteria into investment decisions.

Information Sources

Corporate Social Responsibility Website is a news source covering corporate social responsibility. It is a good place to start researching the social and environmental profile of a company

Green Money Journal is a tri-annual journal covering major trends and events in SRI

KLD Research & Analytics is one of the primary independent research firms that cater to SRI managers. As such, it provides up-to-date news, independent research reports and benchmark indexes for the industry.

Centre for Responsible Business, University of California Berkley, Haas School of Business runs the Markowitz Research Program which examines the foundations and trends in SRI. As part of the effort, Lloyd Kurtz, Senior Portfolio Manager of Nelson Capital Management writes a blog that provides commentary on major SRI themes and also has a collection of quantitative studies related to SRI. The centre also runs the Markowitz Prize for Socially Responsible Investing, the only award that recognizes quantitative research in the field.

Social Investment Forum is a membership association for socially responsible investors and related organizations. It hosts an annual conference for members and puts together research related to SRI that ranges from basic definitions, to industry reports.

SRI-advicor.com is a good tool for socially responsible money managers with discussions on SRI strategy and interviews with prominent market players. This website is directed primarily towards traditional institutional investors.

SRI World Group is an up-to-date news source on issues and events related to social responsible investing as well as companies’ social and environmental profile. It also has a database of major companies’ social responsibility reports.

Guest post by Sharini Kulasinghe

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Hedge Fund Paralegal

Hedge Fund Paralegal Position Open

Just a quick note to alert you to a new job listing within the Compliance & Legal Hedge Fund jobs Category.

A hedge fund in Minnesota is looking to hire a paralegal this quarter. For more information please see the job listing page here: Legal & Compliance Jobs

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Selling Tip

Pain Free Hedge Fund Selling Tip

Here is a short video on pain free selling. If you have read a lot of marketing and sales books many will recommend that you find your customer’s pain. I agree with Jeffrey Gitomer though that in the hedge fund world you should build marketing efforts based on relationships, positive solutions and goals. Here’s a clip on this idea:

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

- Richard

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Private Equity Funds

Private Equity Funds vs. Hedge Funds

I just found an interesting PowerPoint presentation describing the different types of private equity funds and hedge funds available today. This is pretty high level but within one presentation it covers much of both industries relatively well.

Here is a direct link to the PowerPoint.

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Prime Broker Survey

Prime Broker Survey Results

A new survey shows that more than one-third of hedge fund and CTA managers are dissatisfied with their prime brokers. The most notable dissatisfaction is with the prime brokers’ personal service. In 2007 80% of funds rated the personal service of their prime brokers as either “good” or “excellent”, this year only 63% gave their prime brokers high marks. This may be a result of the liquidity crisis, which 16% of the managers said negatively effected the relationship with their prime broker.

The survey also shows that many funds are happy with the cost of their prime brokers, with only 7% responding “poor”. However, a considerable 38% of managers rating their prime brokers as “poor” performers of capital introduction. Funds who consider themselves technologically advanced are the most satisfied with their prime brokers.

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Germany Hedge Funds

Germany Hedge Fund Guide

Here is a short collection of articles on the hedge fund industry in Germany. 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.

• Germany to Step Up Hedge Fund Scrutiny. As a plan for German governemnt to place a greater scrutiny on country’s hedge fund investment, Barbara Hendricks, the deputy finance minister, said that Germany would force the funds to declare stakes in companies when they rise to three percent, comparing to the current threshold of 5% as in most European Union states.
• G8 HostGermany Fails to Convince on Hedge Fund Issue (8/06/2007). Germany had put hedge funds on top of the agenda of its year-long G8 presidency given its concerns that rapid growth in the increasingly powerful sector could destabilize the entire global financial system. But the world’s richest nations — Britain, Canada, France, Germany, Italy, Japan, the United States and Russia — have so far spectacularly failed to find a common line on the issue.
• Hedge Fund Opportunities in Germany: Practical Guidance Q&A. With the new German Investment Act and Investment Tax Act in force since January 1, 2004, new opportunities to access the German hedge fund market from abroad have opened up. The objective of this paper is to give practical, hands-on guidance to foreign hedge fund managers who are interested in targeting the growing German market.
• This advisory article briefly explains the taxation issues in Germany’s hedge fund industry for both fund managers and investors. The topics include the various tax structure, requirement and regulations.
• This special report (Aug. 2006) features several articles provide some recent development and oveview of German hedge industry and some decription of it legislatory structure and law regulations. :

German Market Growth Benefits from Master KAG Structure
An interview with Christian Benigni, one of the top three European hedge fund managers with approxiamtely USD 14 billion dollars under management, shared with readers his views on the propects and the potential future development of the German Hedge Fund industry.

Delivering Tax Transparency
When the new legislation governing alternative investment funds came into force in Germany in 2004. HSBC’s Alternative Fund Services (AFS) took a two-fold approach to capitalise on the development of the market. On one hand, in partnership with its software provider, Advent Geneva, and with advice from PricewaterhouseCoopers, AFS launched a project to deliver tax transparency to their clients to enable them to distribute their funds in Germany.

The Evolution of Prime Brokerage in Germany
Since the introduction of the 2004 German Investment Act, there has been debate on the potential growth of the local hedge fund market, and on possible ‘local’ prime brokerage solutions. However, as well as domestic hedge funds, the legislation deals also with another important area: the regulation and distribution of ‘foreign’ (non-German) hedge funds. Furthermore, the related Investment Tax Act enables local investors to obtain favorable tax treatment on investments in foreign funds, including hedge funds.

New ETFs Improve index Tracking and Reducing Trading Costs
Exchange-traded funds allow investors to track the performance of specific market segments more efficiently and reduce costs, helping institutions to create more efficient portfolios for use in core-satellite strategies. A new category of innovative ETFs recently introduced by Indexchange takes advantage of the European Union’s Ucits III directive to mirror the underlying index even more accurately while reducing trading costs.

Institutional Market Pised for Take-off
The change of the law in 2004 allowed hedge funds and funds of hedge funds to be launched under German regulations for the first time. Under the German rules, a Master KAG – service company for hedge funds – can take charge not only of the administration of a fund but its launch, registration and ongoing reporting, leaving the fund manager to focus on the investment management, marketing and the distribution.

Derivatives Take Larger Role with Hedge Funds
Surging flows of capital into hedge funds over the past few years have aroused fears that overcrowding in popular strategies will drive returns down and reduce the appeal of alternative investment approaches. However, the growth of sophisticated investment techniques involving the use of exchangetraded derivatives, with their high levels of liquidity and transparency, is offering managers and investors new opportunities to achieve higher returns, resulting in increased usage of futures and options worldwide.

Hedge Funds Liberalisation Starts to Bear Fruit
When Germany liberalised its rules governing hedge funds and taxation of their income at the beginning of 2004 the initiative was hailed in some quarters as a new dawn for the sector. If Germany, with its tradition of conservatism in investment choices and reputation for pernickety rule-making, could embrace hedge funds and funds of hedge funds, the argument went, the rest of Europe and other markets around the world would surely soon be following suit.

• Hedge Fund Opportunities in Germany. With a new German Investment Act and Investment Tax Act in force since January 1, 2004, new business opportunities have opened up in the German hedge fund sector for foreign providers as well as those onshore. The focus of this artice is on the distribution of foreign hedge funds in Germany and with more detailed information on the provisions of the recent passed Investment Modernization Act
• Introduction and Regulation of Hedge Funds in Germany. On January 1, 2004 the German Investment Act and the German Investment Tax Act were enacted as the major parts of the investment Modernization Act. The focus of this article is to analyze the effect of these new tax provision and also some of the regulatory concerns.
• Hedge Funds and Retail Business: Comparing German, Italian, Swedish and English Law. The aim of this work is to compare the German, Italian, Swedish and English law as to see the principal policies and regulatory cornerstones that will lead us to understand and comprehend the way in which Hedge Funds and their relationship with retail investors is developing.
• This advisory article briefly describes the regulatory structure of Germany’s hedge fund industry; topics include authorization requirement and process of setting up the fund, capital requirements, and marketing restrictions.
• German Hedge Fund Legislation: Modernized but still old-fashioned. This report analyzes the legal framework of the newly passed new German Investment Act and its impacts on the current system. This analysis is conducted from three aspects: past (comparison to old laws), present (its current state), and future (need an up-to-date regulation?).

Conferences & Seminars:

• Pension Fund Investment World Germany 2008. 9/20/2008 – 9/22/2008, Germany – Frankfurt.
• 4th Annual European Conference. A full day of plenary, breakouts and roundtables with leading speakers from venture philanthropy, private equity community, foundations and professional service firms. 9/23/2008, Germany – Frankfurt.

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Asia Hedge Funds

Asia Hedge Fund Guide

Here is a short collection of articles on the hedge fund industry in Asia. 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.

• Great, in dept overview of hedge funds in Asia.
• Top 25 Hedge Fund performers of Asia
• Hedge Funds are by reputation a risky and esoteric investment category that ordinary investors had best avoid. But don’t repeat that mantra in Asia. From Tokyo to Singapore, hedge funds are as hot as Thai chili peppers.
• Another great, in dept overview of hedge funds in Asia.
• In addition to this guide on Asia please see our other guides: China Hedge Fund Guide, Japan Hedge Fund Guide, Hong Kong Hedge Fund Guide, Singapore Hedge Fund guide
• Citigroup expects to see double-digit growth in assets serviced by its recently expanded Asia-Pacific prime brokerage arm, as it seeks more business with global hedge funds setting up in the region. Even with tumbling stock markets impairing the performance of most Asia-focused hedge funds, many well-resourced overseas managers have stepped up their focus on the region.
• Another excellent overview of the Asian hedge fund industry
• The Asian hedge fund industry is coming of age, with funds having had a stellar year in 2003; the Eurekahedge Asian hedge fund index was up by 27% and assets under management rose about 75%. From inception in the late 1980s, growth was relatively pedestrian for most of the first decade. The late 1990s saw a marked change with a rapid acceleration of growth in the number of funds and assets, albeit from a low base.
• The Hedge Fund Association of Asia is a not-for-profit international association and is the Asia chapter of the Hedge Fund Association. Membership is on an invitation-basis.
• Hedge Funds World Asia 2008 Conference taking place at the Hong Kong Convention & Exhibition Center
• Asia’s hedge fund industry in numbers
• Asia-focused hedge funds have taken a beating this year and investors are shying away from managers who not too long ago were seeing double-digit returns. Funds investing in India and China produced the worst performance of any specific hedge fund classification after leading all hedge funds for much of 2007, according to HedgeFund.net.
• Asian Hedge Funds: There’s no substitute for local knowledge
• Asian hedge fund managers will very likely close down or be bought out in growing numbers this year in a painful bout of consolidation triggered by the financial market turmoil. Combined with tougher barriers for potential start-ups, the number of Asian hedge funds could actually shrink in the near term, putting a still-growing pool of investor cash in the pockets of larger, established players.
• Assets invested in hedge funds focused on Asia fell by 10 percent from USD111bn to USD100bn during the first quarter of 2008, a period in which global financial markets declined broadly and volatility increased sharply, according to Chicago-based industry data provider Hedge Fund Research.
• A decade ago, it would have been rather controversial to talk about hedge funds, given the Asian economies were hard hit by a severe financial crisis widely believed to be triggered by a group of aggressive hedge funds at that time. Today, the hedge-fund industry has become an important driving force in the global financial markets. At present, there are about 10,000 hedge funds around the world with assets under management amounting to US$2.5 trillion.
• Extensive report on hedge funds in Asia.
• Hedge Funds build up manpower in Asia
• Asia’s hedge fund industry is growing rapidly as global investors zero in on the region and more traders and fund managers choose to strike out on their own. At the same time, Asian investors are warming up to hedge funds, which offer them a chance to earn higher returns and spread their risks wider than if they just relied on traditional investments like stocks and bonds.
• Although the pace of growth of the Asian hedge funds industry has lessened compared with the past two years, in absolute terms, the growth is still substantial, with more than US$30 billion in net assets estimated to flow into Asian hedge funds in 2006.
• Asia’s booming hedge fund industry will be tested in the coming year by heightened volatility that will catch out less talented managers who have coasted along on the multi-year bull run in regional stock markets.
• Another event for networking and gaining more information about Asian hedge funds
• Investors almost halved the money they put into Asia-focused hedge funds in the second quarter compared to the first three months of the year as a selloff in stocks hurt appetite for risky assets, data showed.
• Singapore Hedge Funds Club Networking event on 9/18/2008
• The hedge-fund party may be over in Asia. After years in which the number and assets of Asia-focused hedge funds have steadily risen, prime brokers and hedge fund managers say they expect a larger number of managers to fold up the tent this year because declining equity returns mean the hedge-fund managers themselves won’t be making much money.
• Hedge funds are suddenly the rage in Asia. That’s an ironic turn of events in a region that just seven years ago blamed speculative trading for its worst financial crisis in decades. It’s no mystery why hedge funds find Asia attractive. Since markets here are less researched and less liquid than Western ones, the kind of inefficiencies on which such outfits thrive abound.
• Asia hedge fund managers improved their performance and lowered redemptions in 2007 in contrast to their US and European counterparts, according to a study.
• Great article about Asian Hedge Fund Allocations
• Another great overview of Asian Hedge Funds
• Book titled Starting a Hedge Fund-an Asian Perspective
• Three recently departed executives of Citigroup’s Global Special Situations Group have announced plans to launch a new hedge fund. Initially they are to be based in Hong Kong, with plans to expand into Singapore.
• Looking for jobs or internships with an Asian hedge fund? – Asian hedge fund Jobs
• Hong Kong continues to be a hot spot of investment for overseas firms looking to tap the Asian hedge fund market. The latest to arrive is Financial Risk Management (FRM), a global hedge fund group, with US$15 billion under management.
• The hedge fund industry in Asia is dominated by a trio of financial centers: Hong Kong, Singapore, and Sydney. In this inaugural issue of the statistical digest, we provide a broad overview of the hedge fund industry in Asia and zero in on issues relevant to investors. Our analysis will be organized along the lines of manager location.
• The first start-up independent Asian hedge fund to begin with more than $US1 billion is expected to be launched in coming weeks, sources said, signaling a watershed for the asset class in the region. The launch underscores the growing confidence and ability of indigenous talent to raise significant amounts of money to compete against global firms, which have piled into the region in recent years.
• Asia’s expanding hedge fund industry will probably create tens of thousands of jobs in the next five years, even as investment bank recruitment dries up after the U.S. subprime mortgage market collapse, said Sheridan Mather, a managing director of recruitment firm Pinnacle International Ltd.
• Investors are exploring the potential of hedge funds based in the Asia-Pacific region as successful US and European managers come up against capacity constraints. Assets managed in the region now top $60bn (€49bn), according to industry estimates, and are expected to reach $85bn by the end of the year
• Another interesting book related to Hedge Funds in Asia
• Another great detailed overview hedge fund presentation
• Great guide to the outsourcing trends and tendencies of the Asian hedge fund industry
• Singapore-based hedge fund JL Capital Pte Ltd is bullish on equity and currency markets in Asia, especially Singapore and Malaysia, founder and managing director James Loh said. The flagship Swordfish Macro fund, which has a global mandate to invest in equities, bonds and currency, saw strong investor inflows from Europe last year in search of Asian investments.
• The Monetary Authority of Singapore’s annual survey of the Singapore asset management industry
• Japanese hedge funds relocate to Singapore
• Korean broker launches Singapore hedge fund
• “Singapore goes alternative” article
• Another article about the dramatic growth in Singapore’s hedge funds:
• Hedge Fund administrator boosts Singapore team to address growing demand for hedge fund service providers in Asia.
• An article about how a top hedge fund manager sets up a Singapore office
• “Asian hedge fund industry booms” – Singapore is one of the main hubs in Asia for hedge fund activity – here is an article on this topic
• Excellent Japanese Hedge Fund resource
• Bloomberg article about Man Group Plc that tripled assets
• Business Week article about hedge funds in Japan
• Hedge Fund World event in Japan
• An interesting interview of Hedge fund life in Tokyo
• Asia Pacific Hedge Fund Database and Directory
• Article describing growing fund numbers in Japan
• Informative overview guide to hedge funds in Japan and the rest of Asia
• Article on why Japan hedge funds are set to outperform many peers
• Article describing the struggles of some Japanese Hedge funds
• Article showing the current state of Hedge funds in Japan
• Japan’s Leading Hedge Funds Conference
• Article describing the choice of some investors to pull out of the Japanese industry
• Bloomberg article about successful Hedge Fund Manager Tadashi Mukai
• Article detailing a UK hedge fund that is increasing its pressure on a Japanese utility
• Interesting article about a British hedge fund and Japan’s market
• Asia Hedge Fund Oscars

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High risk, limited liquidity, taxes, and lack of regulation make investing in private equity challenging. However, the payoff is very attractive making private equity an interesting asset class for family office. The article shows two different points of view (fund of funds and direct private placement) of how family office would enter in private equity.

From the standpoint of diversification and lowest assumed risk, a fund of funds may present the best entry point to private equity given that you do not have specialist who can perform extensive due diligence. Additionally, it is an affordable way to test the water than any other approaches. On the other hand, direct private placement represents the highest level of risk. You must have capability to perform in-depth due diligence, and dig into the portfolio companies of what really happen. The upside of private placement is of course that your return would out-perform anything on traditional security market. Read more on this here.

- Richard

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Tags: Private Equity, Family offices, private equity for multi-family offices, private equity investments by family offices, private equity investment capital from single family offices

Dr. Alan Starkie, “Wealthy families are “insti-viduals”, individuals who have institutional needs in terms of complexity and sophistication”. As a result the family office market is rapidly evolving, with more family offices, more MFOs, leading to more demands on providers of services, and more outsourcing expertise needs. There are some favorable trends and facts that support the needs of outside consultants; buying support consult is cheaper than build it internally, generation changes, acquisition, specialization, lack of omniscience, independency, advanced technology.

To keep pace and take advantage of the myriad opportunities, good consultants need to differentiate themselves in the industry through their objectivity, specialized services, product and service mix, and technological sophistication. Rather than focusing on performance, they should concentrate on providing a level of service commensurate with the demands of “insti-viduals.” If they fail to do this, the perception will remain that consultants lack value added and wattage, are not “on the line” for results, and are not candid in their advice. Read more…

- Richard

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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.

For those of you who do not know what family ffices are and how they relate to hedge funds please see this article: What are Multi-Family Offices?

For in detail information and insight please see Family Offices Group .com

Here is the single family office 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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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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Hedge Fund Subscription

Premium Hedge Fund Subscription Website

I have recently had someone join my team who will help me create a premium content subscription-based hedge fund service.

This will be available in 2009 and at this point we are seeking your direct feedback as to what it should include or not include. What is missing in the hedge fund marketplace? What, if it existed would be very valuable to your business to receive on a weekly or monthly basis?

Please email your ideas to Richard@HedgeFundGroup.org

Thank you in advance for the feedback, much appreciated.

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I just saw this recent article within the Washington Post and thought it was interesting and relevant to the focus on this site on family offices.
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It’s early on a spring morning and Peter Kirsch is busily overseeing the fast-moving life of AOL founder James V. Kimsey. Seemingly everything that touches the mogul finds its way to Kirsch’s desk in his ninth-floor penthouse office overlooking the White House, from philanthropy to investments, from politics to friendships to the management of the sprawling Kimsey household.

As chief of staff in the Office of James V. Kimsey, Kirsch is a quiet force on the local scene.

He arrives at the office at 7:30 a.m. to prepare for another day of controlled chaos. At 9 a.m., he gets his daily briefing. Office accounting manager Stephanie Weir reports nothing amiss in Kimsey’s balance of payments big and small, be it DirecTV or NetJets, Burning Tree Country Club or Nationals baseball tickets, American Express (Black Card) or a utility bill.

Next up is receptionist Brie Hytovitz, the first person to greet office visitors, whether they be Ted Turner or Ted Leonsis. When the Potomac Conservancy wants to have a fundraiser at the Kimsey estate, Hytovitz makes sure the tent company, caterer and parking valet are there. She has recently been putting the final touches on Kimsey’s next monthly “boys’ lunch” with friends, scheduled for Oceanair, a seafood restaurant in downtown D.C.

On it goes, as the meeting melts into the day. Pinning Kirsch down on the phone or in person takes effort. He jumps from one call to another, holding discussions with Hytovitz and a visitor at the same time, while an entrepreneur who needs cash cools his heels in the conference room. One minute Kirsch is on the phone with a big hedge fund manager, the next he is sweeping down the elevator to attend his son’s sporting event. Read more…

- Richard

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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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