Large Hedge Funds

Large Hedge Funds See Assets Move

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

Here’s a short article about performance seen from some well known hedge funds:
_______________________________

Hedge fund managers, after enduring the industry’s worst month in a decade, are seeking to explain to investors what went wrong and what they are doing about it.

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

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

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

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Hedge Fund Fianncials

Hedge Fund Financial Stability Notes

I just found an article which sums up many of the ideas I believe in while evaluating the future prospects for hedge funds in the industry.

Here is an excerpt from the article:

The hedge fund industry will emerge from its biggest ever crisis smaller but while many funds will fail those who survive look set to enjoy bumper returns as bombed out assets rebound in value.

As investors pull cash out in the face of some of the industry’s worst ever performance figures and plummeting stock markets, strategies that relied on borrowing to drive returns when credit was easy will fade and funds will have to cut their lucrative fees. However, the survivors will find rich pickings in a world where assets are cheap and rivals such as banks’ proprietary trading desks take fewer risks. Read more…

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Spain Hedge Fund Guide

1 Page Guide to Hedge Funds in Spain

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

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

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• Dubai Hedge Fund Guide
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Hedge Fund Meltdown?

Hedge Fund Meltdown? | 30% Decline in AUM?

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

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

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

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

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

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

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Letters to Investors

Hedge Fund Letters to Investors

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

Updated

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

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Hedge Fund News

Hedge Fund Video Notes

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

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Hedge Fund Holdings

Top Hedge Fund Holdings Research

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

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

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

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

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

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

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

Link Fest

Hedge Fund Link Fest

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

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Paulson & Co.Positions

John Paulson Hedge Fund Positions

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

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

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

Sources: WSJ, StreetInsider, & investEgate

Guest post by Market Folly

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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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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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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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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:

1. 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.)
2. 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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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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Asset Management Finance

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…
___________________________________

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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Hedge Funds vs. Banks

Hedge Funds Serving Corporations

One long-term trend I’ve seen in the hedge fund industry is that hedge funds are now competing with banks within several dozen areas of business. Here is a short list of why some corporations are turning to hedge funds instead of Banks.

• Some commercial banks may not have enough money to lend because of timing or relationships in place with the corporation
• Some companies launching hostile takeovers need large amounts of cash quickly and hedge funds can sometimes provide the quickest solution at a competitive rate
• A company may need to borrow money overnight or for several days to make payroll until more of their receivables come in
• Some corporations use hedge funds to fund risky projects that wouldn’t fly with many banks
• Lately corporations have turned to hedge funds or sovereign wealth groups in times of desperation, when they need large infusions of cash to stay afloat

Yesterday I sent a note out about Hedge Fund Conference Email Alerts. The email-based subscribers to my blog could not see the email opt-in form though. If you would like to sign-up for free for these alerts please see this page: Hedge Fund Conference & Event Alert Email List

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The following piece on Martin Asset 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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Tarzana, California-based alternative investment boutique Martin Asset Management has launched investment strategies based on exchange-traded funds that it says are able to replicate hedge-fund-like returns and risk factors without heavy fees, lock-ups and non-transparent holdings.

“Our approach allows investors to obtain the very same benefits as they would with a hedge fund without the limitations usually associated with hedge funds,” says Francisco Martin, senior managing director of the firm he founded in February 2007.

“We use an investment philosophy similar to global tactical asset allocation that attempts to exploit short-term market inefficiencies by taking positions in various markets with a view to profiting from relative movements across those markets.”

“The approach focuses on general movements in the markets rather than on performance of individual securities within them. Positions are generally taken with a relatively short-term time horizon of three to six months, hence the term tactical asset allocation, and in markets across the globe, hence global.”

Martin Asset Management does not levy an annual management fee but has a 10 per cent performance fee with high water mark. “The transparency of a separate managed account and the elimination of all hedge fund-imposed barriers make our approach much more attractive to the investor,” Martin says.

Earlier this year Martin Asset Management established the Ilios Alternative Energy Fund, a long-biased fund that invests in public companies involved in wind, solar, hydro, geothermal and biomass energy, and hedge certain exposure using inversely correlated ETFs from PowerShares.

- Richard

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Best Practices for Hedge Funds

Link – Best Practices for Hedge Funds

The Managed Funds Association has recently put out a new version of their Best Practices Guide. Here is an excerpt from their website on what these are and how to download them:
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The objectives of Sound Practices are to:

* Strengthen business practices of the hedge fund industry through a strong framework of internal policies and practices
* Encourage individualized assessment and application of recommendations
* Enhance market discipline in the global financial marketplace

Sound Practices, which was originally published in 2000 and is now in its fourth edition, provides peer-to-peer recommendations for establishing standards of excellence in virtually every aspect of business. The recommendations included in Sound Practices are divided among the seven topics listed below:

* Management, Trading, and Information Technology Controls
* Responsibilities to Investors
* Determination of Net Asset Value
* Risk Management
* Regulatory Controls
* Trading Relationship Management, Monitoring, and Disclosure
* Business Continuity, Disaster Recovery, and Crisis Management

MFA has revised Sound Practices in cooperation with international organizations that share the PWG and MFA’s goal of providing market participants with a framework for establishing uniform principles and guidance for the global hedge fund industry.

Click here for a copy of Sound Practices (please note this is a large pdf file that requires Adobe Acrobat Reader and might take time to download).

- Richard

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Who can Invest in hedge funds?

“Sophisticated investors” invest in hedge funds. These investors do not need the protection that comes with the regulations on mutual funds. These wealthy individuals must pass either an accredited investor test or a qualified purchaser test.

An Accredited Investor is an individual who either:
a.) has a net worth greater than $1 million.
b.) has an income in the past two years that exceeds $200,000/year, and expects to continue this way.
or c.) holds assets greater than $5 million.

A Qualified Purchaser is either:
a.) an individual that owns at least $5 million in investments.
b.) a family-held business that owns at least $5 million in investments.
c.) a business that has discretion of at least $25 million in investments.
d.) a trust that is sponsored by qualified purchasers.

- Richard

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South Africa Hedge Fund

Guide to Hedge Funds in South Africa

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

• This latest edition of Doing Business with South Africa is a uniquely authoritative source of economic data and business information. The guide reviews business conditions in the new South Africa, the changing local and provincial governments, the restructuring of competition policy and the exchange control outlook. It also discusses the potential opened up by privatization and the practicalities of entering into joint ventures. Read More…
• “A hedge fund is a vehicle that houses traditional and alternative investments against equities, bonds and credits” Cannon Asset Managers’ chief investment officer Adrian Saville says during volatile times investors often rush into hedge funds seeking protection. “But these have proved to be almost as volatile as equity markets with much lower rates of return. The experience of January 2008 comes to mind, when stock markets around the globe traded lower and hedge funds saw losses in that month too,” he says. Read More…
• South Africa is a strong, rapidly growing commodity-based economy based upon mining, agriculture and manufacture – but with a strong tradition of financial services and trading sophistication. As a result, it has developed animpressive and fast-growing hedge fund industry. Read More…
• South African Hedge Funds – Article posted here on this blog earlier this year.
• Six of South Africa’s top performing hedge funds were recognized for their achievements at the second annual Old Mutual Symmetry Hedge Fund Awards in Cape Town last night. The winners were picked from 21 eligible hedge funds that participated in the qualifying SYmmETRY Multi-Manager Hedge Fund Performance Survey.
• During March the Financial Services Board, together with the South African Chapter of AIMA and the Association of Collective Investments, issued a joint discussion paper calling for comment on the regulation of hedge funds in South Africa.1 The publication of the joint discussion paper was the culmination of lengthy discussions, in which the executive of the South African Chapter of AIMA played an integral part.
• In August 2007 the FSB, in cognizance of the many inexperienced hedge fund managers operating in the South African market, introduced Regulations under the Financial Advisory and Intermediary Services Act, 2002 (FAIS) governing the managers of hedge funds and funds of hedge funds. Read More…
• African Hedge Funds – Short post on various African hedge fund resources
• The South African private equity industry recorded total funds under management of R41.5bn at the close of 2003, a ten per cent increase on the previous year, according to KPMG and the South Africa Private Equity and Venture Capital Association. A total of 50% of third party funds raised during 2003 have been sourced from South Africa and 48% from Europe
• South Africa’s hedge fund market has been hampered by strict limits on the amounts pension funds can invest, but Willem van der Merwe of African Harvest Alternative Investment believes anticipated changes in the rules later this year could give the local hedge fund industry a boost
• This latest Hedgeweek Special Report on South Africa’s Hedge Fund Service (2008) contained numerous articles on SA’s hedge fund industry for readers to download. The discussed topics varied from its growth potential to its regulatory environment to its fund servicing role globally. A must-read as an introduction of SA’s hedge fund industry. Read more…
• South Africa: A new hedge fund market emerges. An excellent overall guide that introduces South Africa’s hedge fund industry, its regulatory environment, institutional investors, and various other topics. Read more…
• South African Hedge Fund Industry Grows by Stealth. This brief article analyzed the growth potential of hedge fund industry in South Africa by looking at its potential market size, macro-economic environment and regulatory policies. Read more…
• Benchmarking South Africa’s Hedge Fund. This website features a latest Hedgeweek Special Report on South African Hedge fund Industry in 2008. Some of the questions would be answered by this report are: How attractive are South African hedge funds as an investment opportunity? And is your fund or fund of funds outperforming or underperforming? Read More…
• Fast-growing bustle in the hedgerow. The size of the hedge fund industry in South Africa has trippled over the past three years – in terms of both assets under management (around R18bn) and the number of funds (more than 100). This article will analyze how did all these growth take place and how would it continue in the near future with broader acceptance from local investors.
• South Africa’s Hedge Fund Industry Poised for Lift-off. This article analyzed the current growth trend of South Africa’s hedge fund industry, and how the change in region’s current restrictive rules and increase in local investors’ sophistication would stimulate the growth of hedge fund in SA. Read more…
• A Comparison of South African Hedge Fund Risk Measures. This academic paper discussed the development of a more effectively discriminatory hedge fund performance measures for accessing the risk and return performance of South African hedge funds. Read more…
• This article discussed how the recent subprime crisis and the global economic downturn would affect the South Africa’s economy and its hedge fund industry. Read more…
• This excellent article provides a brief but yet comprehensive overview of the regulatory landscape for hedge funds in South Africa. Read more…
• This article provides a brief outline of the hedge fund regulation in South Africa, with discussion on various provisions of its Financial Advisory and Intermediary Services Act passed on 2002 (“FAIS Act”), and on August 2007 (“the Hedge Fund Regulation”). Read more…
• This article discusses the issue of tax exposures for foreigners that are investing South Africa’s funds. Read more…

Hedge Fund Jobs in South Africa

• List your hedge fund jobs here by emailing Richard@HedgeFundGroup.org

Hedge Fund Conference in South Africa

• List your hedge fund conference here by emailing Richard@HedgeFundGroup.org

- Richard

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Weak Dollar

Weak US Dollar – Video Post

Here is a quick video on foreign currency exchange, and why a weak US Dollar can benefit some large multi-national corporations. This is a very simple easy to understand video on this issue.

- Richard

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Hedge Fund Investment Mistakes

Top 4 Hedge Fund Investment Mistakes

There are many good and bad reasons to invest in hedge funds. Below are 4 of the most common hedge fund investment mistakes that I see or hear talked about by hedge fund managers, family offices and financial advisors. Each of these points are cautions on not any form of financial advice or recommendation recommendations on investing with any particular hedge fund strategy.

1. Investing based on emotions, market heights and excitement. Investing based on a hunch or short term trend can help find new ideas or hedge fund managers with unique perspectives but without thorough due diligence can lead to working with sub-par managers.
2. Chasing high returns. Many un-experienced Investors don’t ask themselves often enough – at what risk were those returns gained? What risks am I comfortable in taking on? Etc. This is why a wealth management firm or family office or consultant can be critical to making sure you are making wise investment choices for your unique situation, goals and needs.
3. Investing with friends – Many times you may not see the forest while being asked for money from a friend. The truth is that many hedge funds do not survive in the long-term. They are not asking to borrow a book, this is your hard earned money. If you can’t afford to lose the money you might not want to invest it in a hedge fund or at least a friend’s hedge fund at all.
4. “Hedge Fund Rich” – Thinking that a single – all eggs in one basket bet is going to make you rich. This rarely happens, the average hedge fund does beat the S&P but is far from returning the types of returns you sometimes read about in the papers. The most popular mainstream media outlets like to focus on the extreme because it sells newspapers, it draws eye balls. Most hedge fund managers are not frauds and most do not return 56% returns for their investors. Make sure and conduct industry-wide research from Databases and not just WSJ articles and coffee table talk with friends. Thorough due diligence and hard numbers trump all opinions.

- Richard

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Hedge Fund Marketing Tools

Tools for Hedge Fund Marketers & 3PMs

I have created this page to list a collection of online hedge fund marketing tools available to professionals within the hedge fund marketing space.

• Family Office Directory | Directory of Family Offices | A directory of over 500 family offices, these include both single and multi-family offices within the US and abroad.

• Master Contact Database: The industry’s leading master contact database containing details on over 20,700 alternative investment funds, CTAs fund of funds, etc.

• Fund of Hedge Fund Database Fund of Hedge Funds Database which profiles 2,585 funds and is the most comprehensive database of its kind
• Fund of Hedge Fund Directory: Directory of Funds of Hedge Funds
  profiles 1,032 carefully selected funds of hedge funds and funds of CTAs

• Capital Hedge Investor Databases: A complete investor database solution for hedge funds looking to raise capital across several distribution channels.

• Email Newsletter Creation Tool: Aweber is the #1 provider of email newsletter creation and management services. Creating an email newsletter keeps you in front of your prospects and loyal customers. Aweber offers a suite of low cost professional email newsletter templates and their how-to guides, quick online support and email tips make them a favorite of thousands of firms. Click here now to see what Aweber offers.

• Hedge Fund Database: Thorough database which contains comprehensive information on 3,169 single manager hedge funds.
• Hedge Fund Directory: A less expensive and lighter collection of single hedge fund manager contact details.
  

• CTA Database A source for managed futures data for the past 20 years and contains comprehensive data on 864 CTA programs.
  
• CTA Directory A less expensive lighter version of the database above
  

• Hedge Fund Asset Flow Reports Order reports to dig into where asset flows are coming and going within the hedge fund industry. Monthly reports available.

• List of Hedge Funds in Massachusetts
• List of Hedge Funds In Connecticut
  
• List of Hedge Funds in New York
• List of Hedge Funds in California
• List of Hedge Funds in Chicago and State of Illinois
• List of Hedge Funds in Dallas, Houston & State of Texas

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Foreign Currency Exchange

Foreign Currency Exchange Trends Video

Here is a quick video on foreign currency exchange, and why a weak US Dollar can benefit some large multi-national corporations. This is a very simple easy to understand video on this issue.

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

Tired of reading articles? Watch more videos like this one above within the Hedge Fund Videos Directory.

- Richard

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Financial Certification

Financial Certification in Hedge Funds

Here is the result of a recent interview I completed with the Financial Times regarding the Hedge Fund Group (HFG) and Certified Hedge Fund Professional (CHP) Designation, a new financial certification. Thanks to Fintag for the friendly (overly friendly) plug over on his blog here.

Here is a short excerpt from the Financial Times article:

“Students can receive qualifications for almost anything, be it a “maple syrup” course at New York’s Alfred University or “cyberfeminism” at Cornell. Basic economics teaches that so long as there is demand and resources, supply will shortly follow.

Richard Wilson, founder of the Hedge Fund Group (HFG), a professional networking organisation, witnessed a demand for a programme dedicated to the study of hedge funds. This discovery led to the Certified Hedge Fund Professional (CHP) Designate initiative. Mr Wilson previously worked for a currency and commodity hedge fund and a fund of funds in South Africa before joining a hedge fund marketing firm.

The charter he has helped create is a programme designed to prepare students for life in a hedge fund. “It will also save two-thirds of training on the job and enable them to walk right in and know what is going on,” says Mr Wilson.

The Chartered Financial Analyst and Chartered Alternative Investment Analyst are well established rival programmes. The CHFA project, launched in mid-July, is designed to be similar, but not a copy of others…. An online training forum provides career advice, CV checks, and access to a directory of managing directors and recruiters for students. Students gain admission to the Hedge Fund Group (HFG) and its 9,000 members.

The charter received roughly 900 applications for the first year, but intake was limited to 100…. “The Hedge Fund Group (HFG) team has been fabulous. They answer every question quickly, accurately and professionally. It’s this stuff that, quite simply, builds credibility,” says, Sameer Vishwanathan, a new student of the CHP Designation Program.”

Here is the full article.

Certified Hedge Fund Professional (CHP) Links

• Top 10 Certified Hedge Fund Professional (CHP) Designation Benefits
• Certified Hedge Fund Professional (CHP) Overview
• Hedge Fund Group (HFG) Board of Advisors
• CHP FAQ
• CHP Study Guide
• CHP Registration

- Richard

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