- Targeting Hedge Funds
- Cerberus’s Snow Says `Lighter’ Regulation Best for Hedge Funds
- Equity funds trading credit derivatives seen risky
- Morgan Stanley increases its exposure to hedge fund sector
- Morgan Stanley Buys Minority Stake in Avenue Capital
- Morgan Stanley buys two hedge funds to plug gap
- Senior hedge fund exec to leave Lehman unit
- Man Investments Posts Double Digit Growth to Lead Alpha Magazine’s Fund of Funds 50
Targeting Hedge Funds – Wall Street Journal
The big news with last month’s implosion of Amaranth Advisors hedge fund was how little news it made. Even as the $9 billion fund was spiraling down after bad energy bets, J.P. Morgan Chase and the Citadel Investment Group stepped in to pick up the pieces. J.P. Morgan even reported that the deal boosted its third-quarter earnings.
But the Amaranth debacle still poses a different threat — the political kind. Senate Finance Chairman Charles Grassley is circulating a letter to regulators looking for suggestions on how to regulate hedge funds. He’s far from the only one. Connecticut Attorney General Richard Blumenthal is bidding to become the next Eliot Spitzer by doing to hedge funds what New York’s AG did to the insurance industry. (Someone might want to tell Mr. Blumenthal that if he wants to drive this rich and growing industry out of Greenwich, he should keep it up.)
Rumblings can be heard abroad too. The German government wants the G-8 to take up hedge-fund and private-equity regulation. A select committee of the British Parliament is already examining regulations. Arthur Levitt, a former head of the SEC who opposes more hedge-fund regulation, nonetheless says he’d be surprised if Congress doesn’t take up the issue next year, no matter which party controls Congress….
Cerberus’s Snow Says `Lighter’ Regulation Best for Hedge Funds – Bloomberg
John Snow, the former U.S. Treasury secretary named chairman of Cerberus Capital Management LP this month, said investors, not policy makers, are the best regulators of hedge funds.
Snow, who left George W. Bush’s administration in June after 3 1/2 years, said he came to favor a “lighter” touch for hedge funds because the $1.3 trillion industry was too big for the government to monitor effectively.
“The real policing of these pools of capital are the investors,” Snow said yesterday in his first interview since joining New York-based Cerberus. Any government promise to increase scrutiny would create “a real risk of moral hazard that implies, `Don’t worry. Now the government is watching over you and there aren’t any problems.”’
His comments come as pressure mounts to regulate the industry after the collapse last month of Amaranth Advisors LLC. The Greenwich, Connecticut-based firm lost $6.6 billion in a few weeks with wrong-way bets on energy prices, the biggest meltdown ever at a hedge fund….
Equity funds trading credit derivatives seen risky – Reuters
Hedge funds that specialize in equity investments are increasingly also trading in credit derivatives, and this may be risky because of their lack of expertise with the securities, according to hedge fund advisor Hennessee Group LLC.
Many equity funds are inexperienced with credit derivatives and may be using the securities in inappropriate ways, Hennessee said in a release on Monday.
Credit default swaps, the most common credit derivative, insure against a borrower defaulting on its debt. The contracts are used to speculate on a change in credit quality, or to hedge against losses.
Equity funds have been purchasing protection on corporate debt, sub-prime mortgage-backed fixed income securities and indices, and on emerging market government debt on expectations the credit quality of the securities will deteriorate, Hennessee said…..
Morgan Stanley increases its exposure to hedge fund sector – Financial Times via MSNBC
Morgan Stanley has bought a stake in Avenue Capital, one of the world’s biggest hedge fund groups and a specialist in distressed debt trading.
The investment bank is paying close to $300m for between 15 and 20 per cent of Avenue Capital to become the latest full-service investment bank to increase its hedge fund exposure, according to people close to the matter.
The official terms of Morgan Stanley’s alliance with Avenue Capital, which manages $12bn of assets, were not disclosed. But the deal highlights the trend of big banks buying or taking stakes in hedge fund groups in spite of a recent run of high-profile failures and a decline in performance from the sector.
Morgan Stanley is also in talks to acquire hedge fund group FrontPoint Partners for about $300m. An announcement on that deal could come soon, people close to the matter said….
Morgan Stanley Buys Minority Stake in Avenue Capital – Bloomberg
Morgan Stanley, the second-biggest U.S. securities firm by market value, agreed to purchase a minority stake in Avenue Capital Group, a hedge fund manager with $12 billion in assets that buys debt of ailing companies.
Terms of the agreement, under which Avenue will remain an independent firm, weren’t disclosed in a statement released by Morgan Stanley today. The company is paying about $280 million for slightly less than 20 percent of the New York-based hedge fund, said two people familiar with the situation who declined to be identified.
Morgan Stanley, led by Chief Executive Officer John Mack, managed $76 billion of so-called alternative assets in hedge funds and private equity as of Aug. 31, about half as much as rival Goldman Sachs Group Inc. Morgan Stanley also may buy part of hedge fund FrontPoint Partners LLC in Greenwich, Connecticut.
“They’re trying to catch up with their competition, and hopefully they’re not doing it at a terrible time,” said Benjamin Wallace, who helps oversee about $600 million at Westborough, Massachusetts-based Grimes & Co., which owns Morgan Stanley shares…..
Morgan Stanley buys two hedge funds to plug gap – The Times of London
MORGAN STANLEY will clinch two hedge fund deals this week as John Mack, its chief executive, races to fill what he regards as a serious gap in the Wall Street bank’s range of businesses.
Yesterday Morgan paid about $300 million (£158 million) for a near-20 per cent stake in Avenue Capital Group, a New York-based hedge fund manager specialising in distressed debt.
Within the next few days it is expected to pay between $300 million and $400 million for FrontPoint Partners, a hedge fund group with $5.5 billion under management.
Mr Mack, who joined Morgan last year after a damaging boardroom war, has lamented the fact that the bank “missed the boat” in exploiting booming demand for alternative investments such as hedge funds….
Senior hedge fund exec to leave Lehman unit – Reuters
Jolyne Caruso, among the most senior women executives in the hedge fund industry, is leaving Lehman Brothers as global head of its Absolute Return Strategies business by the end of the year, a Lehman spokesman said on Monday.
Caruso, 46, the former president and co-founder of Andor Capital, a major hedge fund group, had joined Lehman in March 2005 to oversee Lehman’s $6.5 billion portfolio of hedge fund investments. She was also on the Lehman Brothers Management
Committee and Investment Management Division steering committee.The spokesman declined to elaborate on the reasons for Caruso’s departure or what she plans to do next, except to confirm that she will leave the bank.
Caruso with well-known investor Daniel Benton helped found Andor Capital, a $3 billion hedge fund group, when it split from Pequot Capital Management in 2001. Between 1992 and 2001, Caruso was chairman and president of JPMorgan Securities and head of Equities-Americas….
Man Investments Posts Double Digit Growth to Lead Alpha Magazine’s Fund of Funds 50 – PR Web
London-based Man Investments unseats UBS to take top honors in Alpha magazine’s Fund of Funds 50, the fifth annual ranking of the world’s biggest multimanager hedge fund firms. Man Investments’ fund capital grew by more than 11 percent to $39.8 billion in multimanager hedge funds, helping it to overtake the Swiss giant, which sold its $18 billion Global Asset Management fund-of-funds business to Julius Baer Group in December 2005.
With a more than 44 percent increase in fund capital, Union Bancaire Privée held on to its No. 3 spot maintaining $30 billion in multimanager hedge funds. Rounding out the top five are Permal Asset Management moving up to No. 4 with $26 billion in fund capital, a gain of more than 38 percent, and HSBC Private Bank/HSBC Republic Investments with $25.2 billion in multimanager hedge funds, a gain of nearly 25 percent.
The 2006 gains come in stark contrast to pundit predictions of the nearing demise of the fund-of-hedge-funds business. UBS, as the result of its sale of GAM, was the only top ten firm — and one of just five total firms — to post a loss. On the whole, Alpha’s Fund of Funds 50 oversaw a combined $550 billion in assets as of June 30, 2006, up 21 percent from last year’s ranking.
Tags: Hedge funds
