You could not blame GLG Partners co-founder Noam Gottesman for feeling a little smug today. News broke yesterday that Greg Coffey, the former GLG star emerging markets trader is now leaving rival Moore Capital Management, the firm he defected to from GLG in late 2008. Some $1.3bn of client money flowed out of Coffey’s emerging markets / global macro hedge funds at GLG at the time – no doubt much to Moore, and to Gottesmann’s dismay. It was a major event in a generally horrible year for GLG. Sharp investment losses occurred on some funds, others were gated. Some GLG fund assets were caught by Lehman Brothers’ collapse. Assets overall fell by 39%. And GLG shares fell by 83%.
Putnam misled investors, state says (BostonGlobe)
Massachusetts Secretary of State William F. Galvin on Wednesday charged a unit of Boston-based Putnam Investments with deceiving investors about $3 billion in investments in mortgage-related securities that went on to lose money. According to Galvin’s office, Putnam Advisory Co. allowed a prominent Illinois hedge fund, Magnetar Capital, to help select securities for collateralized debt obligations, vehicles made up of risky sliced-up mortgages that imploded in the financial crisis. But Magnetar was in a position to gain if the securities, many of them subprime, defaulted. Magnetar reaped $67 million on those investments, Galvin alleged, while other investors lost money. Magnetar’s role of betting against the securities was not disclosed to the other investors, Galvin said.
New AIFMD passport regime opens way for surge in Gibraltar-based funds (RealWire)
With the regulatory changes coming in under AIFMID, Gibraltar is being hailed as the ideal place to support hedge funds looking to re-domicile in Europe, according to Gibraltarian minister for financial services, Gilbert Licudi. Nicola Smith, CEO of Gibraltar based fund administrator Helvetic, commented: “The incoming AIFMD passport regime, alongside other regulations that will make it more complicated for non-EU domiciled funds to gain approval and to market to EU-based investors, is resulting in many Hedge Funds seeking a foothold in a member state. With Gibraltar’s combination of low tax and full AIFMD compliance, Gilbert Licudi’s announcement that Gibraltar is open for business is the latest shot in the battle for funds now sniffing around EU shores.”
Man Group client withdrawals hinder fightback (Reuters)
Hedge fund manager Man Group has suffered a net withdrawal of client funds for a fifth straight quarter as its struggle to revive its fortunes is hit by poor returns from its main fund. Man (EMG.L), whose shares are down nearly 70 percent since the start of last year on the back of outflows and poor fund returns, said clients withdrew a net $2.2 billion over the three months through September, up from $1.4 billion the previous quarter. The company warned there were few signs of improvement. “The flow environment continues to be challenging,” said Chief Executive Peter Clarke in a statement. “Investor sentiment, and consequently the outlook for flows, continues to be subdued.”
EDHEC reports 2.76% September gain for emerging markets hedge funds (Opalesque)
In September, stocks maintained their uptrend (S&P 500: 2.58%), with implied volatility near historical lows (VIX: 15.7%). High-grade bonds fell slightly (Lehman Global: -0.31%, Lehman US: -0.18%), while riskier fixed-income instruments strengthened significantly (Convertibles: 1.81%, Credit-Spread Index: 1.00%). Commodities retreated after two strongly positive months (-1.38%), and the dollar downtrend persisted (-1.17%). The performance of hedge fund strategies exposed to the equity risk factor was mostly comparable to that of last month (Equity Market Neutral: 0.42%, Event-Driven: 1.29%, Long/Short Equity: 1.63%). The directional segment however managed to be stronger still, thanks to the largest alpha, when measured through the dynamic exposure.
HFR: Total hedge fund assets surged to a new record in Q3 by +3.6% to $2.19tln (Opalesque)
Total hedge fund assets surged to a new record on strong 3Q performance and the 3rd consecutive quarter of net inflows, eclipsing the previous record set in the first quarter of 2012, according to data released today by HFR, the global leader in the indexation, research and analysis of the global hedge fund industry. Hedge fund capital increased by +3.6 percent to $2.19 trillion as of the end of 3Q12, an increase of $80 billion during the quarter and $183 billion year-to-date. Investors allocated $10.6 billion of net new capital to hedge funds in 3Q, bringing YTD net inflows to $31 billion. Despite these figures, if inflows continue at their current pace through the end of the year, 2012 would have the lowest inflow total since 2009, when investors withdrew $131 billion from the hedge fund industry.
SEC charges former hedge fund adviser Yorkville with fraud (HedgeWeek)
The Securities and Exchange Commission has charged a former USD1bn hedge fund advisory firm and two executives with scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors. The SEC alleges that New Jersey-based Yorkville Advisors, founder and president Mark Angelo, and chief financial officer Edward Schinik enticed pension funds and other investors to invest in their hedge funds by falsely portraying Yorkville as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure. They misrepresented the safety and liquidity of the investments made by the hedge funds, and charged excessive fees to the funds based on the fraudulently inflated values of the investments.
Victory Park Capital Appoints COO (PEHub)
Victory Park Capital has named Jordan Allen, a 20-plus-year veteran of the hedge fund and private equity industries, as principal and chief operating officer, a new position effective January, 2013. Allen, who until December will remain co-head of North America, chief operating officer and chief financial officer of Man Investments USA, will help oversee business operations. At Man Investments, a $53 billion asset manager, Allen oversaw Man’s U.S. business with Lance Donenberg. Man’s U.S. headquarters in New York includes five investment management teams, hedge fund research, risk management, legal and compliance, and sales.
Not every hedge fund starting out in Connecticut will succeed (Opalesque)
Participants at the recent Opalesque Connecticut Roundtable agreed on the whole that while the quality of life is high and the costs of maintaining a business are lower in Connecticut, it just ain’t New York – as New York is the place where funds can have a superior infrastructure, be close to servicer providers and investors. And hedge fund start-ups above all need that proximity. Although those hedge funds starting out in Connecticut could survive with a “robust business plan” and benefit from “thinking more clearly.” “We are seeing numerous funds launching in Connecticut, although not every one will succeed,” said Steve Simmons, Managing Director at Southport Harbor Associates, a hedge fund consultant.
ALTIN fund of hedge funds discloses full holdings (InvestmentEurope)
ALTIN, the $250m multi-strategy fund of hedge funds listed on the London and Swiss stock exchanges, has disclosed its entire portfolio of holdings as part of its continued commitment to full investor transparency. In the year to end August 2012, ALTIN posted a net return of 3.45%, outperforming the HFRI Fund of Funds Composite Index, which returned 2.48% in the same period. In the three years to end May 2012, ALTIN posted a net return of 12.85%, outperforming the HFRI Fund of Funds Composite Index, which returned 5.34% in the same period.
Former hedge fund manager Zwirn eyes shadow banking opportunities (HedgeFundsReview)
Former head of a $6 billion hedge fund, Daniel Zwirn, is looking for capital to start a new fund focused on a variety of credit opportunities. Zwirn, who closed his hedge fund DB Zwirn in 2008 after an internal review uncovered improper fund transfers and accounting of expenses, is in discussions with strategic backers about launching an alternative asset management company that will pursue a variety of shadow banking strategies. “Looking ahead the return potential of most traditional liquid hedge fund strategies is very limited, assuming today’s low interest rate environment persists. The real opportunity for investors is to occupy the competitive space evacuated by traditional lenders. It’s one of the few ways to earn attractive, uncorrelated returns,” says Zwirn.
Hedge And PE Funds Among Top 10 Romney Donors (Finalternatives)
Hedge funds and private equity funds made accounted for five of the top 10 donors to Republican Mitt Romney’s election campaign, according to federal disclosures filed Monday. The list, compiled by Reuters, showed private equity giant Kohlberg Kravis Roberts in second place, having donated $986,400. Paul Singer’s $19 billion hedge fund Elliott Management was in fourth place, with a donation of $812,750. Moreover, Singer has personally donated another $1 million to the Romney super PAC Restore the Future, as well as giving over $220,000 to 31 Republicans across the country.
Catastrophe Reinsurer Nephila Joins Hedge Fund Standards Board (Finalternatives)
Nephila Capital, an investment manager specializing in natural catastrophe and weather risk reinsurance, has become a signatory member of the Hedge Fund Standards Board. …“As part of the application process, we performed an in-depth, gap analysis of the firm’s control structure in areas including disclosure, valuation, operational risk, governance, risk management and shareholder conduct,” said Steve Glassman, a principal and chief compliance officer with Nephila. “This process was very beneficial to the firm and we expect it to provide an on-going benefit as each member of the HFSB is required to commit and conform to the standards on an annual basis.”
FBI steps up Fletcher’s follies probe (NYPost)
The feds have ramped up their investigation of Manhattan hedge fund Fletcher Asset Management, The Post has learned. Fletcher International, the hedge fund run by Alphonse “Buddy” Fletcher, filed for bankruptcy in June amid a battle with three Louisiana pension funds seeking to recover $100 million they invested. The investors say the money has disappeared, and they have accused Fletcher of an “intricate shell game” to move the money around in what a bankruptcy judge has called a “hydra-headed organization.”
Level Global Manager Seeks to Show Partner Traded Too (BusinessWeek)
Level Global Investors LP co-founder Anthony Chiasson, who faces trial Oct. 29 for insider trading of two technology companies, asked to present jurors with an analysis he said shows the hedge fund’s other co-founder, David Ganek, made trades in the same stocks at the same time. While Ganek hasn’t been accused of wrongdoing, Chiasson’s lawyers told a judge in an Oct. 3 letter that they want to introduce evidence showing the fund manager’s trading in Dell Inc. (NASDAQ:DELL) and NVIDIA Corporation (NASDAQ:NVDA) occurred in the same period their client was accused of insider trading. The two men were co-heads of Level Global’s largest fund before the firm closed.
Rich Families Cut Back on Buyout Firms in Shift to Direct Deals (SFGate)
Daniel Lubin, whose family wealth comes from a maker of diaper-rash cream built by his grandfather and later acquired by Pfizer Inc., is taking more control of his fortune. …“If you have a third or half of your portfolio where you’re paying 2 and 20, suddenly you’re saying, ‘You know what, these guys are eating up half of my return,’” Lubin said of fees charged by many private equity and hedge funds, traditionally 2 percent of assets and 20 percent of profits. “That doesn’t make any sense. There’s got to be a better way.” Single-family offices are investing directly because of declining fund returns and concerns that some outside managers charge high fees and may have conflicts of interest, according to Wharton. The offices generally are dedicated to the investment oversight and financial planning of one clan. They usually serve families worth at least $100 million, such as those of computer maker Michael Dell and Microsoft Corp. co- founder Bill Gates.
George Soros: Reduce the Number of Black Males in Prison (Fora)
When the Obama administration took office in 2009, there was a groundswell of belief that America was entering a “post-racial” era in which preference, discrimination and prejudice would begin to dissipate and that minorities, especially African-Americans, would begin to see themselves in a better economic and social position. As many Americans ask themselves whether or not they are better off than they were four years ago, social critics and economists have re-examined the question of a post-racial America under Obama. Though the President himself has expressed doubt that his election was going to end America’s cultural divide, there are signs that America’s black population isn’t much better off than they were in 2008– and in some cases, they are worse off. A new book titled Invisible Men: Mass Incarceration and the Myth of Black Progress examines the plight of young black males and how an entire generation of men are still far behind in terms of wealth, employment, income, and health.
