Ray Dalio of Bridgewater Associates became the most successful hedge fund manager in history last year when the cumulative $35.8 billion he has earned investors since 1975 eclipsed George Soros’ $31.2 billion in career gains. So mere mortals might pay some heed to what Dalio is buying these days. As it happens, the master’s biggest purchase in the second quarter of 2012 was Brazil -specifically, the iShares MSCI Brazil Index Fund ( EWZ , quote ). Bridgewater Associates poured more than $100 million into the struggling Latin American giant, grabbing some 2 million shares of the ETF at an average price of $56.
Hedge fund advertising is a wild pitch (MarketWatch)
Hedge funds and private-equity pools just became a whole lot more interested in Main Street investors. …It stems from the U.S. Securities and Exchange Commission’s proposal last month to relax rules that have kept hedge funds and private-equity firms from soliciting the general public for more than 70 years. (The proposal will go through a comment period, but you can expect to see hedge-fund advertising come 2013.)
Troubled hedge fund Pentagon to fight SEC’s $100m fine (Telegraph)
A contemporary of David Cameron’s at Oxford University, Mr Chester took the dramatic step after his hedge fund, Pentagon Capital Management, was fined $98.5m earlier this year for allegedly engaging in late trading in mutual funds between 1999 and 2003. Begbies Traynor, which was appointed administrator, has thrown its weight behind an appeal lodged against the ruling by Pentagon. The UK accountancy group said there were “substantial grounds for appeal”, according to documents filed at Companies House.
Let hedgies advertise? Fund firms are furious (InvestmentNews)
The Securities and Exchange Commission is taking heat for a proposed rule that would allow issuers of private securities, such as hedge funds, to advertise their offerings and solicit the public. The agency last week voted to put the proposal out for comment. The controversial rule change is mandated under the Jumpstart Our Business Startups Act. Once enacted, the revised rule will affect private securities that are exempt from registration under SEC Rule 506 of Regulation D and sold only to accredited investors.
Luxembourg to transpose AIFM directive and introduce new structure for hedge funds (HedgeFundsReview)
Luxembourg has moved closer to adopting the alternative investment fund managers (AIFM) directive. Its parliament is currently considering a bill which will transpose Level 1 of the directive into national law and introduce other measures for hedge funds. The bill was passed to the Luxembourg parliament on August 24. “In principle the draft bill reproduces the AIFM directive requirements,” says Camille Thommes, director-general of the Association of the Luxembourg Fund Industry (Alfi).
Fund performance fees: to pay or not to pay for the best? (CityWire)
With the heroic performance of Great Britain’s Olympians receding towards the history books, the attention of investors once more returns to performance of their funds. With this comes the thorny issue of whether to pay performance fees or, by opposing, end them. In theory, a fee that increases with performance helps align talented managers’ interests with those of investors, leading to better outcomes all round. The ability for retail funds to charge such fees, introduced in 2004, also allows fund management groups to retain talented managers rather than lose them to the lucrative hedge fund world.
Aurora Investment executives see changing market conditions as opportunity (PIOnline)
In today’s high-volatility/low-return market, Scott Schweighauser said institutional investors should not be asking whether they should invest in hedge funds, but rather how large of an allocation they can make to the asset class. Mr. Schweighauser, chief investment officer at hedge funds-of-funds firm Aurora Investment Management LLC, and Roxanne Martino, CEO, are confident in their ability to identify the top hedge fund talent and produce what investors need in this day and age — solid returns with low volatility.
Focus on North America – Investors flock to US hedge funds despite recent losses (InvestmentEurope)
Markets in America, the ‘home the hedge fund’, inflicted losses on managers focused on them in June, but inflow data suggests investors still prefer portfolios focused there than any other geography. Data providers Eurekahedge found North American-focused funds took in new business of $660bn in June, more than double the amount of the next-most popular region (Asia ex-Japan), which absorbed $300m.
Mason Capital calls meeting of Telus shareholders (VancouverSun)
New York hedge fund Mason Capital Management has fired back at Telus by calling its own meeting for voting shareholders – this one to set a mini-mum premium to support consolidating the telecom company’s shares. Vancouver-based Telus and Mason are in a battle over converting the telecom company’s dual share structure of voting and non-voting shares into one class of common shares. Mason owns just under 20 per cent of Telus’ voting shares.
Cayman Court lays down more guidelines for enforceability of side letters (HedgeWeek)
After being a hot topic in the Cayman Islands for a number of years, the Grand Court has handed down two decisions in quick succession relating to side letters entered into by Cayman Islands corporate hedge funds. The first was Medley Opportunity Fund Ltd. v. Fintan Master Fund Ltd & Nautical Nominees Ltd (21 June 2012), where Justice Quin decided the point that a side letter must be signed by the investor of record, and not some other party such as the beneficial owner of the shares, in order to be enforceable.
Gere ‘amazed’ by success (Stuff)
Richard Gere is “amazed” that his career is still going strong in his golden years. The actor stars as a hedge fund manager who cheats on his wife in upcoming dramatic thriller Arbitrage. He is extremely grateful for this prime role. “I’m amazed that I’m still doing this, to tell you the truth,” Richard told Entertainment Tonight.”And I’m going to be 63 in a couple of weeks and I feel incredibly fortunate and surprised that they still ask me to do it.”
Positron pushing Gary plans despite challenges (nwiTimes)
GARY | City officials want to finalize a deal with Positron Corp. to have a high-energy cyclotron and manufacturing facility built near Interstate 65 and 15th Avenue. Positron’s announcement about a Gary site comes at a time when the Westmont, Ill.-based firm is dogged by questions of whether it can earn a profit and CEO Patrick Rooney battles a lawsuit filed last year by the U.S. Securities and Exchange Commission accusing him of misleading investors in a hedge fund he managed.
UCITS Hedge Fund Wagers On Rosier Economic Outlook (WealthBriefing)
A long-short emerging market stock-picking equity fund that is marking its first year in the business is positioned for improved economic data in the coming months, its managers said in a recent note. “We are currently of the belief that macro data will improve over the coming months as the lagged effect of rate cuts are transmitted to the real economy, commodity price declines put extra dollars in consumer pockets, and the removal of immediate European uncertainty has a positive effect on company hiring plans and consumer spending globally,” according to the latest factsheet of the Montlake Skyline UCITS Fund.
HSBC expands Asia-Pacific equities and prime services franchise (TheAsset)
HSBC’s global banking and markets division has made nine senior appointments in its Asia-Pacific equities and prime services units. HSBC’s global equities unit continues to pursue a targeted approach in different countries. Asian markets including Hong Kong and India are among the core emerging markets in which the bank aims to maintain a top tier competitive position.
Bernanke, The Inflator (SeekingAlpha)
Well, the short-term market response is in for the Friday speech of Fed Chairman Ben Bernanke. The stock market is up, the price of gold reached a five-month high, and the value of the dollar weakened. On could argue that all three of these responses centered on the possibility that the Federal Reserve would engage in some additional monetary easing in the near future, especially at the next meeting of the Fed’s Open Market Committee meeting on September 12 and 13.
Boxing for Buhinga: The Fight Club Diaries (HuffingtonPost)
What do you do when your friend tells you they’re organising a charity white collar boxing event? As a 31 year old, size 14 (recently 16), un-sporty, office-bound ecommerce operations manager I’ve signed myself (and my skinny hedge fund analyst friend Lora) up to a white collar boxing event in November this year.
Aima Hong Kong elects new chairman (TheAsset)
The Alternative Investment Management Association (Aima), the global hedge fund association, has elected Philip Tye, founding partner and managing director of Dragonback Capital, as the new chairman of its Hong Kong national group. Anthony Byrne, head of Asia-Pacific Prime Finance and Managing Director at Deutsche Bank, has been elected as deputy chair while Michael Gibson, partner at Lim Advisors, has been elected as treasurer.
Operational due diligence and private equity, new book offers a way forward for investors (Opalesque)
Private equity is responsible for billions of dollars in investments the world over, however, those investments are often slow moving and more complex than other investment options. Despite that, private equity continues to show strong growth at all levels and with that comes increasing investor demand for transparency. In a new book – Private Equity Operational Due Diligence, independent operational due diligence expert, Jason Scharfman has created an interactive guide for investors that explains what they should be looking for from private equity funds before they invest.
Rockland saga lifts veil on conflicts of interest (iol)
A loss of R60 million need not concern members of the Telkom Retirement Fund, because “the investment is very small in relation to total [fund] assets” (0.2 percent of R30 billion). Shockingly, this is what the Telkom Retirement Fund told its members last week after the Financial Services Board (FSB) had applied successfully for the Western Cape High Court to place under provisional curatorship the Rockland Targeted Development Investment Fund (TDIF); the fund’s manager, Rockland Investment Managers (RIM); and its holding company, the Rockland Group.
Tea and trading rooms vanish as Chinese brokerages move upmarket (Reuters)
The Chinese retail investor trading room, a photogenic anachronism frequented by tea-swilling, day-trading retirees who buy and sell stocks between hands of cards, may soon be gone as brokerages cut costs and move upmarket. China’s security houses are shrinking their retail outlet space to save on rent, and converting rooms once dedicated to sociable mom-and-pop investors into spaces reserved for wealthy individuals and hot-shot hedge fund clients.
Fresenius Decides Against Second Bid For Rhoen (4-Traders)
Fresenius SE & Co. KGaA (>> Fresenius SE & Co KGaA) said it won’t place a second bid for private hospital operator Rhoen-Klinikum AG (>> Rhoen-Klinikum AG) in what could have cemented the health-care company’s leading market position in Germany. “Fresenius has decided not to submit a new takeover offer to the shareholders of Rhoen-Klinikum for the time being,” Fresenius said Monday, adding it had tried to find solutions to combine its own hospital operator Helios with Rhoen-Klinikum by taking over a stake of less than 90%.
Distressed debt funds eye UK retailers (FT)
Hedge funds and private equity firms that specialise in acquiring the debts of distressed companies are eyeing UK retailers, as limp consumer spending continues to weigh heavily on the industry. Retail has been one of the worst-hit sectors in the UK’s struggling economy, with the number of companies entering administration rising by more than a third year on- ear to 52 in the second quarter of 2012, according to accountants KPMG.
PE firms face inquiry on tax strategy (Business-Standard)
NY attorney general investigating if Bain Capital, Kohlberg and others converted management fees into fund fees The New York attorney general is investigating whether some of the nation’s biggest private equity firms have abused a tax strategy in order to slice hundreds of millions of dollars from their tax bills, according to executives with direct knowledge of the inquiry. The attorney general, Eric T Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.
Sahai keeps Citigroup ahead of the game (eFinancialNews)
Under his leadership, assets under custody have grown from $8 trillion in early 2005 to $12 trillion today, making it the fourth biggest global custodian. Sahai is well-practised at growing a business. Speaking to Financial News from his office in Tribeca, New York, the 55-year-old tells of three different occasions where he was handed a growth mandate. The first time was when he became head of transaction services in 1994, having joined Citi a decade earlier in his native India. He set up a team to develop new technologies. “That was good for cash management, and was leveraged by Citi for longer-term efficiencies,” he said.
Accountants need to expand their minds (IrishTimes)
There is clearly a need for scientists and good mathematicians in financial centres while accountants who study maths and physics could encourage some much needed innovation …In 1973, academic Myron Scholes, along with other rocket scientists borrowed from the world of physics the “heat diffusion equation” to develop a system that allowed banks to reduce the risks of trading derivatives to hedge funds and sophisticated customers. The Black Scholes model is both practical yet elegant and won Scholes a Nobel prize for his contribution to finance.
Atom’s Tsuchiya Starts Advising New Japan-Focused Hedge Fund (Bloomberg)
Atsuko Tsuchiya, a former Citadel Investment Group LLC fund manager, started advising a hedge fund that bets on Japan’s rising and falling stocks after ending a contract with a similar fund last year. Tsuchiya, chief executive officer of Tokyo-based Atom Capital Management Co., is targeting to raise about $100 million in the first year for the Atom Japan Fund, which got $10 million in seed capital from an investor she declined to identify in a telephone interview. The Atom fund will stop taking money from investors when it reaches about $300 million, she said.
California Bid To End Business Tax Break Falls Short (Bloomberg)
A California bill that would have stripped out-of-state corporations of an option for lowering their state income taxes was defeated in the closing hours of the Legislature’s term. …Revenue from the bill, which would have raised $1.2 billion next year and $950 million in each of the following two years, was to have been earmarked for university scholarships to aid students whose families earn less than $150,000 a year. California taxpayers will get a chance to vote on the so- called single sales factor in November in a ballot measure financed by San Francisco hedge-fund executive Thomas Steyer.
Analysts agree that commodities are set for a comeback (Opalesque)
August saw commodities beat equities, bonds and the dollar for a second consecutive month, in what was reported as ‘the longest streak in more than a year’. The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 6.4 percent in August, led by silver, with silver futures up 13% over August, cocoa and heating oil. Raw materials rose more than 20% since mid-June, and commodities rose more than 80% from December 2008 to June 2011.
Future Capital Partners strengthens team ahead of investment activity (Opalesque)
Future Capital Partners (“FCP”), the £6 billion ($9.5bn) alternative investment boutique, has appointed James Pargeter to its business development team as it gears up for a product push in Q4. James joins as Business Development Manager with specific responsibilities for corporate financial planning on behalf of FCP’s clients. James’ remit includes a focus on working with and developing FCP’s network of accountants & corporate tax planners, through whom FCP’s range of investments are marketed. He will work within FCP’s 10-strong business development team, headed up by Piers Denne, Head of Sales.
SEC Issues Risk Alert on “Pay-To-Play” Prohibitions Under MSRB Rules (SEC)
The Securities and Exchange Commission today issued an alert to strengthen compliance with a Municipal Securities Rulemaking Board rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers with whom they are doing or seek to do business. The Risk Alert issued by the agency’s Office of Compliance Inspections and Examinations notes that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called “pay to play” practices.
Fee Rate Advisory #7 for Fiscal Year 2013 (SEC)
The Securities and Exchange Commission today announced that in fiscal year 2013 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $136.40 per million dollars. The Commission determined this new rate in accordance with procedures required under the securities laws. Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment.
Institutional investors quicken shift to alternative investments (PIOnline)
Fixed income’s dwindling return expectations and equities’ volatility are causing institutional investors to lean more heavily than ever on alternative investments. An analysis of hirings reported by Pensions & Investments reveals that 54% of money allocated in manager hirings by institutions since the first quarter of 2011 were for alternatives. Since the start of 2011, investors have made a total of $94.6 billion in alternative investment commitments, including real estate, compared with $79.6 billion to equities and fixed income.
Hedge fund firms accepting screens to get faith-based business (PIOnline)
Hedge fund managers hungry for institutional assets are increasingly willing to incorporate exclusionary screens into their investment approaches to keep portfolios in line with the socially responsible investment values of church-affiliated investors. It was nearly impossible before the financial crisis of 2008-’09 to convince hedge fund managers to share the contents of their portfolios with investors, much less to apply any type of constraint to the managers’ investment strategies.
