13/12/2011 Author: Will Wainewright

HFMWeek Daily Snapshot - 13 December

NEWSPAPERS AND WIRES
After months of heavy losses, big and small clients asked funds to return $9bn in October, Bloomberg reports. That number is three times as large as the $2.6bn they pulled out in September, data from BarclayHedge and TrimTabs Investment Research show. The dramatic jump in redemption requests shrank the industry to $1.66trn, its lowest level in nearly two years and well below its $2trn peak, the researchers said in a report released on Monday.

Three former executives of Washington Mutual Inc. have agreed to settle a civil lawsuit stemming from the biggest-ever US bank failure for less than 10% of the $900m that was sought by federal regulators, people familiar with the situation told the Wall Street Journal. The deal would mark the latest setback for the government in a high-profile, financial-crisis-related case. The lion's share of the payout, which is expected to total less than $75m, would come from insurers and the bank's estate - not from the pockets of the former executives.

Raj Rajaratnam, the former hedge fund manager serving an 11-year prison sentence for insider trading, can have his passport back, along with the title to his $17.5m Manhattan apartment and $2.5m in cash, Bloomberg reports. Rajaratnam, the Galleon Group co-founder, reported to a federal medical prison in Ayer, Massachusetts, on 5 December to begin serving his sentence. US District Judge Richard Holwell agreed with prosecutors that Rajaratnam’s assets, which secured his $100m bond, should be returned. 

Richard Hurowitz, who has been running a $1bn hedge fund since leaving Halcyon Asset Management, made his foray into shareholder activism on Monday by taking on the boards of a Canadian and a German company, writes Reuters. Whipsawing markets driven by the euro zone debt crisis and uncertainty over global economic growth have made it more challenging for hedge fund managers to deliver the returns they have promised investors, spurring them to try new strategies.

European banks seeking to meet capital targets by selling contingent convertible bonds may struggle to attract investors after regulators imposed limits on the form the instruments must take, according to Bloomberg. The European Banking Authority said last week lenders could use the securities, bonds that convert into equity or are written down if a bank’s capital drops below a set level, to help plug a €115bn ($153bn) capital shortfall.

Sino-Forest Corp., the timber producer fending off fraud allegations, said it will default on its bonds and miss a self-imposed deadline to report earnings as it considers putting itself up for sale, Bloomberg writes. Sino-Forest won’t make a $9.78m interest payment on its 2016 convertible notes that’s due 15 December, the Hong Kong-and Mississauga, Ontario-based company said yesterday in a statement. There’s no assurance if or when the earnings results will be released, it said.