22/02/2012

HFMWeek Daily Snapshot - 22 February

NEWSPAPERS AND WIRES
A rough year for Asian hedge funds in 2011 exposed the long-only bias of many managers' portfolios, leaving the industry fighting a tough battle to retain clients as assets shrink and fund closures accelerate, according to Reuters. The setback puts at risk the industry's slow recovery since 2008 and highlights the need for the survivors to reinvent themselves in Asia, where lower market turnover makes some of the trading strategies used by hedge funds in the United States and Europe harder to replicate.

John Paulson’s $23bn hedge fund was sued by an investor over Paulson & Co’s reported $468m losses in Sino-Forest Corp last year, reports Bloomberg. Hugh Culverhouse seeks class-action status on behalf of all investors who lost money in the hedge fund, according to a complaint filed today in federal court in Miami. “Defendants breached their fiduciary duties by conducting a grossly negligent due diligence analysis of Sino-Forest’s business operations that did not analyse the substantial risks of holding a near-billion-dollar investment in a forestry company based in China,” Culverhouse said in his complaint.

Lansdowne Partners, one of Europe's biggest hedge fund firms, is to rename its flagship $7.5bn UK Equity fund, reflecting its overseas investments and allowing it to invest in emerging markets, a source close to the firm told Reuters. The fund, run by Stuart Roden and Peter Davies, will be renamed the Lansdowne Developed Markets fund in April. The portfolio has already been investing about half its assets outside the UK, including taking large stakes in US banks, and will now be able to put up to 10% in emerging markets, although there are no immediate plans to do this.

Investor demands to pull out of hedge funds rose from an all-time low last month but remain at a historically subdued level, data from hedge fund services firm GlobeOp shows, in a sign investors are not deserting the sector despite last year's mediocre returns, writes Reuters. The GlobeOp Forward Redemption Indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of GlobeOp's assets under administration, was 3.14% in February.

Hedge fund manager John Paulson has been leaning on Hartford Financial to split in two, but the insurance team at Bernstein Research doesn’t think such a split can happen any time soon, reports the Wall Street Journal. Such a move “makes sense conceptually,” Bernstein analyst Suneet Kamath writes in a note to clients today. But “from a practical perspective, we feel that such a move would be quite difficult” and doesn’t appear to be a priority for Hartford’s management.

LAUNCHES AND CLOSURES
Doric Capital Corp, one of Hong Kong's oldest hedge fund firms founded by former Man Group executive Michael Nock, has shut its decade-old Asia ex-Japan long/short equity fund and plans to focus on managing its small-cap strategy, writes Reuters. Launched in October 2001, the flagship Doric Focus Fund closed in January following a 28% loss in 2011, according to a letter to investors seen by Reuters this week. Assets were down to about $25m from a peak of just over $350m in 2006.