15/02/2010 Author: Tony Griffiths

HFMWeek Daily Snapshot - 15 February

NEWSPAPERS & WIRES
Global hedge funds have staked millions of dollars against some of Europe's biggest companies amid continuing fears over the strength of the euro, reports the Daily Telegraph. A raft of European banks, healthcare companies and property firms have attracted a sudden spike in short positions over the past two weeks, according to figures from DataExplorers. Financial stocks, considered to be in the frontline in the event of a full-blown attack on the euro, have been particularly targeted. Bolsas y Mercados Espanoles (BME), the operator of the financial markets in Spain, is showing a short position worth nearly 7pc of its €1.7bn market value, suggesting that traders are betting nearly €120m that its share price will fall. Spanish banks Banco de Sabadell and Banco de Valencia are also being shorted by hedge funds.
 
Money flows to US mutual funds were positive in January, with investors pouring more than half their investments into bond funds and international funds posting their biggest monthly inflows since late 2007, reports Reuters. A report by Morningstar said US stock funds reversed a four-month slide, taking in $2.7bn last month after bleeding $25.8bn in 2009. US mutual funds took in $44.5bn in January, with taxable and municipal bonds gathering $28bn in assets. International funds took in $8.1bn, adding to the $25.5bn they took in last year, Morningstar said.
 
Warren Buffett has increased his investment in Munich Re to become the biggest shareholder in Europe’s largest reinsurer, with a stake worth almost €1.1bn ($1.5bn), reports the Financial Times. The US investor owns more than 5.07% of Munich Re shares, according to a regulatory filing required after his stake exceeded 5%. Mr Buffett last month also acknowledged holding options for a further 1.95% stake, with an exercise date of 11 March. His stakebuilding in the German group began several years ago but was stepped up last month when he reported owning more than 3%.
 
Bloomberg reports that David Tepper, the money manager with one of last year’s top-performing hedge funds, bought four US airline stocks and raised his Citigroup stake by 73% in the fourth quarter, a regulatory filing shows. His Appaloosa Management’s holdings in Citigroup rose to 138.1 million common shares at yearend from 79.7 million shares at 30 September, according to a Form 13F filed yesterday with the US Securities and Exchange Commission.
 
Some of London’s largest hedge fund managers are stepping up their hiring, adding traders and sales people from investment banks, as well as from their smaller fund manager peers, reports the Wall Street Journal. Among the most active recruiters in recent months have been blue-chip hedge funds Caxton Europe, Citadel Europe, Moore Europe, SAC Global Investors and Tudor Capital Europe.
 
A few weeks ago, one of Europe's largest hedge funds quietly decided to refrain from using credit derivatives to make aggressive bets that Greece and other peripheral eurozone countries might default, reports the Financial Times. The reason? Though the fund could see short-term profit opportunities in the trade – and knew other funds were exploiting this – its managers feared a regulatory backlash and political shift, if pressures rose on the eurozone. It was a canny call. Last week, turmoil in eurozone markets eased after European leaders pledged vague support for Greece. But while their statement grabbed the headlines, what provoked most debate on trading desks in London was a comment from Christine Lagarde, French finance minister. She warned that European leaders would take a united approach towards "speculators". Then she warned that "what we are going to take away from this crisis is certainly a second look at the validity, solidity of sovereign [credit default swaps]", or the market when investors use derivatives to bet on whether governments might default.
 
Billionaire activist investor Nelson Peltz disclosed that the value of stocks held by his firm Trian Partners fell about 18% in the fourth quarter as the company sold stakes in several holdings, reports Reuters. Trian Partners General Partner llc held stakes in stocks with a value of almost $1.66bn on 31 December 2009, according to documents filed with the US Securities and Exchange Commission. That was down from more than $2.03bn at 30 September 2009. During the fourth quarter, the New York-based hedge fund sold its shares in Chemtura, Kraft Foods, Philip Morris International, Lorillard, Career Education, General Mills and Willis Group Holdings, according to the filings.
 
LAUNCHES & CLOSURES
Liontrust's head of fixed income Simon Thorp has said his forthcoming absolute return bond fund would deploy full Ucits III powers to replicate his long/short credit strategy, reports the Financial Times. He said the Ucits format would see returns on the Liontrust Credit Absolute Return fund fall by as little as 20%, compared with his existing hedge fund, while providing weekly liquidity. The Cayman-based Liontrust Credit fund has gained 135% since launch in November 2000, net of fees and expenses, despite scandals such as Enron and Parmalat, the tech bust and the credit crunch.
 
PEOPLE MOVES
Goldman Sachs Group said Marc Spilker, co-head of the investment management division, is leaving after 20 years at the firm, according to an internal memo. Edward Forst will take over Spilker’s role, according to a separate memo, reports Bloomberg.