24/02/2010 Author: Tony Griffiths

HFMWeek Daily Snapshot - 24 February

NEWSPAPERS & WIRES
Hedge fund assets may climb 14% this year as proposed regulations ease the concerns of risk-averse investors, according to Eurekahedge, says Bloomberg. Assets may reach $1.68trn by the end of the year, compared with about $1.48trn in 2009 when managers posted their best annual performance in six years, according to the Singapore-based industry researcher. Eurekahedge also reported that Asia ex-Japan hedge funds declined 2.42% in January, after gaining a record 37.4% in 2009.
 
The US Treasury Department wants to give regulators discretion to define proprietary trading, as the White House tries to revive its plan to bar banks from making risky bets that could cause another financial crisis, Bloomberg reports. One month after President Barack Obama said firms “will no longer be allowed” to trade for their own accounts, officials say they need flexibility to avoid impairing the $7.2trn Treasury securities market.
 
EU lawmakers said on Tuesday that they were optimistic about reaching a compromise deal on controversial hedge fund and private equity fund legislation, the FT reports. As a key parliamentary committee met on Tuesday, lawmakers from the main political groupings sounded surprisingly hopeful of working through their differences and praised the lead given by Jean-Paul Gauzes, the French centre-right MEP who is charged with steering the legislation through the European parliament.
 
Citigroup is in talks to sell a hedge fund business with about $4bn in assets as the bank company continues to whittle down a $547bn pool of assets marked for sale, reports the WSJ, citing people familiar with the sale talks. SkyBridge Capital, a New York alternative-asset manager led by two alumni of Goldman Sachs Group, is in advanced talks to buy Citi's fund of hedge funds business, the same people said. No pact has yet been signed, and the proposed sale price couldn't be determined.
 
Hedge funds are using little borrowing and do not pose a big risk to the global financial system, said Britain's FSA, in a boost to those fighting European plans to clamp down on the industry, Reuters reports. The two FSA surveys of UK-based large hedge fund firms and prime brokers, conducted at the end of October, show that on average hedge funds were borrowing $102 in October for every $100 they had raised from investors. "(Prime broker data suggests) ... major hedge funds did not pose a potentially destabilising credit counterparty risk across the surveyed banks," the FSA said in a statement.
 
Rab Capital, the London hedge fund manager that bet on the recovery of Northern Rock and lost, is to auction investors’ stakes in its beleaguered flagship fund, reports the FT. In an effort to mollify unhappy clients of the $550m (£356m) Special Situations fund, once the poster child of hedge fund investing, Rab is to allow the entire fund to be put up for sale in the secondary market – a rare decision within the usually closely guarded hedge fund industry.
 
Steel Partners, the activist hedge fund group controlled by Warren Lichtenstein, yesterday raised the heat in its clash with Sapporo by asking shareholders to support moves to improve corporate governance at the Japanese brewer, the FT reports. The US activist hedge fund, which has an 18% stake in Sapporo and has been its largest shareholder since 2004, is urging other shareholders to vote for six new directors that Steel Partners has nominated to Sapporo’s board.
 
Corriente Advisors, a hedge fund firm that handed investors a six-fold gain betting against US subprime mortgages, is cashing in a portion of a winning wager against European government bonds, according to two investors, says Bloomberg. Corriente’s European Divergence Master Fund, set up in late 2007 anticipating the weakest European nations would have trouble meeting debt obligations, will make a $320m payment to its backers next month, said the investors, who declined to be identified because the information is private.
 
London-based Commoditrade is opening its hedge fund unit to outside investors next month. The investment firm has renamed the unit, which it bought last February, for the occasion. Rather than investing in AMCO Commodities, investors will give their money to Mentum, Bloomberg News reports. And instead of the hedge fund structure that the firm has employed since its debut four years ago, Mentum will offer separately managed accounts exclusively.
 
A little-known hedge fund manager in Fort Worth, Texas, has racked up hundreds of millions of dollars in profits betting on the debt crisis roiling Europe, reports the WSJ. Rather than celebrate his two-year bet, however, Mark Hart III is lying low, as some policy makers lash out against those wagering against the debt of various countries. Hart is one of several investors who for years have been betting on fiscal woes in Europe. Unlike many other managers, he runs a fund dedicated to making this trade.
 
Carl Icahn is fighting back against a Texas hedge fund honcho he calls a 'serial suer', says FIN Alternatives. The billionaire investor and hedge fund manager has filed a countersuit against Geoffrey Raynor, whose Q Investments and Nineteen Eighty-Nine hedge funds last month sued Icahn and his Ichan Enterprises, seeking to derail the latter’s $2bn debt sale plan. Q alleged that Icahn Enterprises, which is controlled by Icahn’s hedge fund, Icahn Associates, misled potential investors about its stake in auto parts supplier Federal-Mogul. But Icahn has an allegation of his own: Q and Raynor filed the lawsuit despite knowing it was “false and frivolous.”
 
PEOPLE MOVES
Two former Merrill Lynch investment bankers, Sam Chapin and Todd Kaplan, will return to the firm as executive vice chairmen of global banking, Bank of America said on Monday, Reuters reports. Chapin will be based in New York, while Kaplan, recently at hedge fund Citadel Investment Group, will be based in Chicago. Prior to leaving the bank last year, Chapin was with Merrill for 26 years, and Kaplan for 22 years.