05/03/2010 Author: Tony Griffiths

HFMWeek Daily Snapshot - 5 March

NEWSPAPERS & WIRES
Hedge funds have significantly increased their investments in banks in the past year, particularly buying more stock in the fourth quarter, regulatory filings show, the WSJ reports. Hedge funds now own 19% of Popular, more than 9% of SunTrust Banks, 6% of Citigroup and Zions Bancorp, and more than 4% of Wells Fargo & Co "Hedge funds like to buy bargains," said Anton Schutz, a portfolio manager with Mendon Capital Advisors Corp, who bought $3.4m in Citigroup stock and invested in several regional banks such as New York Community Bancorp.
 
Representative Sander Levin will take over the Ways and Means tax-writing panel in the US House of Representatives pending the outcome of ethics probes against fellow Democrat Charles Rangel, says Reuters. Levin may be best known on Wall Street for championing a bill to change the tax treatment for hedge and private equity fund advisers, taxing so-called carried interest as ordinary income. Levin has several times sponsored a bill to change the tax treatment of investment income earned by private equity, hedge funds and certain other managers. Currently the income is treated as a dividend income, taxed about approximately 15%.
 
Singapore is planning to create its own hedge fund capital, modelled on Greenwich, Connecticut, in a cluster of ex-British army homes called Nepal Hill, a 15-minute cab-ride from the city-state’s main banking district. The Monetary Authority of Singapore and JTC Corp – the government agency developing and marketing the project in Nepal Hill – quietly asked hedge fund managers in January to visit the district’s so-called black-and-white bungalows, named for their white-washed walls and dark timber frames, according to a copy of the invitation obtained by Bloomberg.

Cocoa prices may fall 13% in two months, extending this year’s slump, as traders shift money away from commodities to the dollar, said Luis A Rangel, a trader and researcher at ICAP Futures, Bloomberg reports. Hedge fund managers and other large speculators have slashed their net-long positions in cocoa futures, US data show. Speculative long positions outnumbered short positions by 28,506 contracts on 23 February, down 36% from a 22-month high on 26 January. The dollar has climbed 7% against a basket of major currencies since the end of November.

Investors are expected to take more time to select managers who are grappling with the spectre of new regulation as well as macroeconomic concerns, executives at the Reuters Private Equity and Hedge Fund Summit said this week. "US pension funds that haven't been direct participants in the hedge fund industry are now working with hedge fund consultancies, looking for opportunities," said James Fallon, director at Bank of America Merrill Lynch, speaking about increased interest from US pensions in Asia. In January, global investors sent $4.51bn in new money to hedge funds, hedge fund research and services company Channel Capital Group reported.

Investors plowed a record $2.6bn into global bond funds in the week ended 3 March, moving out of money markets to seek higher returns because of the threat of quickening inflation, EPFR Global said in a report. US bond funds drew in $2bn, attracting cash for a 61st straight week, the report showed. Money market funds lost $30bn of assets, the Cambridge, Massachusetts-based data company said, Bloomberg reports.

Victims of the Bernard Madoff scandal that invested through the $1.4bn Luxembourg-based LuxAlpha fund set up by UBS cannot sue the Swiss bank and auditor Ernst & Young directly, a Luxembourg court has ruled, the FT reports. Instead, they must file claims via the liquidators of the fund, a judge said on Thursday in a test case involving 10 investors. More than 100 lawsuits have been filed against UBS, which served as custodian for the LuxAlpha fund, claiming it neglected its duties by delegating control of the assets to Madoff.