10/06/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 10 June

NEWSPAPERS AND WIRES
A panel headed by Governor Charlie Crist approved a revised investment policy Tuesday for Florida's state retirement fund to reduce its reliance on stocks and other equities while adding hedge funds, says Bloomberg. The State Board of Administration adopted the changes recommended by a consulting firm, the board's advisory council and its executive director, Ash Williams, a former Wall Street hedge fund manager. The changes are expected to reduce the $109.5bn pension fund's risk while increasing its return by $2.1bn over a span of 15 or more years. While the board currently has no hedge fund investments, the revised policy targets 4% of the pension assets for hedge funds during the first phase and 6% if the Legislature changes the law.

Citigroup shares are trading at a "meaningful" discount, partly because the banking giant has roughly $50bn of assets and excess capital that the market hasn't really spotted, hedge fund manager Bill Ackman wrote in a letter to investors this week, reports the Wall Street Journal. Pershing Square Capital Management, Ackman's hedge fund firm, recently bought 146.5 million Citi shares, wagering about 9% of fund capital on the company. However, Citi shares have slipped in recent weeks on concern about financial industry reform, alleged fraud at Goldman Sachs, the overhang of the government's big stake in Citi and sovereign-debt problems in Europe, Ackman said. Those pressures "have created a compelling opportunity to purchase Citi shares at a meaningful discount to their fair value," Ackman wrote in the letter.

An Australian hedge fund manager has filed a lawsuit against Goldman Sachs seeking more than $1bn in damages after losing money in troubled mortgage-linked securities, according to the Wall Street Journal. Basis Capital's Basis Yield Alpha Fund alleges it was defrauded when it purchased $78m of the Timberwolf synthetic collateralised debt obligations being sold by Goldman in June 2007. The Sydney-based hedge fund manager said in the suit that Goldman knew at the time that the securities were doomed as the mortgage market began to show cracks. "Goldman was pressuring investors to take the risk of toxic securities off its books with knowingly false sales pitches," said Eric Lewis of Baach Robinson & Lewis, Basis Yield Alpha Fund's lead counsel.

Bonds of Asian companies at the lower end of investment grade that are least affected by economic swings offer the best opportunity for investors, according to hedge fund Prudent Asia Capital Management, reports Bloomberg.“Asia will witness sustained growth while at the same time, companies are deleveraging,” Jim Lee, co-founder of Prudent Asia, said in an interview. “We’re more focused on developed economies within Asia, such as Japan, Korea and Australia. Within that, defensive sectors which aren’t cyclical, like banks, utilities and waste-management companies.”East and South Asian economies will grow 7.1% in 2010 versus 2.9% for the US and 1% for the European Union, according to a May United Nations report. Asia proved more resilient to the economic slowdown, the report said.

Pierre-Henri Flamand, head of Goldman Sach’s in-house trading until the end of last month, has begun marketing his own hedge fund in what is expected to be one of this year's biggest launches, the Wall Street Journal reports. Flamand is said to have been meeting with investors in the US and the UK to raise money for the fund, called Edoma Partners and plans to trade global stocks, with a focus on Europe, and has a seven-person investment team that includes several other Goldman alumni. Flamand resigned from Goldman earlier this year and has secured offices on boutique-lined Bond Street. He is currently said to be in the process of registering Edoma—a name derived from the first letters of his children's names—with regulators.

A man accused of trying to sell insider information about the Walt Disney company to hedge funds has been ordered held without bail, reports FINalternatives. Yonni Sebbag’s lawyer did not oppose the prosecution’s request that his client be detained, explaining that Sebbag had only just hired him. Sebbag and his girlfriend, former Disney secretary Bonnie Hoxie, were arrested last month after they tried to sell advanced information about Disney’s earnings to about 20 hedge funds, as well as other investment firms. Sebbag was transferred to New York, where the case was filed, on Monday. Hoxie, who is free on bail, is expected to appear there tomorrow. Both face up to 20 years in prison if convicted of the conspiracy and wire fraud.

LAUNCHES
GCI Asset Management and Orix Investment Corporation will start today a hedge fund using computer models to spot trends in futures prices and profit from market turmoil, Bloomberg reports. The Orix Commodities Fund will open with initial capital of 4 billion yen ($44m) and aims to increase assets to as much as 30 billion yen ($328m) within three years, said Shinichiro Nagai, a senior manager at the investment group of Tokyo-based GCI, a Japanese hedge-fund firm. The CTA uses computer programs to search for price signals in futures markets ranging from equities and bonds to oil and gold. “Being one of the few Japan-based CTAs, we will aim to capture the appetite of those seeking Asian exposure,” said Atsuhito Mori, Orix Investment’s chief trader, in an interview in Tokyo.

Financial services firm Matrix has announced the launch of its second Ucits III fund, the Matrix Lazard Opportunities Fund. The fund, which is managed by Matrix Money Management, who in turn has appointed Lazard Asset Management as its sub-investment manager, aims to achieve absolute returns through a combination of capital appreciation and income. The fund’s strategy aims to take advantage of situations where the team believes a security’s price diverges from its expected value and aims to provide superior risk-adjusted returns when compared to broad equity and credit benchmarks. Sean Reynolds, senior portfolio manager, leads a six person investment team, with experience in event driven, relative value and convertibles strategies.