11/06/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 11 June

NEWSPAPERS AND WIRES
Many hedge funds are adopting a new way to avoid a repeat of the massive redemptions that crushed managers during the 2008 financial crisis, according to MarketWatch. So-called investor-level gates are becoming increasingly common through the industry, replacing more traditional fund-level gates, say investors. King Street Capital Management, one of the largest credit hedge fund firms with more than $19bn in assets, introduced an investor-level gate recently, while Philip Falcone's Blue Line distressed debt hedge fund, launched last year, also  has an investor-level gate. The new approach limits investors to withdrawing a portion of their money from hedge funds at any one time. A common investor-level gate limits redemptions to 25% of an investor's money each quarter over four quarters.

Austrian hedge fund Superfund said on Friday it has shut six international sales offices and laid off staff as part of cost-saving measures amid a tough business environment, Reuters reports. Superfund has closed its sales offices in Singapore, Dubai, Sydney, Sao Paulo, Liechtenstein and Monaco and will now manage its operations out of Vienna, Hong Kong and New York, the firm said in a statement. The firm, which uses computer programmes to run its managed futures funds, rose to prominence in the mid-1990s by regularly producing double-digit returns; however, according to Superfund's latest report, its flagship Superfund Q-AG lost 24% in 2009 and was down 6.9% in the five months ended May.

A judge in New York has signed off on a $26.3m settlement Ciena Capital struck with a hedge fund and the federal government to resolve allegations of loan fraud, reports the Wall Street Journal. Judge Arthur J. Gonzalez of the US Bankruptcy Court in Manhattan approved the deal in court papers filed Wednesday, affirming that the settlement is "in the best interests of the debtors, their estates and their stakeholders" and a "fair and equitable" resolution to the dispute.  Under the settlement, the US Small Business Administration and hedge fund Greenlight Capital will drop claims related to the fraudulent loan scheme that landed a former Ciena executive a 10-year prison sentence – and in exchange, Ciena will pay $26.3m.

Hedge fund veteran Seth Klarman almost doubled his hedge fund’s assets to $22bn in the past two years as the industry shrank – by sticking with the off-the-beaten-path investments he has pursued since starting out in 1983, says Reuters. Unlike John Paulson, who made $15bn by betting against home mortgages, Klarman didn’t see one big trade that would profit as markets began to collapse. Instead, the founder of Baupost Group focused on corporate bonds he calculated would yield solid returns even if the economy got worse. “We didn’t have the degree of conviction Paulson had,” said Klarman in an interview. “We don’t deal in absolutes. We deal in probabilities.”

US hedge fund CarVal Investors has allegedly given an emergency loan to Lifemark, a stricken Luxembourg company in which British pensioners have invested around $510m (£350m), reveals Reuters. The $2.5m loan is the first of four possible advances - up to a total of $6m - to help Lifemark pay hefty premiums on its portfolio of life settlement policies and avoid seeing $1.3bn worth of policies start lapsing. "Lifemark needed short-term funding that has been supplied by CarVal," one source said on Thursday. "People are now working on the restructuring plan which will hopefully be proposed to bondholders in the near future."

European hedge funds betting on the fallout from unforeseen events were among a small band of winners in a stormy May for investors – and they predict things could get stormier over the next three months, says Reuters. While hedge funds lost about 2 to 3% of their value in May, according to data groups, against a backdrop of a 10% fall in world stocks – as markets were buffeted by the "flash crash" on the Dow, BP's Gulf of Mexico oil spill and riots in Greece against austerity measures to combat its debt crisis – a few funds betting on fallout from rare, unforeseen events reaped the benefits, as did some funds betting on currency moves or those able to hedge against market falls.

LAUNCHES
A former top executive at Steven Cohen's SAC Capital Advisors plans to launch his own hedge fund firm, according to business documents, reports Reuters. Brian Cohn, who was SAC's president until January 2008, plans to launch Archeroak Capital Management in Old Greenwich, Connecticut, according to documents from the Delaware Corporate Registry where he incorporated the firm late last year. Cohn, 43, left SAC after working at the $12bn fund firm for more than a decade, though he was not directly involved with making investments. Cohn's move comes at a time when large pension funds are eager to help boost returns by putting money to work in the hedge fund industry and many new funds are being launched. A handful of former executives at prominent fund firms have announced plans in the past months to set off on their own.

PEOPLE MOVES
HSBC has hired a former Goldman Sachs relationship manager to its year-old prime services division, responsible for helping integrate new hedge fund clients on to the platform, as the UK bank extends its efforts to win lucrative business from alternative and traditional asset managers, says Financial News. Anthony Bennett has joined HSBC as head of integration at the prime services unit it forged last summer, and will work with the prime services sales and client services team to help bring new hedge fund clients on to the unit's platform. Bennett joins from Goldman Sachs, where he was a relationship manager in the prime brokerage team. Based in London, he will report to Terry Minkey, global head of client service and integration for HSBC Prime Services.