18/06/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 18 June

NEWSPAPERS AND WIRES
Citigroup is reportedly planning to raise more than $3bn for its private-equity and hedge funds, even as US lawmakers consider banning banks from owning and investing in so-called alternative funds, reports Bloomberg. Citi Capital Advisors, which oversees about $14bn, may seek $1.5bn for private equity this year and $750m for hedge funds, said people who declined to be identified because the plans aren’t public. An additional $1bn is targeted next year for hedge funds, the people said. “Regardless of the ultimate outcome of financial reform, our priority will always be protecting the interests of our clients, who have selected us to be the fiduciary manager of their assets, and ensuring the soundness of the CCA platform moving forward,” spokeswoman Danielle Romero-Apsilos said.

Hedge funds taking directional bets on markets will be among the best performers in 2010 as concerns over the health of major economies continue to dominate markets, said Lombard Odier's head of hedge funds advisory, Reuters reports. Cedric Kohler said on the sidelines of the GAIM hedge funds conference that strong trends in currencies, equities, debt and commodities could help the strategy known as global macro to prosper into 2011 despite a disappointing May. "The overall environment has been driven by macro events in 2010, and I believe it will continue to be the case because of economic imbalances in the largest markets," said Kohler, whose team at the Geneva-based private bank oversees a fund of hedge funds and advises clients on hedge fund investments.

The hedge fund creditors of the Texas Rangers continued their effort to derail the baseball team’s sale at a bankruptcy hearing this week, demanding that team owner and private equity legend Tom Hicks be removed from the decision-making process and bitterly disputing the amount they are to receive in the sale, according to FINalternatives. Andrew Leblanc, an attorney for the creditors, led by hedge fund Monarch Alternative Capital, asked a bankruptcy judge in Fort Worth, Texas, to appoint a trustee to replace Hicks as the decision-maker for the Rangers’ equity holders. He called into question Hicks’ impartiality, noting that both Hicks and Major League Baseball favour the $575m deal led by Hall of Famer Nolan Ryan—a deal the hedge funds say undervalues the Rangers.

Man Group's $1.6bn takeover of GLG is likely to signal the start of a wave of mergers in a fragmented hedge fund industry still struggling to rebuild asset levels after the crisis, executives said, Reuters reports. Thousands of smaller funds, which have seen little of the industry's $30bn or more of inflows since last summer and which are more reliant on generating good performance to earn fees, are under most pressure to join forces, fund bosses said. But Man's deal shows most firms are still looking for ways to plug the gap left by $330bn of net outflows in the year to June 2009, according to data provider Hedge Fund Research (HFR)."Overall, we're going to see more M&A, especially in and around managers in sub-$1bn funds space," Rob Mellor, UK hedge fund leader at PricewaterhouseCoopers, told Reuters on the sidelines of the annual GAIM International conference.

Countrywide Financial Corp, the mortgage lender acquired by Bank of America Corporation on Thursday won dismissal of a lawsuit by SRM hedge fund alleging Countrywide and top executives delayed disclosure of its problems in the US housing market boom and bust, reports Reuters. A written ruling by Manhattan federal court Judge Richard Berman said in part that the hedge fund "failed to plead facts showing a primary violation of the securities laws" by former Countrywide chief executive officer Angelo Mozilo, company president David Sambol and executive managing director Eric Sieracki. The judge granted Countrywide's motion to dismiss the lawsuit, which also identified Countrywide, Bank of America and former BOFA chief executive officer Ken Lewis as defendants, ruling that the fund failed to allege the lender "made a material misstatement or omission."

Veteran hedge fund manager Bill Browder is buying commodities and the companies that produce them in emerging markets to profit from what he said is a looming crisis in the world's major currencies, says Reuters. He believes that burgeoning debt and budget deficits in Europe and the US will lead to the debasement of these currencies, shifting economic power to the better-positioned emerging economies. "The enormous debt burdens and deficits are the elephants in the room. Emerging markets generally don't have them," he said, speaking to Reuters at the GAIM International hedge fund conference here. He said his Hermitage Global fund, which manages $1bn for foundations and wealthy families, was buying shares in the cheapest companies producing hard assets and would take direct exposure to gold via exchange traded funds and mining companies.

Banks could be permitted to invest in hedge funds alongside customers, in one of several compromises being negotiated to secure votes for financial reform, according to the FT. Such a change, which has been criticised by Carl Levin, a Democratic senator from Michigan, would allow an institution to make a small capital investment in a hedge fund or private equity firm to complement that of a client. The “Volcker rule”, which prevents banks from proprietary trading, also bars sponsorship and in­vestment in private pools of capital based on the argument that deposit-taking institutions should not be engaged in risky activity. But banks and some clients have told lawmakers that a minimal co-investment would provide “skin in the game” to help ensure that banks acted in the best interests of customers.

LAUNCHES
Turcan Connell is to release one of its core strategies across the wider market with the launch of a Ucits III fund of hedge funds and structured products, says Citywire. Pending regulatory approval, the Edinburgh-based firm will launch The Absolute Return fund in the coming months, targeting annualised returns of 6% to 8%. Although the fund is intended predominantly for Turcan Connell clients, outside investors will be able to access the strategy. The strategy has a three-year track record, returning just over 6.5% per annum. Chief investment officer Haig Bathgate said the new fund is effectively carved out of Turcan Connell’s hedge fund and structured product exposure, totalling over £100m at present. ‘It is a non-directional absolute return fund and hopefully we will be able to deliver the returns that we have done historically through difficult periods,’ he said.

NewAlpha, a subsidiary of asset management firm OFI group, has announced the launch of NewAlpha Genesis 4, its fourth hedge fund seeding vehicle for institutional investors. The fund, which is a contractual fund, aims to raise €200m from European institutional investors, family offices, private banks and sovereign funds. “The crisis in 2008 prompted investors to pool their positions with the most established managers, generating major concentration risks and depriving them from the innovative potential offered by smaller, young fund managers,” said Antoine Rolland, NewAlpha’s CEO and CIO. “These early-stage managers deliver higher returns, mainly due to their relatively pure investment style and their adaptability to increasingly turbulent market conditions.” NewAlpha AM has invested a total of €380m in 14 mostly foreign fund managers since its inception in 2003.