21/06/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 21 June

NEWSPAPER AND WIRES
JPMorgan Chase is pushing ahead with talks to buy a large Brazilian hedge fund and private equity group, in spite of impending US legislation designed to limit the involvement of commercial banks in such activities, according to the FT. People close to the situation said the US financial group was in advanced discussions to buy Gávea Investimentos, an asset management company that manages about $5.3bn in assets and was founded by Armínio Fraga, the former president of Brazil's central bank. No deal has yet been reached and the talks could still collapse, but JPMorgan's decision to go ahead with the discussions highlights its confidence that the new regulatory regime will not prevent deposit-taking banks from owning hedge funds. The so-called "Volcker rule" would ban banks from trading on their own account and limit their ability to invest in or "sponsor" hedge funds and private equity.

European legislators are likely to miss their July 6 deadline for ratifying regulation on alternative investments, says Financial News. According to sources, the final vote may be delayed until the autumn, giving private equity and hedge fund trade bodies more time to lobby for changes in the text of the Alternative Investment Fund Managers (AIFM) Directive. The European Parliament, European Commission and European Council held their third meeting last week to consider removing exemptions previously inserted for private equity. But the parties have struggled to reach agreement and more meetings are planned, according to sources. The three institutions had planned just five meetings before putting a final text to a European Parliament vote on July 6. But a further two meetings have now been scheduled – one at the end of the month and one in early July during the same week as the vote. A source said a parliamentary vote on July 6 was now highly unlikely.

Asset management firm F&C is embroiled in a High Court battle with two hedge fund managers over whether it was valid for the men to exercise a series of “put options” last year, reports the FT. The complex case, which began this week, centres on a limited liability partnership set up in 2004 between F&C and Francois Barthelemy and Anthony Culligan at a time when F&C was seeking to fill a gap in its product offering relating to funds of hedge funds investment. F&C holds a 60% interest in the LLP, which managed and set up funds, and the two men hold 20% each. The two men allege in court documents that after the collapse of Lehman Brothers in late 2008, F&C “wanted to shut down the LLP” and tried to do so without informing the individual partners. F&C, which is counter-suing the pair, denies the allegations.

A.R. Capital Group’s founder, Alan Fishman, was sentenced to 37 months in prison for his role in stealing from investors, reports Bloomberg. Fishman and Daniel Ledven, a principal at the firm, pleaded guilty in March to one count each of conspiring to commit securities fraud, US Attorney Preet Bharara in New York said in a statement. Ledven was sentenced to 57 months in prison, according to the statement. A.R. Capital raised about $20m from individual investors in its purported hedge fund between 2003 and September 2006, claiming the money would be invested in international real estate companies and used for leveraged trading, but about $18m of the money was wired to bank accounts in the Ukraine, prosecutors said.

Lehman Brothers International Europe’s unsecured creditors may see returns on billions of dollars in claims cut in half if the failed bank’s parent company wins a case over how funds were separated, says Bloomberg. Lehman Brothers Holdings, which is in bankruptcy in New York, and a hedge fund are asking a London appeals court today for access to money that wasn’t protected in separate accounts by Lehman’s U.K. unit. A lower court ruled in December that clients who didn’t have properly-segregated funds would be treated as unsecured creditors in the UK insolvency case. If Lehman wins the case, the “cash available for the unsecured creditors will be depleted and may even be extinguished,” said Arun Srivastava, a lawyer for Hong Leung Bank, which is representing the unsecured creditors in the case.

Hedge fund T2 Partners has said it likes shares of BP despite the Gulf of Mexico oil spill that has tainted the British company and its stock, according to a Barron's article published on Sunday, Reuters reports. In a column titled "Other Voices," T2's managing partners said their reasons for recently taking a new position in BP are that it is "extraordinarily cheap" and that BP is "highly likely" to be able to cover clean-up, damages, fines and lawsuits relating to the disaster. "The near-term fundamentals are terrible, nobody knows when they will improve and fear-mongers dominate the headlines," managing partners Whitney Tilson and Glenn Tongue said in Barron's. "But for investors with courage, conviction and an outlook longer than a few months, we think this market overreaction is a wonderful buying opportunity."

Hedge fund manager Fortitude Capital is in talks with BT and Macquarie to include its soon to be launched retail offering, Aurora Fortitude Diversified Income Trust, onto their platforms, reports the Financial Standard. Sheriden Hure, senior portfolio manager at Fortitude Capital, said the firm is launching a retail version of its flagship fund, the Fortitude Absolute Return Trust. Hure also confirmed that the firm, which recently announced it was merging with Aurora Funds, is in talks with BT and Macquarie to have its product on their platforms. The expected launch date is 1 July. A key element to the new product is daily liquidity, a feature prized by planners who want the availability of quick withdrawals if necessary."It allows a lot more people to decide how to allocate the funds within the portfolio, giving them flexibility," said Hure.

LAUNCHES
Former Citywire AAA-rated star Ajay Gambhir has returned to the retail market with the launch of a pan European-focused Newcits fund, says Citywire. Gambhir investment skills have only been available to high net worth investors through his Samsara hedge fund since he quit JP Morgan for RWCV Partners (formerly MPC Investors) in March 2007. The Luxembourg-domiciled RWC Europe Absolute Alpha fund will be based on the same strategy Gambhir applies to Samsara. It will target an annualised return of between 10-15% over the market cycle and carry a 20% performance fee subject to a high watermark and threshold. The fund currently contains 121 holdings with 62 on the long side and 59 on the short and has a net long position of 60% and a gross exposure of 180%.  

Charlemagne Capital, the specialist emerging markets group, has announced that it has today launched the Magna Undervalued Assets Fund. The fund aims to invest in listed close-end funds and companies trading at large discounts to their NAVs and to work actively to narrow these discounts, and will invest in opportunities across Global Emerging Markets, ranging from listed equities to property. Underlying assets are expected to be listed across a range of stock markets, including London, AIM and NYSE, as well as local emerging market. The fund will be structured as a sub fund of Magna Umbrella Fund, an open ended investment company authorised by the Financial Regulator as a Ucits III fund.