12/07/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 12 July

NEWSPAPERS AND WIRES
Hedge funds slashed bets that oil would rise last week to the lowest level in more than a year just before crude began its biggest advance since May, reports Bloomberg. So-called long positions on the New York Mercantile Exchange dropped 31% in the seven days ended 6 July to the lowest level since April 2009, according to the weekly Commitment of Traders report from the Commodity Futures Trading Commission. Oil rose 5.5% on the Nymex last week, settling at $76.09 a barrel as of 9 July. It slipped 0.3% today to $75.89 a barrel at 6:30 am London time.“There’s a lot of fluctuation in the market,” said Hamza Khan, an analyst with Schork Group, a consulting company in Pennsylvania. “We’re seeing money managers getting it wrong more often than they’re getting it right.”

Hedge funds and other investors are preparing to profit from the latest chapter of the European sovereign debt crisis: the publication of the results of bank stress tests on 23 July, says the Guardian. Investment banks have been compiling research notes designed to ensure speculators get the most out of the uncertainty, regardless of the test results. These may underline the soundness of the European recovery and trigger a jump in bond and share prices, or indicate a gloomier scenario and cause a plunge in value. In Europe, speculation about the exposure to volatile southern European bonds has hit the share price of banks such as Santander. The tests are expected to show banks' exposure to sovereign debt, but may leave out bigger parts of their balance sheets, such as loans or other fixed income products, a hedge fund manager said.

A hedge fund manager wants to donate $150m to Stony Brook University - but there's a catch, says NY Daily News. James Simons, who once led the school's math department, will only provide the money if the state agrees to loosen its control of the state university system. Simons, who is already the biggest donor in the history of Stony Brook, wants the Legislature to let each SUNY school set its own tuition. If they allow it, he'll fork over the dough. Governor Paterson supports allowing the schools to set their own tuition, though most members of the Assembly do not. Critics worry the plan could make the state system too expensive for low- and middle-income students. Forbes magazine estimated Simons' worth at about $8bn. He has donated thousands to politicians from both major parties, including Paterson.

Asia-based hedge fund managers are able to generate higher returns than those outside the region running similar strategies, according to a study, the FT reports. The results come as some of the world’s biggest hedge funds, including Soros Fund Management, seek to open offices in Asia to complement their existing operations in Europe and the US. “While there are some very good Asian managers based outside the region, generally they’re handicapped in their return potential compared with indigenous managers,” said Peter Douglas, head of GFIA, the Singapore-based consultancy that carried out the research. The study, which tracked the performance of 668 funds from January 2005 to May 2010, found that Asia-based managers generated better annualised returns, on average, than their non-Asia-based peers.

The UK's youngest finance minister since 1886 said Sunday he's "personally quite attracted" to a measure within US financial overhaul plans that would curb proprietary trading by banks, reports the Wall Street Journal. During an CNN interview George Osborne, the UK's Chancellor of the Exchequer, said it's been his position for more than a year "that large-scale proprietary trading and large-scale internal hedge funds don't sit totally easily alongside retail banking." The measure, known as "the Volcker rule," as it was proposed by former Fed Chairman Paul Volcker, would curb propriety trading by the largest financial firms, though banks could make de minimus investments in hedge and private-equity funds. 

Aberdeen Asset Management has overhauled the ex-Bramdean Alternatives investment trust, which had inadvertently invested in Bernard Madoff’s huge Ponzi scheme, reports Fund Strategy. David Boyle, the new manager, has changed the portfolio from a pan-alternatives vehicle into a private equity fund of funds after Aberdeen replaced Bramdean as manager and rebranded the trust Aberdeen Private Equity. The hedge fund holding, 3.3% at the end of April, will fall to zero. Aberdeen has invested 51.7% of the portfolio in private equity, with 42.5% in cash. Part of the cash will be invested in new opportunities, including specialist funds such as M&G Healthcare, leaving part of it to invest in existing holdings. Of the fund’s portfolio, 31% is in buyouts, 18% in distressed debt, 17% in secondary investments, 15% in venture capital, 10% in growth capital and 9% in other areas.