13/07/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 13 July

NEWSPAPERS AND WIRES
The hedge fund industry recorded estimated inflows of $4bn in May, the third month of more money getting put into them than leaving in the past four months, according to TrimTabs and BarclayHedge, reports the Wall Street Journal. However, the inflow was more than offset by woes in the stock market that led to hedge fund asset levels falling for the first time since July. Funds saw their biggest loss in 19 months in May, but the drop paled in comparison to those in US equities markets. BarclayHedge chief executive Sol Waksman said that during May that "hedge funds posted a negative return of 3.2%, the worst since October 2008. But flow data won't show a hit until June because most funds allow redemptions only on a quarterly basis". Asset levels fell $30bn in May to $1.5trn, said Trim Tabs/BarclayHedge, and outflows related to the recent declines are likely to be seen in the June data.

Billionaire Nelson Peltz is seeking to raise $1.5bn for a fund aimed at buying minority stakes in public companies, according to two people with direct knowledge of his plans, Bloomberg reports. Peltz, who oversees New York-based hedge-fund firm Trian Fund Management, is marketing the investment pool as a private-equity fund because client money will be locked up for longer than with most hedge funds, said the people, who declined to be identified because the information is private. The fund will seek representation on the boards of companies in which it invests, said one of the people. Peltz is the largest investor in fast-food chain Wendy’s/Arby’s Group Inc. and is known for buying stakes in companies and then pushing them to increase their value by cutting costs or merging.

A hedge fund is taking aim at the world's biggest banks in an effort to recoup $1.2bn it lost on subprime mortgages, entering a legal fight where so far Wall Street has largely been unscathed, says Reuters. The lawsuit by Cambridge Place Investment Management against Morgan Stanley, Goldman Sachs Group and about ten other banks, is one of the biggest cases of its kind to be filed so far in US courts. The case cites a sizable number of so-called "confidential witnesses" quoted in the lawsuit, who said underwriting standards were abandoned in order to meet demands for mortgages from Wall Street. The case could encourage other investors, such as large pension funds, to bring similar lawsuits against Wall Street.

Hedge funds had their fourth-worst first half since industry performance-tracking began as Europe's sovereign debt crisis and concern about a slowdown in the global economic recovery hit equity and credit markets, consulting firm Hennessee Group said Monday, reports MarketWatch. An index of hedge funds run by Hennessee climbed 0.2% in the first half of 2010. The only years with worse performance in the first six months of the year were 2008, 2002, and 1994, the firm noted. Hennessee has been tracking performance in the industry since 1987. "Despite sluggish performance, hedge funds outperformed the stock market in the first half of 2010. The Standard & Poor's 500 Index slumped more than 7% in the period.

A hedge fund founded by former Citigroup star energy trader Andrew Hall has lost money for a second straight month as broad concerns about the economy have weighed down specialised commodity markets, the FT reveals. Hall’s Astenbeck commodities fund reported a slide of 2.2% in June, according to a report to investors. After a 10% fall in May the fund has lost 11.8% this year. “We feel frustrated with our performance and that we have not been able to capitalise on significant moves within what is for the time being a range-bound market, meanwhile losing money on core positions,” Hall said in a letter to investors. Hall is head of Phibro, the oil and gas trading unit that Citi sold to Occidental Petroleum last year under government pressure over his potential $100m pay package.

Two hedge fund executives now know when they will learn their fates for their roles in the b Ponzi scheme, says FINalternatives. US District Judge Richard Kyle, who in April sentenced the Minnesota businessman and hedge fund manager to 50 years in prison, set the sentencing dates for six of the seven people who have pleaded guilty in the $3.6bn fraud. Among them are Lancelot Investment Management founder Gregory Bell and Harold Katz, the firm’s vice president of finance and accounting. Bell will be sentenced first, on 20 August, Katz will face the music on 28 September, as the last of the six to be sentenced. Bell could be sentenced to 20 years in prison, while Katz faces up to five years for conspiracy.

PEOPLE MOVES
Two senior executives of Morgan Stanley Investment Management are leaving, six months after Gregory Fleming joined the Wall Street firm to oversee and restructure the division, according to the Wall Street Journal. Stuart Bohart and Stephen Trevor, the departing executives, were co-heads of the asset-management business until Fleming arrived in February. Both reported to Fleming, a former Merrill Lynch president and the first big hire by Morgan Stanley chief executive James Gorman. Gorman tapped Fleming before he formally took over the CEO job on 1 January. Fleming has named half a dozen new money-management executives in senior operational, sales and investment roles.

One of the survivors of Long-Term Capital Management (LTCM), the US hedge fund infamously bailed out by Wall Street in the late 1990s, has resurfaced at London-based Capula Investment Management, reports City AM. Ayman Hindy became a partner at Capula last week, according to a regulatory filing. He has been working at the government fixed income specialist for some time as a senior portfolio manager, City AM understands. He moved to its US office in June. Hindy was a strategist at LTCM when it ran into trouble just over a decade ago. The fund ballooned to control more than $100bn (£67bn) assets at its peak, but suffered gargantuan losses after Russia defaulted on its debts in 1998 and had to be rescued by its creditors in a move arranged by the Federal Reserve. It closed in 2000.