22/07/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 22 July

NEWSPAPERS AND WIRES
The trustee overseeing the liquidation of convicted fraudster Bernard Madoff's investment firm has expanded his lawsuit in the US bankruptcy court, setting his sights on one group of hedge funds in particular, reports CNN. Irving Picard amended his suit - initially filed in May 2009 - to demand $3.6bn from 43 new defendants, the majority of whom are subsidiaries or employees of the Fairfield Greenwich Group. Fairfield Greenwich Group was one of Madoff's largest feeder funds. Among the most significant additions to the list of defendants were Walter Noel, Jeffrey Tucker and Andres Piedrahita, the group's co-founders. The 228-page complaint declares that the hedge fund employees, "were active participants in and substantially aided, enabled and helped sustain Madoff's Ponzi scheme". 

New York City’s pension funds for police officers, firefighters and civil employees are seeking proposals from hedge fund consultants as they weigh whether to invest in the loosely regulated investment pools, Bloomberg reports. The three funds, with combined assets of $64.5bn as of March 31, want advice from firms on formulating strategy, identifying new investments and monitoring portfolios, according to a request for proposals from the comptroller’s office. The pension plans are considering investing in hedge funds even as money flowing into the pools, which hold $1.65trn in assets, slowed by 30% in the second quarter, according to Hedge Fund Research. One of five tax dollars collected by New York City, about $7.6bn, will go into the pension funds this year. The city fired six money managers earlier this year after “poor performance” of the funds. 

Sanlam Investments, a division of the JSE-listed Sanlam Group, on Wednesday announced it had realigned its hedge fund cluster in order to extract value and synergies across its existing fund of hedge funds businesses, Blue Ink Investments and Octane Holdings, says Business Report. The realignment adds weight to SI's strategy of actively growing its holistic hedge fund offering. It follows a September 2009 announcement that the business had increased its stake in Swiss-based international fund of hedge funds manager, Octane, to 100% and in Blue Ink Investments, a local fund of hedge funds manager, to 75%. “Hedge funds add significantly to the risk/return characteristics of a diversified portfolio so strengthening our offering in this space has been a real priority for us,” says CEO Johan van der Merwe. 

Finnowave Investment, a Japanese hedge-fund firm, aims to quadruple assets to 100 billion yen ($1.2bn) in about two years after it won a license to manage funds, making it easier to lure local pension money. Finnowave obtained the discretionary investment manager license from Japan’s Financial Services Agency in June, said Hideki Wakabayashi, president of the Tokyo-based company. Assets under management currently stand at about 25 billion yen across three funds, he said. The firm joins a growing number of Japanese hedge funds aiming to tap increased investment and advising demand from local pensions. More than a third of the Japanese pensions surveyed by JPMorgan Chase & Co.’s asset management said they expect to boost allocations to alternative investments such as hedge funds. 

Hedge fund investor Anthony Ward’s snapping up of 7% of the global cocoa supply last Friday could end up leaving him with a bitter taste in his mouth after the markets turned against him, reports Citywire. Cocoa prices have actually fallen by 5% over the last two days leaving the Armajaro co-founder sitting on a £33m paper loss. On the face of it, the move to buy 240,000 metric tonnes of cocoa looked a shrewd deal as fundamentals are clearly on his side. The recent heavy rains in the Ivory Coast, Africa’s largest producer, have blighted crops and washed away roads, making the already poor harvest difficult to transport. Added to this, warehouse stocks are pretty low, while Chinese and Indian demand continues to grow rapaciously. 

President Barack Obama on Wednesday signed into law the most historic shakeup of the regulation of US banks since the Great Depression, placing new fees and limits on the nation's biggest banks, imposing new restrictions on the $450trn derivatives market, and crafting a major new consumer-protection division for mortgage and credit-card products, reports MarketWatch. "Financial reform is not just good for consumers; it is good for the economy," Obama said at a signing ceremony with dozens of Democratic lawmakers and consumer advocates in attendance. "Passing this bill was no easy task. To get there, we had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change." 

Fund of hedge fund manager 3A has added two new event-driven funds to its Altin portfolio, increasing the weighting to 18.58% as at 30 June, MoneyMarketing reveals. The fund is the only London-listed fund of hedge funds to disclose all its holdings on a quarterly basis. It holds 2.33% in Alden global distressed opportunities and 3.88% in Jana Offshore Partners. 3A splits event-driven funds into two categories - distressed managers and those focusing on mergers, acquisition and capital structure arbitrage. Capital structure arbitrage involves going long and short on different assets within the same company. In Altin, 3A prefers managers who focus on mergers, acquisitions and capital structure arbitrage because many firms are making changes to clean balance sheets, leading to investment opportunities.