23/07/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 23 July

NEWSPAPERS AND WIRES
Hedge funds pulled in $9.5bn during the second quarter with nervous investors preferring to send their money to the biggest and best established managers, according to industry tracker Hedge Fund Research on Tuesday, reports Reuters. Hedge fund managers have seen flat returns on average as they have battled a volatile market so far this year, but that hasn't stopped wealthy investors from sinking more cash into the industry. Strategies like global macro and event-driven funds that may insulate investors from stock market swings, have been seen as particularly attractive. The fund industry's most established firms with more than $5bn in assets under management, saw $8.8bn of the total inflows in the second quarter, according to HFRI.

Harbinger Capital Partners, the hedge-fund firm run by billionaire Philip A Falcone, lost about 10% last month in a pool of hard-to-sell assets that it is divesting for clients, according to two investors, Bloomberg reports. The so-called side pocket, with about $2bn in assets, has slumped 14% this year, said the people, who asked not to be named. Hedge funds fell an average of 0.86% in June and 0.21% this year, according to Chicago-based Hedge Fund Research. Harbinger, started by Falcone in 2001, limited withdrawals from its biggest fund in 2008 to about 65% of assets and told clients that it may take as long as two years for the rest of the money to be returned. The firm lost money last month on its investments in battery to pet-food maker Spectrum Brands Holding and wireless-network operator TerreStar Corp, the people said.

Blackstone Group on Thursday reported a wider second-quarter loss from the year before as the hedge fund and private equity firm faced headwinds from weaker global equity markets and a flat credit market, says Bloomberg. Blackstone posted a loss of $193.3m, or 55 cents per unit, compared with a loss of $164.3m, or 60 cents per unit, in the second quarter of 2009. Adjusted net income totalled $205.2m, or 18 cents per unit. On average, analysts surveyed by Thomson Reuters expected Blackstone to post income of 16 cents per unit. Quarterly revenue climbed to $550.1m from $406.4m. Analysts expected revenue of $493.6m.

The Securities and Exchange Commission (SEC) will allow issuers of asset-backed bonds to omit credit ratings from filings for six months, helping them adjust to rules passed into law this week as part of the financial regulations overhaul, Bloomberg reports. “This action will provide issuers, rating agencies and other market participants with a transition period in order to implement changes to comply,” Meredith Cross, the director of the SEC’s division of corporate finance, said yesterday in an e- mailed statement. The most sweeping regulatory legislation for Wall Street since the Great Depression, signed into law by President Barack Obama on 21 July, makes ratings companies vulnerable to lawsuits when underwriters include their assessments in documents used to sell debt.

The SEC’s internal watchdog said he will expand his probe into whether politics drove an agency lawsuit against Goldman Sachs to include the timing behind a $550m settlement with the company, reports Bloomberg, SEC Inspector General David Kotz agreed in April to a request from US Representative Darrell Issa, a California Republican, that he probe whether politics prompted the lawsuit against Goldman Sachs. Today, in response to another request from Issa, Kotz said in a letter to the congressman that he will broaden the probe to review the agency’s 15 July accord with the New York-based bank. Issa requested that Kotz examine whether there was any political reason that the SEC’s announcement of the settlement came two hours after the Senate approved legislation overhauling financial regulation.

PEOPLE MOVES
Executive recruiting firm Heidrick & Struggles International has a new head of its hedge fund practice, says FINalternatives. Daniel Edwards - who helped build the Chicago-based firm’s hedge fund business - has now added that practice to his list of responsibilities. Edwards has been managing partner of geographies and regional managing partner for Asia-Pacific, as well as co-head of Heidrick’s financial services practice. Before his globe-trotting days, Edwards served as head of the firm’s Wall Street office and co-head of the hedge funds practice. “Bottom-line, we are listening to our clients. Our asset management and hedge fund clients are dramatically rethinking their human capital strategies,” Edwards said. “Our cross-sector approach to human capital solutions positions Heidrick to be the leading provider of talent expertise and beyond.”

Pimco has hired two hedge fund traders as it continues to beef up its nascent equities business, say FINalternatives. Rebecca Babin has joined the California-based money manager, best known for its bond funds, as an equity trader, while Mark Cooper has been named an equity analyst. Both serve as senior vice presidents and work out of the New York office. Babin joined Pimco from Brigade Capital Management, where she was a trader for the high-yield and capital structure arbitrage hedge fund, focusing on stocks, options, convertibles and macro hedging products. Cooper most recently was a partner at Omega Advisors, working as a portfolio manager and analyst. He also formerly worked at Pequot Capital Management.

Chris Poil, the fund manager credited with Baring Asset Management’s re-emergence as an institutional heavyweight, has taken the helm of a new Trafalgar Capital open-ended vehicle, reports Citywire. Poil – who left Baring in 2000 and handed over his UK head of equities role to Richard Buxton – will manage the Ucits III Trafalgar Quadrant fund, which was launched softly to the market on 1 June. The absolute return fund is authorised by the Irish Financial Regulator and open to institutional investors and private client wealth managers. It splits companies into four quadrants or segments, based on their value and growth characteristics. Long positions will be taken in firms priced cheaply with the potential for high growth, whereas short-term bets will be used to access more expensive businesses unlikely to expand.

Stockbroker WH Ireland has unveiled former hedge fund manager Paul Compton as its new chief executive in a boardroom reshuffle following further losses, according to Citywire. Compton, who previously co-managed the Toscafund Mid Cap long/short equity fund, will start his new role on 6 September. WH Ireland has made a pre-tax loss of £518,000 in the six months to the end of May, compared to a consolidated loss of £523,000 over the same period last year. Total funds under management were up 14.7% to £1.35bn. In a change at the top, Compton will replace outgoing chief executive Richard Ford. Prior to his stint with the alternative asset manager, he was head of capital markets at Collins Stewart from 2002 to 2007. During his time there, the team raised £7.6bn in 234 separate transactions.

UBS has hired Jon-Paul Rorech, the bond and credit derivatives salesman who while at Deutsche Bank was the subject of the SEC's first case involving credit default swap insider-trading charges, reports Wall Street Journal. Rorech, who left Deutsche Bank recently to take up the newly created role at UBS, was vindicated in June after a federal judge dismissed the case on the grounds that there was insufficient evidence to support the SEC's allegations. He is set to start in early August as a managing director in hedge fund credit sales, reporting to Joseph Stewart, co-head of credit sales for North America at UBS. Stewart confirmed the hire via a spokesman, but otherwise declined to comment.