30/07/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 30 July

Osmium Capital Management is set to close its flagship hedge fund to new investors this year, says FINalternatives. The Osmium Special Situations Fund currently manages $330m; however, the firm has enjoyed strong returns in recent years, including a 6% jump in the first half. Osmium credited a decline in proprietary trading on the part of banks and risk-aversion on the part of hedge funds for the number of opportunities it has enjoyed. The firm said that existing commitments and “strong” interest from other investors should push it to $500m by the end of the year. When it reaches that level, the firm will close the fund, which has an annualiSed return of 16% since its launch more than five year ago, it said.

Metacapital Management, the hedge fund firm run by former Lehman Brothers Holdings mortgage-bond trader Deepak Narula, returned 28% in the first half of this year, boosted by government-backed debt that benefits from limited homeowner refinancing, reports Bloomberg. Now the New York-based firm is seeking to protect against one of the “biggest” risks in the $5.2trn market for agency mortgage bonds, Narula wrote in a letter to investors on 22 July. That’s the potential for the US to boost refinancing amid record-low loan rates by changing the rules at taxpayer-supported Fannie Mae and Freddie Mac, he wrote.

An ambitious but ill-judged foray into hedge funds by one of Switzerland’s leading private banks was revealed on Wednesday when EFG International wrote off almost SFr860m ($813.4m) it had invested, reports the FT. The group wrote down the value of its holdings in Marble Bar Asset Management and in CM Advisors after big outflows of funds. It also took a charge on DSAM, another structured products business, but retained some goodwill because of the company’s separate successful private clients activities. EFG bought into hedge funds after reversing its previous strategy of offering only externally generated products to customers to avoid any possible conflicts of interest. The change of strategy came after rich clients expressed interest in in-house funds, said Lonnie Howell, the bank’s chief executive and co-founder.

The trustee recovering assets for victims of convicted Ponzi-scheme operator Bernard Madoff sought yet new targets for funds Thursday with a series of lawsuits alleging customer assets were diverted to businesses to enrich Madoff's family members, reports the Wall Street Journal. According to the suits, funds were transferred to a family fund that invested in a hedge fund and a biotechnology company, in oil and gas properties—including gas and oil wells and a land lease in Texas—and in a company that developed intellectual property related to an electronic auction system for securities and commodities. The suits on behalf of the trustee, Irving Picard, allege members of his family stood to benefit from some of these businesses and entities. The family members include Mr. Madoff's wife Ruth, his brother Peter, his sons Andrew and Mark and his niece Shana.

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The co-head of the Bank of New York Mellon’s asset management arm is set to join a hedge fund, reports FINalternatives. Jonathan Little has agreed to become CEO of Kedge Capital’s nascent global asset management business. He is charged with building the asset management unit through acquisitions and fund management team lift-outs, the London-based hedge fund said. He is due to start at Kedge in November. At BNY Asset Management, Little was vice chairman and interim co-head. The group recently restructured its fund of hedge funds businesses, merging two of them and winding down the third, Ivy Asset Management. Mitchell Harris, BNY Asset Management’s other interim co-head, will lead the business on his own until a permanent head of the division is hired.

Li Lu, a Chinese-American investor and hedge fund manager, could be in line to take a top investment role at Warren Buffett's Berkshire Hathaway and even succeed the legendary US investor, the Wall Street Journal reports. In an interview with the newspaper, Berkshire' vice chairman Charlie Munger said he felt it was "a foregone conclusion" that Li, a hedge fund manager who largely invests in Asian technology stocks, would become one of Berkshire Hathaway's top investment officials. The Journal reported that Li is in line to become a successor to Buffett, who has built an estimated $47bn (S$64.1bn ) fortune running the Nebraska-based company, does not have any current plans to step down, but speculation about his eventual successor has increased in the past few years.