04/08/2010 Author: Edward Dean

HFMWeek Daily Snapshot - 4 August

Qbasis, a Liechtenstein-based hedge fund, has gained approval from UK regulators to start marketing the Qbasis Futures Fund, the first managed futures exchange traded fund (ETF), reports the FT. Qbasis has already raised €1.5m ($2m) for the fund, which was originally launched on 1 April on the Hamburg Stock Exchange. Alistair Evans, director of UK sales, said the firm is considering listing the ETF on the London Stock Exchange. “We think there will be considerable demand in the UK for an onshore managed futures fund,” he said. Actively managed ETFs are already popular in the US but as yet remain relatively unfamiliar in Europe.

Och-Ziff Capital Management quadrupled profits in Q2 2010, a period widely regarded in terms of performance as one of the worst ever for many of its peers, reports the FT. The US hedge fund group bucked an industry-wide trend that saw global hedge fund-managed assets shrink by $20bn and the average manager lose 2.5% in the three months to the end of June, according to Hedge Fund Research. Total assets under management at New York-based Och-Ziff remained stable at $25.3bn over the same period, rising to $25.9bn as at 1 August on the back of $300m of net inflows and $300m in performance-related gains, according to a filing on Tuesday with US regulators.

A hedge fund that made stellar returns in 2007 by trading long and short positions on financial firms failed to keep up the momentum and suffered an 87% fall in profits the following year after losing more than 30% on its fund, according to accounts filed recently at Companies House, according to Financial News. Algebris, a UK hedge fund set up in 2006, saw a decline in profits from £97m ($155.5m) in the year to September 2008 to £13m ($20.7m) in the year to the end of September last year. An Algebris spokesman stated that the fund’s performance had improved since 2008, although it lost 12.16% in Q2 2010, with an 8.93% loss in May.

Hedge-fund service provider GlobeOp Financial Services reported a 10% rise in the assets it administrates, to $120bn, helping it boost revenue and report a $19.9m pretax profit for the first half, the Wall Street Journal reports. Revenue grew 13% to $89.4m from $79.2m in the first half of 2009, mainly because assets were well ahead of the $83bn it had managed at 30 June 2009. The London-listed company, which runs middle- and back-office functions for about 190 hedge-fund firms and other asset managers, had reported a $34m pre-tax loss for the same six months of 2009.

India-focused hedge fund firm Dynamic Equity Partners is ramping up its marketing efforts and opening up to outside investors, according to FINalternatives. The New Jersey-based firm launched its Diversified India Fund in August of 2009, but has recently begun to accept outside money. According to fund manager Raj Nandiwada, “the investment strategy is to capture the India growth opportunities through a portfolio of 25 to 30 stocks that is well diversified and liquid with a macro hedge”. The portfolio’s gross performance since inception through June 30 is 33.18%, which compared favorably to its benchmark, NIFTY, which returned 13.49% during the same period. Year-to-date gross performance is 9.54% vs. NIFTY's 2.14%.

Pictet & Cie., Switzerland’s largest closely held bank, said hedge funds have weathered the recession and will benefit as record low interest rates and bigger price swings attract wealthy individuals and institutional clients, reports Bloomberg. Net new investments in hedge funds totaled $23.3bn in the first half of 2010, after outflows of more than $285bn in the previous two years, according to data compiled by Hedge Fund Research. Hedge funds fell by an average 2.5% in the second quarter, while the S&P 500 dropped 12%. “Maybe one of the surprises after the crisis is that the big funds didn’t change their attitude, but increased their willingness to invest,” said Jacques de Saussure, who succeeded Ivan Pictet last month as senior managing partner of the Geneva-based firm. “People are still interested in hedge funds.”

Hedge fund manager J. Ezra Merkin asked a US judge to dismiss a class-action lawsuit accusing him of recklessly funnelling millions of dollars in client funds to now-imprisoned Ponzi schemer Bernard Madoff, reports Reuters. In a filing late Monday in Manhattan federal court, Merkin said the plaintiff investors cannot show that he and his Gabriel Capital Corp investment advisory affiliate "knew about, much less participated in, the Madoff fraud". Rejecting the contention that he should have performed better due diligence, Merkin said he had no motive to commit fraud, and himself lost more than $100m with Madoff.