11/08/2010 Author: Edward Dean

HFMWeek Daily Snapshot - 11 August

NEWSPAPERS AND WIRES
Two hedge funds have significantly reduced their stakes in troubled social housing repairs group Connaught, after the value of its holding plunged by more than £13m ($20.5m), reports Reuters. Parvus Capital Management has exited its 18.06% stake with a loss of £70m ($110.4m), most of which was held through contracts for difference. Breeden European Partners declared a 13% stake, or 18 million shares at the start of July, but following Connaught’s announcement that the firm would make a loss for the year, this stake was cut to 6%, or 8 million shares. Breeden’s holding has plummeted in value from £19.6m ($30.9m) at the start of July, to just £5.3m ($8.4m) on 5 August. 

Hedge funds focusing on Asia ex-Japan posted the strongest gains by region in July, but the funds remained in the red compared with the start of 2010 according to fund tracker Eurekahedge, reports Reuters. Asia ex-Japan hedge funds returned 3.56% in July, beating the 3.19% returns from Eastern European and Russian hedge funds and the 2.36% returns posted by Latin American funds. The Asia ex-Japan funds were, however, down 0.14% from the start of the year - the only region to show a negative return for 2010. Eurekahedge said India-focused funds were the best performers so far this year, returning 4.62% as of end-July. 

Hedge funds have embarked on a spree of buying equities for the first time since before the Greek sovereign debt crisis, reports the Wall Street Journal. Rising equity markets and lower volatility were cited as driving factors behind the shift by hedge funds to net buyers of equities. The co-head of European prime brokerage at a US bank said that hedge funds have been increasing their long positions since the start of July, when markets began to rally and volatility came down. “It's all about momentum,” he said. “Hedge funds are momentum players. When markets start going up they will start putting on positions.” 

CQS is betting on a further improvement across credit markets, believing cheap valuations and a benign outlook for interest rates will prolong the recent rally in bond prices, according to a report from Reuters. The firm - which runs $7.5bn in credit, asset-backed security and convertible bond funds - raised its bets in junk and investment-grade credit three to four weeks ago, said CEO Michael Hintze, although it sold some positions in the rally. "Markets had moved downwards and valuations were beginning to look more attractive in light of generally positive Q2 earnings," he said. 

A survey of Ucits funds of hedge funds conducted by structured asset management boutique KDK Asset Management has revealed that the launch of Ucits-compliant multi-manager funds is a rising trend, according to Opalesque. 47 funds of hedge funds managers from both Europe and the US with aggregate assets under management of more than $300bn were surveyed in June and July, with 80% of respondents disclosing that they have either launched or are considering launching Ucits-compliant funds in the next few months. According to KDK, there are currently 980 Ucits funds worldwide managing nearly $100bn in assets and 125 new funds were launched in the first five months of 2010, attracting total net inflows of $12bn. Ucits hedge funds now account for 7% of the total hedge fund universe of $1.5trn. 

CLOSURES 
Apollo Management, a private equity firm co-founded by Leon Black, has closed its London metals-based hedge fund, reports Bloomberg. The New York-based firm put $40m into the Apollo Metals Trading Fund which was started in March 2009, according to an SEC filing. The hedge fund traded industrial and precious metals and mining equities. Hedge funds investing in commodities fell 5.3% on average in the first half of 2010, according to Hedge Fund Research. The firm did not provide a reason as to why the fund was closing, nor would they comment on the number of employees at the fund. Mark Thompson, the fund’s manager, left Apollo in June. 

PEOPLE MOVES
Gartmore has hired Nick Anderson as its new head of research for global equities, according to City AM. Anderson is to join in September, reporting to head of global equities Neil Rogan. He previously spent seven years at Insight Investment, where he was head of equity research, responsible for the UK, European and international equity research teams. Prior to that, he was head of pan-European research at Schroders.

Broker dealer BTIG has appointed Michael Nethercott as a director in equity sales trading, according to a report from MarketWatch. Nethercott was previously working with Lighthouse Financial Group as part of the firm’s agency focused execution desk. Prior to joining Lighthouse, Nethercott was part of an enterprising group that started an internal agency only desk for the firm’s clients at Bear Stearns. BTIG’s global equities team, led by Richard Blank, now has more than 70 sales traders.