12/08/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 12 August

NEWSPAPER AND WIRES
Man Group, one of the UK’s largest hedge fund managers, has endured an unaccustomed run of bad news of late, says the FT. For so long the most prominent symbol of the growth of London’s hedge fund sector, Man is now facing accusations that  AHL, its flagship fund, is “broken” following a period of poor performance. It has also experienced a number of personnel departures and has seen its proposed $1.6bn (£1bn) acquisition of rival GLG Partners criticised as too expensive. In response to the difficulties, Man’s shares have fallen 31 % in 2010, making the company the subject of bid rumours. Bank of New York Mellon is the most recent potential buyer to be linked, although analysts and people close to the company dismiss the idea.

Anthony Scaramucci, SkyBridge Capital Group's founder and managing partner, is seeking to shake up the hedge fund seeding business, which he described as in "nuclear winter," reveals the Wall Street Journal. "Seeding" is the business of taking stakes in start-up hedge-fund managers, as opposed to investing with them as limited partners. Currently, it's "difficult for new hedge fund managers to make it," Scaramucci said in an interview with Dow Jones, because of factors such as "investor fear, market uncertainty, the economic recession and the prospect of finding more hedge-fund rogues and criminals."Scaramucci's idea for shaking up the business is to lend some "permanency" to capital that gets invested in hedge-fund managers--in the way the closed-end mutual funds have permanent capital that can't be withdrawn by investors before the end of expiry.

US Treasury bonds, often a top choice for risk-averse investors, are attracting more interest from hedge funds now, according to a study released Wednesday by consulting firm Greenwich Associates, reports MarketWatch. Hedge-fund trading volume in US government bonds surged by more than 70% in the past year. In 2009, hedge funds generated about 3% of trading volume in this market. This year, that share jumped to roughly 20%, Greenwich Associates said. The move is being partly driven by demands on the $1.8trn industry by institutional investors. Stocks, commodities and riskier currencies fell on worry over the flagging US recovery and slowing growth in China. All three major US indexes turned negative for the year.

BNY Mellon Western Fund Management Co., a Chinese joint venture of the world’s largest custody bank, plans to nearly double staff by 2011 after receiving approval to start doing business in China, reports Bloomberg.“We plan to increase staff to around 70 by around the end of next year from the 40 we have now,” said Bin Hu, chief executive officer of the venture between BNY Mellon and Xi’an, China-based Western Securities Co. “They will be mainly investment, sales and back office.” Hu, a former hedge-fund manager at Coefficient Global in San Francisco, said he’s “cautious” on Chinese equities given concerns that inflation will hamper government measures to stimulate growth.

Fund administrator Butterfield Fulcrum Group, backed by private equity firms 3i Group and Carlyle Group among others, is ready to grow by acquiring peers and there is no lack of targets, its chief executive told Dow Jones Newswires. "Our scale has made us a consolidator of choice and we are a buyer. I have been approached by four counterparts in 30 days," said Michael Clark, who declined to give details. Clark was appointed CEO just 30 days ago. Clark, who aided JP Morgan Chase & Co.'s banking unit with 28 acquisitions in his 13-year stint there, including the $30m purchase of syndicated loan and CDO analytics and processing company, is no stranger to growing through acquisitions. "In the next three years, we will focus on a broad global network," he said. "We'd love to find a partner that already has an office in Asia."

Citigroup may be facing an avalanche of lawsuits over a series of hedge funds it bailed out two years ago after an arbitrator awarded a pair of investors $1.8m, according to FINalternatives. The Financial Industry Regulatory Authority panel found that Citigroup Global Markets and Citi Alternative Investments negligently mismanaged the MAT/ASTA funds and negligently supervised employees, the law offices of Robert Wayne Pearce and Page Perry said. The two law firms have now teamed up to represent other clients of the municipal bond hedge funds, and they are not alone in that endeavour.“Citigroup sold these products like tickets on the Titanic and, with this ruling, they're going to pay their victims whose investments they sunk,” Robert Pearce said.