18/08/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 18 August

NEWSPAPERS AND WIRES
UK asset manager Gartmore is looking to take advantage of the "Volcker rule" by hiring proprietary traders from banks to boost its hedge-fund activities, as it seeks to move on from the resignation of star fund manager Guillaume Rambourg, according to the Wall Street Journal. The Volcker rule, which is part of the US financial-overhaul bill, will force many US banks to divest proprietary-trading activities (or in-house trading with the firm's own capital) and private-equity investments. Gartmore said yesterday that, as of 30 June, its assets under management had slipped 15% to £19.9bn ($31.2bn), from £23.5bn ($36.7bn) at the end of March and £22.2bn ($34.7bn) at the end of 2009.

Some big hedge funds have taken a liking to mortgage insurers in recent months, says the Wall Street Journal, especially PMI Group, whose stock-market value has plunged in recent years. Paulson & Co., one of the world's largest hedge fund firms, said in a regulatory filing late Monday that it held 5 million PMI shares at the end of June. The firm held no PMI stock at the end of March. Blue Ridge Capital, run by former Tiger Management trader John Griffin, disclosed a new 8 million-share stake in PMI as of the end of June, according to a recent filing. Omega Advisors, run by Leon Cooperman, almost doubled its stake in PMI to 7.93 million shares during the second quarter, another recent regulatory filing showed.  PMI shares jumped 15% to close at $3 yesterday. The stock is up almost 19% so far this year.

Shares of Hartford Financial Services rose yesterday after the New York-based hedge fund run by billionaire John Paulson revealed that it had increased its stake in the insurer, reports Bloomberg. On Tuesday, Paulson & Co. reported it held 44 million shares in Hartford Financial Services at the end of June, according to a US SEC filing. The hedge fund owned 12.75 million Hartford shares at the end of March. Earlier this month, Hartford lowered its net income expectations for the year due to the uncertain global economy and volatile financial markets even though it returned to profit in the second quarter. It posted net income of 92 cents a share, excluding certain charges. Analysts surveyed by Thomson Reuters expected 91 cents per share.

The former IBM executive who pleaded guilty in the fed's widespread insider trading case centring on hedge fund Galleon Group says his alleged accomplice and former mistress Danielle Chiesi "played" him, the Wall Street Journal. Chiesi "manipulated" or "played" Robert Moffat for tips on IBM, Lenovo Group and Advanced Micro Devices, his lawyers wrote to a federal judge in Manhattan yesterday. She had a "business model" that involved mining information from corporate execs, they said. Moffat's legal team asked US District Judge Deborah Batts, who is presiding over the case, to grant the 54-year-old tech executive probation rather than the six-month prison term prosecutors requested. Moffat met Chiesi in 2002 and "over time" their relationship became "intimate," according to the legal team. Moffat gave Chiesi confidential information based on "a misguided desire to appear important and knowledgeable," the lawyers said.

The chief executive of Gartmore, the UK asset manager, has attempted to draw a line under speculation that has dogged the company for months amid ongoing outflows from its £6bn hedge fund business, says the FT. The company has failed to recover from a share price decline of 40% since the suspension in April and resignation last month of Guillaume Rambourg, one of its star traders, who broke internal trading rules and is under investigation by the FSA. Jeffrey Mayer, chief executive, said: “The constant dialogue [with the market] during challenging periods does create more speculation, uncertainty and conjecture around the business that is not healthy.” Mayer said fund outflows since Rambourg’s suspension were worse than expected, but that he was confident the business was regaining momentum.

Wachovia Corp., the bank now owned by Wells Fargo & Co., won dismissal of a lawsuit that accused it of forcing a hedge fund to make higher margin payments than necessary on a credit-default swap, Bloomberg reports. US District Judge Laura Taylor Swain in Manhattan also ruled yesterday that the hedge fund, VCG Special Opportunities Master Fund, must pay Wachovia an as-yet-unspecified further amount under the deal. In July 2009, Swain narrowed the suit to one claim that Wachovia, as the “valuation agent” of  a collateralized-debt obligation the swap covered, violated “good faith and fair dealing” by determining that VCG owed more in collateral than the swap’s $10m value.

A group of funds is seeking to swap a majority of shares in consumer-products company Spectrum Brands Holdings for newly issued shares of Harbinger Group, reports the Wall Street Journal. The funds group includes hedge fund Harbinger Capital Partners, managed by billionaire Philip Falcone. Both companies' shares would be valued at recent market values, according to a filing with the US SEC. In a letter, dated 13 August, to a special committee of Harbinger Group's board, the funds group offers to turn over a majority of Spectrum's outstanding shares in exchange for newly issued shares of Harbinger Group. The funds own about 67% of Spectrum's shares, according to the letter, which was included in the SEC filing.

PEOPLE MOVES
BNP Paribas said yesterday it has reorganised its investment banking business for the Americas and named Edward Speal as head of global equities and commodity derivatives for the region, reports Bloomberg. Speal has been with Paris-based BNP Paribas for more than 20 years. He is currently head of the structured finance business which includes export, project, energy and commodity finance. Also in the Americas group, Lionel Crassier, who has been with the bank 15 years in senior positions, was named head of equities and Dan Cozine appointed head of structured finance, while Chris Innes has joined the bank as head of equity flow and financing sales also for the Americas – he previously has worked for Bank of America and had his own hedge fund and equity brokerage firm.