19/08/2010 Author: Ben Haidari

HFMWeek Daily Snapshot - 19 August

NEWSPAPERS AND WIRES
Stanley F. Druckenmiller, the hedge fund magnate who led George Soros’s famous bet against the British pound, is calling it quits and shutting down his investment firm, Duquesne Capital, reports the New York Times. Druckenmiller wrote in a letter to investors that he had grown increasingly dissatisfied with the pressures of running a big fund, and that while Duquesne Capital was on track to yet another positive return, it was not performing up to his personal standards. “I have had to recognise that competing in the markets over such a long timeframe imposes heavy personal costs,” he wrote. “While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain.”

A return of investor enthusiasm has helped Europe's largest hedge funds lift their assets by more than a fifth over the past year; however, a preference for big firms has made it difficult for new entrants to break into the top 10 reveal the Wall Street Journal. According to Financial News's annual review of the industry, Europe's 10 largest firms saw their assets under management (AuM) rise by 22% to $146bn over the 12 months ending 30 June. The previous year's top 10 had seen their assets fall by 33% compared with June 2008. Brevan Howard remained in the top spot, with $31.8bn in AuM, up 31% from a year earlier. The biggest growth in the top 20 came from BlueCrest Capital Management, which saw assets balloon by 65% thanks to strong performance and investor inflows. BlueCrest's growth pushed it to third place, just behind Man Group's AHL and ahead of Lansdowne Partners.

JP Morgan Chase & Co. is in advanced talks to buy a Brazilian hedge fund established by former central bank governor Arminio Fraga, reports the Wall Street Journal. The firm is currently negotiating the acquisition of Gavea Investimentos, which had some $5.8bn in assets under management at the end of 2009, through its hedge fund unit, Highbridge Capital Management, according to Brazilian newspaper Valor Economico. An assistant to Fraga said the former central banker is in the US this week and declined to comment on the report. Fraga is highly respected in the Brazilian market for his three years at the helm of the central bank between 1999 and 2002, when he managed a currency crisis and battled inflation and laid the groundwork for a decade of relative economic stability.

The largest trade group representing hedge funds called on the European Union to move ahead with reforms of the over-the-counter (OTC) derivatives market saying “the benefits will outweigh increased costs”, reports Bloomberg. Hedge fund managers support them in spite of “significant costs associated with administrative and operational changes the reforms would require,” the Alternative Investment Management Association (Aima) said. The Group of 20 proposals to report OTC derivative contracts to trade repositories and clear trades of standard contracts through central clearinghouses would reduce systemic risk, the trade group said.“Managers recognise the need for such reforms,” Andrew Baker, chief executive officer of Aima said in a statement. They will “work closely with policy makers to ensure that reforms and new regulations are well thought-out, coordinated and give due consideration to all the parties active in the OTC derivatives market.”

Hedge funds bounced back from a tricky June last month, with 12 out of 14 strategies posting positive performance, based on reports from Edhec-Risk Institute, according to Financial News. The results are a complete turnaround from June when only one strategy – short selling – posted positive results. The best-performing strategy in July was emerging markets, which rose 3%, followed by convertible arbitrage. The latter, which typically involves simultaneously taking a long position in convertible bonds while taking a short position in the same issuer’s stock, had one of the best year-to-date performances, up 5.2%.This strategy’s positive results were closely linked to the performance of another – fixed-income arbitrage, which exploits mispricing on fixed income securities. Fixed income arbitrage was up 5.4% year-to-date and outperformed conventional bonds, up by 0.99%, and the Lehman Global Bond Index, up 0.68%

A federal judge refused to dismiss an investor lawsuit against Fairfield Greenwich Group, a hedge fund firm accused of funneling money to the now-imprisoned Bernard Madoff for his massive Ponzi scheme, ABCNews reports. In a 201-page ruling, District Judge Victor Marrero in Manhattan narrowed the lawsuit against Fairfield and other firms that provided administrative, custodial and accounting services. Fairfield and co-founder Walter Noel are among 46 defendants in a separate lawsuit by Irving Picard, a court-appointed trustee who is seeking to recover money for victims of the estimated $65bn Ponzi scheme. Investors and Picard have accused Fairfield of guiding billions of dollars to Bernard L. Madoff Investment Securities, which Picard is now liquidating. Picard has estimated Fairfield received more than $1bn of fees from Madoff, including for operating its "feeder funds".

PEOPLE MOVES
Accounting and administration firm The Conifer Group has taken on Douglas Lang to serve as head of fund administration, reports FINalternatives. His new role will require him to manage an 18-person team that provides middle and back office services to more than 100 hedge fund clients. Lang was previously the managing director for Butterfield Fulcrum Group, where he worked for over a decade. “Adding a top-notch veteran like Doug to our executive team is something that is going to bring an immediate benefit to our client base,” said Jack McDonald, chief executive officer and president of Conifer.

Former hedge fund manager Ajay Kapur has joined Deutsche Bank to head the firm’s Asian equity strategy team. Kapur founded a hedge fund in Hong Kong, First Horse Capital, three years ago, after leaving Citigroup, FINalternatives reports. At Citi, he served both as chief global equity strategist and chief Asia equity strategist. He worked at Morgan Stanley as head of equity strategy before joining Citi. Guy Ashton, global head of company research at Deutsche Bank, said: “Ajay is one of the best-known and most respected names in the industry, having worked in equity research and strategy on both the buy and sell sides since 1989.”