23/08/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 23 August

NEWSPAPERS AND WIRES
Hedge funds cut bullish bets on gasoline by the most in almost four years as petroleum stockpiles surpassed the highest level since 1990 and the US vacation season drew to an end, reports Bloomberg. Hedge funds and other large speculators reduced wagers on rising prices by 74% the week ended 17 August, the most since October 2006, the Commodity Futures Trading Commission reported on 20 August. Gasoline has dropped 21% since reaching its 2010 high of $2.4351 a gallon on the New York Mercantile Exchange on 3 May. “People are just taking money off the table.” said Rich Ilczyszyn, a senior market strategist at Lind-Waldock & Co., a Chicago-based futures brokerage for institutional and individual investors. “We’re going to start trading down all the way to January.”

Troubled F&C Asset Management will report a fall in client fund levels this week despite the acquisition of Thames River Capital, investment bank Numis Securities has predicted, reports City AM. F&C is forecast to say assets under management stood at £99.9bn (S155.3bn) at the end of June, down 1.6% from April’s number but up 13% year-on-year. The takeover of hedge fund boutique Thames River, due to complete next month, will add around £4.2bn ($6.5bn) to F&C’s assets. F&C’s share price has been under pressure this year. The stock closed unchanged at 63p on Friday, having jumped 11.5p earlier in the week on the back of takeover talk. Chief executive Alain Grisay is expected to meet with rebel shareholder Edward Bramson following the interim figures on Thursday. Bramson built up a 9.7% stake in F&C last week through his AIM-listed turnaround vehicle, Sherborne. 

Paolo Pellegrini, the investor who helped hedge fund manager John Paulson score more than $15bn of profits betting against risky mortgages, is returning money to clients of his own hedge fund after suffering losses this year, reports the Wall Street Journal. Pellegrini's PSQR Capital has lost about 11% so far in 2010, according to a WSJ source. The decline included a drop of about 8% in July, after bets against US Treasury and other moves went awry, which has made it more difficult for Pellegrini to raise cash from investors. In a recent letter to his investors, Pellegrini, who has been bearish on financial assets, the dollar and government bonds, said he could reopen his firm to outsiders in the future. For the time being, the firm will invest only his own money.

Hedge funds strongly oppose new proposals to regulate their pay by deferring bonuses and swapping some of the cash for share-based instruments, says Financial News. The proposals, drafted by the UK Financial Services Authority and the European Commission, are part of a wider initiative to expand the scope of the FSA’s remuneration code to 2,500 firms, including hedge funds and asset managers. Hedge fund managers have protested that the proposals were originally designed for banks, not hedge funds. They say they fail to take into account the fundamental differences between the two types of institution. Rod Barker, partner at International Standard Asset Management, a systematic fund led by Larry Hite and Stanley Fink, said that it is very difficult for hedge funds to attract capital if their interests are not aligned with those of their investors.

A father and son who ran a pair of small hedge funds catering to Silicon Valley Indian professionals are defending themselves against a lawsuit filed by angry investors who say the two hid big losses in 2008, Mercury News reports. The lawsuit is a sour turn for what started as a small investment fund for the family of retired tech executive Vishwas Godbole and a few close friends. By 2008, it had grown to about 150 investors with $90m in two separate funds, Opulent and Opulent Lite. The investors were valley professionals, graduates of India's top tech schools, and people who came from the same region in western India. The lawsuit alleges that the Godboles, after telling investors in 2008 the funds were weathering the market crash without major damage, stunned their clients in 2009 by saying the funds' value had actually dropped by a combined $18m.

Despite apparent bullishness towards emerging markets (EMs) among investors in recent months, EM hedge funds saw net withdrawals of $1.5bn in the second quarter, according to Chicago-based Hedge Fund Research (HFR), Asian Investor reports. Those redemptions were concentrated in emerging Asia and Russia, while investors allocated new capital to hedge funds focusing on Latin America and the Middle East and North Africa. The figures for Russia are perhaps not surprising, given the dire performance of the country's stock market in 2009 and for the first half of this year, although there has been a recent rebound. Taking into account that EM hedge funds suffered redemptions of more than $550m in the first quarter, investors have withdrawn more than $2bn from EM hedge funds in the first half.

Hedge fund Salus Alpha expects to make money from investor fears of a double dip recession – despite believing the opposite, reports Reuters.  Going along with jittery investors seeking safe havens against a possible global recession, chief investment officer Oliver Prock has bought dollars and bonds - but he is ready to start shorting the dollar again as soon as he can, in line with his own conviction that another recession will be avoided. "The market is now more concerned about growth of the economy than the Greek or Spanish situation," Prock said in comments emailed to Reuters. "Since the market is investigating the possibility of a double dip recession we positioned ourselves accordingly."

LAUNCHES
A former Moore Capital equity business manager is planning to launch a hedge fund that aims to select the best ideas from the sell-side and create bespoke portfolios for investors based on their individual risk profiles, according to Financial News. Stephen Cole, who spent three years at Moore Capital before leaving in March, has formed alpha capture firm AlphaNex Capital, and is planning to go live with the venture in the first quarter of next year. He said: “We intend to offer investors the ability to get involved in alpha capture. We will gather and monitor investment ideas from salespeople at brokers and investment banks. We will come up with a subset of contributors, tailored to each investor’s risk profile and sector bias.”