01/09/2010 Author: Shannon Hawthorne

HFMWeek Daily Snapshot - 1 September

NEWSPAPERS AND WIRES
Fidelity and London-based hedge fund CQS have launched legal action against Numis Securities on the grounds of 'fraudulent misrepresentations' during a fund raising back in 2007,  reports Citywire. The stock in question, the now insolvent Canadian oil company Rock Well Petroleum, used Numis to raise in $150m (£97m) from investors. Fidelity and CQS, alongside Oceanic and St Peter Port Capital, are said to have invested a combined $95m in Rock Well. However, according to Fidelity and CQS, Numis failed to mention in its investor briefing at the time that US-based oil rival, Omega Oil, had launched a legal action against Rock Well, claiming the group had infringed its patents. In a statement posted on the London stock exchange at midday Numis confirmed it had been notified about the allegations but claimed they were unfounded.

JP Morgan is winding down its proprietary-trading operations and has given notice to its roughly 20 proprietary-commodities traders about the elimination of their jobs, according to a person familiar with the matter, the Wall Street Journal reports. The bank hasn't focused much on proprietary trading, but its small proprietary-trading desks are nonetheless affected by the Dodd-Frank financial-overhaul law, particularly by what is known as the Volcker rule, which curtails proprietary trading, private equity and other investments that banks make with their own capital rather than for their clients. JP Morgan has decided to exit from all proprietary trading, and its commodities proprietary-trading desk, which is in London, was one of the largest such trading desks at the bank, according to a person familiar with the matter.

Hedge fund manager Elliott Management on Tuesday dropped its court case against trade publication Absolute Return + Alpha, bringing to a close a battle over public disclosure of a hedge fund's investments, reports the Wall Street Journal. Elliott withdrew its court petition seeking discovery about who leaked Elliott's investor letter to the publication just two days before the trade magazine was due to submit an affidavit to the New York state court in Manhattan. The magazine published its article on 26 August despite the pending court case. Elliott, which argued last week that disclosure of its positions in the investor letter would harm Elliott and damage its competitive position, said "developments since the application was filed made the discovery unnecessary." 

A law firm hired by the estate of Lehman Brothers Holdings has demanded trading records, e-mail and other correspondence for all of 2008 from a collection of prominent hedge funds and the venerable Goldman Sachs, reports the New York Times. The firms named in the inquiry make up a ‘Who’s Who’ of the hedge fund world, and include SAC Capital Advisors, Greenlight Capital, the Citadel Investment Group and Och-Ziff Capital Management. At a hearing on Wednesday of the Financial Crisis Inquiry Commission, the investigative panel appointed by Congress, Lehman’s former chief executive, Richard S. Fuld Jr, is expected to field questions on the role hedge fund investors might have played in Lehman’s failure, according to people involved with the proceedings who spoke on the condition of anonymity. 

Top hedge fund managers like Dinakar Singh and David Einhorn scooped up Microsoft Corp shares in the second quarter, taking advantage of historically low price-to-earnings multiples for the world's largest software company, reports Reuters. Microsoft – whose systems run more than 90% of the world's personal computers – saw its shares fall sharply last quarter, even as Wall Street analysts forecast rising profits in the year ahead. The decline means the stock is now trading around 10 times expected earnings for the next 12 months, close to its lowest multiple on record and a 70% discount to peers, according to StarMine data; and taking into account Microsoft's $37bn of cash, the true multiple is more like 8, some investors said. 

LAUNCHES
E Fund Management, China’s second-largest asset management company, plans to start the nation’s first officially registered hedge fund after the securities regulator eased rules in July, reports Bloomberg. E Fund will be able to raise money from high-net-worth individuals in separate managed accounts and use the same investment strategies as hedge funds in what the money manager with about 200 billion yuan ($29bn) in assets says will be the first institutional hedge-fund product in China. The nation with the world’s fourth-largest number of millionaires has expanded money-management products to meet growing demand. Regulators introduced index futures and short selling in April, enabling investors to bet on falling as well as rising prices, to ease fluctuations after the Shanghai Composite Index jumped 80% in 2009 before slumping. 

Einoshin Arima and Giselle Leung, former proprietary traders at Mizuho Securities, have raised about $120m for a new hedge fund that will bet on rising and falling stocks, mostly in Japan, Bloomberg reports. The Hareion Fund will start today with money from institutional investors in Asia, according to Arima, the founder of Hong Kong-based Areion Asset Management. The fund, which is able to take up about $300m, won’t accept additional money for a while to build up performance, he said.The fund’s entry into the Japanese market comes after the benchmark Nikkei 225 Stock Average slumped to a 16-month low on concerns that the strengthening yen will hinder Japan’s export-fueled recovery.“I don’t believe that Japan is going to be written off forever going forward,” said Arima. “We view this as a good time for us to start the fund.” 

PEOPLE MOVES
JPMorgan, the second- biggest US bank, has hired Colin P. Fenton, previously the chief executive officer of Curium Capital Advisors, as global head of commodities strategy, a new position, according to Bloomberg. Fenton will report to Tom Schmidt, head of global commodity research and Americas equity research, Kimberly Weinrick, a spokeswoman for the New York-based bank, said. Fenton, who joined yesterday, will be within the investment-banking arm of the company, she said. Earlier in his career, Fenton was a commodity analyst at Goldman Sachs, and also worked at Stanley Druckenmiller’s Duquesne Capital Management hedge fund.

Eric Haskel, formally senior partner and head of real estate at Greycourt & Co., an investment advisory firm that caters to ultra-high-net-worth families, has left to join Perella Weinberg Partners as managing director of the Agility strategy unit. In this role, Haskel will focus on real assets investments and will be a senior member of the investment committee. He will be based in the firm’s Denver office and reports to Chris Bittman, a partner at Perella Weinberg and CEO/CIO of the Perella Weinberg Partners Agility Funds. During his time at Greycourt, Haskel focused on the investment needs of wealthy families and endowments.