04/10/2007

HFM Week Snapshot - 4 October

NEWSPAPER AND WIRES: FTAlphaville reports more trouble and strife for Absolute Capital Management. Following on from the departure of its enigmatic ‘leader’ Florian Homm, in the middle of September, Absolute probably expected friends and more importantly investors to rally round to its cause. Nothing of it, “Three hedge funds run by Absolute Capital Management plummeted more than 20% as prime brokers tightened margin requirements and other investors shorted companies where they were known to have big stakes,” reported the FT’s alternatives site. The three musketeers probably wasn’t part of their bedtime reading.

Basis Capital, one of the early casualties in the subprime fallout is finally allowing investors to withdraw their money from the fund frozen in July according to Bloomberg News. “Basis will accept redemption requests on its Pac-Rim Opportunity Fund, the company's largest, it said in a letter to investors dated Tuesday,” according to the newswire, which continued; “Basis is also seeking investors' approval for splitting the Pac-Rim fund in an attempt to attract new investors and save the company from closure. It wants to separate the fund's structured-credit investments from Asian high-yield assets to form two new funds, the firm said in an investor notice Friday.”

Merrill Lynch is the latest investment bank to begin its summer clearout pre-empting almost inevitable writedowns in the banks fixed income business;” Merrill didn't disclose the extent of any likely write-downs. But the size of those losses may equal or exceed a $4 billion estimate made by one analyst last week, according to people on Wall Street. That could erase most or all of the firm's quarterly profit and leave Merrill the hardest hit of any U.S. securities firm,” according to the Wall Street Journal.  The paper continued; “Merrill ousted its global head of fixed income, Osman Semerci, as well as his deputy, Dale Lattanzio, co-head of fixed income for the Americas, and also showed the door to their former boss, Dow Kim, the former co-head of institutional securities.

Economists get it right for a change and call the Bank of England’s hand. Not keen to follow in the Fed’s footsteps, Mervyn King left interest rates on hold at 5.75%. The FT saw this as “opting to take more time to assess the implications of the credit squeeze for growth and inflation prospects. The Bank’s decision to stay its hand was widely anticipated, with all economists polled by Reuters predicting there would be no change.”

For all of you poor soles out there fretting over mortgage payments spare a thought for those affected by the super-prime fallout; “Househunting has gone on hold for London homes in the £2 million-to-£5 million price bracket as nervous City bankers fret over the size of their next annual bonus,” as reported by The Times. Hold on, is that a light I see at  the end of the tunnel; “Prices of super-prime homes, typically in Mayfair, Belgravia, Knightsbridge and Kensington, have risen by on average nearly 50 per cent over the 12 months to the end of August, Knight Frank reported.” Phew.