18/08/2008

HFMWeek Snapshot – 18 August

NEWSPAPERS AND WIRES

Ospraie Management, the US hedge fund led by Dwight Anderson, has seen about $1bn wiped off the value of Ospraie Fund over the last 12 months amid misplaced bets on commodities, according to a report in the Wall Street Journal.

More and more Japanese specialist hedge funds (many of them long/short equity) appear to be in a death spiral. Not many years ago there were over 300 hedge funds in New York, London, Singapore, Hong Kong and Sydney commanding combined assets in the range of $20-25bn.

Hedge funds lost an average of 1.99% in July, according to the Barclay Hedge Fund Index, and are now down by 4.44% since the beginning of this year. The Barclay Fund of Funds Index lost 2.57% in July.

Europe’s 10 largest hedge fund managers have taken advantage of superior operational infrastructures to grow their assets under management by almost a fifth in the 12 months to the end of June, according to eFinancial News

If there’s a stock that can spark a shouting match these days, it’s MBIA. William Ackman, the hedge fund boss, is the unofficial spokesman for the MBIA bears, who argue that the bond insurer is sliding toward oblivion; bulls, such as the value investor Marty Whitman, have said the fears are overblown. The debate hits close to home on Wall Street, because MBIA insures many of the wilting mortgage-backed securities that banks and brokerages hold on their books.

Hedge fund fraudster Salman Shariff has been sentenced to 57 months behind bars, years after swindling millions from trusting investors. Shariff's Miami-based funds raked in almost $11m from 1998 to 2001, while Shariff afforded himself all of the luxuries indigenous to South Florida, including an ocean-front South Beach condo, a Ferrari Testarossa and a 43-foot yacht, the Financial Times reports.

The Alberta Securities Commission (ASC) has imposed market restrictions and administrative penalties on James Albert Jeffery, Thomas Edward Repke and Richard George Kearl in connection with the illegal distribution of Coadum Capital Fund 1, and Coadum Capital Fund II, securities, Investment Executive reports.

Goldman Sachs has been instructed to sell one of the world's leading lift firms for an estimated £450m. Goldman Sachs co-owns Wittur as part of a consortium that includes the hedge fund Cerberus, the Independent reports.

With the end of Lehman Brothers's fiscal third quarter less than two weeks away, some analysts are anticipating a loss of $1.8bn or more, instead of the modest profit they previously expected. If the dour projections come true, Lehman's losses since the start of March would total at least $4.5bn – or more than the firm churned out in profit during fiscal 2007, the Wall Street Journal reports.

HSBC and Santander, Europe's top two banks, are increasing their lead over hard-hit rivals and may have a window of opportunity to drive home their capital strength advantage and pick up bargains and market share, Reuters reports.

Morgan Stanley and Goldman Sachs are responding to the credit crisis with new systems that use the market's view of their own creditworthiness as a basis for lending decisions, according to people familiar with the matter. The message is that "if our firm is in trouble, we would rather fund ourselves than fund you [hedge funds]", said a brokerage executive with knowledge of the arrangements, the Financial Times reports.

The US Treasury is growing increasingly likely to recapitalise Fannie Mae and Freddie Mac in the months ahead on the taxpayer’s dime, Barron’s reports. Such a move could wipe out existing holders of the agencies’ common stock, with preferred shareholders and even holders of the two entities’ $19bn of subordinated debt also suffering losses.

Merrill Lynch has imposed a global hiring freeze for the rest of 2008. The freeze will be imposed across the board, excepting the firm's retail broking unit, and will even apply to positions where budget has already been allocated. The freeze covers both permanent and temporary positions, and includes replacement hires, Here Is The City reports.

LAUNCHES

Goldman Sachs has launched a new proprietary fund to invest in select assets in the Middle East in a reversal of recent flows which have seen sovereign wealth funds from the region invest in western assets. The fund has been started with an initial balance of up to $300m, with the fund likely to increase in size as more investment opportunities are identified, the Telegraph reports.

Crederian Fund Services has launched a new full-service fund administration for the alternative asset management industry. Crederian is headed by two industry veterans, president and chief executive Vincent J. Ciavardini and executive vice-president and chief operating officer Gene J. Cichanowsky.

Arch Financial Products, in a joint venture with Nice Capital, has launched a fund investing in UK residential property. The fund will purchase properties being offered by distressed sellers in London, then convert them to multi-tenant properties.

PEOPLE MOVES

Port Funds, a wholly owned subsidiary of Harmonious Group, has appointed Didier Rault to the board. Mr Rault retains his position as chairman of International Finance Capital

Tapio Pekkala has joined hedge fund manager Heptagon Capital as an investment manager, from Blue White Alternative Investments.

Dominic Rossi, head of equities at Threadneedle, is leaving to become chief investment officer at Gartmore. Rossi will be a member of Gartmore’s board and executive committee and answer to Jeff Mayer, president and chief executive, FT Adviser reports.

VIRTUAL HEDGE

Jessica Walter didn't go to Harvard University to study cupcakes, but that's what she does since losing her job as a vice president in credit strategy at Bear Stearns. Bankers are "buying businesses for themselves, moving west or to Europe, including Russia, or to Dubai," said Jeanne Branthover, managing director of Boyden Global Executive Search in New York, Bloomberg reports.