25/09/2007

HFMWeek Snapshot - 25 September

NEWSPAPERS AND WIRES: The Wall Street Journal reports that just days after reassuring investors that he remained its biggest shareholder, and would continue to fight for holder value in what it calls a “shocking resignation letter,” the co-founder of Absolute Capital Management, Florian Homm, has sold most of his stake in the London-based hedge fund, “As of yesterday,  Homm's CSI Asset Management vehicle still retained a 4.77% holding, or 3.3m shares in Absolute, according to a stock market announcement.” Homm, who held a 19.2% stake as of the last public announcement on 6 September, sold the shares to a vehicle called Farkland Ventures, that is linked to Absolute Capital executive Andreas Rialas and his family, Absolute said. The company confirmed Rialas's vehicle acquired 10m shares for £3.52m ($7.1m) Friday. “His resignation sparked a flood of investor requests for the return of cash, forcing Absolute Capital to suspend redemptions on some equity funds, and the company last week proposed restructuring some of those funds.”

Conde Nast Portfolio.com says that Florian Homm’s recent divorce has now played a part in the saga, as for part of his settlement, he gave ex wife Susan Devine Homm millions of shares in Absolute Capital. The piece says: “It turns out that Homm unloaded most of his shares on Friday in a fire sale to an investment vehicle run by another Absolute Capital executive. He sold 10 million shares at the bargain basement price of 32.5 pence per share, or $6.6 million total, leaving him just a 4.77 percent stake in the company. Absolute shares opened today at about 50 pence per share…Where does the ex-wife come in? It turns out they had just been through a divorce, and as part of the settlement, he gave her millions of shares of Absolute Capital. So Susan Devine Homm, with a 5.8% stake, is now a bigger shareholder in the firm that her ex-husband almost single-handedly crushed last week…Complicating matters further, a report in the Sunday Times of London yesterday claims that Homm went to Zurich to see his ex-wife last weekend, just days before he surprised everyone with his resignation. According to "a friend" of Homm's, the meeting went badly.”

The Financial Times carries a comment piece by  Paul Marshall, chairman of Marshall Wace, which says that in July, a hedge fund working group was established, with Sir Andrew Large as chairman. The group was to review industry standards and best practice in relation to valuation, risk management and disclosure. The piece says: “None of those involved in this project would have anticipated, or desired, that the remit would have become quite so topical, quite so soon.” It adds that for the corporate sector, “and for some in the media, hedge funds have become, wrongly, synonymous with corporate activism. The political world has developed a growing interest in our industry for all the above reasons, plus a concern about the size of the rewards for the highest earners… Ours is an industry that has always placed a high value on privacy, both to respect the confidentiality of our clients and to preserve our own commercial and investment edge. There will be those who argue that public engagement of any kind goes against the grain of the maverick entrepreneurialism that is at the heart of the industry’s success. But such a position is becoming increasingly untenable.”

Investment News says that Morgan Stanley is in talks to purchase a 20% stake in Traxis Partners, a hedge fund founded by the company's former chief strategist, Barton Biggs. It says that the move, which the New York-based company could announce within a month, would give it a stake in the $1.5bn "macro" fund that trades in global currencies, fixed income and equities, according to published reports. Mr. Biggs left Morgan Stanley in 2003 to form Greenwich, Connecticut.-based Traxis. Biggs is also an author, and his 2006 book Hedgehogging, the story of his fund’s launch, was very well received.