Opalesque London: A roundup of last week’s hedge fund launches, closures, index performance, trends, regulatory, legal and financial events pertaining the alternative investments world.
Last week, we heard of fund launches from Creditor Liquidity Solutions, L&G, Alpstar, LODH Gestion and Mascot Capital.
Jayhawk Capital liquidated its U.S.-focused hedge fund; five funds run by Lancelot blamed Petters as they filed bankruptcy; and Toronto-based Epic shuttered its flagship hedge fund following a 43% loss.
Highbridge denied reports that it was closing several funds and said it was going to build a new European unit. It was later reported that Highbridge had fired 10% of its NYC staff and was planning further cuts in Europe and Asia.
Citadel, which largest hedge fund had lost 35% YTD, denied rumours that it had approached the US government for aid and that the Fed was probing the firm. Citadel eventually announced plans to wind down its $1 billion FoHFs and shift the capital to a seeding business.
On the M&A scene, hedge fund manager Absolute Alpha begun talks with a number of Australian-based global equities managers with a view to purchasing their funds, and RREEF bought a minority stake in the real estate hedge fund Rosen Real Estate Securities.
Wolkswagen’s shares more than doubled on Monday when Porsche (the famed half-car maker, half-hedge fund) announced an unexpected stake increase to 74%. Hedge funds, rushing to cover short positions, were forced to buy stock from a shrinking pool of shares in free float. Many short-sellers faced great losses: funds including Greenlight and Odey A. M. admitted to having big short positions in VW - and Highbridge, Marshall Wace and Citadel denied reports of large losses.
Porsche eventually offered to sell 5% of its VW shares to help hedge funds settle their short exposure. German regulator Bafin launched a probe into the share swings and AIMA said it was planning to ask the EU to clamp down on a German legal loophole.
It was reported that listed funds of hedge funds had by now lost 15.9% YTD, and that traders and investment managers attributed the October stock-market rout to hedge fund sell-offs. Soros said he expected a two-thirds reduction in the number of hedge funds, and the Bank of England warned that hedge funds were ‘facing a credit storm’. On the positive side, S&P issued a report stating that under fire rated hedge funds would likely retool and rise again. And the likes of Steven Cohen, David Einhorn, Paul Singer and Alan Howard were said to be going against the grain by raising more money from investors.
As Dec. 31, the next redemption window for most funds, is looming, hedge funds tried to limit redemptions, using gate provisions or restructuring. Bloomberg.com reported that investors might pull as much 25% of their money from hedge funds by year-end, forcing managers to dump assets and extending the worst market selloff in 50 years.
The WSJ reported that Tikehau, Centaurus and Polygon had limited investors’ withdrawals; Gottex, Wermuth, Auriel and Atlantis had suspended withdrawals until further notice; and RAB, Ramius, BlueBay and Henderson had proposed favourable fees to investors against less redemptions. Deephaven suspended withdrawals from its multi-strategy hedge fund. Investors in Pickens’ energy HF, which had lost 60% YTD, asked to redeem.
The financial crisis was still hitting on big financial institutions: Bear Stearns’ $30bln mortgage portfolio fell 9%; Deutsche Bank might have lost $400m on equity derivatives trades; Citigroup and HSBC were still seeking buyers for a $6bln loan to Dubai’s Investment Corp.; Lazard posted a 3Q loss of $77m; Barclays, looking for capital, might secure loans from the Middle East and two Russian banks; RBS was said to possibly face further write-downs in H2; but Santander’s profits rose by 4.4%. AIG raised new funds from the new Fed facility to repay part of its $123bln Fed loan.
Mitsubishi UFJ was considering raising up to 1 trillion yen ($10.6 billion) to replenish its capital; Nomura might post a loss of around $2bln by year-ending March 31 following the purchase of Lehman's Asian, European and Middle East units.
Meanwhile, Lehman Europe’s unwinding was delayed because of slow co-operation from other banks. Freddie Mac asked a U.S. bankruptcy judge if it could conduct an investigation into $1.2bln it claimed was owed by Lehman; a group of public pension funds, suing to recover money lost on Lehman's fall, added new legal claims against Lehman based on information from former employees; UAE investors in Lehman launched a website to protect rights and investments; Deutsche Postbank was said to be needing at least Eur1bln in fresh capital due to a Lehman exposure. The MFA urged one of Lehman’s administrators to consider options to expedite the bankruptcy resolution process. Carlyle was expected to bid for Lehman’s investment management division.
The US Fed cut interest rates by half a percentage point to 1% and announced that it would lend $30bln each to central banks in Brazil, Mexico, South Korea and Singapore to lend on to local banks. The dollar loans, structured as currency swaps, were intended to help meet intense demand for dollars in these major emerging markets, according to the FT. The move eased the worries of Asian companies and banks and restored confidence in Latin American markets.
Norway, South Korea, China, Hong Kong, Taiwan subsequently cut interest rates too. Iceland lifted its rates from 12% to 18%. The European Central Bank, the U.K. and Japan are expected to follow suit this week.
The Group of Seven expressed concern the soaring Japanese yen was posing a threat to the financial and economic stability as recession worries spread worldwide.
In the U.S., stock futures fell, indicating the market may extend the worst monthly plunge in 70 years. Mid-size U.S. banks lined up for government cash. The Treasury predicted huge gover......................
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