http://www.hfalert.com Hedge Fund Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Fri, 03 Feb 2012 20:08:36 -0700 60 http://www.hfalert.com/headlines.php?hid=155646 Hedge fund heavyweight Mariner Investment has teamed up with managed-futures shop Hyman Beck to launch a mutual fund. Mariner Hyman Beck Global Fund, which began trading in December, marks the latest example of an alternative-asset manager attempting to broaden its investor base by offering a mutual fund product. The vehicles strategy, which targets financial futures around the globe, also is available via a hedge fund that launched this month. Under the terms of their partnership, Hyman Beck serves as portfolio manager, while Mariner handles marketing and risk management. For Mariner, a $12 billion fund operator, the joint venture represents its first foray into managed futures. It also marks the first time the Harrison, N.Y., firm has offered a mutual fund a move designed to attract investors concerned about the infrequent liquidity and tax headaches associated with hedge funds. For Hyman Beck, based in Florham Park, N.J., the partnership means gaining access to Mariners formidable marketing team. Distribution pipes take a long time to build up, and they have it down to a science, an industry source said of Mariner. The mutual fund comes with a low minimum-investment threshold, though Mariner doesnt intend to market it to retail investors. Instead, it will be sold through advisors and brokerages that cater to wealthy clients. Since the 2008 market rout, a growing number of hedge fund firms have rolled out mutual funds in an effort to boost assets under management. In some cas... http://www.hfalert.com/headlines.php?hid=155688 Japans largest bank is pulling $2.5 billion from funds of funds managed by BlackRock, Grosvenor Capital, Mesirow Financial and UBS. Bank of Tokyo-Mitsubishi UFJ submitted yearend redemption requests for the full amounts it had invested with BlackRock, Grosvenor and Mesirow, while only partially withdrawing from UBS. The bank expects the requests to be fully honored by the end of March. The investments represent the bulk of the Tokyo institutions $3 billion hedge fund portfolio. The bank will still have about $500 million of proprietary capital in vehicles run by Blackstone and UBS. The withdrawals amount to a sharp pullback for an institution once recognized as among the worlds biggest hedge fund investors. When Tokyo-Mitsubishi absorbed UFJ Holdings in 2006, they had a combined $7 billion invested in hedge funds more than any other single investor at the time, one market player recalled. Why the retreat Sources said the latest round of redemptions was prompted by a combination of performance concerns and new rules restricting how banks can invest their proprietary capital. With Basel 3 and Dodd Frank, its kind of unclear for banks right now what they can stay invested in, a Tokyo-based broker-dealer said, referring to the Bank for International Settlements Basel 3 rules and the Dodd-Frank Act in the U.S. Bank of Tokyo deploys capital to hedge funds via its securities investment department. The investment team is headed by portfolio manager Akihiro Toyoshima. Over the years, the bank has... http://www.hfalert.com/headlines.php?hid=155351 Mount Lucas Management, well known for its quantitative approach to futures trading, has filed a patent-infringement lawsuit against rival quant manager Alpha Financial Technologies. In a complaint filed last month in New York, the Newtown, Pa., firm accuses Alpha Financial of using a Mount Lucas program to manage a proprietary index called ATF Diversified Trends Indicator. Both Mount Lucas and Alpha Financial, a Grapevine, Texas, firm headed by famed futures trader Victor Sperandeo, manage hedge funds based on proprietary indexes that track commodity and financial futures. Im comfortable were in the right, said Sperandeo, better known as Trader Vic. His firm has yet to file a formal response. What prompted the lawsuit A routine review of competitors funds by Mount Lucas law firm, Leason Ellis of White Plains, N.Y. Lawyer David Leason insists Mount Lucas isnt out to damage Alpha Financials business. Mount Lucas interest is that it receives a fair royalty, he said. Although Mount Lucas has been in business for 25 years, its patent was filed three years later than a similar patent held by Alpha Financial, founded in 2000. But patent law can be counter-intuitive, said Bernard Rhee, a patent attorney at Technology and Business Law Advisors of Baltimore. If someone builds a better mousetrap, he said, the newer patent can nullify the effect of an earlier one. But when the patents involve an idea such as an investment process, disputes are notoriously hard to resolve. Th... http://www.hfalert.com/headlines.php?hid=155263 Fed up with weak returns from blue-chip managers, institutional investors are poised to increase their allocations to smaller, less-established fund shops. Thats the consensus among 20 market players who responded to Hedge Fund Alerts annual industry-outlook survey. While opinions varied as to the extent of the shift, a majority said they expect emerging managers to attract a larger percentage of the capital that pensions and other institutions invest in hedge funds. We believe many global leaders in alternatives are planning initiatives that will see their allocations to smaller managers grow, said Ray Carroll, chief investment officer at Breton Hill, a Toronto global-macro shop that recently landed a $100 million mandate from Calpers. Following the 2008 financial crisis, hedge fund investors generally gravitated to the biggest, most experienced managers in search of stability and safety. But many of those same limited partners have grown increasingly dissatisfied with the performance of their hedge fund portfolios even as most managers continue to charge the same high fees and limit investors access to their money. Generally weak returns during the second half of 2011 only heightened investor frustration, a number of survey respondents noted. The average hedge fund ended the year down about 4, according to various estimates, while the Samp;P 500 index gained 2.1. Institutional investors will not pay for average and below-average returns, said Peter Tarrant, head of capital introduction at prime broker BTIG. Added... http://www.hfalert.com/headlines.php?hid=155077 Tortus Capital is adding staff following the launch of its debut fund in October. The New York firm, led by former Fir Tree Partners executive David Salanic, installed Eric Liu last month as head trader. In the next six months, Tortus plans to fill four more positions: compliance officer, controller and director of marketing, as well as another analyst post. Tortus Capital Fund launched Oct. 19 with about $50 million. In addition to Salanic, the day-one staff included chief financial officer Richard Wandner, who previously spent 12 years at Viking Global; analyst Eric Bodnar, formerly of Silver Point Capital; and analyst Micael Calatrava, who previously worked at Aerium Capital. Liu last was a trader at Traxis Partners. Tortus takes an opportunistic approach to investing in performing and nonperforming credit instruments globally, including corporate bonds and sovereign debt. The fund typically holds 10-20 long positions and 20-30 shorts for periods ranging from three months to five years. Tortus offers two share classes. Limited partners who agree to a two-year lockup are charged discounted fees of 1.5 of assets and 15 of gains, versus the standard 2-and-20 fee structure for investors willing to accept only a one-year lockup. Salanic, the funds portfolio manager, worked at the $7 billion Fir Tree from 2007 until this year. His focus was on sovereign debt and distressed activist plays, among other types of investments. http://www.hfalert.com/headlines.php?hid=155055 For the second time in two years, Nadeem Walji has closed the doors of his fund shop. In 2009, the Duquesne Capital alumnus pulled the plug on his Duma Capital Partners, a once-$500 million multi-strategy firm that got walloped by financial-crisis redemptions. Now, Walji is unwinding Duma Capital Management, a $100 million global-macro operation he launched with backing from Atticus Capital founder Timothy Barakett. As of late last month, Waljis new firm was on track to return $90 million of investor capital from Duma Liquid Opportunities Fund, with the remaining $10 million held back pending an audit. What happened Apparently, Walji feared he couldnt grow the firm quickly enough to attract the kind of investment talent he wanted. The management came to the conclusion that it would be most prudent to return all capital as soon as possible so that Dumas investors may reallocate for 2012, said Duma spokesman Konstantin Shishkin. Before starting his own business, Walji managed money first at Soros Fund Management and then at Duquesne under Stanley Druckenmiller, himself a Soros alumnus. Walji was a star trader and partner at Duquesne, where he ran more than $500 million. In 2005, he founded Duma Capital Partners, whose flagship fund delivered returns of 7.7 in 2006, 22.8 in 2007 and 6.2 in 2008 a year when the average hedge fund lost 19. Despite the strong performance, liquidity-strapped investors barraged Duma with redemption requests in late 2008 and early 2009, whittling assets under... http://www.hfalert.com/headlines.php?hid=154754 Texas Permanent School Fund is planning to revamp its $2.5 billion hedge fund portfolio by abandoning funds of funds in favor of single-manager vehicles. Like other endowments that have recently made similar moves, the $25.5 billion operation sees the shift as a way to save on fees. Its investment team has begun discussing criteria for manager selection, and plans to submit a proposal to the states Board of Education in January. Texas Permanents investment staff then will begin identifying potential investments in single-manager funds, which it would present to the Board at an April 18 meeting. It remains to be determined how quickly the operation would reallocate capital from funds of funds to direct hedge fund investments, where it currently isnt a player. At a finance-committee meeting earlier this month, Texas Permanent chief investment officer Holland Timmins reported that moving to direct investments in hedge funds would save the endowment an estimated $114 million over five years owing to the fact that funds of funds charge a second layer of fees. The endowment has paid $72 million of fees to fund-of-fund operators since getting into the sector four years ago, he said. Transferring capital to single-manager funds also would help Texas Permanent respond more nimbly to other issues within its portfolio. For example, it recently placed K2 Advisors on an internal watch list due to underperformance. Earlier in the year, it pulled $400 million from a Goldman Sachs fund of funds amid concerns... http://www.hfalert.com/headlines.php?hid=154734 Eastman Kodaks pension plan is preparing to cash out of five hedge funds and invest the proceeds in vehicles run by three other hedge fund operators and a mutual-fund manager. The reshuffling of Kodaks fund managers is the centerpiece of an overhaul of the $4.7 billion U.S. portion of the companys retirement plan, whose worldwide portfolio totals $7 billion. The beneficiaries of the restructuring will be funds run by: Passport Capital of San Francisco, with $4.5 billion under management. Scout Capital of New York, with $2.3 billion. Select Equity of New York, with $4 billion. Tradewinds Global Investors of Los Angeles, a $39 billion unit of mutual-fund giant Nuveen Investments. Kodak will be investing in Tradewinds All-Cap vehicle, which targets shares of companies of all sizes. Kodak still hasnt officially notified its five current fund managers of its plans to redeem, but it intends to have its capital back from those vehicles by Feb. 1. It also expects to have contracts in place with the four new managers by that date. The pension plan overhaul is in the works as the 131-year-old imaging giant scrambles to raise capital. The Rochester, N.Y., company insists that it has no plans to seek bankruptcy protection. But it recently hired Jones Day, a law firm that handles bankruptcies and other types of corporate restructurings, as well as restructuring specialist FTI Consulting. The pension-plan overhaul is being spearheaded by Tim Barrett, who took the job a year ago after overseeing San... http://www.hfalert.com/headlines.php?hid=154510 A large institutional investor is set to park $150 million with Talpion Fund Management, an equity-focused shop headed by former Highbridge Capital honcho Henry Swieca. The investment, teed up for the Nov. 15 subscription period, would be followed by another $50 million half due before yearend and half next year. Together, the commitments would boost Talpions assets under management to more than $600 million, from about $425 million now. The inflows are notable for several reasons, starting with the fact that the New York firm has yet to conduct a formal marketing campaign. Whats more, Swieca seems to have gained the trust of an institutional backer despite heavy staff turnover in recent months. When Swieca began converting Talpion from a family office into a hedge fund manager late last year, he embarked on an aggressive hiring spree that boosted headcount to about 35. But a combination of layoffs and resignations has cut the roster by 7-8 staffers. The turnover has led to speculation that Swieca may be having second thoughts about starting a hedge fund business. But a person familiar with his thinking said hes committed to rebuilding Talpions staff and raising additional capital. Indeed, the firm is currently looking to fill its first in-house marketing position. In the meantime, large investors apparently are willing to invest with Talpion on the strength of Swiecas reputation. Highbridge, a J.P. Morgan subsidiary that is among the worlds largest hedge fund operators, was founded in 1992 by Swieca... http://www.hfalert.com/headlines.php?hid=154397 If former SAC Capital president Brian Cohn ever had any intention of establishing a hedge fund firm of his own, its now pretty clear hes going to stick to running his own money. Cohn recently laid off two staffers at his family office, Archeroak Capital, leaving only one other besides himself. Word has it that Christina Kim was one of those let go. She is best known for her tenure at Daniel Bentons Andor Capital, which shut down amid the market collapse in late 2008. Cohn spent 11 years as president of SAC before leaving the Stamford, Conn., firm in 2008 to launch Archeroak. Early on, sources said, Cohn planned to start a hedge fund operation, despite having limited experience on the investment side of the business. The idea was that he would recruit top-notch traders and analysts, while drawing on his experience at SAC to build an institutional-quality infrastructure. But apparently investors didnt buy the premise. In the end, they couldnt overlook the fact that Cohn had no money-management experience. However, a source close to the Old Greenwich, Conn., firm insisted that Cohns intention from the start was to manage money only for himself. In any case, he plans to maintain Archeroak as a family office going forward. Among Cohns earliest hires at Archeroak was Jeff Messina, a former Level Global analyst who covered cyclical stocks. But Messina was on board only for a short while, and currently works for Citadel in San Francisco. http://www.hfalert.com/headlines.php?hid=154232 Employees of Kingdon Capital are worried that the firms dismal third-quarter performance could trigger an avalanche of redemptions followed by a wave of layoffs. The firms main fund, M. Kingdon Offshore, was down about 19 through the end of September, then regained a little ground as the stock market rallied during the first few weeks of this month. By the second week of October, the fund had trimmed its year-to-date loss to 16.9. Nonetheless, Kingdons third-quarter return amounts to one of the worst drawdowns in its nearly 30 years as an equity manager. The steepest decline coincided with the stock-market crash of October 1987, when Kingdons fund fell 30.2. The fund lost about 20 in 2008. At the firms annual investor meeting, scheduled for Nov. 16, Kingdon executives are expected to concede they were too bullish on U.S. stocks headed into the third quarter, and that the funds net-long exposure was higher than usual. The fund has since reduced its equity exposure. In any case, the assumption among Kingdons staffers is that a number of investors will seek to pull out at yearend. The big question is how many. The outcome wont become clear until the end of November the deadline for submitting yearend redemption requests. A person familiar with the firm said management has no intention of laying off portfolio managers. But some investment staffers have begun looking for opportunities elsewhere. Two Asia-stock analysts left last month shortly after the New York firm hired a ... http://www.hfalert.com/headlines.php?hid=154164 Its shaping up to be another rough year for Tontine Asset Management, a once-$7 billion firm that has struggled to regain its footing since the 2008 market rout. The latest trouble: Tontine Capital Partners 2, the successor to a vehicle that collapsed during the financial crisis, has suffered crippling losses in recent months. Two share classes fell some 24 in August and again in September, and were down about 40 year to date, according to data the firm provided to investors. Another share class, representing investors who stuck with the firm through the 2008 debacle, is down a whopping 86.4 year to date, including a 55.9 loss in September alone. Those shares, dubbed Class S, are backed by a highly concentrated position in Broadwind Energy, a penny stock that has cost Tontine dearly in the past couple of years. Broadwind, which makes wind-energy equipment, closed at 32 cents on Sept. 30, down from $2.31 at the start of the year and nearly $10 in early 2010. In recent weeks, Tontine has notified Class-S shareholders that if they want to redeem at yearend, theyll have to accept payments in kind that is, shares of Broadwind rather than cash. The firm resorted to a similar maneuver in May 2010, when Tontine Capital Partners 2 fell 44 as a result of its holdings of Broadwind and Exide Technologies. That month, Tontine honored some redemption requests with Broadwind and Exide stock. In the end, the move may have exacerbated the funds losses, since the investors apparently turned around and sold the stocks ... http://www.hfalert.com/headlines.php?hid=154009 San Bernardino County Employees is set to name interim chief investment officer Donald Pierce to the permanent post. The $6.1 billion pension system, which allocates about 20 of its capital to hedge funds, has been working on reorganizing its leadership ranks since the departure last year of Timothy Barrett. He held the dual titles of chief investment officer and executive director. In July, the San Bernardino, Calif., operation hired Norm Ruggles as chief executive the first step in a plan to split the roles of Barretts old job. Last week, the pensions board gave the nod to Pierce as chief investment officer. Pierce, who has worked at San Bernardino County Employees since 2001, is credited with introducing the pension to several investment strategies, including emerging-market debt, non-U.S. private equity and volatility trading. Hes been at the heart of that portfolio and its design, said a source who was anxious to see Pierce get the position. Barrett resigned in October 2010 to take the top investment job at Eastman Kodak a post that pays $1.1 million a year. Pierce is now working with Ruggles to develop investment objectives, including asset allocations and return targets, and to select managers that can achieve those goals. Ruggles previously worked at Pension Trustee Advisors, a Centennial, Colo., consultant. Before joining San Bernardino County Employees, Pierce worked at pension advisor Watson Wyatt, which last year merged with Towers Perrin to form Towers Watson. The pension... http://www.hfalert.com/headlines.php?hid=153878 A Cerberus Capital hedge fund is behind schedule in its plan to meet some $3 billion of redemption requests that limited partners submitted during the financial crisis. The vehicle, Cerberus International, had some $5 billion of assets when investors headed for the exits in late 2008 and early 2009. Because the funds holdings are illiquid, Cerberus transferred some $3 billion of the assets to a special-purpose vehicle and set a timetable for gradually liquidating the stakes. Specifically, the fund operator told investors it would sell one-quarter of the assets each year beginning Oct. 1, 2009. According to that schedule, half of the assets should have been liquidated by now. In fact, only about 35 of the vehicles positions have been sold. Instead of completing the liquidation process in four years, it now looks like the vehicle wont be fully unwound for at least six years, assuming the recent market turmoil doesnt get any worse. The New York firm has blamed the delay on several factors, including the March 11 earthquake and tsunami in Japan, where it owns stakes in several companies. But some investors say theyve heard enough. Theyve always got their excuses, said one disgruntled LP. Cerberus International, launched in the early 1990s, makes private-equity like investments in companies around the globe. But the financial crisis highlighted a liquidity mismatch between the funds underlying assets and the redemption schedule offered to investors. Of the $2 billion of assets remaining in the... http://www.hfalert.com/headlines.php?hid=153855 A senior executive at QFS Asset Management left the quantitative fund shop just months after founder Sandy Grossman orchestrated a merger and turned over the chief executives job to an outsider. Theresa Patti, a partner and senior portfolio strategist, stepped down in August after more than 10 years at the Greenwich, Conn., firm. She hasnt disclosed her next move. Pattis position encompassed a range of responsibilities at the $2.2 billion firm. She worked closely with Grossman on analyzing the risks and returns of QFS trading strategies, advised clients on setting up separate accounts and helped develop investment products. She also served as a liaison between the trading desk and investment community. She was basically the voice of the firm, said a source familiar with the operation. She went into large investor meetings, did more than most marketers, knew trades. She was like a PM. Another QFS executive, research chief Jim Xiong, left the firm in June. He had spent 14 years working under Grossman and has yet to land a new position. Its not clear what prompted the departures, but sources said they likely were related to Grossmans diminishing role at the firm. After QFS acquired New York asset manager Cenario Capital in April, Grossman stepped down as chief executive and installed Cenarios chairman and chief executive, Karlheinz Muhr. Grossman is chairman of the combined business. One source said Patti will take a 6-12 month sabbatical, then plans to seek a senior position at another firm.... http://www.hfalert.com/headlines.php?hid=153596 Lions Path Capital is carving out an unusual niche in the hedge fund-incubation arena: quantitative strategies. Like other fund incubators, the New York firm provides startup capital, office space, operational support and compliance advice to fledgling managers. Since launching last year, Lions Path has backed 11 long/short equity startups. But on Sept. 1, Lions Path took on its first two quantitative-trading specialists Brunswick Capital and Harrington Street Advisors. And it is scouting for additional quant managers. The quant focus is unusual in the incubation sector because of the highly technical nature of the traders strategies. In addition to the usual array of incubation services, Lions Path will provide quants with programming help to translate their algorithms into market-ready trading systems. It will then audit the results and, assuming good returns, eventually would help market the funds to outside investors, including other seeders. Lions Path invests only partners money, typically backing startup managers with $1 million to $25 million apiece. Brunswick and Harrington both started trading this month with less than $5 million of seed capital. Lions Path currently is putting a third quant manager through a trial run. Lions Path is focusing on quant strategies that can generate 12-plus net returns and are designed to avoid drawdowns of more than 6. Directional strategies must exit trades daily, while market-neutral strategies can hold positions overnight. Unlike many hedge fund backers,... http://www.hfalert.com/headlines.php?hid=153490 Steve Eismans top lieutenants at FrontPoint Partners have split with the celebrity stock picker and are now gearing up to launch their own hedge fund. When word got out in June that Eisman would leave FrontPoint after liquidating his two funds, market players assumed hed take three key investment staffers with him head trader Danny Moses and analysts Porter Collins and Vincent Daniel. As it turns out, the three have set up their own firm, Seawolf Capital, with plans to begin trading a financial-stock fund in January. The team of Collins, Daniel and Moses had been working with Eisman since 2006. Together, they ran two of FrontPoints best-known vehicles: FrontPoint Financial Services Fund and FrontPoint Horizons Fund. Eisman and his staff are best known for their early bet against subprime-mortgage bonds a trade chronicled by Michael Lewis in The Big Short. In 2007, the financial-services fund delivered a 66.2 return. Eisman is expected to launch another fund under a new umbrella, though details have yet to emerge. Some market players said the former FrontPoint team may find it more difficult to raise capital separately than they would have as a unit. One problem investors may have is analyzing their performance at FrontPoint that is, who gets credit for the funds returns. Its not positive, said a fund-of-funds operator. Not that one or both cant be successful, but it certainly gives one pause. For their part, Collins, Daniel and Moses intend to invest a combined... http://www.hfalert.com/headlines.php?hid=153476 In his parting letter to investors, Scottwood Capital founder Edward Perlman said in July that he wasnt just exiting the hedge fund business he was getting out of the financial markets altogether. In the face of increasing volatility and risk, Scottwood had spent the previous 3-4 months dramatically reducing exposures, raising substantial cash and, consistent with always trying to do the right thing, is returning investor capital, Perlman wrote. He then made one of several market calls, pointedly advising his limited partners not to be invested in the financial markets at this time. Within a couple of weeks, Perlmans letter looked remarkably prescient. Samp;Ps downgrade of U.S. debt on Aug. 5 sent markets into a tailspin. Since the Greenwich, Conn., firm was mostly in cash by then, it still expects to meet its Sept. 30 deadline for returning investor capital. After that, Perlman plans to convert Scottwood into a family office. It wasnt the first time Perlman made a well-timed market call. In the third quarter of 2008, Scottwood scrambled to dial down risk, so that by the time markets were cratering in October, the firm was all in cash. Scottwood finished the year down 7.6, compared to an industrywide loss of 19. The next year, the Scottwood fund gained a whopping 45, then lost 6.6 in 2010. This year, it was up 1.5 through the end of July. Since its inception in 2001, the fund has delivered an 11.7 average annual return. In his July letter, Perlman made another market call: Due to big unwanted changes impo... http://www.hfalert.com/headlines.php?hid=153472 Investors are pouring increasing amounts of cash into DoubleLine Capital, just as founder Jeffrey Gundlach begins defending himself against a lawsuit by former employer TCW. DoubleLine Opportunistic Income Fund received inflows of $100 million or more on multiple days during the week starting Aug. 8 and collected $85 million on top of that on Aug. 15. Thats up from average daily inflows of $20 million to $30 million for the fixed-income vehicle in prior weeks. The rush of capital comes as something of a surprise, given that TCWs case commenced in Los Angeles County Superior Court on July 28. Typically, fund backers shy away from managers who are entangled in a legal proceeding. But the lawsuit might actually have helped in this case by shining a spotlight on Gundlach, who in his days at TCW was known as one of the worlds most savvy bond investors. He took the stand Aug. 15. Thats the market speaking, one fund-data analyst said. Gundlach is still considered to be on the rise, while TCW looks to be going in the opposite direction. Thats not to say DoubleLine had trouble raising capital before. Indeed, Strategic Insight ranks the Los Angeles firm number-one ever in terms of first-year inflows among mutual fund managers in the U.S. The opportunistic fund, which combines characteristics of a hedge fund, private equity vehicle and mutual fund, now has more than $600 million under management. But most of DoubleLines assets are in the $8.5 billion DoubleLine Total Return Bond Fund, which functions a... http://www.hfalert.com/headlines.php?hid=153207 Despite some high-profile flops, hedge funds as a whole outperformed the Samp;P 500 index amid the extreme market turmoil earlier this month, according to two industry gauges. Paulson amp; Co. made headlines for ever-deepening losses in its Paulson Advantage Fund Plus, which fell about 10 during the first two weeks of August and is down more than 30 year to date. A Maverick Capital fund fell 11 during the first half of the month. But an index maintained by Lyxor Asset Management tells a different story. Lyxor Hedge Funds Tracker, a composite of 100 large funds around the globe, fell 3.5 from Aug. 1 to Aug. 9, compared to a 9.2 drop for the Samp;P 500. Year to date, the Lyxor index was down 5, versus 5.7 for the Samp;P. A broader snapshot comes from Morgan Stanleys prime brokerage, which has hundreds of hedge fund clients. During the first five days of August, the average fund in Morgan Stanleys stable fell 2.3, versus a 7.2 decline for the Samp;P 500 and an 8.5 drop for the MSCI World Index, the bank advised its clients last week. The results mirror the industrys performance during the financial crisis. In 2008, hedge funds lost an average of 18 versus a 38 decline for the Samp;P 500. Lyxor, a unit of Societe Generale, has access to some of the most current performance data because it invests with fund operators through separate accounts, which provide clients with greater transparency and liquidity than whats typically available via commingled funds. Only 22 of the 100 vehicles in Lyxors managed-account... http://www.hfalert.com/headlines.php?hid=153123 Scottwood Capital is throwing in the towel. The Greenwich, Conn., firm, which launched an event-driven credit fund in 2001, will return most of its $470 million of outside capital at the end of next month. At that point, Scottwood will convert to a family office for founder Edward Perlman. In July, Perlman put investors on notice that he planned to get out of the hedge fund business due to a perceived increase in credit-market risk, compounded by ongoing regulatory uncertainty. He began liquidating positions and was entirely in cash at the start of this month. The Scottwood Partners fund was up 1.8 through the end of July. Since inception, the fund has delivered an 11.7 average annual return. The wind-down caps a tumultuous few years for Scottwood, which has experienced wild swings both in performance and assets under management. The firm was managing a little less than $1 billion in early 2008, just before financial markets went into a tailspin. The ensuing losses and investor withdrawals cut Scottwoods assets by about 75. Because Scottwood didnt gate its fund, limited partners used it like an ATM, Perlman said. But investors were quick to return, thanks to a whopping 45 gain in 2009 and another 20 increase during the first four months of 2010. In no time, it seemed, the firms assets were back up close to $1 billion. Then came the May 2010 flash crash, which contributed to a monthly loss of 18.5 the firms worst-ever one-month performance. The... http://www.hfalert.com/headlines.php?hid=152971 Nomura, which already sells prime-brokerage services to hedge funds in Asia and Europe, now wants a piece of the U.S. market. Itll be a tall order for the Tokyo bank, given the dominance of major Wall Street banks and the proliferation of so-called mini primes in the wake of the financial crisis. But Nomura apparently believes it can distinguish itself in several areas, including stock lending, swaps trading and capital introduction for Asia-focused managers. Just last week, the banks brokerage unit, Nomura Securities, promoted Declan Breslin to U.S. head of prime services, transferring him from the European prime-brokerage unit. Meanwhile, Darci Tobin was hired as head of prime-services origination, with a mandate to develop and sell prime-brokerage products to U.S. managers. She has experience both in product development and sales, having previously worked at Credit Suisse, Morgan Stanley and fund operator Paloma Partners. Word has it that Nomura is looking to fill other prime-brokerage posts in the U.S. The bank already counts a handful of U.S. hedge fund clients whose needs are mostly limited to borrowing stocks of Asian companies. Nomuras goal is to build on those relationships by offering an increasing variety of services. They have the pieces necessary to create a decent prime brokerage in the U.S., one market player said. Establishing a foothold wont be easy, however, given the presence of prime-brokerage powerhouses such as Credit Suisse, Deutsche Bank,... http://www.hfalert.com/headlines.php?hid=152880 Citadel has taken steps to rein in its equity portfolio managers by limiting the amount of risk they can take. In recent weeks, the Chicago hedge fund operator has adopted a policy requiring all equity books to be beta neutral at the end of each day. A portfolio thats beta neutral has little or no sensitivity to market volatility. As a practical matter, the requirement means a portfolios long and short positions have to balance out. Why the change Sources said it could be a sign that Ken Griffins firm is getting ready to boost leverage across its equity business in an effort to juice returns and lift its main funds back above their high-water marks. Citadels flagship Kensington and Wellington vehicles each fell 55 in 2008 and have been struggling to make up for the losses ever since. As a result, the firm has gone for nearly three years without any performance-fee revenue from those funds. Meanwhile, management-fee revenue has fallen sharply since the market crash, as assets under management have dropped to $11 billion, from about $20 billion in 2007. One reason for the outsized 2008 losses was that Kensington and Wellington were heavily leveraged, perhaps as much as eight times. One source said Citadel recently raised the leverage limit for equity investments, though the firm denied it. A Citadel spokesman said the leverage on its equity books has held steady for the past few years at about six times. Even six-times leveraged, however, is significantly higher than average for equity... http://www.hfalert.com/headlines.php?hid=152771 A founding member of John Griffins Blue Ridge Capital is laying the groundwork for a hedge fund that has the potential for a blockbuster launch. Richard Gerson, who spent 15 years at Blue Ridge before setting out on his own in recent months, plans to open an office in New York, where hes expected to begin trading a global stock vehicle early next year. Market players said the fund could launch with $1 billion or more, based on Gersons tenure at the $6.8 billion Blue Ridge. Another plus: The operation appears to have the blessing of Griffin, one of the original Tiger cubs who worked under Julian Robertson at Tiger Management. The word is that some Blue Ridge investors are ready to invest with Gerson. Meanwhile, Gerson has begun searching for office space and hiring key personnel. Set to join as chief operating officer is Martin Byman, who previously was co-head of European prime brokerage at Morgan Stanley. Byman spent 15 years at the investment bank before resigning in February. At Blue Ridge, Gerson oversaw a range of investments around the world. Among other things, he co-founded Blue Ridge China, a private equity unit focused on Chinese companies. Gerson had worked at Blue Ridge almost from the start. Griffin founded the firm in 1996, following a three-year stint as president of Tiger Management. Gerson is the brother of Mark Gerson, chairman of expert-network firm Gerson Lehrman. http://www.hfalert.com/headlines.php?hid=152748 A team of former Camulos Capital staffers is back in the business of buying distressed assets. Value Recovery Capital has risen from the ashes of Camulos, a distressed-credit hedge fund firm that got crushed by the financial crisis. The new outfit, which is operating from Camulos former offices in Stamford, Conn., scouts for large portfolios of distressed bank or hedge fund assets, then buys and manages them on behalf of deep-pocketed investors. The firm just pulled off its first deal, taking down a $150 million portfolio for an institutional investor. Value Recovery is led by Camulos co-founder Richard Brennan and three other ex-Camulos staffers. Brennan said hes taking a go-slow approach at first, but is already thinking about a possible fund launch down the road. There are four of us here with very deep relationships, and were kind of sitting back and saying, Its time to be patient, he said. But well be back. Brennan foresees numerous opportunities in the second half, as European banks move to clean up their balance sheets to comply with more stringent capital-reserve requirements under the Bank for International Settlements recently adopted Basel 3 accords. In particular, Brennan expects to get a crack at large portfolios of real estate loans, as well as loans and securities tied to commercial aircraft and shipping. Value Recoverys strategy is to first identify attractive investment opportunities, then gauge the appetite of various investors with which it works. Once it finds a will... http://www.hfalert.com/headlines.php?hid=152642 Ellen Wang, who rang up 20-plus returns as head of Clinton Groups quantitative-trading program, is weeks away from launching her own hedge fund. Since leaving George Halls shop in late 2009, Wang has been writing software, importing reams of stock-market data and building a staff of nine at her New York firm, Academy Investment. The plan is to begin trading on paper for a few weeks before soliciting capital from outside investors. At the very least, the fund would start out with $5 million to $10 million of partner money. A formal launch is planned for August or September. Unlike most recent startups, Academy isnt looking for seed capital. The expectation is that Wang will have little trouble attracting money from institutional investors, given her track record at Clinton and Academys investor-friendly terms including 100 monthly liquidity with notice of just 30 days. At New York-based Clinton, Wang managed as much as $1.8 billion, including leverage. Her strategy generated a 21.2 average annual return from 2005 to 2010. Even in 2008, when the average hedge fund lost 18, her portfolio was up 22. In marketing Academy Quantitative Global Fund, Wang will extrapolate her Clinton returns through the end of last year in order to give prospective investors a fuller picture. It isnt a matter of burnishing her image, since Wangs 2010 return would have been about 11.3 well below her average. She has consistently outperformed the benchmark HFRI Equity Market Neutral Index, which gained an... http://www.hfalert.com/headlines.php?hid=152365 Credit Suisse is being more selective about the hedge fund managers it takes on as clients. Since the start of the year, the banks prime-brokerage operation has opened its doors to only about 10 of the startups that have sought help with fund launches. At least thats what prime-brokerage chief Phil Vasan told some of his hedge fund clients during a June 22 conference call. In the past, Credit Suisse typically formed relationships with about 20 of the managers who approached the bank. Credit Suisse appears to be holding startups to higher standards in terms of managers backgrounds and track records, their operational experience and the sophistication of their infrastructure. It isnt enough that a portfolio manager has the potential to deliver good returns he or she also has to know how to run a business. The idea is to focus on managers that have the most potential to generate substantial profits down the road. The move comes as the prime-brokerage industry is grappling with declining revenues and profits. An annual survey published June 22 by Global Custodian magazine found total prime-brokerage revenues remain well below historical norms. By being more selective, Credit Suisse also can provide higher-quality capital-introduction services for both managers and investors, Vasan said. Indeed, the move was driven in part by requests from investors. In a market flush with launches, investors tell us theyre challenged to sort through them all and find what theyre looking for, Vasan told his hedge fund clients. http://www.hfalert.com/headlines.php?hid=152219 After tripling assets under management in the past two years, Standard General is making an all-out push to reach the $1 billion mark. Founders Soohyung Kim and Nicholas Singer, who previously worked together at Cyrus Capital and Och-Ziff Capital, are telling prospective investors they see an abundance of opportunities for their strategy namely event-driven investments in mid-cap companies. They have been out meeting investors with increasing frequency, placing a strong emphasis on raising capital from pension funds and other large institutions. The two also have made a point of speaking at industry conferences. Their New York firm got off the ground in 2007 with a $100 million seed investment from Reservoir Capital. Thanks to strong track records they first developed at Och-Ziff, and then Cyrus, Kim and Singer did little active fund raising during the first couple of years. Then, in mid-2009, they hired former Serengeti Asset Management marketing executive Stephen Usher to spearhead a fund-raising campaign. At the time, Standard General had about $200 million under management. Since then, assets have swollen to $600 million. Kim and Singer have told investors they want to quickly raise another $400 million or so to capitalize on distressed-investment opportunities in the gaming, power and retail industries. Theyve also said they plan to stop accepting new investors once the fund reaches $1 billion of assets. Standard General invests in the debt and equity of companies with market capitalizati... http://www.hfalert.com/headlines.php?hid=152030 Bruce Amlicke is back atop UBS giant fund-of-funds business. Effective July 1, Amlicke takes over as global head and co-chief investment officer of a newly formed group that combines three previously autonomous multi-manager units: Alternative Investment Solutions, headquartered in Stamford, Conn.; Alternative Funds Advisory Group, a Zurich-based operation; and a third unit that was part of the banks wealth-management business. The combined operation will be based in Stamford. Amlicke is among the best-known players in the fund-of-funds business, having started out at derivatives shop OConnor amp; Associates before the firm was acquired by UBS in 1992. He went on to play a key role in building the banks Alternative Investment Solutions unit into one of the industrys largest multi-manager hedge fund operations. Amlicke left UBS in 2004 to head Blackstones fund-of-funds business until retiring in 2009. But last year, UBS lured him out of retirement, reinstalling him as co-chief investment officer of Alternative Investment Solutions alongside Rick Nardis. Under the reorganization, Nardis will become co-chief investment officer of the expanded operation. Meanwhile, Ulrich Keller, chief investment officer of the Alternative Funds Advisory unit, will soon leave the bank. He is expected to stay on long enough to help ensure an orderly transition. In his new role, Amlicke will oversee a staff of 100, including 50 investment professionals. Combined, the units coming under his command h... http://www.hfalert.com/headlines.php?hid=152077 An energy-stock trader who has enjoyed the backing of Citadel unit PioneerPath Capital is about to head out on his own, with the firms continued support. Todd Kantor is in the early stages of setting up a New York operation called Encompass Capital that would follow the same strategy he has employed at PioneerPath one of two multi-manager units under Citadels umbrella. Chances are that it will take him several months to get organized and raise enough outside capital to hold a formal launch. In the meantime, Kantor and Citadel are hammering out details of the arrangement. Its almost certain that Citadel will invest directly in Kantors fund alongside other backers, and its possible hell separately continue to run his current portfolio at the firm a setup that could help bolster confidence among outside investors. The pact also marks a milestone for Citadel, as Kantor is the first portfolio manager chosen by the firm to spin off with backing from PioneerPath or its sister unit, Surveyor Capital. Kantor, formerly an investment analyst at Touradji Capital, joined PioneerPath in 2008, the year Citadel launched the business. He has one of the longest track records of any professional within the unit, which brings in equity managers to invest as Citadel employees. That Kantor is the first to spin off also suggests that he has delivered some of the strongest returns. His portfolio at PioneerPath presumably is on the large side for the division, whose managers can run hundreds of millions of dollars. Between... http://www.hfalert.com/headlines.php?hid=151822 U.S. hedge fund investors will soon get their first crack at LGT Capital, a large fund-of-funds manager well regarded in Europe. LGT already is familiar to private equity investors in the U.S., thanks to multi-manager vehicles with a combined $16 billion of private equity holdings, but the firm hasnt before marketed its hedge fund offerings in the States. Why now Mainly because U.S. investors accounted for the lions share of global inflows into funds of hedge funds last year. The Swiss firm currently manages about $5 billion in a dozen multi-manager hedge fund vehicles for investors in Europe and Asia. LGTs hedge fund management team, led by Roberto Paganoni, is now laying the legal groundwork to begin raising capital in the U.S. starting in the first quarter of 2012. The planned marketing push is being timed to coincide with the implementation of new regulations requiring most U.S. hedge fund managers to register with the SEC. Its unclear what vehicles LGT plans to offer in the States. Its possible the firm will launch multi-manager funds specifically tailored to U.S. investors, but it also may provide access to some of its existing vehicles. That would include LGTs flagship Crown Managed Futures fund, which has $1.3 billion under management and has delivered a 9.4 average annual return since its inception in 2000. U.S. investors also could get a shot at Crown Select Opportunities, which was up 6.6 this year through April, following an 11 gain last year. The fund, which had $82 million under... http://www.hfalert.com/headlines.php?hid=151577 A group of London-based marketing professionals is starting a trade group for European firms that specialize in raising capital for hedge funds. While hedge fund marketing firms in the U.S. are represented by Sifma and the Third-Party Marketers Association, their counterparts in Europe have lacked a cohesive voice. The result, according to veteran marketers James Parker and Richard Watkins, is that the role of fund-raising professionals has been widely misunderstood and undervalued by Europes hedge fund industry. Parker, who heads startup Aravis Partners, and Watkins, the founder of Liability Solutions, are now working with the partners of three other London firms Astir Capital, Campion Capital and Trinity Capital to get a trade group off the ground. Theyve each kicked in capital to incorporate the yet-to-be named association and launch a website. The plan is to begin recruiting members within a couple of months. I was always slightly aggravated that the image of third-party marketing firms in Europe is that they were a rather odd group and didnt have the same professionalism as private equity placement agents or in-house marketers, said Watkins, who founded Liability in 2000. He added that existing industry groups such as the Alternative Investment Management Association and Hedge Funds Standards Board dont specifically address the needs of third-party marketers. Late last year, Parker and Watkins set out to identify hedge fund marketers across Europe and invite them to a planning meeting at a London p... http://www.hfalert.com/headlines.php?hid=151417 Fortress Investment is planning to auction off $1.4 billion of life settlements that it seized from a failed hedge fund, in an offering that market players are viewing as a bellwether of sorts. The New York investment giant is aiming for June 2 to name a winner, with Houlihan Lokey overseeing the process via a unit that helps clients dispose of illiquid fund assets. Already, word is circulating that the portfolio is fetching offers higher than those garnered in other recent life-settlement sales many of which went for pennies on the dollar. Fortress gained control of the investments via a series of events involving a vehicle called HM Ruby Fund run by Himelsein Mandel Fund Management of Los Angeles. Like other life-settlement buyers, Himelsein Mandel was purchasing the rights to collect on senior citizens life policies when they die via arrangements that required it to take over the policyholders premium payments. But like many of its peers, the shop accumulated so many policies when the market was booming in 2005 and 2006 that it couldnt keep up on its obligations. Himelsein Mandel then borrowed $65 million from Fortress to help cover servicing costs. And after Himelsein started missing loan payments late last year, Fortress forced a foreclosure sale. As many life-settlement buyers blew up or shifted to other areas in recent years, large players including Fortress, Apollo Management and Oak Tree Capital began viewing those shops holdings as potential distressed-asset plays. Indeed, it appears Fortress... http://www.hfalert.com/headlines.php?hid=151554 J.P. Morgan is gearing up to launch a European prime-brokerage business next month, filling a gap that has hampered its ability to work with hedge funds outside the U.S. The bank has been quietly adding staff to its broker-dealer arm in London, J.P. Morgan Securities Ltd., and now has several dozen people dedicated to the roll-out of a prime-brokerage offering for fund operators in Europe. The bank expects to hire additional staff over the next 12 months. We already have a good pipeline of hedge funds, a mix between more recent startups and more established funds, that have committed themselves to become JPMSL clients, said Andrea Angelone, global co-head of prime brokerage at J.P. Morgan. We tend to target the larger, more established funds, but we obviously are in contact with startups and funds across the market. The banks London team will provide a full suite of prime-brokerage services, from clearing and settling to securities lending and capital introduction. The new offering dovetails with the recent launch of an expanded swaps business in London and a well-established European custody business. Once we have the JPMSL offering up and running in June, we will have a leading and complete servicing platform, Angelone said. The objective is to offer both cash and synthetic exposure as a combined package, which is what hedge funds are seeking. J.P. Morgan entered the ranks of major prime brokers via its 2008 takeover of Bear Stearns. But Bears prime brokerage was strictly a U.S. business, and the kn... http://www.hfalert.com/headlines.php?hid=151166 Stark Investments is teeing up a hedge fund that would use credit-default swaps to short subprime mortgage-backed securities. The vehicle is noteworthy for a couple of reasons, starting with the fact that it represents Stark's first launch since the financial crisis. The strategy, too, is a throwback, similar to the play John Paulson, Steve Eisman and a few other prescient portfolio managers made just before the implosion of the subprime-mortgage market in 2007. But Stark is making it clear that its planned RMBS CDS Opportunity fund doesn't represent a bet against the housing market or subprime mortgages per se. The St. Francis, Wis., fund operator sees a narrow window of only a few months to short the subordinate tranches of particular MBS issues suffering from severe loss rates. Since marketing began in February, Stark has lined up $150 million of verbal commitments for the vehicle. No launch date has been set. But given the fund's strategy, Stark is expected to begin investing any day now. Stark designed the strategy to capitalize on two trends. First is the apparent weakness of mortgage-backed securities issued just before the credit crisis. As an example, the fund's marketing documents cite a 2006 deal where 51 of the loans backing the bonds are delinquent and another 31 are in some stage of foreclosure. The fund will buy credit protection against the subordinate tranches of deals like this, where we think the level of delinquencies and severities will completely wipe out any value of underlying... http://www.hfalert.com/headlines.php?hid=151141 European consultants that help managers launch UCITS hedge funds are working with a growing number of U.S. fund operators. Alceda Fund Management, a Luxembourg shop, recently held talks with two New York hedge fund firms and a Denver commodity-trading advisor that want to set up Undertakings for Collective Investments in Transferable Securities a tightly regulated European fund structure that has been widely embraced by hedge fund managers in the European Union. Natixis, meanwhile, expects to sign deals with four U.S. fund operators that would rely on the French investment bank to lay the legal and operational groundwork for UCITS vehicles. And Geneva-based ML Capital is on track to seed 5-6 UCITS funds by yearend, including at least one run by a U.S. manager. The UCITS phenomenon is going to take off for U.S. managers simply because they need to expand their distribution base, and because investors in Europe, from institutional to retail, are now embracing the UCITS structure, said a market player familiar with the UCITS landscape. UCITS are used by asset managers in Europe to run more than amp;8364;6 trillion ($8.7 trillion) of mostly long-only investment vehicles such as mutual funds. For years, hedge fund managers were barred from adopting the UCITS structure because of a prohibition on trading derivatives. But that changed with the EU's implementation of the so-called UCITS 3 directive in 2001. More recently, many of the top European hedge fund shops have set up UCITS in a bid to attr... http://www.hfalert.com/headlines.php?hid=150906 Kenmar Group is off to a strong start with two funds of funds it began pitching to European investors in recent months. The Rye, N.Y., firm, which manages $1.5 billion via a series of multi-manager vehicles, has quickly raised $200 million for its Kenmar Liquid Commodity Index and Kenmar Liquid Global Macro Index funds. The Luxembourg-domiciled vehicles are registered with European regulators as UCITS, or Undertakings for Collective Investment in Transferable Securities, which provide investors a high degree of liquidity and transparency. Kenmar has tapped RBS to help market the funds. The new offerings are dubbed index funds because they're tied to some of the 40 hedge funds Kenmar invests in via its main multi-manager product, known as the Clarity Managed Account and Analytics Platform. Kenmar added several managers in advance of the vehicles' launch and is looking to add more. The global-macro UCITS is up slightly since its Jan. 1 inception. The fund fell 0.25 in January, gained 2 in February, then fell a little more than 1 in March, according to Bloomberg. Under European Union rules, UCITS must allow investors to redeem at least twice a month. By comparison, most of Kenmar's U.S. vehicles offer quarterly liquidity. EU regulations also require UCITS managers to provide investors with detailed information about their vehicles' performance and risk exposures. To that end, Kenmar has hired fund administrator GlobeOp to handle reporting and risk analytics for investors.... http://www.hfalert.com/headlines.php?hid=150794 Pushing to raise $1.5 billion for its latest hedge fund-seeding vehicle, Reservoir Capital has agreed to cut management fees for large investors a move apparently aimed at quelling complaints about its fee structure. The New York firm is granting fee concessions to investors that commit at least $200 million to the Reservoir Strategic Partners fund. One beneficiary is New Jersey Investment Council, which pledged $200 million to the vehicle. The $71.6 billion pension system pushed Reservoir to lower the fee it charges on committed capital to 0.75, from 1.5. The fee on invested capital was cut to 1, from 1.5. Reservoir has agreed to similar fee breaks for other large investors. Why Because most other hedge fund seeders assess management fees only on invested capital. Reservoir adheres to a fee structure more typical in the private equity arena, taking a cut of both drawn and undrawn commitments. The practice has led to complaints from prospective investors, which apparently played a role in Reservoir's decision to lower fees for certain clients. The firm has been doing seeding forever, and has some of the best successes in the industry, a competitor said. All that being said . . . [their] competition is on drawn-down fees. The question now is whether the fee discounts Reservoir is granting to blue-chip clients like New Jersey Investment will lead to sniping among smaller investors. The developments underscore the success big institutional investors have had in wringing... http://www.hfalert.com/headlines.php?hid=150611 A co-founder of Deccan Value Advisors, a once-$1.5 billion hedge fund operator that wound down in 2009, has relaunched the business. The Greenwich, Conn., firm, now known as Deccan Value Investors, has quickly raised some $400 million since chief investment officer Vinit Bodas began trading again last year. Word has it Deccan Value Investors Fund has regained favor among some of the big institutional investors that backed the original fund. Bodas is telling prospective investors that the new fund's strategy is the same as the predecessor vehicle, Deccan Value Advisors Fund. Deccan was known for taking highly concentrated, long-only positions in up to 10-12 companies. The manager occasionally used shorting to hedge its bets. In 2009, co-founder Paul Korngiebel, who previously worked with Bodas at Brandes Investment Partners of San Diego, announced his intention to leave the firm. The remaining partners decided it didn't make sense to buy Korngiebel out and instead proceeded to unwind the fund. That vehicle posted a gross cumulative return of 47 from its inception in 2004 to its liquidation in August 2009. The fund gained 57 during its first three years, then fell 10 from August 2007 to August 2008. It was flat during its final year of trading. Bodas launched the successor vehicle in April 2010 with $13 million. Deccan Value Investors Fund posted a net gain of 8 last year. It's unclear why Korngiebel chose to leave Deccan when he did, but a source close to the firm insisted it had nothing to do w... http://www.hfalert.com/headlines.php?hid=150479 Former Merlin Securities technology chief Amr Mohamed has resurfaced with plans to launch a website connecting hedge funds with their limited partners. From his New York firm, HedgeWave, Mohamed plans to begin beta-testing the online service in about four months, then go live a few months after that. The idea behind the website is to make it easier for fund managers to communicate with their investors, and provide limited partners with one-stop shopping for performance data, net-asset values and other information. Here's how it would work: Fund operators would upload investor communications to a password-protected site. HedgeWave would then aggregate the relevant information for each investor. Information on all of an investor's hedge funds would be available at a glance assuming each of the fund managers uses the site. The time-saving benefits are potentially substantial for limited partners who work with multiple managers. Those investors currently receive information about their holdings via e-mails or by logging on to separate websites. Now, they'll be able to access all of the data in one location. Mohamed plans to offer the service free of charge both to managers and investors. How will HedgeWave make money Initially, by selling advertising on the website. Down the road, Mohamed may charge for analytical tools that investors could use to help select managers. Other offerings could be aimed at managers. One novel idea: a system that tracks analyst stock picks, so that a... http://www.hfalert.com/headlines.php?hid=150303 Centaur Performance has reinvented itself once again. Led by its flamboyant founder, David McMahan, the Greenwich, Conn., firm has changed its investment focus from credit instruments to securities linked to oil, gas, metals and other commodities. Effective March 1, the firm rebranded its onshore Centaur Credit Select Fund and offshore Centaur Low-Lev Arbitrage Fund as Centaur Commercial Materials Fund, with both U.S.- and Bermuda-domiciled versions. The changes prompted the resignation of chief investment officer Henry Pizzutello, who had joined two years ago to rebuild the firm in the wake of the credit crisis. Pizzutello left last month. He was replaced this month by Derren Geiger, who had been running an energy-focused vehicle for the firm. The strategy shift was dictated by McMahan, who views oil, gas, gold and other natural resources as the next big opportunity. Centaur will steer clear of soft commodities such as grain and cotton. The firm's investments are now divided into three buckets. The credit team remains intact, but the focus now is on debt instruments tied to commodity-related companies. A separate portfolio will invest in commodity-related stocks and stock futures, with Strategic Asset Management of Chicago serving as a subadvisor. Geiger will continue to run his energy vehicle, dubbed Caritas Royalty Fund, which primarily targets oil and natural gas royalties. Pizzutello left because his expertise is credit investing, and he felt uncomfortable overseeing other ty... http://www.hfalert.com/headlines.php?hid=150187 Lloyd Mandell has pulled the plug on his Coeus Capital and taken a position at Carlson Capital. Mandell, who founded his Greenwich, Conn., firm in 2006, just finished returning $300 million to investors. Coeus apparently struggled to raise capital amid humdrum returns, including a 4 gain last year when the Samp;P 500 index rose 15. The fund's cumulative gain since its inception more than four years ago: 27, compared to a 1 gain for the Samp;P. In a Feb. 11 letter to investors, Mandell suggested Coeus wasn't generating enough fee revenue to support its payroll. He said he decided to shutter the firm because it wasn't fair to maintain his staff in such a difficult fund-raising environment. Mandell joined Dallas-based Carlson as a portfolio manager on March 1. He was brought on to help expand Carlson's book of healthcare-related investments. Mandell will pick healthcare stocks from a Carlson outpost in Greenwich. Carlson, with $6.5 billion of assets, is a multi-strategy shop that divvies up its capital among 30 portfolio managers, who trade credit, equity, event-driven and relative-value strategies. Carlson's flagship fund, Double Black Diamond, gained 10.3 last year. The firm employs 70 investment professionals overall. It's unclear how big a staff Mandell had at Coeus. One of his analysts, Shantanu Mukherjee, left in January to join activist investor P2 Capital of New York. http://www.hfalert.com/headlines.php?hid=150066 Jason Ader is back at the helm of his hedge fund. Ader, a former Bear Stearns consumer-stock analyst, founded New York-based Hayground Cove Asset Management in 2003 with seed capital from Bear. But in late 2007, he turned over the reins of his Hayground Cove Institutional Partners fund to two deputies so he could focus his attention on a few large activist bets, including an investment in the Las Vegas Sands casino. The long/short equity fund soon suffered from a combination of redemptions and investment losses. In 2009, Ader reallocated a portion of the fund's remaining capital to a private equity-like vehicle, Doha Partners, that invested in a Nevada bank and companies in India. As a result, the Hayground Cove hedge fund saw assets under management fall from a peak of about $500 million just before Ader's departure to about $50 million today. Doha Partners, meanwhile, has grown to about $450 million of assets. Word has it that Ader was unhappy with the hedge fund's performance under his deputies portfolio manager Mark Soloway and head trader Evan Wax. Both departed at the end of 2010. Under Ader's stewardship once again, the fund has gained 12 in less than two months. How Mainly by exiting unprofitable positions and focusing on what Ader knows best: companies in the gambling, lodging and leisure sectors. Before Ader stepped down as portfolio manager, the fund had produced an average annual gain of about 12. Following Ader's departure, the fund lost 25 in... http://www.hfalert.com/headlines.php?hid=149849 York Capital has nabbed investment staffers from Sigma Capital and Meru Capital to take over as co-heads of equity trading, filling a position vacated by one of York's most senior executives. Edward Zatorski retired this month as head of equities trading after 15 years at the $14.9 billion hedge fund firm. To fill his shoes, York recruited Sean Holub from Sigma and Zachary Williams from Meru. Zatorski will continue working for a while on a consulting basis to ensure a smooth transition. When there were four employees at York, Ed was one of them, said a person close to the firm. This was a very, very comprehensive search that went on for many months. Sigma is a New York unit of SAC Capital, the Stamford, Conn., hedge fund operation headed by Steve Cohen. Meru, founded by alumni of Old Lane Partners, was one of the largest launches of 2009. At York, Holub and Williams head a team of six equities traders who share the trading floor with two credit specialists. Investment decisions are made by event-driven equities chief Michael Weinberger, chief investment officer Daniel Schwartz and firm founder Jamie Dinan, who sit on the trading floor and field ideas from a cadre of 50 analysts. The trading team is responsible for information flows to the decision makers, the source said. They let them know what is being offered, how it's trading. They are very actively involved in execution around these investment ideas. The multi-strategy York Capital Management fund gained upwards of 40 in 2009 and... http://www.hfalert.com/headlines.php?hid=149700 Chris Shumway's announcement last week that he's shutting down his $8 billion hedge fund operation infuriated fund-of-funds managers who had vouched for him. Shumway Capital's investors had been on edge since November, when he surprised the market with news that he was relinquishing the title of chief investment officer and elevating a portfolio manager to the post. As investors lined up to withdraw billions of dollars, Shumway went into damage-control mode, promising to postpone the management changes for at least three months. Based on Shumway's reassurances, a number of fund-of-funds managers that invest with him decided to stay put, telling their investors that Shumway could be counted on. But on Feb. 4, Shumway announced he was calling it quits, leaving the fund-of-funds executives with egg on their faces. They look stupid, like they don't know what's going on, said a consultant who advises pension plans on hedge fund investments. Shumway Capital's closure also is a potential embarrassment for Goldman Sachs, whose Petershill Fund acquired an 8 stake in the New York firm just 13 months ago. The buzz among market players this week was that Goldman's private equity vehicle looks bad for investing in Shumway at what was likely the firm's top valuation. Word has it that Goldman executives learned of Shumway's decision only slightly ahead of other investors. It's unclear how Goldman plans to respond, though industry insiders said the bank's lawyers presumably structured the Petershill Fund investment... http://www.hfalert.com/headlines.php?hid=149461 Merlin Securities co-founder Amr Mohamed left the prime-brokerage firm last week. Mohamed, who resigned Jan. 26, oversaw technology for Merlin, which has successfully competed against the Wall Street banks largely on the strength of its technology offerings. He has been touted for years as the brains and the genius behind their great product, said a prime-brokerage executive at a competing firm. Mohamed, who was known to frequently butt heads with his partners, left to start a social-networking website aimed at the financial-services industry. Merlin executives, who have been talking to Mohamed about the new business for the past 18 months, may provide financial backing. Merlin, which is based in San Francisco, was founded in 2004 by Mohamed, senior partner Charles Brama, chief executive Stephan Vermut, and Vermut's son, Aaron Vermut, the chief operating officer. Merlin isn't ranked among the major prime brokers big banks such as Credit Suisse, Goldman Sachs and J.P. Morgan but with more than 500 hedge fund clients, it dwarfs most of the so-called mini primes that launched in the wake of the financial crisis. San Francisco-based Merlin provides hedge fund managers with a full complement of prime-brokerage services, including trade finance, portfolio management and risk analysis. A key to Merlin's success in winning market share has been the application of proprietary technology in each of those areas. Stephan Vermut played down the impact of Mohamed's departure, noting that 25... http://www.hfalert.com/headlines.php?hid=149184 After two years spent pleading its case to Washington lawmakers, the Managed Funds Association is setting its sights on a new audience: big institutional investors. The hedge fund industry's top lobbying group plans to use its Network 2011 conference in Palm Beach, Fla., next week to kick off a public-relations campaign aimed at attracting more investments from college endowments, foundations, pensions and other large institutions. Some 800 industry professionals are signed up to attend the three-day event, which opens Jan. 30 at the Breakers. With the Dodd-Frank Act now in the books, the MFA is turning its attention from regulatory reform to an issue that continues to challenge the industry more than two years after the financial crisis: the sluggish fund-raising environment. Hedge fund managers are especially eager to attract sticky money from large institutions, which generally have long-term investment horizons and aren't as likely to redeem when the market hits a rough patch. To make its case to endowment managers and pension chief investment officers, the MFA plans to dispatch staffers and other industry professionals to convene investor roundtables and speak at events that draw large investors. Among other things, the MFA will highlight the challenges institutional investors face in meeting their obligations. A study released in October by Northwestern University and University of Rochester found that state pension plans alone were underfunded by a combined $3 trillion. In many cases, the... http://www.hfalert.com/headlines.php?hid=149038 Investors in asset-based lending vehicles run by Stillwater Capital may have to wait another six months before redeeming their investments. A year ago, the New York firm struck a deal to convert limited-partnership interests in two hedge funds and a fund of funds into restricted shares in a publicly traded company known as Gerova Financial. Under the deal, Stillwater investors were told they could begin selling their Gerova stock in January 2011. Last month, however, Gerova disclosed in regulatory filings that the timetable for freeing up Stillwater investors was being pushed back. Why Because Stillwater was five months late in filing audit reports, and more recent acquisitions by Gerova had complicated efforts to properly value the company. Reached this week, Stillwater founder Jack Doueck acknowledged it could be another six months before investors are permitted to sell their Gerova shares. Meanwhile, financial analyst Dalrymple Finance issued a report last week accusing Gerova of mismanagement and fraud. In a Jan. 18 press release, Gerova denied the allegations and said it had hired corporate sleuth Kroll to investigate possible market manipulation by Dalrymple. Like other asset-based lending managers, Stillwater got caught in a liquidity squeeze during the financial crisis. Unable to meet withdrawal requests, the firm suspended redemptions from three vehicles: Stillwater Asset-Backed Fund, Stillwater Real Estate Fund and Stillwater Market Neutral Fund, which invests in other asset-based lending... http://www.hfalert.com/headlines.php?hid=149018 Arizona Public Safety Personnel, which began investing in hedge funds only two years ago, is now contemplating seed investments in startup managers. Ryan Parham, chief investment officer of the $6.5 billion pension system, said he hopes to get a seeding program off the ground by yearend. Still to be decided are how to structure the investments whether the pension would seek a stake in the business, a cut of profits, or what and how much to invest in each manager. The pension's hedge fund consultant, Albourne Partners, would advise Parham on manager selection. It would be a big move for Arizona Public Safety Personnel, considering that few public pensions of any size have ventured into the high risk/reward realm of seed investing. Calpers, for instance, has given serious thought to seeding hedge funds, but has yet to make any investments. New York Common Fund is currently searching for a manager to run a seeding program. The Arizona pension has been steadily growing its hedge fund portfolio since making its initial investments in early 2009. Most recently, it allocated $40 million last month to an emerging-market debt fund called Iguazu Partners. It's unclear how much the pension has invested in hedge funds overall, since it doesn't have a separate hedge fund portfolio. Instead, it invests opportunistically across its entire portfolio. Research firm Preqin recently pegged the pension's hedge fund assets at about $470 million, but that was before the Iguazu investment. The pension has exposure to more than 70... http://www.hfalert.com/headlines.php?hid=148796 A former UBS portfolio manager who once oversaw $240 billion of assets will soon begin marketing a global-macro strategy that has gained better than 15 in a little over a year. Brian Singer set up Singer Partners in September 2009 with the idea of building a track record before raising outside capital. He and a half dozen members of his portfolio-management team from UBS started out trading about $10 million of friends and family money. Since then, the Winnetka, Ill., firm has grown to $150 million under management without any formal marketing. Now, Singer is gearing up to launch a fund-raising campaign in the second quarter. The first step: hiring an in-house marketing professional. Singer has interviewed two candidates already. The global-macro vehicle mostly trades derivatives, including futures, options and swaps. Singer generally shuns individual stocks and bonds in favor of bets on indexes, as well as exchange-traded funds. The fund, which began trading in October 2009, is unleveraged. Aside from the early gains, investors will likely be attracted by the fund's fee structure: just 1 of assets and no performance fee for the first five years. Once the performance fee kicks in, investors will pay only for profits above and beyond market gains. He's trying to do the right thing, said a fund-of-funds executive familiar with Singer's business. He's trying to have clients pay for only real skill, as opposed to taking market risk. Singer spent 18 years at UBS through 2007, most recently holding the... http://www.hfalert.com/headlines.php?hid=148692 Three former Ramius Capital staffers are set to launch a hedge fund next month with backing from Investcorp. After leaving Ramius in June, portfolio manager Bob Kaynor established Ballast Capital of New York. He was soon joined by two of his former colleagues from Ramius: portfolio manager Mason Stark and consumer-stock analyst Joanna Wald. Kaynor and his partners are now laying the groundwork for a long/short equity fund. They recently landed an undisclosed seed investment from Investcorp, a Bahrain-based asset manager serving wealthy clients in the Middle East. Earlier this year, Investcorp relaunched its hedge fund-seeding business, which went dormant after the financial crisis. The firm typically invests $50 million to $100 million per manager. Kaynor spent seven years at Ramius, which last year was acquired by boutique investment bank Cowen Group. Before that, he worked at Barbary Coast Capital of San Francisco. Stark, whose father, Morgan Stark, is a Ramius co-founder, previously worked at Granite Capital of New York. http://www.hfalert.com/headlines.php?hid=148594 Loch Capital appears to be throwing in the towel. Two weeks after its offices were raided by federal officials pursuing a broad insider-trading case, the Boston firm told most of its staff that their last day of work would be Dec. 31, according to a person who's been briefed on the matter. The firm, founded in 2002 by brothers Timothy McSweeney and Todd McSweeney, has a staff of 14. A Loch spokesman, Mark O'Toole, declined to say whether layoffs are in the works, but he denied that the McSweeneys are preparing to shut down the business. quot;No decision has been made to close Loch Capital Management,quot; O'Toole said this week. Loch has been under siege since the beginning of the year, when investors lined up to withdraw amid reports that the McSweeneys were linked to a hedge fund manager who is a key witness in the Galleon Group case. That manager, S2 Capital co-founder Steven Fortuna, pleaded guilty to insider-trading charges in November 2009. That month, federal prosecutors charged Galleon chief Raj Rajaratnam with insider trading in the largest such case ever brought against a hedge fund manager. Loch, which according to some reports managed as much as $2 billion at its peak, has recently seen assets under management slide to around $200 million. The situation went from bad to worse when the FBI raided Loch's offices on Nov. 22. That same day, agents also raided Diamondback Capital's offices in Stamford, Conn., and New York-based Level Global. All three firms have said they've... http://www.hfalert.com/headlines.php?hid=148475 The SEC's latest insider-trading investigation has hedge fund managers working overtime to calm worried investors and drill their employees on compliance procedures. After news broke last week that federal investigators had raided three hedge fund firms and served subpoenas on two others, fund managers across the industry were flooded with calls and e-mails from their shareholders. Had the manager received a subpoena or otherwise been contacted by the SEC Does he do business with any of the firms targeted by the probe Does the firm have an adequate compliance framework Despite being on high alert, most managers remained confident in their trading strategies and continued to rely on their regular research channels, both inside and outside their firms. A key focus of the insider-trading probe is on independent research networks that sell proprietary stock analysis to hedge funds. quot;People are at work,quot; said a lawyer whose client had received a subpoena. quot;It would be irresponsible to say, 'I'm not going to invest in securities,' when that is your mandate.quot; Still, many managers are taking steps to ensure their investment staffers are extra careful when it comes to handling information about the companies they invest in. Among other things, they are reviewing their compliance procedures and conducting refresher courses for employees. quot;People don't want to make mistakes,quot; one industry lawyer said. For example: Staffers are being reminded that if they receive an e-mail from a source containing questionable... http://www.hfalert.com/headlines.php?hid=148378 Perry Capital has said good-bye to its last remaining equity specialist, marking the end of a three-year makeover for Richard Perry's hedge fund shop. Chet Kapoor left the New York firm within the past few weeks, just nine months after making partner. Kapoor, who ran a book of technology, media and telecommunications stocks, was followed out the door by his three-member team: Mendel Hui, a partner since March 2009; Byram Karanjia; and Seth Basham. Kapoor is considering launching his own hedge fund, one market player said, though he could end up taking a job with another firm. Perry, which had nearly $7 billion under management in the first quarter of this year, has been steadily unwinding its equity business since mid-2007. quot;We made the decision to go back to Perry Capital's investing roots by returning to our event-driven, deep-value hedged roots,quot; Richard Perry said in a Nov. 9 letter apprising investors of Kapoor's departure. Perry Capital's investment staff - led by Dave Russekoff, Alp Ercil and Adam Stanislavsky, with input from founders Paul Leff and Perry - spent all of 2008 and the first part of 2009 focused on credit investments. More recently, the firm also has targeted special-situation equities, including financials in the U.S., Europe and Asia. But the equity book is now in the hands of the firm's core event-driven team, not equity specialists like Kapoor. In his letter to investors, Perry credited Russekoff, Ercil, Stanislavsky and their team with generating all of the firm's 2010 equity gains, which have... http://www.hfalert.com/headlines.php?hid=148280 Utah Retirement, which became a vocal advocate of revamping hedge fund terms during the financial crisis, has convinced most of the 40-odd managers it works with to reduce their management fees. The $19 billion pension system has won fee concessions both from existing fund managers and vehicles it has invested in since the market meltdown in late 2008. Almost all of those fund operators are now charging less than the industry-standard 2 of assets under management. One of the new funds agreed to drop its management fee altogether. In some cases, the pension has convinced managers to cut its fees for all of the investors in a fund once assets under management reach certain benchmarks. quot;You don't need for those managers to get higher fees if they've got more assets under management,quot; said one person familiar with the pension's thinking. At the same time, Utah Retirement has switched some managers over to a new method for calculating incentive compensation. Instead of the typical 20 annual performance fee, the pension prefers to pay out incentive fees over 3-5 years. In a typical case, a manager might agree to receive an initial 60-70 of the performance fee, with the balance held in escrow and paid out only if the fund continues to deliver profits. Not all managers have embraced the deferred-compensation structure. For some, such a payment schedule would lead to serious cash-flow problems, said a fund manager familiar with the pension's pitch. In return for the fee concessions, Utah Retirement has told managers... http://www.hfalert.com/headlines.php?hid=148190 Peter Carey, the architect of New York Common Fund's $4 billion hedge fund portfolio, is leaving the pension to join SkyBridge Capital. SkyBridge, a $7.4 billion fund-of-funds and seeding business led by Anthony Scaramucci, recruited Carey to oversee a unit that customizes hedge fund portfolios for institutional investors. He starts at the New York firm on Nov. 8. Carey, who joined New York Common Fund in 2007 from Bear Stearns, is credited with revamping the pension's hedge fund portfolio amid the market meltdown of 2008. Among other things, Carey cut fee expenses by withdrawing from a number of funds of funds and investing directly in hedge funds. He also helped the pension navigate the pay-to-play scandal that led former state comptroller Alan Hevesi to plead guilty last month to a federal corruption charge. The retirement system, which currently manages $126 billion of assets, was named the top large pension fund of the year for 2010 by Institutional Investor. Carey joins SkyBridge at a time of rapid growth. Earlier this year, the firm acquired a $4 billion fund-of-funds business from Citigroup. In addition to running multi-manager vehicles, SkyBridge makes seed investments in startup fund managers and advises sovereign-wealth funds, pension plans, insurance companies and other large investors. http://www.hfalert.com/headlines.php?hid=148103 Stark Investments is the latest hedge fund manager to hire Credit Suisse to help gated investors sell their shares on the secondary market. Credit Suisse will soon conduct an auction for shares in a special-purpose vehicle dubbed Stark Select, which holds $1 billion of illiquid assets that Stark has been struggling to sell since the market debacle of 2008. As outlined by Stark executives on an Oct. 22 conference call, the investment bank will first solicit bids from outside investors, then survey Stark's limited partners to see what price they'd be willing to accept for their shares. Credit Suisse will then set a quot;clearing pricequot; aimed at generating the highest volume of trades. The bank has conducted similar auctions for at least eight other fund operators, including Camulos Capital, GoldenTree Asset Management, Ospraie Management, Plainfield Asset Management and RAB Capital. The auctions have met with mixed success. Cumulatively, they have facilitated the sale of $800 million of hedge fund stakes, but market players say that represents a small percentage of the total shares held by gated investors. Like many hedge fund managers, Stark was unable to meet the mountain of redemption requests that piled up during the financial crisis. In late 2008, the St. Francis, Wis., firm suspended withdrawals from its flagship Stark Investments fund and an offshore companion, Shepherd Fund, and set about restructuring the vehicles. The centerpiece of the restructuring effort was creating the Stark Select vehicle... http://www.hfalert.com/headlines.php?hid=147995 A former partner at Eastern Advisors is prepping a hedge fund with backing from Lone Pine Capital chief Steve Mandel. Peter Boodell, a top-performing equities analyst at Scott Booth's Eastern Advisors, has formed Boodell amp; Co. of New York with plans to launch an Asia-focused stock fund in the first quarter of 2011. Mandel has committed an unknown amount of seed capital to the vehicle, Boodell Value Capital. Boodell's firm apparently is only the second hedge fund startup to receive seed money from Mandel, whose Greenwich, Conn., firm is among the largest U.S. hedge fund managers. The first was David Stemerman, a Lone Pine alumnus who started Conatus Capital in 2009 with $2.3 billion. Boodell worked from 2005 to late 2009 at Eastern Advisors, an Asia-focused equities manager in New York that is backed by Julian Robertson's Tiger Management. Boodell analyzed Asian stocks in the media, gambling, natural-resources and retail sectors. During his stint at Eastern, the firm averaged $300 million under management. In 2007, the Eastern Advisors hedge fund gained 96 - making it the top-performing quot;Tiger cubquot; vehicle that year. At Boodell amp; Co., early investors are being offered an economic interest in the firm, though it's unclear if that would take the form of an equity stake or a cut of revenues. Investors who pony up at least $5 million for two years would receive a perpetual interest in the business, with no sunset provision, and could get their investment back if the fund's performance drops 20.... http://www.hfalert.com/headlines.php?hid=147901 Ellington Management this month won a mandate to run a $500 million portfolio of mortgage-backed securities. The assignment came from unidentified investors who pulled their holdings from TCW earlier this year following the departure of star bond trader Jeffrey Gundlach. Ellington, a specialist in mortgage-backed securities, created a new vehicle to accommodate the investors. Los Angeles-based TCW, an asset-management arm of French bank Societe Generale, has lost a number of big clients since acquiring Metropolitan West Asset Management in late 2009 and forcing Gundlach out at the beginning of this year. Since then, Gundlach has opened a fixed-income shop called DoubleLine. October has been a good month for Ellington, an Old Greenwich, Conn., firm founded in 1994 by former Kidder Peabody bond trader Michael Vranos. On Oct. 4, a specialty-finance entity dubbed Ellington Financial began trading on the New York Stock Exchange. The initial public offering raised $101 million, which Ellington plans to use to buy mortgage bonds backed by subprime and Alt-A loans. Like many bond-fund managers, Ellington suspended withdrawals from two of its hedge funds during the credit crisis. Assets under management have slipped from a peak of more than $5 billion in late 2007 to around $3 billion today. Last year, the firm began diversifying its product line, launching a pair of long/short equity funds. http://www.hfalert.com/headlines.php?hid=147799 Retail- and consumer-stock portfolio manager Julie Macklowe is getting out of the hedge fund business. Macklowe, who ran Macklowe Asset Management, closed the New York operation last week in order to pursue business opportunities in the fashion industry. Specifically, she plans to start a fashion-related company and make seed investments in other fashion businesses. Macklowe's firm was a unit of Israel quot;Izzyquot; Englander's Millennium Management. In early 2008, Englander staked Macklowe with $250 million, and Millennium remained her firm's only client. Macklowe's move apparently wasn't prompted by performance issues, as she had posted decent returns. At the end, Macklowe had $250 million under management - the same amount she started with. She began telling key staffers about her plans several months ago in order to give them time to line up new jobs. Before joining Millennium, Macklowe ran a retail- and consumer-stock portfolio for Sigma Capital, a unit of Steve Cohen's SAC Capital. In all, she spent about nine years as a hedge fund portfolio manager. Before that, she worked in private equity and venture capital at J.P. Morgan. Fashion has long been of keen interest to Macklowe, the daughter-in-law of real estate magnate Harry Macklowe. She recently appeared on Vogue.com's best-dressed list. http://www.hfalert.com/headlines.php?hid=147604 John Botti is shutting down his $402 million Emrose Capital, telling investors he's no longer confident he can preserve their capital in such volatile markets. During more than 12 years as a hedge fund manager - first at Botti Brown, then at Emrose - Botti has never had a down year. But in an unusually candid letter to investors, Botti said his quot;substandard resultsquot; in recent months have raised doubts about his performance going forward. quot;Knowing that I could structure portfolios that would break even and most likely produce gains in declining markets has been something that I could always depend upon,quot; he wrote Sept. 9 from his Mill Valley, Calif., firm. quot;Our recent losses in the midst of a declining market have cast doubt around this long-standing assumption.quot; Emrose Offshore Master Fund, which Botti launched in January 2009, gained 6.4 last year and 3.1 this year through August. But his 2010 returns included dips of 0.9 in June, 0.6 in July and 1.4 in August. Botti said he plans to liquidate the fund's long/short equity portfolio by Nov. 30. The decision marks the second time that Botti has stepped down as a hedge fund manager. He ran San Francisco-based Botti Brown for a decade before resigning about four years ago. The firm has since been renamed Spring Point Capital. Botti said there won't be a third act as a hedge fund manager. He now plans to use Emrose's strategy to manage his own money. He'll also continue running Mt. Tam Capital, a fund of funds that Botti started with other San... http://www.hfalert.com/headlines.php?hid=147474 With his firm in wind-down mode, Theory Capital co-founder Carl Fantasia has lined up a new job as a portfolio manager at SAC Capital. The move comes just three weeks after Fantasia and his partner, Robert Broggi, e-mailed investors with news that they're shutting down their Boston firm a little more than a year after it opened. The Tudor Investment alumni launched a technology, media and telecommunications stock fund with backing from Jim Palotta, who once headed Tudor's equity business. But despite their pedigrees, Broggi and Fantasia never got much traction with investors. Fantasia is expected to start Oct. 1 in the Boston office of SAC, which is headquartered in Stamford, Conn. Word has it that Steve Cohen's $13 billion firm has promised Fantasia an analyst and about $300 million of capital to work with. It's unclear what Broggi plans to do next. Broggi and Fantasia worked together for about five years at Tudor, where they ran a book of technology, media and telecommunications stocks within Palotta's Raptor Capital unit. During the financial crisis, Palotta spun off Raptor as a separate business in Boston, but shuttered the firm last year. After setting up Theory Capital in June 2009, Broggi and Fantasia launched their hedge fund in November with an undisclosed amount of seed capital from Palotta. Despite his imprimatur - and promising early returns - Theory fell far short of its fund-raising goal. The firm never reached the $20 million mark, and Broggi and Fantasia realized it would... http://www.hfalert.com/headlines.php?hid=147375 Another Atticus Capital alumnus is set to join BeaconLight Capital. The move will reunite Duncan MacLean, who oversaw commodities investing at Atticus, with his former colleagues Ed Bosek and Noam Ohana, who together founded BeaconLight at the beginning of this year. MacLean will join the New York firm in October as a partner and senior analyst. BeaconLight is one of at least four hedge fund firms that have risen from the ashes of Atticus, which shut down last year after founder Tim Barakett said he was leaving the business to devote more time to family and philanthropic interests. The once-$20 billion firm was hit hard by the financial crisis, with assets under management dwindling to $8 billion at the time of Barakett's departure. Bosek and Ohana have positioned BeaconLight as a back-to-basics long/short equity operation - a strategy that appears to be clicking with investors. The firm has raised nearly $100 million since the start of the year. Bosek was a partner at Atticus, while Ohana oversaw an internal fund of funds. They left that firm in May 2009, several months before Barakett announced his exit from fund management. MacLean left Atticus in late 2009, then joined Shumway Capital as an industrial-stock portfolio manager. He left Shumway after only seven months because he wanted to rejoin his Atticus teammates. MacLean was an early investor in the BeaconLight fund, as was Barakett. Although BeaconLight doesn't have a dedicated commodities portfolio, MacLean is expected to focus... http://www.hfalert.com/headlines.php?hid=147273 Recent staff turnover at Millennium Management has led to speculation that Israel quot;Izzyquot; Englander is downsizing his firm amid shrinking assets, but insiders said the departures are more about performance than cost-cutting. Among the latest investment staffers to leave is consumer-stock portfolio manager Matthew Karchmer, who worked for a Millennium unit called Green Arrow Capital. He left last month for a job as a portfolio manager at D.E. Shaw. In the wake of Karchmer's departure, Millennium laid off his deputy, Richard Wang, about three weeks ago. There's no word yet on Wang's next move. Meanwhile, analyst Effie Veres last week departed from another Millennium unit, Macklowe Asset Management. Veres worked directly for Julie Macklowe, a former SAC Capital portfolio manager who joined Millennium in late 2008. Like a number of other Millennium portfolio managers, Macklowe operates under her own banner but trades exclusively for Englander. While Veres' destination is unknown, another former Macklowe analyst, Aaron Meyer, is expected to resurface soon at RBC Capital Markets. Meyer was laid off by Millennium last month. Another portfolio manager, Mike Keohane, who worked for a Millennium unit called Catapult Capital, left the firm 2-3 months ago. He had been running a book of consumer stocks totaling $400 million to $500 million. There's no word yet on his plans. Because Millennium's assets under management have slipped to just over $7 billion, from a peak of $13 billion in early 2008, some market play... http://www.hfalert.com/headlines.php?hid=147185 After losing investors in droves during the financial crisis, commodities giant Winton Capital is in growth mode once again. Some 300 investors pulled out more than $3 billion in 2008, though not because of performance concerns. Indeed, the London firm's flagship Winton Futures Fund gained 21 that year, while the average hedge fund fell 19. Instead, redemptions were driven by the so-called quot;ATM effectquot; - that is, cash-starved investors tapping relatively liquid strategies such as commodities as if withdrawing from a bank ATM. The withdrawals dropped Winton's assets under management to around $13 billion in mid-2009, from a peak of $16 billion the year before. But during the past year, an aggressive fund-raising campaign has added about $400 million to Winton Futures Fund. The vehicle now has $4.6 billion under management, down from its 2008 peak of $7 billion. The firm's overall assets stand around $13.5 billion, including managed accounts. In terms of investor headcount, Winton dropped from about 1,100 limited partners in 2008 to 800 by early 2009. Since then, the firm has added about 100 new investors. The firm's fund-raising success is attributable to several factors, beginning with performance. While most commodity managers have been whipsawed by the market's volatility this year - with some suffering double-digit losses - Winton Futures Fund was up 3.8 through July 31. The fund fell 4.6 last year. David Harding, who founded the firm in 1997, remains quot;one of the all-time darlingsquot; among commodity-trading... http://www.hfalert.com/headlines.php?hid=147071 Securities-lending pioneer John DiRocco is marketing software that automates the process of borrowing stocks and bonds, potentially lowering costs for fund managers. The system, dubbed BorrowMaster, consolidates information from prime brokers, making it easier for managers to compare rates. Such data is currently available, though not in a form that's easy to access and analyze, DiRocco said. His firm, HedgeSpeed Technology of Wilton, Conn., charges about $10,000 a month for the software package and technical support. quot;With the exception of the largest multi-strategy funds, managers don't have such tools to monitor lending rates of every block of stock or bond they want to borrow,quot; said DiRocco, formerly the chief financial officer at hedge fund giant Citadel. HedgeSpeed's software tracks the securities-lending market over time, so managers know immediately when financing costs go up or down. Managers often don't keep track of rate changes, and are surprised when they get a higher-than-expected prime-brokerage bill at the end of the month. For large hedge fund operations, BorrowMaster can help portfolio managers keep track of which traders are shorting which securities - a feature prime brokers don't usually offer. Such information can be useful to a portfolio manager whose traders have separate Pamp;L statements, so each trader can be charged appropriate borrowing costs. HedgeSpeed is pitching the product to firms with at least $300 million under management, although the largest hedge fund operators... http://www.hfalert.com/headlines.php?hid=146947 Philadelphia Public Employees is getting ready to make its first investments in commodity funds. The $5 billion pension system is acting on an asset-allocation study that recommended a 5 allocation for so-called real assets, including commodities. Though the study was completed a few months ago, pension officials are just now researching the commodities market and evaluating investment targets with the goal of generating a short list of fund managers by yearend. When pensions carve out real-asset allocations, they typically invest in tangible assets such as oil, timber and land. But at least initially, Philadelphia Public Employees expects to focus mainly on hedge funds that invest in commodity futures. The first few investments will likely be made through funds of hedge funds. Later on, the pension may target oil-and-gas vehicles that have a private equity-like structure, as well as commodity-related stock funds. Separately, Philadelphia Public Employees recently increased its allocation for hedge fund investments to 10 from 6. In the future, investments in funds that include a commodity component as part of a broader strategy, such as global macro, will likely come out of the hedge fund bucket, not the real-asset account. http://www.hfalert.com/headlines.php?hid=146825 Several prime brokers are looking to capitalize on growing interest among U.S. fund managers in so-called UCITS, a tightly regulated European vehicle that has become a big hit with investors. J.P. Morgan and Morgan Stanley are pitching a range of advisory services to managers interested in setting up hedge funds under the UCITS umbrella - UCITS being shorthand for Undertakings for Collective Investments in Transferrable Securities. Their focus is on U.S. firms that are largely unfamiliar with the European Union's regulatory framework. J.P. Morgan, for example, is advising managers on how to set up, operate and market UCITS hedge funds. It also is providing custody, capital introduction and other services. Bank of America, meanwhile, is providing select U.S. managers access to a London-based UCITS distribution platform that currently has five vehicles. BofA plans to add another 14 managers once they've cleared regulatory hurdles. In general, it takes a manager about six months to get a UCITS fund off the ground. Because of their strict regulatory parameters, UCITS hedge funds can be marketed to retail investors, though they've also proved popular with risk-sensitive institutional investors such as pension systems. The EU requires UCITS managers to maintain tight risk controls and to provide investors with easier liquidity and more transparency than a typical hedge fund. Indeed, because UCITS investors can typically withdraw on a daily basis, less-liquid strategies such as credit hedge funds are unlikely... http://www.hfalert.com/headlines.php?hid=146711 State regulators are gearing up to police several thousand hedge fund operators that will be forced to register at the state level under the pending financial-reform bill. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which is headed toward final passage by the Senate as early as this week, requires hedge fund managers with less than $100 million of assets to register with their appropriate state regulator. Across the U.S., some 4,500 managers, including fund-of-funds operators, fit the bill, according to Hedge Fund Research. While the smallest firms already are required to register at the state level, thousands of others will become the responsibility of state regulators within one year of the bill's signing. In many states, officials aren't waiting for President Obama's signature to prepare for the expected onslaught. At a meeting of the North American Securities Administrators Association (NASAA) earlier this month, regulators from California, Michigan and other states said they planned to add staff to examine hedge funds and other investment advisors that will soon come under their jurisdiction. Officials representing 45 states signed an agreement pledging to cooperate when it comes to registering and monitoring fund managers. In Connecticut, home to many of the largest U.S. hedge fund operations, officials are reviewing their registration process and oversight functions. They also are expected to hire additional personnel to handle the increased workload. For now, states have... http://www.hfalert.com/headlines.php?hid=146618 Origami Capital, which buys illiquid hedge fund stakes on the secondary market, has acquired 40 of the shares in Cambridge Place Investment's three remaining funds. The vehicles - CPIM Structured Credit Fund 20, 1000 and 1500 - have a combined $230 million under management. With permission from Cambridge Place, Chicago-based Origami issued a tender offer to all of the funds' investors, and in the end reached deals to acquire $92 million of shares at undisclosed discounts. Sellers included funds of hedge funds and institutional investors. The deal - a large one by secondary-market standards - comes on the heels of a potentially much larger transaction between Origami and investors in fund-of-funds manager Union Bancaire Privee. Origami made a $1 billion tender offer to UBP investors, but the deal fell through about a month ago. The three Cambridge Place funds invested in U.S. and European commercial and residential mortgage-backed securities, including a large chunk of subprime home loans, with a long-biased strategy that included some shorting of related indexes. The funds were named for their target returns - CPIM Structured Credit Funds 20 for 20 bp over Libor; 1000 for Libor plus 10 percentage points; and 1500 for 15 percentage points over Libor. The London firm has been unwinding the vehicles since suspending redemptions in late 2007. The funds are expected to complete the liquidation process within about two years. Origami plans to retain its shares in the funds until they're fully liquidated. Origami was... http://www.hfalert.com/headlines.php?hid=146507 Andrew Hall's Astenbeck Capital is getting ready to close its doors to new investors within the next few months. Hall, a legendary energy trader best known as head of the big commodity manager Phibro, has raised nearly $1.1 billion for his Astenbeck Offshore Commodities Fund 2 since launching in January 2008. That's more than his early backers expected him to raise, so Hall is now planning a quot;soft closequot; by the end of the summer, several investors said. The arrangement will allow existing limited partners to increase their stakes if they choose to do so, but bar new investors - probably until sometime next year. Hall continues to run New York-based Phibro, which was a unit of Citigroup until Occidental Petroleum bought the business last year for about $370 million. Occidental also owns a 20 stake in Astenbeck. Hall set up Astenbeck in New York at the beginning of this year to take over management of two Phibro funds - Phibro Offshore Commodities Fund 2 and a U.S.-domiciled version - that have since been rebranded as Astenbeck vehicles. Hall's plan for a quot;soft closequot; applies both to the offshore and onshore versions of the fund. Astenbeck Offshore Commodities Fund 2 includes $50 million of Hall's own money and capital from 37 other investors, according to a June 21 SEC filing. The fund has an unusually high minimum investment of $25 million. Hall's decision to stop marketing Astenbeck stemmed mainly from pressure from investors who felt the fund had grown too large. But unusually choppy market... http://www.hfalert.com/headlines.php?hid=146394 Persistent correlation between commodity and equity markets has contributed to wild performance swings for some of the top operators of commodity hedge funds, including Aisling Analytics, BlueGold Capital and Clive Capital. Returns of commodity-trading advisors usually are uncorrelated with broader financial markets, which is what makes them appealing to managers and investors alike. Since the economic downturn, however, the markets have moved largely in unison, confounding investment strategies - and marketing efforts - employed by many commodity hedge funds. quot;Everything's being dominated by macro variables, everything's correlating to an unusually high degree, and it's unclear how long that will last,quot; one manager said. quot;The good [funds] are down 3, and the bad ones are down 15-18.quot; Aisling, a giant Singapore commodity-trading advisor, has had a particularly difficult year so far. The firm, which trades mainly in quot;softquot; agriculture and energy futures, was up 9 in January but is now down around 15 year to date. BlueGold started out the year with an 11 loss in January, prompting the London firm to send a letter to investors quashing rumors that it was unwinding. It turned things around in February and March, then suffered another sharp loss - of 12.5 - in May. London-based Clive fell 6 in May - its worst monthly decline since 2008. The woes of each firm can be blamed at least in part on ill-timed trades and other portfolio missteps. But market players see broader macro-economic factors changing the dynamics ... http://www.hfalert.com/headlines.php?hid=146262 With Congress on the verge of passing a so-called carried-interest bill, some hedge fund managers are considering selling their businesses in order to avoid sharply higher tax rates. As early as this week, the Senate could approve the American Jobs and Closing Tax Loopholes Act, which would tax managers' performance-fee revenue as income, at a top rate that is currently 35, rather than as capital gains, at a rate as low as 15. Even more worrisome than the performance-fee tax is a provision that would change the tax treatment for the sale of a hedge fund-management firm. Instead of taxing the proceeds as capital gains, as is the case with most businesses, the so-called enterprise-value provision would force managers to pay income taxes on a big chunk of the sale. While Congress has been debating the carried-interest bill since last year, the hedge fund industry only recently has begun focusing on the enterprise-value provision. At the Managed Funds Association conference in Chicago last week, an accountant said a hedge fund client had been quot;freaking outquot; about the legislation because it originally was scheduled to go into effect upon passage of the bill. Under a recent compromise, the changes wouldn't take effect until Jan. 1, 2011. quot;They are putting the deal together as we speak,quot; the accountant said of his client. Dean Rubino, whose Kelly Park Capital of New York is looking to buy fund-of-hedge-funds businesses, said he has been using the Congressional action as a marketing technique, sending... http://www.hfalert.com/headlines.php?hid=146167 Emma Sugarman, head of capital introduction for BNP Paribas, leaves for London later this month for the start of a two-continent hiring tour aimed at establishing outposts in Europe and Asia. It's the latest sign that the Paris bank is getting serious about expanding the U.S.-based prime-brokerage business it acquired from Bank of America in September 2008 into a global operation. Sugarman is looking to hire at least two cap-intro people for the London office and possibly a third to work in Paris. She will then travel to Hong Kong to interview for two cap-intro positions covering Asia. Meanwhile, Sam Hocking, BNP's global head of prime-brokerage sales, has several hires in the pipeline for sales positions in the U.S., and the bank is expected to add still more U.S.-based salespeople later this year. Once the prime-brokerage operation goes global next year, the bank is expected to hire salespeople for Europe and Asia. One market player said BNP has been interviewing quot;quite a few peoplequot; as part of the global hiring effort. She said the bank has a favorable reputation in the prime-brokerage arena because of well-respected managers it retained from BofA, including Sugarman; Jeff Lowe, who heads the quot;on-boardingquot; team that helps situate new clients; J.P. Muir, deputy global head of prime-brokerage sales; and Jake Jacoby, head of prime-brokerage trading risk. After BNP acquired the BofA unit, there was a fair amount of staff and client turnover. In the first quarter of 2009, BNP sold about 150 smaller prime-brokerage... http://www.hfalert.com/headlines.php?hid=146054 Carbon360, a research firm that tracks the fund-administration industry, is launching an online matchmaking service where administration firms can bid for contracts with hedge funds. The yet-to-be-named service, set to go live later this month, is designed to impose a degree of transparency and uniformity on negotiations between fund administrators and hedge fund operators. Under current practices, each administration firm requires fund managers to fill out lengthy paperwork detailing their assets and strategies. The problem is that the forms vary from administrator to administrator, making it difficult for fund managers to compare offers from competing service providers. Based on its knowledge of the administration business, Carbon360 has developed a uniform set of forms that hedge fund managers can fill out online. Not only will this save fund managers time, but when administrators bid for their business, the pricing will be based on comparable services. This should make it easier for fund managers to evaluate the bids, according to Daniel Golyanov, a senior research analyst at Carbon360 who is overseeing the initiative. Some hedge fund managers complain that the current system makes it difficult, if not impossible, to compare offers from different administrators. Pricing can vary from a few hundred dollars a month to tens of thousands of dollars. For their part, administration firms say their prices vary widely because they are highly dependent on the nature of the fund, including the types of assets and... http://www.hfalert.com/headlines.php?hid=145925 It's shaping up to be a really bad month for a host of big-name fund managers, including Citadel, Diamondback Capital, SAC Capital, Third Point and Viking Global. Across the industry, hedge fund operators tallied significant losses for the first three weeks of May amid plunging stock and commodity prices. The market was unsettled by the quot;flash crashquot; of May 6, Europe's sovereign-debt crisis and the prospect of a military conflict in Korea. The only fund managers to emerge unscathed: dedicated short-sellers. As one investor put it: quot;A lot of guys are long and wrong in this environment.quot; One of the biggest decliners of the month so far was Eddie Lampert's ESL Investments, down a whopping 15. Through April of this year, the fund had shown a gain of 22.7. According to investors, the roster of prominent managers whose funds are down significantly this month also includes: Cevian Capital, a Stockholm manager that was off 10 for the first three weeks of May. Citadel, whose flagship Wellington and Kensington funds each fell 2 through May 20, putting them down about 2.9 for the year. Credit Suisse Hedging-Griffo, a multi-billion-dollar global-macro manager that posted month-to-date losses of 5-6 through May 21. Diamondback, whose offshore and onshore vehicles fell 3.8 and are now up just 0.2 for the year. Israel quot;Izzyquot; Englander's Millennium Management, whose flagship fund was down 1.5 through May 20, following a 5 gain through April. Paulson amp; Co., whose Credit Opportunities Fund fell 2 following a... http://www.hfalert.com/headlines.php?hid=145807 Medley Capital is pitching an unusual plan to restructure its asset-based lending hedge fund, which has had a freeze on withdrawals since late 2008. In a May 4 letter to its investors, the $1 billion New York firm proposed transferring a portion of the assets in Medley Opportunity Fund to a quot;business development companyquot; that would be structured as a publicly traded corporation. The new entity would manage the assets - eight loans with a combined principal balance of $112 million - until market conditions improve to the point that they can be sold at or near par value. Meanwhile, Medley's investors would be given shares in the new company in exchange for their shares in the hedge fund. While details of the plan remain sketchy, Medley appears to be taking a cue from Warren Lichtenstein's Steel Partners, a New York firm that last year converted one of its hedge funds into a publicly traded company. The move drew a lawsuit from a big investor, Carl Icahn's AFC Industries, which accused Steel Partners of fraud. Medley proposes to capitalize the business development company via an initial public offering on the New York Stock Exchange. Separately, Medley would allow limited partners in the asset-based lending vehicle to exchange some of their hedge fund shares for common stock in the new company. Those investors would be permitted to sell the stock on the open market following a six-month moratorium. Medley's current investment team would continue to manage the assets transferred to the business development... http://www.hfalert.com/headlines.php?hid=145706 Add Baupost Group, Louis Dreyfus, Mason Capital and Two Sigma to the list of large hedge fund operators that have cut off new investments amid a turnaround in the fund-raising market. In some cases, including Baupost and Mason, the firms are closing windows they had opened in the aftermath of the market crisis in late 2008, when investors collectively withdrew tens of billions of dollars from hedge funds. In other cases, managers are barring new investors because their funds are just now reaching capacity. Jeffrey Altman's Owl Creek Asset Management, for example, plans to stop accepting new investors when its Owl Creek funds reach a combined $7.5 billion to $8 billion - something investors expect to happen by the end of September. The fact that a growing number of fund operators are now turning away investors is further evidence of the industry's dramatic rebound since hitting bottom around the end of 2008. As a rule, the biggest beneficiaries have been large managers that continued to perform well during the financial crisis or at least resisted the temptation to suspend or limit withdrawals when investors needed their money most. Louis Dreyfus' LD Commodities Alpha Fund will effectively stop accepting capital as of June 30, opening for new investments only with permission from its board of directors. The fund, which launched at the end of 2008, topped $1 billion for the first time on April 1. The Paris firm also launched a more highly leveraged version of the fund on April 1, though it's unclear if that vehicle will rem... http://www.hfalert.com/headlines.php?hid=145586 (SEE CORRECTION BELOW) Larch Lane Advisors and PineBridge Investments expect to raise an additional $600 million by yearend for a hedge fund-seeding vehicle they jointly operate. The private equity vehicle, Select Plus Fund, launched in June 2008 with $400 million, which has since been invested with four hedge fund managers in exchange for a cut of their revenues. In recent weeks, executives from seeding specialist Larch Lane and PineBridge, a unit of AIG, have embarked on a new fund-raising campaign aimed at consultants and prospective investors, including endowments, foundations and family offices. Select Plus Fund now expects to hold a second equity close with a total of $1 billion sometime in the fourth quarter. In marketing documents, the fund's promoters say that in the wake of the financial crisis, emerging hedge fund managers no longer can rely on many traditional sources of startup capital, such as funds of funds, multi-strategy hedge funds and proprietary-trading desks. That, and the fact that the available talent pool for new managers is quot;outstanding,quot; makes for an attractive seeding environment, according to Select Plus. The fund eventually wants to invest $50 million to $100 million apiece in 10-15 hedge funds, though certain managers could be eligible for larger investments. The four funds backed by Select Plus so far: Feingold O'Keeffe Distressed Loan Master Fund, a $159 million U.S. bank-loan hedge fund operated by Boston-based Feingold O'Keeffe Capital that was seeded in May 2008; The... http://www.hfalert.com/headlines.php?hid=145457 Even as assets under management continue to grow at an impressive clip, K2 Advisors has told its portfolio managers and other key staffers that they must reinvest a larger portion of their bonuses. The $8.7 billion fund-of-funds manager now requires investment staffers to sink 50 of their bonuses into one or more of the firm's vehicles, up from 33 in the past. Staff members will regain access to their money after three years. The Stamford, Conn., firm increased the reinvestment requirement so that the financial interests of its staffers are better aligned with those of its investors. It's also a way for K2 to retain staff, since it locks up more of their compensation. While some observers called K2's maneuver quot;harsh,quot; others said it was a natural extension of the firm's business model. quot;Some funds of funds are growing and putting their money back into the business,quot; one market player said. quot;Then there are others that are a cash machine, an ATM, and they take the money out.quot; K2's general counsel, Michael Andersen, left the firm this month, though his departure apparently was unrelated to the new bonus policy. His destination is unknown, but he appears to have left on good terms. The firm already has lined up a possible replacement and expects to fill the position within two weeks. Founded in 1994 by Tiger Management alumnus David Saunders, K2 is one of the few multi-manager firms that has managed to raise significant amounts of capital during the financial crisis. Net inflows totaled $900 million in 2008... http://www.hfalert.com/headlines.php?hid=145360 Commodities-fund operator Touradji Capital last month finished unwinding a home-run trade in the sugar market that netted a profit of around $46 million, more than tripling an investment that started as a loser. The New York firm, led by Paul Touradji, began betting against sugar prices around October, when futures were trading in the range of 20-22 cents per pound on the ICE Futures U.S. in New York. Over the next few months, the outlook for Touradji's bearish position looked increasingly grim, as the price of sugar futures began an historic climb to a 29-year high of 30.4 cents per pound on Feb. 1. The run-up was largely attributable to adverse weather that stifled production in Brazil and India, the world's largest sugar producers. Watching its position turn worthless, Touradji remained committed to its view that prices would fall over the longer term. In fact, the vehicle, Touradji Global Resources Fund, continued to increase its position by accumulating cheap, quot;out-of-the-moneyquot; put options on futures contracts, eventually winding up with 30,000 puts. The contracts gave the holder an option to sell sugar futures, for delivery in May, for 18 cents and 20 cents a pound by mid-April. Each futures contract represents 112,000 pounds of raw sugar. It quickly became obvious to traders in the New York sugar pit that a big investor was snapping up a large volume of puts, but most were under the impression that the buyer was using the options to hedge a long position. Soon after the Feb. 1 peak, Touradji began selling... http://www.hfalert.com/headlines.php?hid=145244 A medical doctor who once ran a large healthcare fund for Davidson Kempner has started his own hedge fund operation. Roderick Wong officially founded RTW Investments on March 1 and immediately began trading RTW Onshore and RTW Offshore funds, long/short vehicles that target the healthcare sector. Wong, who launched with less than $100 million, plans to close the doors to new investors once he raises a total of $500 million. Wong and his three partners - including an analyst who worked under him at Davidson Kempner - are focusing on companies that produce drugs, medical devices and diagnostic tools. RTW employs an event-driven strategy to identify opportunities, primarily in equities, but with a smattering of derivative and debt plays. Wong previously managed Davidson Kempner Healthcare Fund, which peaked in 2008 with about $750 million under management - making it one of the largest hedge funds in the sector. He started out managing a healthcare book in 2005, and the next year Davidson Kempner promoted the portfolio to a dedicated fund. Wong delivered consistently impressive returns, though the fund lost money in 2008, when the average hedge fund fell 18. He resigned in early 2009. Wong's departure was unrelated to the fund's performance. David Kempner shuttered the fund after Wong left and required him to wait a year before starting his own firm. Since March 1, 2009, Wong has managed his own capital as if it were a hedge fund, complete with audited returns and performance reported net of a typical... http://www.hfalert.com/headlines.php?hid=145130 Thomas White, former head of global markets at Bank of America, is preparing to launch a hedge fund that would take a multi-strategy approach to the credit sector. White formed City on a Hill Advisors of New York about eight months after retiring from BofA in September 2008. He has hired several analysts in recent months and plans to begin marketing the fund within weeks, according to a person familiar with his plans. White oversaw a pair of distressed-credit funds for BofA that generated average annual returns approaching 20 over five years. The funds managed the bank's own capital and never opened to outside investors. BofA shuttered both vehicles after White left. White's partners at City on a Hill are Michael Lilley, Ray Cubero and Alison Inafuku Edge. Lilley previously worked with White at both BofA and Morgan Stanley. Cubero, who is head of research, formerly was a managing director at BofA. Edge, an attorney who is filling the dual roles of chief operating officer and marketing chief, has worked at a number of hedge funds. Her longest stint was as director of client relations at Archeus Capital, a once-$3 billion firm that shut down in 2006. Joining City on a Hill as head of trading is Leon Bourn, who was White's long-time deputy at BofA. The firm also has hired four analysts - S. Owais Ahmad, Prakash Gopinath, Eren Pamir and Ray Lenihan - all with experience at buy-side shops. White joined BofA predecessor NationsBank in 1994 from Morgan Stanley. Over the years at BofA, he worked in sales, trading, research... http://www.hfalert.com/headlines.php?hid=145016 Moore Capital has been aggressively recruiting proprietary-trading teams from big investment banks. In the past two months, the $14 billion hedge fund manager has hired four people from Citigroup's prop desk, including chief trader Matt Carpenter and his deputy, Matt Newton. The most recent moves: This month, Moore enlisted Citi healthcare-stock portfolio manager Jay Kim and his equity analyst, Susan Lee. Moore, led by Louis Bacon, isn't the only big-name fund operator looking to lure proprietary traders frustrated by the shifting regulatory landscape and post-financial-crisis limits on compensation. Balyasny Asset Management, Blackstone Group's hedge fund business, Citadel's PioneerPath Capital unit, Diamondback Capital, Millennium Management and SAC Capital all are on the prowl for Wall Street talent. The hedge fund firms have gotten a boost from the so-called Volcker rule, the Obama Administration's proposed ban on proprietary trading by regulated banks. The proposal is named for former Federal Reserve Chairman Paul Volcker, an advisor to President Obama. Some market players noted, however, that the most aggressive hedge fund shops have been targeting bank prop desks since the market meltdown in late 2008. And some investment banks - including Bank of America, Morgan Stanley and RBC - have been equally aggressive in recruiting outside portfolio managers to join their desks. Carpenter, who ran $1 billion of proprietary capital for Citi, is setting up a long-short equity group at Moore based on the model he... http://www.hfalert.com/headlines.php?hid=144884 Investors in asset-based-lending hedge funds, whose positions have been virtually frozen since the credit crisis, are starting to see signs of a thaw. Because asset-based lending is an inherently illiquid strategy, fund managers across the board suspended redemptions and restructured their vehicles in late 2008 and early 2009. Until recently, most managers have been unable or unwilling to liquidate their funds' assets, leaving their investors in limbo. Amid the ongoing liquidity concerns, investors couldn't even sell their shares on the secondary market. In just the past few weeks, however, secondary-market players have seen a slight uptick in activity involving shares of several asset-based-lending vehicles, including funds operated by Himelsein Mandel Fund Management, Third Eye Capital and Medley Global. A few transactions have closed, though in most cases the bid-ask spreads remain wide. Still, a market is beginning to form where none existed for more than a year. quot;We're seeing these positions start to transact,quot; said Neil Campbell, head of alternative investments at London brokerage Tullett Prebon. quot;Liquidity seems to be returning.quot; In most cases, asset-based-lending managers have yet to pay back their investors. That's because some of the companies that they lent to went belly up during the financial crisis or otherwise have been unable to repay their debts. In other cases, the funds made loans to fraudulent schemes, such as those run by Tom Petters in Minnesota and Scott Rothstein in Florida.... http://www.hfalert.com/headlines.php?hid=144776 The operator of the only U.S. securities-lending exchange is pushing to expand the marketplace, in part, by making it more accessible to hedge fund managers. Quadriserv's AQS exchange currently serves some 60 prime brokers, hedge fund operators and institutions that borrow and lend stocks. Until now, however, only self-clearing brokerages and a handful of other firms have been given direct access to the exchange, while hedge funds and most other non-clearing members have had to work through the big brokerages. Starting later this month, Quadriserv's self-clearing brokerages will quot;sponsorquot; hedge funds for direct access. This would allow fund managers to work off the same trading screens as the major brokers - providing better transparency and price discovery. Quadriserv, a New York firm backed by Bank of America, Bessemer Venture Partners, Citigroup, International Securities Exchange, Renaissance Technologies and other market players, launched AQS 10 months ago to provide a central electronic marketplace where short sellers and lenders can go to exchange securities. The key selling point of the exchange is that it increases liquidity and transparency while reducing counterparty risk, since all trades are cleared through Options Clearing Corp. In the past, securities lending and borrowing have been strictly private, bilateral transactions. By all accounts, the exchange has been a hit with many market players. Starting with just four members, the exchange now counts 60 clearing and non-clearing... http://www.hfalert.com/headlines.php?hid=144660 Springbok Capital has raised $250 million for a multi-manager vehicle that will place an extraordinary demand on underlying managers. On April 1, the New York firm will begin allocating $10 million to $50 million apiece to smaller hedge fund operators that agree to set aside reserve capital that will serve the same purpose as a first-loss piece in a structured-finance deal. Should the manager lose money, the reserve capital will serve as a cushion for other investors in the multi-manager vehicle. In exchange, Springbok is willing to negotiate performance fees that are significantly higher than the standard 20 of gains. In the past, hedge fund operators might have laughed at a fund-of-funds manager making such a request. But since the financial crisis, even many prominent fund shops have made concessions to investors by reducing fees, easing liquidity and hiring third-party administrators. Springbok is betting the arrangement will appeal to less-established managers who have struggled to raise capital during the downturn. The new vehicle, Prelude Opportunity Fund, targets liquid, low-volatility hedge funds with less than $250 million under management. The idea of requiring managers to set aside reserve capital to protect the fund was inspired by the proprietary-trading desks of big banks, which often require traders to invest their own money along with the bank's capital. In the event of losses, the trader's capital serves as collateral for the bank. Springbok was founded in 2004 by Gavin Saitowitz,... http://www.hfalert.com/headlines.php?hid=151511 Neil Chriss, a former SAC Capital portfolio manager who launched a hedge fund in 2008 with backing from Renaissance Technologies, will soon open the door to outside investors. Chriss' Hutchin Hill Capital Master Fund will begin accepting subscriptions sometime in the second quarter, but the opening could be brief: The $400 million vehicle is expected to raise another $600 million-plus within 12 months, then close to new investments. If Chriss had chosen not to cap the fund, market players said, he easily could have raised $2 billion overall. The multi-strategy fund is expected to generate strong demand in part because Chriss has never had a down year as a portfolio manager. The Hutchin Capital fund, which began trading in July 2008, gained 13 through yearend 2008 and 17 in 2009. Chriss' investment strategies include hedged credit and equities, arbitrage, global macro, event-driven and one-off opportunistic plays. The vehicle was launched with $300 million of seed capital from James Simons' Renaissance, a $20 billion manager in East Setauket, N.Y. The seed investment came from the $7 billion Meritage Fund, which runs money exclusively for Renaissance partners, including Simons. The vehicle is headed by Simons' son, Nathaniel Simons. Chriss worked at Steve Cohen's SAC from 2003 to 2007. He managed two of the five subfunds, including both quantitative and non-quantitative strategies, that comprise the multi-billion-dollar SAC Multi-Strategy Fund. Chriss' portfolios represented... http://www.hfalert.com/headlines.php?hid=144459 A legal dispute between the founding partners of Camulos Capital is becoming increasingly ugly. In court papers filed earlier this month, Camulos co-founders Richard Brennan and Richard Holahan allege that their former partner, William Seibold, cost the Stamford, Conn., firm millions of dollars in unnecessary expenditures before he left in 2007. Seibold turned a dozen European quot;fact-finding tripsquot; into lavish vacations, attending the 2006 Olympics and purchasing expensive wines for his personal cellar, according to Brennan and Holahan. Along the way, they said, Seibold laid plans for a competing hedge fund. Their allegations were in response to a lawsuit Seibold filed in December, in which he accused Brennan and Holahan of refusing to pay him $67 million of accumulated compensation, investment gains and equity in the firm. Seibold followed up the complaint by filing court papers on Christmas Eve attempting to seize the assets of Camulos and his former partners. Brennan, Holahan and Seibold all worked together at Soros Fund Management before setting up Camulos in 2005. At the time Seibold left in June 2007, the firm had about $2 billion under management. Seibold claims he was improperly forced out by his partners, then was rebuffed when he tried to collect his compensation and withdraw his investments. Brennan and Holahan say Seibold received $5 million in salary, bonuses and benefits before he quit the firm. quot;The notion that there was any sort of impropriety or unlawful or illegal conduct is frivolou... http://www.hfalert.com/headlines.php?hid=144329 King Street Capital is on the verge of closing its flagship fund to new investments after taking in more than $3 billion of fresh capital over the past 12 months. At a time when most hedge fund managers were struggling with a mountain of redemption requests, King Street's overall assets under management jumped from $15.8 billion in January 2009 to $19.2 billion last month. Perhaps it's no wonder, considering that the King Street Capital fund has never had a down year since launching in 1995. In 2008, when hedge funds lost an average of 18, the King Street vehicle gained 2.5. Last year, it returned 20.1. In a Feb. 5 letter to investors, the New York firm said it wants to quot;moderate the future growth of the fund's capital subject to developing market conditions.quot; One investor said he was told that King Street doesn't want to see overall assets under management exceed about $20 billion - suggesting the flagship fund could close to new investments any day. At the same time, the firm told investors it was tweaking the fund's liquidity terms. Previously, the fund permitted withdrawals of up to 25 of overall assets per quarter. Now, King Street is switching to an investor-level limit of 25 per quarter. That means investors can withdraw up to 25 of their capital every three months - regardless of the total volume of redemptions for that period. quot;This is about them managing their liquidity,quot; one investor said, quot;but there are probably those who got stuck in 2008 who will like the changes.quot; In a... http://www.hfalert.com/headlines.php?hid=144220 Jason Huemer, who helped SAC Capital raise $6 billion as the firm's head of marketing, has joined Visium Asset Management to lead an expansion of the healthcare-focused firm. Visium, a New York fund operator with $1.6 billion under management, named Huemer president last month. One of his first tasks: rolling out a multi-strategy fund on March 1. The vehicle currently runs $100 million for Visium's partners. March 1 also is the date that the firm's flagship Visium Balanced Fund, a $1.5 billion long/short equity vehicle, will stop accepting new investments. The multi-strategy vehicle, Visium Global Fund, has portfolio managers running long/short equity strategies in several sectors. It also makes distressed-company investments and quantitative-equity plays. The fund manager is expected to hire additional portfolio managers in the near future. Visium currently has about 25 investment staffers. The firm also manages a $30 million credit healthcare vehicle, Visium Credit Opportunities Fund, that launched in May 2009. It gained 19.9 through yearend. Huemer joined Steve Cohen's SAC as head of marketing and investor relations in 2005, when the firm was reopening to outside investors after 6-7 years. Under Huemer, SAC's marketing team raised $6 billion for the flagship SAC Capital fund and SAC Multi-Strategy Fund. Today, SAC has about $13 billion under management overall. Huemer also worked for one year as chief operating officer of SAC unit Sigma Capital, even as he continued to oversee SAC's... http://www.hfalert.com/headlines.php?hid=144123 Highbridge Capital co-founder Henry Swieca, who left the hedge fund giant at yearend, is looking to hire a slew of market pros for his newly opened family office. Swieca, who formed Highbridge in 1992 with Glenn Dubin, set up Swieca Holdings in New York to manage his own money. In addition to traders and analysts, Swieca is looking for a chief financial officer - suggesting to some market players that he eventually wants to expand beyond a family office. For starters, Swieca hired a team of event-driven specialists from New York-based One East Partners: brothers Nathaniel Storch and Thomas Storch, along with Michael McNamara and Michael Goldberg. Highbridge, with $21 billion under management, is wholly owned by J.P. Morgan. When the bank bought a controlling stake in the firm in 2004, Swieca and Dubin agreed to stay on for at least five years. Dubin has no plans to leave Highbridge. He and Swieca also run a fund-of-funds business called Corbin Capital. http://www.hfalert.com/headlines.php?hid=143987 A 4-year-old accounting rule is finally catching up to the hedge fund industry. At issue is the Financial Accounting Standards Board's Interpretation No. 48, better known as Fin 48, which provides guidance on accounting for uncertain tax liabilities. Adopted by FASB in 2006, Fin 48 initially applied only to publicly traded companies. But starting with the 2009 tax year, the rule's reach was expanded to limited partnerships and private investment vehicles. As a result, many fund managers and their accountants are just now coming to terms with the complicated provision. What they're discovering is this: Certain investment gains that didn't necessarily constitute taxable events in the past now must be booked as liabilities pending a review by the IRS or other tax authority. That, in turn, is putting a dent in net asset values. quot;Some people believed that Fin 48 adoption would not be a big deal for hedge funds and private equity because they typically are not subject to federal income tax as a partnership,quot; said Craig Eaton, a partner at accounting and consulting boutique Moody, Famiglietti amp; Andronico in Tewksbury, Mass. quot;They're now finding out that Fin 48 is more far-reaching.quot; Fin 48 was introduced to limit the wiggle room companies have in accounting for uncertain tax liabilities - profit or income that may or may not be deemed taxable by the IRS or state tax agency. The rule says that when in doubt, a possible tax obligation should be treated as a liability until the government says otherwise. Many fund... http://www.hfalert.com/headlines.php?hid=143891 The list of former Galleon Group staffers who have resurfaced at other hedge fund operations continues to grow. Three months after Raj Rajaratnam abruptly shut the doors of his firm amid an insider-trading scandal, at least four investment staffers and one marketing specialist are working for other managers, including some big-name firms. Three other Galleon alumni have opened an office with tentative plans to launch a hedge fund. Among the latest to return to the industry: Charles Benziger, who managed a large portfolio of consumer stocks for Rajaratnam, landed this month at Ken Griffin's Citadel Investment. Grant Hutchinson was hired by London-based Polygon Investment this month to work on marketing and investor relations. Nadeem Janmohamed, a technology-stock analyst, took a job this month with S Squared Technology of New York. Two other analysts, Eric Wasserstrom and Rajeev Patel, went to work in recent weeks at Soros Fund Management. Meanwhile, ex-Galleon traders Leon Shaulov, Owen Li and Adam Smith are laying the groundwork for their own hedge fund. Rajaratnam shuttered his $3.7 billion firm in October, shortly after he was arrested and charged with 13 counts of insider trading. The early buzz among hedge fund recruiters was that the scandal would make it difficult, if not impossible, for many staffers to find work in the industry. But it now looks like former Galleon employees with solid track records and no ties to the insider-trading scheme are being welcomed by fund managers hungry for talent.... http://www.hfalert.com/headlines.php?hid=143780 A regulatory crackdown on corporate pension plans is putting pressure on hedge fund managers. The U.S. Department of Labor now requires private pensions to disclose any gifts, entertainment or other perks they receive from hedge funds and third-party marketers. In response, pension administrators are seeking detailed records from fund managers. The initial deadline for pensions to meet the heightened requirements is July 31. One lawyer who represents hedge funds said several of his clients already are preparing to turn over records of meals and other events at which they picked up the tab for pension officials. quot;There is some unease that DOL might not differentiate between legitimate, relationship-building activities and things that clearly don't pass the smell test, like giving someone a yacht,quot; said Steve Rabitz, a lawyer with the New York firm Stroock amp; Stroock. quot;There are real questions being raised about what might be reportable and what might not be legal.quot; Ever since the New York Common Fund scandal came to light early last year, government regulators have been tightening the screws on both public and private pension plans. quot;I think people in the private pension space might not have recorded these amounts religiously in the past, but not anymore,quot; said Melanie Nussdorf, a lawyer with Steptoe amp; Johnson. quot;In the public space, there isn't anyone giving anything to anyone.quot; Under the law, any expenditure in excess of $10 must be reported, although pensions don't have to file a report until they receive up to $5,000... http://www.hfalert.com/headlines.php?hid=143685 Sandell Asset Management has shrunk to about $1 billion under management - a precipitous fall for a firm that was running $7 billion just two years ago. The operations of the multi-strategy fund shop also continue to shrink: Last month, the New York firm closed its Hong Kong office, leaving it with a lone outpost in London and fewer than 40 staffers. Among the latest departures: Rebecca Pacholder, a partner in the firm who worked closely with credit-trading chief Serge Adam, left Dec. 31 for a new job at an undisclosed firm. Founded by Tom Sandell in 1998, the firm is best known for its flagship Castlerigg fund, whose offshore version lost 32.6 in 2008. Castlerigg reportedly gained 8.5 last year through November, but that didn't include quot;special situation sharesquot; that were down 11.4 during the same period. As much as 50 of Sandell's overall investor capital apparently is tied up in investments the firm has labeled as illiquid. The Castlerigg portfolio traditionally was split among three strategies: credit, special-situations equity and merger arbitrage. Before starting the firm, Tom Sandell was a senior managing director in Bear Stearns' risk-arbitrage unit. Castlerigg's special-situations portfolio had dwindled to only 2 of the fund's net equity as of November - three months after the departure of Nick Graziano, head of special situations trading. He left to join Leon Cooperman's Omega Advisors. Just before Christmas, Sandell announced it was sharpening its focus on the remaining... http://www.hfalert.com/headlines.php?hid=143545 Distressed-investment specialist Bay Harbour Management is putting the finishing touches on a hedge fund that is expected to have $500 million under management by midyear 2010. The New York firm plans to launch BHR Master Fund on Jan. 1 with about $300 million of investor equity. The fund is designed to make special-situations investments in the debt of distressed U.S. companies. Once it reaches the $500 million mark, BHR would close to new investors. In a marketing environment where any fund launch north of $100 million is considered impressive, Bay Harbour apparently is capitalizing on investors' appetite for credit-opportunities investments, pitching equity-like returns with less risk. As it has in the past, Bay Harbour has teamed up with Neil Ramsey, who runs RQSI of Louisville, Ky., to create BHR Master Fund. The vehicle will be managed by a new firm, BHR Capital, which is operating out of Bay Harbour's offices. The principals of BHR Capital, including Ramsey, are kicking in a combined $100 million of equity for the fund launch. BHR's principals also include Steve Van Dyke, the founder and managing partner of Bay Harbour, and Michael Thompson, who is a principal of Bay Harbour. Van Dyke is chief investment officer of BHR Capital, while Thompson is portfolio manager of the new fund. Ramsey, Van Dyke and Thompson all serve on the fund's investment committee. Bay Harbour has partnered with Ramsey on a series of initiatives over the past 20 years. Overall, Bay Harbour manages about $400 million of hedge fund... http://www.hfalert.com/headlines.php?hid=143436 Hedge fund giant GLG Partners is repackaging its key equity strategies for a fund that began trading last week. The vehicle, GLG Global Equity Tactical, deploys capital to existing management teams across five portfolios: relative value, emerging markets, volatility trading, financial-services stocks and pan-European equities. Prior to the addition of the new fund, the equity teams managed portfolios ranging from $70 million to $390 million. The $22 billion London manager teed up the vehicle in response to investors seeking broad exposure to GLG's equity strategies, which outperformed both the broader stock markets and various hedge fund benchmarks last year. Until now, the only way to get exposure to the firm's stock-trading teams was via single-strategy equity funds or multi-strategy vehicles. Back-testing a simulated portfolio modeled on the new fund showed average annual returns of 21.5 going back to 2005. That included a 21 gain last year, when hedge funds lost an average of 18. This year, the simulated portfolio has gained around 22. Helming the new vehicle are David Sanders, co-manager of GLG Financials Fund, and Warren Touwen, who came aboard last year to conduct behavioral analysis of the firm's European equity traders. Touwen previously worked at Merrill Lynch as a portfolio manager and director of the bank's global strategic risk group. Sanders, a Goldman Sachs alumnus, has been at GLG since June 2006. While the fund charges typical fees of 2 of assets under management and 20 of gains, early... http://www.hfalert.com/headlines.php?hid=143338 Although his firm has seen only a trickle of revenue during the past two years, Clarium Capital founder Peter Thiel is seeking to reassure investors that he remains committed to his $2 billion hedge fund and its global-macro strategy. Some investors in Clarium's hedge fund have grown increasingly nervous about the San Francisco firm's financial stability after nearly two years of losses. Unlike most hedge funds, Clarium charges no management fee - just 25 of gains - so the firm hasn't had any hedge fund revenue since the end of 2007. Thiel, best known as a venture capitalist who co-founded PayPal, told investors during a conference call last month that he has the wherewithal to keep the firm afloat. For one thing, Clarium manages several separate accounts that have continued to pay management fees. And the hedge fund's hefty performance fee generated enough revenue in the good years to sustain the firm for the foreseeable future. Thiel said he plans to continue running his personal capital through Clarium's hedge fund for another 10-15 years. Thanks to Thiel's deep pockets, Clarium can remain in business at a time when countless fund operators are struggling to survive. After the hedge fund industry suffered its worst-ever losses last year, many funds remain well below their high-water marks. For fund operators, that means getting by on management fees for as long as their funds are under water. Indeed, many management firms are expected to go bust before their funds get back to their high-water marks.... http://www.hfalert.com/headlines.php?hid=143109 The SEC has extended the reach of its insider-trading probe by looking into the activities of a stock analyst who worked at Balyasny Asset Management until just several weeks ago. The Chicago firm informed its investors of the investigation over the weekend and told them that it had invited the SEC to look into its books to verify the actions of the unidentified individual. It also reassured investors that the probe focused on the analyst, not the firm as a whole. The analyst worked as part of Balyasny's extensive group of research professionals from early 2008 until recently. The firm now employs some 80 researchers and portfolio managers, many who work in New York. It couldn't be learned whether the analyst was dismissed by the firm or left voluntarily. After learning in recent weeks that the commission was investigating the analyst's activities, Balyasny conducted an internal review of its operations with the help of an outside specialist. The review found no improprieties at the firm, which oversees $2 billion of investments, about half through its flagship vehicle, Atlas Global fund. Atlas Global, which follows diversified-equity and global-macro strategies, has produced gains each year since its inception in 2002. quot;We've a very long history of compliance and take it extremely seriously,quot; said Balyasny vice chairman Barry Colvin. quot;We've always attempted to do the right thing, as was demonstrated through these circumstances.quot; Balyasny has become the third major hedge fund operator with... http://www.hfalert.com/headlines.php?hid=142998 Hedge fund backer Weston Capital has teamed up with Swiss fund-of-funds operator Harcourt Investment Consulting to launch an incubation vehicle. Weston, a $1.2 billion firm run by Albert Hallac, signed a joint-venture agreement with Harcourt last week, with the goal of launching Weston Capital Partners Fund 3 by yearend. Weston already has raised $10 million from investors in its two other incubation vehicles: Weston Atlas Partners Fund and Weston Capital Partners Fund 2. The Westport, Conn., firm eventually hopes to raise $250 million for the new fund. Weston will take the lead in managing the vehicle, but the Harcourt name will appear on offering memoranda and marketing materials due to go out between Nov. 15 and Dec. 1. The Zurich outfit will have a seat on the fund's investment committee, and Harcourt's investment and risk-management teams will vet managers invited to join the seeding platform. Harcourt, which is owned by Swiss private bank Vontobel Group, has some prior experience in the hedge fund-incubation business. The $3.9 billion firm spoke with several incubation specialists in the U.S. before reaching a deal with Weston. Harcourt was attracted by Weston's marketing team and the way the firm has structured past deals. On the performance front, Weston stumbled last year, when Atlas Partners dropped 34.8. The fund recouped two-thirds of that loss during the first nine months of this year, rising 35.8. Weston Capital Partners Fund 2 has fared better. It gained 10.7 in 2008, and was up 9.1... http://www.hfalert.com/headlines.php?hid=142888 Three hedge fund service providers are separately pursuing startup managers by offering streamlined services and cut-rate fees. Fund administrator Columbus Avenue Consulting has set up an quot;emerging managers platformquot; that provides basic asset-valuation and reporting services for half the usual rate. Citigroup has begun marketing a currency-trading platform designed to be accessible to small hedge funds that don't yet trade in large volumes. And auditor Grant Thornton is about to introduce a tiered pricing schedule that would offer quot;softerquot; services at reduced fees. The initiatives reflect the contraction of the hedge fund business during the past year. Prior to last year's market meltdown, hedge fund managers could count on launching with at least $100 million under management. Now, with many investors still licking their wounds, the norm has become a quot;soft launchquot; with $10 million or $20 million raised from friends and family. quot;They want to get their feet wet, establish a track record and go out publicly to investors in 2011,quot; said Stephanie Doane, head of business development for Columbus Avenue. quot;But in the interim, they want to keep costs low.quot; Columbus Avenue already has signed up two managers that plan to launch funds in January. Over the next year, the New York firm hopes to add 20 or so long/short equity funds to its emerging-managers platform. For under $3,000 a month, Columbus will do month-end net-asset valuations and process subscriptions and redemption requests. Additionally, it will handle daily tr... http://www.hfalert.com/headlines.php?hid=142753 The investment team that managed Ross Perot's failed hedge fund, Parkcentral Global, is gearing up to launch a fund of its own. Peter Karmin, who was the top portfolio manager at fund operator Parkcentral Capital, left in June to form Highland Park Office Partners of Highland Park, Ill., with six other Parkcentral alumni. Karmin quit Parkcentral at the urging of investors eager to back a new fund managed by his team. Highland Park plans to launch a fixed-income hedge fund in 2010, but already is managing more than $1 billion of long-only credit investments for institutions and family offices via managed accounts. Parkcentral was set up primarily to run money for Perot and his family. The firm was based in Dallas, but mostly the investment staff worked in Highland Park, Ill. Parkcentral decided to liquidate its hedge fund last November after it had fallen 40 for the year. At the beginning of 2008, Parkcentral Global had about $2.5 billion under management, but by yearend the fund was down to about $1.5 billion. By some accounts, including the allegations in an investor lawsuit, the value of the assets continued to fall until they were worth less than the fund's liabilities. Despite Parkcentral's meltdown, Highland Park is drawing interest from investors who see an array of opportunities across the fixed-income spectrum, even in low-risk asset classes. At the same time, some banks have indicated they are again willing to extend credit to leverage up such investments. Karmin is chief investment officer of... http://www.hfalert.com/headlines.php?hid=142653 Ervin Shindell, a big contributor to Citadel Investment's high-flying returns prior to last year's meltdown, is setting up his own hedge fund. Shindell's firm, RoundKeep Capital of Chicago, is expected to launch an event-driven fund in the first quarter of 2010. Shindell left Ken Griffin's Citadel in March 2008 after 10 years with the Chicago firm, including the last five as head of its event-driven group. Given his success at Citadel, Shindell's first fund is expected to launch with about $500 million of investor capital, despite the still-difficult fund-raising environment for new funds. Before falling 55 last year, Griffin's flagship hedge funds boasted a 10-year average annual return of 22. Shindell's group was a significant contributor, at its peak running 10-20 of Citadel's capital. Before last year's downturn, Citadel had about $20 billion under management. At RoundKeep, Shindell is expected to maintain the basic strategy he led at Citadel. The fund will focus on investments mainly in North America and Europe, and to a lesser extent on Asia. Event-driven opportunities will include typical risk-arbitrage investments in the mergers-and-acquisitions space, and the fund also will be on the lookout for catalysts such as spinoffs and corporate announcements. Several former members of Shindell's team at Citadel are now on board at RoundKeep: Joseph Rotter, who previously headed Citadel's North American event-driven group; Rob Donath, who was global head of trading for the event-driven group; and Rob... http://www.hfalert.com/headlines.php?hid=142568 Shaken by an SEC proposal that could severely damage their business, third-party hedge fund marketers will revise their code of ethics at an upcoming annual meeting later this month in Chicago. The move planned by the Third Party Marketers Association is part of an industry effort to head off federal regulation and legislation that would severely limit the portion of the institutional-investment community that placement agents can serve. Some marketers have begun refusing to handle hedge funds that aren't registered with the SEC - a gesture that could soon become moot under pending U.S. legislation that would require most funds to register. At the same time, promised regulatory reforms for the hedge fund industry are slowly advancing. Under an SEC proposal introduced in August, fund-marketing firms would be banned from receiving payment for serving as a matchmaker between investment advisors and government pension plans. The $2.2 trillion in state and municipal retirement systems represent about one-third of all U.S. pension-plan dollars. The proposal was made in the wake of the New York Common Fund scandal, which implicated placement agents in alleged kickbacks to public officials who secured investments. Placement agents have fought back hard against the SEC rules. Their association, known as 3PM for short, sent a 23-page letter to the SEC, joining about 100 others who submitted comments lambasting the commission's plan. To be sure, there are dissenting views - New York Mayor M... http://www.hfalert.com/headlines.php?hid=142445 The investment industry is hopeful the SEC will scale back its proposal that would require asset managers to undergo surprise reviews by private auditors in order to deter swindlers like Bernard Madoff. Their optimism stems from closed-door sessions that representatives of the 470-member Investment Adviser Association held in recent weeks with SEC chief Mary Schapiro and two other commissioners. The group's executive director, David Tittsworth, said the agency officials appeared sympathetic to the concerns of his association, whose members include managers of hedge funds and mutual funds. A follow-up meeting with a fourth member of the five-commissioner SEC is scheduled for today. SEC officials stressed the seriousness of the issue and vowed action by yearend, but it was also clear that they had been sifting through some of the 700-plus letters filed in response to the proposal. quot;I felt there was a real sensitivity to what we in the industry, what real people who will be affected by this rule change would be put through,quot; Tittsworth said. He added that Schapiro had a firm grasp of the industry's concerns. quot;This was not some high-plane conversation,quot; he said. quot;She was extremely knowledgeable about every issue we raised.quot; Under the May 20 proposal, the SEC would require annual quot;surprise auditsquot; by independent accounting firms on all registered investment advisors and broker-dealers deemed to have quot;custodyquot; of client assets. The commission has used a strict definition of quot;custodyquot; to include even client assets held... http://www.hfalert.com/headlines.php?hid=142356 William Ackman, founder of Pershing Square Capital, pulled no punches last week in admitting to investors that he misplayed the market in the second quarter. His Sept. 18 letter to investors was a surprisingly harsh mea culpa considering the returns that his hedge funds produced were less than shameful. His two main funds, Pershing Square 1 and 2, gained around 7 each in the April-June stretch. Pershing Square International rose 8.2 during the same period. Still, those results were far worse than the 16 gain in the Samp;P 500 index in the second quarter and the 20 jump in the Nasdaq index. Discussing that shortfall, Ackman beat himself up in writing, admitting his firm was guilty of quot;errors of omissionquot; for missing out on buying opportunities as stocks surged during the second quarter. quot;Because I believe that owning up to one's mistakes in a public fashion decreases the probability of those errors reoccurring, I do so here,quot; he wrote. His firm had $6 billion of assets at the end of 2008. As a stock picker, Ackman is known for taking concentrated positions based on extensive research. In his 10-page letter, he acknowledged the strategy has its limitations during a bull market. quot;We have always believed in managing a concentrated, high-conviction portfolio that requires detailed, in-depth and oftentimes consuming analysis,quot; he wrote. quot;The benefit of our approach is that once we find an investment that is extraordinarily attractive, we can confidently invest a meaningful percentage of our capital.... http://www.hfalert.com/headlines.php?hid=142246 ---------- CORRECTION: An article on Sept. 16, quot;Cautious UK Taking Months to Okay Funds,quot; misspelled the last name of Julian Korek, a founding partner of Kinetic Partners. ---------- Don't expect swift government permission to start marketing a hedge fund in the U.K., where the Financial Services Authority is taking months to give its go-ahead. Since early this year, the London regulator has needed about four months and sometimes longer to complete background checks of key officials, conduct risk-management and operations reviews and take other approval steps. That's at least twice as long as the 6-8 weeks FSA had been taking in years past to give the go-ahead to funds. The regulatory backlog worsened in April and May, when FSA was inundated with proposals from investment firms rushing to pursue what they view as post-crisis market opportunities. Case in point: Only this week did two former Deephaven Capital professionals receive verbal approval to start marketing their planned event-driven hedge fund - nearly five months after applying to the FSA. And they are still waiting for written confirmation. In April, Tony Chedraoui and Mark Madden submitted their initial paperwork to FSA after setting up Tyrus Capital. Word has it they will launch with $750 million to $1 billion. Their proposed vehicle would follow the same approach as Deephaven's $500 million European Event Fund. Chedraoui managed that vehicle for Deephaven until Stark... http://www.hfalert.com/headlines.php?hid=142100 Three former staffers of different multi-billion-dollar fund-management firms are starting a hedge fund that would invest in stocks and bonds, having lined up more than $100 million of backing from at least two unidentified investors. The founders of New York startup Alti Capital are Rishi Bajaj, formerly of Silver Point Capital; Toby Symonds, who worked at SAC Capital; and Steve Tesoriere of Anchorage Capital. By yearend, they plan to start trading through a long/short fund that would invest in the equities and fixed-income securities of 20 or fewer companies at a time. Bajaj and Tesoriere will serve as portfolio managers for the firm, while Symonds will handle the business side of Alti, including marketing duties. Bajaj was a senior analyst focused on debt and equity investments in technology, media and telecommunications companies at Silver Point, a $6.5 billion debt-focused firm in Greenwich, Conn. He left Silver Point in May. Tesoriere was a senior analyst at Anchorage, a $7 billion New York firm that invests in distressed debt and other credit products, since the firm's inception in 2003. Prior to that, he did a stint at Goldman Sachs. Symonds worked nine years at Morgan Stanley, the last two in its prime-brokerage unit. In 2002, he left Morgan Stanley and joined SAC to recruit portfolio managers for the Stamford, Conn., firm and its subsidiaries. He left the $14 billion SAC in 2008. http://www.hfalert.com/headlines.php?hid=141920 Trian Fund Management, the hedge fund firm run by corporate raider Nelson Peltz, is cutting fees and loosening liquidity in a bid to attract fresh capital. Peltz, whose takeover targets have included food companies Heinz, Kraft, Arby's and Wendy's, disclosed the changes in an Aug. 4 letter to investors in his two hedge funds, Trian Partners and Trian Credit. The firm's original fund, Trian Partners, has posted disappointing returns since its inception in 2005. Trian Credit has gained about 15 since its launch last summer. Both funds were set up with unusually long three-year lockups and standard 2 management and 20 performance fees. The New York firm is now restructuring each fund into two share classes. Both share classes offer a reduced management fee of 1.5. One share class also offers better liquidity: a one-year lockup instead of three years. Investors in the other share class will still have their capital locked up for three years, but they will pay a reduced performance fee of 15. And the performance fee only kicks in after the three-year lockup period expires. Peltz quot;is trying to keep existing investors and give a carrot to new ones,quot; one investor said. quot;It's as simple as that.quot; Since launching in November 2005, Trian Partners has returned a paltry annual gain of 1.2 on average. The vehicle rose 14 in 2006 and 5.3 in 2007, but it lost 18.9 last year. Trian Partners is up 5 for the first seven months of this year, including a 10.5 gain in July. Peltz isn't alone among activist managers... http://www.hfalert.com/headlines.php?hid=141854 Hedge fund administrators, after experiencing a one-third drop in assets under administration amid last year's financial-market carnage, are drawing a measure of hope from an unlikely source: Bernard Madoff. To reassure investors spooked by Madoff's fraud, a number of large hedge fund managers that previously did their own number-crunching have hired outside administrators to calculate net asset value and produce investor reports. That could help top administration firms hold on to their market shares, even as overall assets continue to drop. If Madoff's massive Ponzi scheme ultimately means more business for fund administrators, that silver lining is hardly visible in a new industry survey that documents in excruciating detail how the steep losses and heavy redemptions that plagued most hedge funds last fall took a toll on administration shops (see table on Page 6). Nearly every firm in the top 25 suffered double-digit declines in assets under administration. The survey, conducted by Carbon360 Research of New York, found that assets under administration fell to $3.4 trillion at the end of March, from $4.7 trillion a year earlier - a 28 drop. As late as last summer, the research firm was forecasting a single-digit gain for the year ending in March 2009. But that was before Lehman Brothers collapsed, triggering the near-collapse of securities markets worldwide. Carbon360's numbers reflect some double counting, since they include assets in both single-manager funds and funds of funds. What's... http://www.hfalert.com/headlines.php?hid=141727 Two fund managers have teamed up to buy stakes in hedge fund quot;side pocketsquot; from impatient investors willing to sell their shares at steep discounts. Andrew Lawrence and Jonathan Lewis, who formed Rosebrook Partners in New York, are targeting hedge fund shares tied to illiquid assets or long-term investments that could take years to unwind. They are looking to pick up shares on the cheap from investors unable or unwilling to wait for the side-pocketed assets to be liquidated. Rosebrook has raised between $150 million and $200 million so far, managing the money in separate accounts for institutional investors that include an investment manager, a life insurer and an endowment. The firm aims to raise another $200 million for a private equity fund that would follow the same strategy. Before launching Rosebrook, Lawrence worked at San Francisco-based Pantera Capital, where he was co-manager of the $800 million PCM Global Macro Fund. He left Pantera in March. He previously was chief executive of Longitude, a New York derivatives business that he sold in 2005. He also founded Rubicon Capital, a global-macro hedge fund operator in New York. Lewis most recently was managing partner of New York-based Folio Holdings, an opportunistic fund that invests in multiple asset classes. He earlier founded Metropolis Capital, a $40 million venture-capital firm in New York. At Rosebrook, the partners' initial goal was to raise $200 million for a private equity fund before the July-August European vacation season, when... http://www.hfalert.com/headlines.php?hid=141603 Amid huge writedowns and regulatory issues, UBS has struggled to fill the top job in its prime-brokerage unit following the defection of Alex Ehrlich to Morgan Stanley. After Ehrlich left in May, UBS apparently told employees it would name a new global head of prime brokerage by July 1. The word on the street is that UBS so far has been unable to lure top talent because of concerns about the bank's financial strength and demands by U.S. authorities that UBS disclose the names of thousands of private-banking clients. Another issue: The bank's apparent reluctance to offer a long-term contract. quot;They don't have the luxury of time,quot; one market player said, noting that the firm's client balances have dropped 50 from their 2007 peak of around $286 billion. By leaving the top job vacant for too long, he said, UBS risks giving the appearance that it is no longer committed to prime brokerage. UBS declined to comment. The bank's prime-brokerage business - which Bernstein Research recently ranked fourth in terms of market share behind J.P. Morgan, Goldman Sachs and Morgan Stanley - is temporarily being run by Dan Coleman, the global head of equities. The global head of prime brokerage reports to Coleman. In the U.S., John Laub runs prime brokerage for UBS, while Marina Slowey oversees Europe. Laub is thought to be a candidate for the top job, though it appears the bank has focused its search so far on outside candidates. Given the issues facing the Swiss bank, it's unclear how much attention prime brokerage... http://www.hfalert.com/headlines.php?hid=141496 It's the end of the line for Drake Management, an operator of hedge funds and long-only accounts that had more than $11 billion under management at the start of last year. The fixed-income specialist suspended redemptions from its hedge funds in late 2007, as the credit crisis deepened, and by the following March decided to get out of the hedge fund business altogether. Now, the firm's founders - chief executive Anthony Faillace and chief operating officer Steve Lutrell - are throwing in the towel on their long-only business as well. The New York firm, which was set up in 2001, did not return phone calls. One sign that Drake is winding down is that its head of client management, Inna Koehler, recently left to join Passport Capital, a San Francisco fund operator run by John Burbank. Like many of its credit-focused peers, Drake's hedge funds suffered huge losses beginning in 2007. From its high-water mark in September 2007, Drake Global Opportunities Fund fell 56.7 through March 2009. The fund was down 4.6 for the first five months of this year. Another vehicle, Drake Absolute Return Fund, has experienced similar losses. Between its hedge funds and long-only accounts, Drake was managing $11.5 billion in early 2008. By the end of the year, assets under management had fallen to $5 billion, including $1.9 billion in its long-only bond business. Earlier this year, hedge fund investors began complaining that Drake was moving too slowly to liquidate the funds and return their capital. The firm was reluctant to sell... http://www.hfalert.com/headlines.php?hid=141415 Daniel B. Zwirn, whose once-high-flying hedge fund firm was brought down by an accounting scandal, is about to raise the curtain on his second act. Even as he continues to unwind D.B. Zwirn, a New York shop that managed more than $5.5 billion at its peak, Zwirn has established a new firm called Zwirn Family Interests and has quietly begun raising capital from friends and family and other backers familiar with his high-risk investment style. Zwirn is not targeting institutional investors at this stage, but has already raised a significant amount of capital for the new venture. Zwirn, 38, is planning to launch several funds in the coming months. He is currently working in New York with a small staff of key lieutenants who followed him from D.B. Zwirn, but soon will be scouting for fresh talent. One market player familiar with his plans said Zwirn is determined to regain his perch high up in the hedge fund industry. Zwirn's early success established him as a hedge fund wunderkind, alongside such industry luminaries as Ken Griffin of Citadel Investment and Dan Och of Och-Ziff. After stints at J.P. Morgan's Highbridge Capital and Michael Dell's MSD Capital, Zwirn founded D.B. Zwirn in 2001 and quickly gained a reputation for high-stakes investing in risky and illiquid assets. The firm's flagship vehicle, D.B. Zwirn Special Opportunities Fund, targeted real estate, debt, private equity and other exotic investments. At its peak, the Special Opportunities Fund - both the U.S. and offshore versions - accounted for ab... http://www.hfalert.com/headlines.php?hid=141298 Polygon, a big multi-strategy hedge fund firm that got clobbered last year, has begun soliciting capital for a pair of single-strategy funds that offer unusually low fees to existing investors. The London firm, run by Reade Griffith and Paddy Dear, is prepping one fund that would focus on European equities and another that would target convertible-bond arbitrage. The firm is trying to lure investors from its flagship Polygon Global Opportunities Fund, a $4 billion multi-strategy vehicle that lost 30 last year through October and is now unwinding. To retain its existing investors, Polygon is offering sharply discounted performance fees. Investors who commit before Aug. 1 would be charged no performance fee for the life of the their investment - a feature that may be unprecedented in the hedge fund industry. They would pay only a 1.5 management fee. Existing investors who join the new funds after Aug. 1 will be permitted to carry over their high-water mark from the multi-strategy fund. They, too, would pay a 1.5 management fee. New investors presumably will be charged the standard 20 performance fee and a 1.5 management fee. Polygon has said it wanted to evolve from a multi-strategy shop into a single-strategy manager, after seeing assets under management in its Global Opportunities Fund fall by about a third last year. The firm believes investors have grown disillusioned with multi-strategy vehicles and are now seeking the expertise of single-strategy managers. Polygon's planned European Equity... http://www.hfalert.com/headlines.php?hid=141215 Farallon Capital has managed to unwind a so-called liquidating trust faster and more profitably than many investors had expected. The $22.7 billion firm angered redeeming investors at the end of last year with a plan to lock up their assets in a separate vehicle until market conditions improved. Investors feared the liquidating trust could take many months to unwind. But a faster-than-expected turnaround in financial markets allowed the firm to pay redeeming shareholders 85 of their investments in the liquidating trust as of June 1. By the end of this month, redeeming investors are expected to have received almost 90 of their money. Investors were further surprised to learn that the assets in the liquidating trust have posted 13-plus gains. The results are a vindication of sorts for Farallon founder Thomas Steyer, whose plan to manage the assets initially drew investors' ire. Like many other hedge fund operators, Steyer's San Francisco firm restricted withdrawals after investors queued up to redeem at the end of 2008. Investors in Farallon's Capital Partners fund asked to withdraw 25 of the assets after the fund lost about 28 through aggressive investments in stocks and bonds, as well as private equity plays. In setting up the liquidating trust, the firm told shareholders it wanted to avoid dumping assets at fire-sale prices - a standard refrain among hedge fund managers during the most difficult year in the industry's history. Across the industry, fund managers set up special-purpose... http://www.hfalert.com/headlines.php?hid=141108 Pursuit Partners liquidated asset-backed securities at a deep discount to their late-March values instead of complying with some redeeming investors who believed they could have recovered more by taking possession of the bonds. At the end of March, the Stamford, Conn., firm set up a special-purpose vehicle for investors seeking to redeem from Pursuit Capital Management Fund 1 and an offshore companion vehicle. A number of investors asked for in-kind payments of the securities, but Pursuit turned most of them down, saying that dividing the holdings into smaller pieces would make them even harder to sell. The firm said it would consider in-kind distributions only for shareholders with more than $50 million of assets - a threshold that excluded all but two investors. Then, in mid-May, Pursuit sold a third of the asset-backed securities in the special-purpose vehicle for 20 of their value as reported in the most recent audited statement on March 31. Around the time of the sale last month, Pursuit offered to buy some of the asset-backed securities directly from investors. But the prices the firm offered were much lower than the valuations contained in the March 31 report. The fund, which managed about $400 million earlier this year, invests in structured-credit products, including residential mortgage-backed securities, collateralized debt obligations and collateralized loan obligations. In January, Pursuit offered investors two options: either redeem their investments or remain in the fund and accept an 18-month lockup.... http://www.hfalert.com/headlines.php?hid=141006 ---------- CORRECTION: A June 10 article, quot;Citadel Fund Carries Novel High-Water Mark,quot; incorrectly reported the liquidity terms for Citadel Investment's two main funds, Kensington Global Strategies and Wellington. Citadel offers two options. One permits investors to redeem any amount of capital once every two years with 90 days' notice, and to withdraw profits annually. The second option allows quarterly redemptions with 45 days' notice, so long as total redemptions from the fund don't exceed 3 of assets. If the 3 threshold is reached, investors can redeem no more than one-sixteenth of their money at a time. If they wish to withdraw more than one-sixteenth, then they face a 5-9 penalty. The liquidity terms will go back into effect once Citadel lifts its suspension on redemptions from the two funds. ---------- Citadel Investment, whose multi-strategy funds remain underwater after falling 55 last year, is about to launch a single-strategy fund with an unusual high-water-mark provision. Ken Griffin's $11 billion hedge fund firm has begun pitching a long/short equities vehicle it plans to launch next month. According to a marketing document, Citadel Global Equities Fund will charge a 2.5 management fee and 25 performance fee. If the new fund falls below its high-water mark, it will still charge a performance fee, albeit at a reduced rate of 12.5. The lower rate will remain in effect until the fund has earned back 250 of the drawdown. If the fund w... http://www.hfalert.com/headlines.php?hid=140875 Cayman Islands, home to more hedge funds than any other offshore jurisdiction, is eyeing a plan to improve the transparency of some 7,000 hedge funds that are domiciled in the British territory. Its financial regulator, Cayman Islands Monetary Authority, is considering the posting of a number of details about hedge funds, including the names of directors and service providers, on its Web site (www.cimoney.com.ky). The site currently provides little more than the name for each of the funds registered with the authority. quot;The site doesn't provide our stakeholders with a lot of beneficial information,quot; said Yolanda McCoy, head of the authority's investments and securities division. quot;One of our primary objectives is to enhance the overall transparency of the hedge fund industry. We hope to have this organized by late 2009.quot; The move comes as offshore jurisdictions, including the Cayman Islands, Bermuda and the British Virgin Islands, have come under increased scrutiny due to their reputation as lightly regulated tax havens. At the most recent G-20 summit, held in London in April, some world leaders threatened sanctions against quot;non-cooperative jurisdictions.quot; At the same time, Cayman Islands officials have heard from institutional investors seeking more transparency in order to aid their due diligence of hedge fund managers. The expanded Web site would provide investors with quick access to the names of prime brokers, auditors, administrators and other firms servicing hedge funds. Investors also would be able to see whet... http://www.hfalert.com/headlines.php?hid=140774 Following a difficult year that saw its flagship fund plummet 40, AQR has begun marketing a special-opportunities fund it launched last year with its own capital. The firm's co-founder, quantitative specialist Cliff Asness, pitched the fund to investors at a recent capital-introduction event in New York sponsored by Goldman Sachs. AQR Diversified Opportunities fund, set up with $40 million of the firm's own money, takes an event-driven approach to investing in convertible bonds, special-purpose-acquisition vehicles and merger arbitrage. The Greenwich, Conn., fund manager is looking to solicit up to $750 million of equity, though it's unclear how much the firm can expect to raise in the current environment. Despite the fund-raising challenges, AQR is expected to begin marketing another vehicle in the coming weeks. Details were unavailable, but the equity goal is roughly $125 million. The 10-year-old firm runs $20 billion - mostly through long-only vehicles, including separate accounts. It also manages hedge funds with $6 billion to $7 billion of assets. Last year, AQR's hedge funds posted mixed results, ranging from a 4 gain to a 40 loss for the firm's flagship, Global Alpha. In the face of sharp losses and heavy redemptions for some of its funds, AQR cut its staff last fall, laying off 15 people, or about 7 of its staff. They were the first layoffs in the firm's history. But the difficulties haven't stopped the firm from cranking out new investment products in an ongoing effort to diversify its business. Earlier... http://www.hfalert.com/headlines.php?hid=140693 FrontPoint Partners, a hedge fund-incubation platform owned by Morgan Stanley, is exploring a management-led buyout. FrontPoint's executives are considering their options for funding a buyout deal that would likely include a minority stake for Morgan Stanley. That would give FrontPoint continued access to the bank's network of investors. It's unclear whether Morgan Stanley is nudging FrontPoint's management toward a buyout. A person close to Morgan Stanley said that the bank and FrontPoint haven't had any discussions about a deal. The bank acquired the firm in December 2006 for $400 million. At the time, FrontPoint's hedge fund managers signed agreements to stay with the firm until the end of 2008. At least a few of those managers haven't had their contracts renewed, although FrontPoint maintains that all of the revenue-sharing agreements remain in place. Some managers have explored severing their ties to FrontPoint and either striking out on their own or joining another hedge fund operator. FrontPoint has about $7.6 billion under management, supplying seed capital and infrastructure support to 15 hedge fund teams. Before being bought by Morgan Stanley, FrontPoint would offer fund managers an equity position in the firm. Morgan Stanley took 100 ownership of FrontPoint. Under a typical seed deal, FrontPoint splits the combined management and performance fees with the fund manager on a 50/50 basis. The split moves toward 75/25, in favor of the fund manager, as a fund gains assets and becomes more profitable. Among... http://www.hfalert.com/headlines.php?hid=140569 Fairfield Greenwich, which had more investor capital tied up with Bernard Madoff's Ponzi scheme than any other firm, is turning over the bulk of its fund-of-funds business to Sciens Capital. While the exact terms of the transaction are unknown, Sciens will initially advise New York-based Fairfield as it restructures four funds of hedge funds whose combined assets under management have fallen to about $2.5 billion, from a peak of $5 billion last year. Assuming investors sign off on the restructuring plan, Sciens would then take over management of the funds, sharing some of the fee revenue with Fairfield. Because no money is changing hands, the deal isn't being described as a sale. However, Sciens eventually is expected to have complete control over the business and to rename the funds. Fairfield will retain a stake in the business. Together, the four funds of funds invest in about 40 hedge funds. Fairfield had about half of its $14 billion of assets under management tied up with Madoff when he admitted in December that he was running a massive fraud. Fairfield, founded in 1983 by Walter Noel and Jeffrey Tucker, now faces charges by securities regulators in Massachusetts, as well as investor lawsuits. The deal with Sciens leaves Fairfield with a fraction of the business it once ran. Sciens will gain control over Fairfield's Chester Global Strategy, Chester Global Emerging Markets, Chester Horizons and Irongate Global funds. Fairfield, meanwhile, will retain a few small funds of funds, some... http://www.hfalert.com/headlines.php?hid=140485 ---------- CORRECTION: A May 6 article, Goldman Cap-Intro Event Draws Big Names, incorrectly reported that a capital-introduction conference being hosted by Goldman Sachs tomorrow in New York was originally to be held in March at the Fairmont Turnberry Isle Resort in Miami. The Miami conference, which Goldman plans to hold at a later date, will focus on emerging hedge fund managers. This week's conference in New York features established managers. ---------- Goldman Sachs has lured some of the most prominent hedge fund managers to a capital-introduction event scheduled for next week, flexing its muscle at a time when many prime brokers are still struggling to find their footing. The bank's senior management has been working the phones to get big-name fund managers to attend, and the efforts have paid off. The biggest coup: Steve Cohen, head of SAC Capital, is slated to attend. Cohen, whose Stamford, Conn., firm manages around $12 billion, rarely attends cap-intro events. Other marquee names who have RSVP'd for the May 14 event in New York include AQR Capital's Cliff Asness, Galleon Group's Raj Rajaratnam, GLG Partners' Pierre LaGrange, Maverick Capital's Lee Ainslie, Millennium Partners' Israel quot;Izzyquot; Englander, Och-Ziff Capital's Dan Och, Pershing Square's William Ackman, Third Point Capital's Dan Loeb and Touradji Capital's Paul Touradji. In past years,... http://www.hfalert.com/headlines.php?hid=140390 James Simons' notoriously secretive Renaissance Technologies is taking a small step toward transparency - a sign that even the most-successful fund operators are feeling pressure to provide more information to investors in the wake of Bernard Madoff's fraud. Two Renaissance funds have instructed their auditor, PricewaterhouseCoopers, to provide limited partners with verification of investment valuations and of the banks that hold fund assets in custody. The auditor will supply the confirmations upon request on a quarterly basis. The affected funds are the long-biased Renaissance Institutional Equity Fund and Renaissance Institutional Futures Fund, a commodities vehicle. Simons, a quantitative-investment specialist, is as well known for secrecy as he is for producing spectacular returns. The move toward transparency clearly comes in response to demands that hedge funds be more open in the aftermath of Madoff's $60 billion Ponzi scheme. Still, the step is relatively small, and it may not go far enough for large institutional investors. For example, after getting burned by Madoff, Union Bancaire Privee said in December that it would pull out of any hedge fund that didn't use an independent administrator to verify its net asset value. One fund operator used by UBP, Millennium Partners, quickly hired administrator GlobeOp. Another, D.E. Shaw, is looking into hiring an outside administrator. But Renaissance has so far decided that hiring an outside administrator is unnecessary. Renaissance apparently doesn't want any... http://www.hfalert.com/headlines.php?hid=140272 Stephen Freidheim's Cyrus Capital hired a chief financial officer last week after several key staffers left the New York firm in recent months. Cyrus, whose assets under management have shrunk dramatically during the past year, has also seen the departure of its chief operating officer, head of research and a senior investment staffer. The outgoing chief financial officer, Cyrus Borzooyeh, and former chief operating officer, Robert Nisi, were both partners in the firm. Borzooyeh has already begun working at Dan Stern's Reservoir Capital part time, but has stuck around Cyrus to help his replacement, Brennan McCaw, get up to speed. Nisi's replacement, David Millich, joined Cyrus a few months ago. Nisi is expected to start at a new firm next month. McCaw previously worked for DKR Oasis Management, a joint venture between DKR Capital Partners and Oasis Management that operates Asia-focused hedge funds. Millich was previously chief operating officer at Diamond Lake, a hedge fund firm founded by former Merrill Lynch investment banking chief Dow Kim. Diamond Lake folded last year before launching a fund. Prior to that, Millich ran the North and South American operations of Merrill's prime-brokerage business. Cyrus, which invests mainly in credit products, had assets under management of $1.1 billion on Feb. 1, according to the firm's Web site. That is down from a peak of about $2 billion in 2008. The firm's flagship vehicle, Cyrus Opportunities Fund 2, lost 55 last year. The fund made big investments in auto companies ... http://www.hfalert.com/headlines.php?hid=140156 Capital-introduction events, which virtually disappeared amid the market's meltdown late last year, are suddenly showing signs of life. As the hedge fund industry reeled from steep losses and heavy redemptions during the fourth quarter of 2008, prime brokers quickly moved to scale back or scuttle cap-intro gatherings in New York, London and elsewhere. Investor appetite for alternative investments all but evaporated as many hedge fund managers were unable to meet redemption requests or make good on the promise of absolute returns. Now, investors are beginning to show renewed interest in hedge funds, based on the attendance at several recent cap-intro events. At the beginning of April, for example, 120 investors attended a gathering in New York hosted by Credit Suisse. In late March, the bank hosted a similar event in London that drew 140 investors. The turnout at both events was quot;more than we expected,quot; said Robert Leonard, Credit Suisse's global chief operating officer for capital services. Attendance has jumped 40-50 compared with late 2008, he said, and is on par or slightly ahead of early 2008. In the coming months, Credit Suisse has additional cap-intro events scheduled for Boston, Geneva, Zurich, Paris, Sao Paolo, Rio de Janeiro and Hong Kong. Merrill Lynch hosted a cap-intro gathering in New York last month that also drew a good crowd. quot;Some very senior people from big fund-management companies attended,quot; said one market player who was at the event. Morgan Stanley organized an event in New York last month... http://www.hfalert.com/headlines.php?hid=140067 Fortress Investment, scrambling to manage heavy withdrawals from its $5 billion Drawbridge Special Opportunities Fund, is proposing an unusual maneuver to meet some of the redemptions. In an April 1 letter to investors, the New York firm sought permission to buy certain illiquid assets Fortress had earlier set aside in special accounts. It's unclear why the firm is interested in purchasing the assets rather than liquidating via secondary-market sales, but presumably Fortress sees an investment opportunity. It also would allow the firm to return some money to investors. Drawbridge Special Opportunities invests mainly by making direct loans to unrated companies. The U.S. version of the fund lost 26 last year, triggering a flood of redemption requests from investors. In response, Fortress established so-called redemption capital accounts at the end of the year to hold certain assets pending liquidation. The terms of the fund already give Fortress the option of purchasing, on a pro rata basis, portions of all of the assets in those accounts. The loans the fund invests in are highly illiquid. Rather than try to sell pieces of the loans held in the redemption capital accounts on the secondary market, the fund manager is seeking to maintain control of entire loans. Some of the redeeming investors still maintain investments in the fund, so those investors would essentially be selling the assets to themselves. In its letter to investors, the firm made another unusual pitch: It asked redeeming investors if they want to particip... http://www.hfalert.com/headlines.php?hid=139967 Stark Investments, which is scrambling to complete its acquisition of Deephaven Capital's main hedge fund, has told its own investors that it wants to restructure two big funds in the wake of sharp losses and heavy redemptions. The multi-strategy fund operator, which manages more than $8.5 billion, has notified investors in its flagship Stark Investment vehicle and an offshore fund, Shepherd Investment, that they will receive a portion of their March 31 redemptions in the form of shares in a newly created vehicle. In a March 23 letter, the Milwaukee firm said it was setting up two companion vehicles to hold the funds' least-liquid assets - Stark Select Asset Fund and Shepherd Select Asset Fund. The firm said it could take up to three years to liquidate the hard-to-sell holdings. Redeeming investors won't be charged a management fee on assets in the new vehicles. The firm, run by Brian Stark and Mike Roth, said that about 55 of the net asset value of Shepherd Investment will be transferred to Shepherd Select. The figure doesn't include investments the firm parked in quot;side pocketsquot; a few years ago to separate liquid assets from private equity-type investments. It's unclear what portion of the assets in Stark Investment would be transferred to Stark Select. The Stark funds have been flooded with redemption requests amid severe losses last year and in early-2009. The Shepherd fund lost 22.2 in 2008 and another 4.2 during the first two months of this year. In their letter to investors, Stark and Roth... http://www.hfalert.com/headlines.php?hid=139860 Hedge-fund incubation firms, which act as middlemen between deep-pocketed investors and startup fund managers, are struggling with a growing mismatch between supply and demand. On the one hand, the incubation shops are seeing heavy demand for seed capital from early-stage managers who have had little luck raising funds since the onset of the financial crisis. But on the other hand, institutional investors that were once eager to back incubation efforts have slashed their allocations for seed financing. Incubation operators such as SkyBridge Capital, Protege Partners and Weston Capital are seeding fewer funds and providing less capital per manager. Incubation firms traditionally have been a key source of capital for startup managers, while also providing much-needed marketing and operational support. quot;There's a lot of tire kicking going on right now,quot; said one early-stage hedge fund manager who has been hunting for seed capital. One incubation executive described the current market conditions as an quot;almost perfect storm.quot; Most incubation firms, he said, are struggling to hold on to existing commitments from investors that are suddenly having second thoughts. The few investors still in the market are increasingly wary of multi-year lockups on their capital - a standard condition for incubation investments. Traditionally, incubators have counted on pension funds, endowments, family offices and wealthy individuals as their main sources of capital. SkyBridge, a New York incubation firm, has reduced its standard... http://www.hfalert.com/headlines.php?hid=139742 With the audit season just around the corner, new accounting rules are requiring funds of funds to consider secondary-market prices when valuing investments in hedge funds that have blocked or gated redemptions. In the past, the auditor of a fund of funds could value an investment in an underlying hedge fund simply by pegging it to the net asset value, as confirmed by that fund's auditor. But under the Financial Accounting Standards Board's mark-to-market requirements, known as FAS 157, the NAV of an underlying fund will have to be discounted by a fund of funds if the hedge fund manager has invoked gate provisions or suspended redemptions, said Jeffrey Yager, a partner at accounting firm McGladrey amp; Pullen. Now, the big question for fund-of-funds auditors is: How much of a discount Funds of funds and their auditors will get some guidance from the American Institute of Certified Public Accountants, which is preparing a quot;technical practice aidquot; to advise auditors. An early draft of the document says that when valuing funds that have been gated or closed to withdrawals, auditors must consider recent sales of the fund's shares on the secondary market. Even when shares have sold at a steep discount, however, auditors aren't required to mark down a multi-manager vehicle's investment in that fund by the full discount, and can consider a range of other factors, including the reputation of the hedge fund manager. Still, the new rule could cause problems for multi-manager funds. Fund-of-funds managers generally would pre... http://www.hfalert.com/headlines.php?hid=139638 Brevan Howard Asset Management is set to hire Morgan Stanley to market the giant hedge fund operator's vehicles to the bank's institutional clients. Brevan Howard already has a prime-brokerage relationship with Morgan Stanley, but the marketing deal would go beyond the standard services the investment bank provides to the London firm. Morgan Stanley would market Brevan Howard funds through multiple channels, not just its prime-brokerage unit. While prime brokers typically don't charge for capital-introduction services, Brevan Howard would pay Morgan Stanley a fee for referrals to institutional clients. The bank hopes the deal will pave the way for more fee-based cap-intro business. Brevan Howard, which has about $26 billion under management, posted big gains last year, even as most fund operators were suffering steep losses. Nonetheless, the firm was hit with redemption requests for about 20 of assets across all of its funds. The tentative deal with Morgan Stanley appears to stem from conversations between John Mack, the investment bank's chief executive, and Brevan Howard founder Alan Howard. The two worked together when Mack was CEO of Credit Suisse First Boston and Howard ran proprietary interest-rate trading for the bank. Howard left Credit Suisse in 2002 to launch Brevan Howard amid efforts by Mack to rein in costs, including compensation. Brevan Howard's flagship vehicle, the $15 billion global-macro Brevan Howard Master Fund, was up more than 20 last year. The firm also runs Brevan Howard... http://www.hfalert.com/headlines.php?hid=139529 Passport Capital's flagship fund redeemed $37 million from a sister vehicle, Passport India Fund, angering some investors who have been waiting for withdrawals as the India-focused fund continues to lose money. The San Francisco firm, with $2 billion under management, disclosed the withdrawal from the India fund in a quarterly letter to the fund's investors last week. As part of a rebalancing of its portfolio, Passport Global Fund redeemed the shares at yearend, the letter said. The move didn't sit well with investors in Passport India, which fell 67 last year. (By comparison, India's benchmark stock index, the Sensex 30, fell 61.) One investor accused the firm, led by John Burbank, of ignoring the fund's liquidity terms, which require three months' notice for withdrawals. The firm also failed to disclose the withdrawal in a timely manner, the investor said. quot;It appears the mother ship could redeem in a day, while the rest of us will have to wait longer than 100 days to get our money back,quot; the investor said. By redeeming, the investor said, the firm further may have pushed down the net asset value of the India fund, and left the remaining investors holding a higher percentage of less-liquid assets. About 35 of the fund's assets are stakes in private companies. The firm should have notified investors as soon as it decided to redeem from the India fund, the disgruntled investor said. The fund has lost another 7 since the start of the year. Passport declined to comment. Since its inception in 2005, Passport... http://www.hfalert.com/headlines.php?hid=139439 Philip Falcone, chief of hedge fund heavyweight Harbinger Capital, is buying out the firm that backed Harbinger at its inception. Harbert Management, a Birmingham, Ala., alternative-investment manager, acquired a stake in Falcone's New York firm when it provided $25 million of seed capital for the launch of Harbinger's first fund in 2001. Falcone is buying back Harbert's stake for an undisclosed sum. The decision to split appears to be mutual. When the deal is finalized, Falcone will own 100 of Harbinger, which has $9 billion under management. But Harbinger will continue to rely on Harbert for operational support. Harbert will also maintain its current investments with Harbinger's funds: the flagship, multi-strategy Harbinger Capital Partners Fund 1, Harbinger Capital Partners Special Situations Fund, and the two vehicles' offshore versions. Falcone began positioning Harbinger to be more independent from Harbert last year when his flagship fund was riding high, up nearly 42 during the first six months of 2008. He hired Blackstone Group's Park Hill unit to take over marketing of his funds. At that point, Harbinger had assets under management in excess of $26 billion. Since then, however, Harbinger's funds have fallen sharply. Its flagship ended 2008 with a 27.8 loss, while Special Opportunities Fund slid 56.1. Losses and redemptions have left the firm with just $9 billion under management. It's unclear how much Harbert has under management with Harbinger. Over the years, Falcone has done well for Harbert,... http://www.hfalert.com/headlines.php?hid=139334 Fund-of-funds operator Alstra Capital is shutting down after its biggest client, Max Capital, decided to take direct control of its hedge fund investments after they suffered double-digit losses last year. Since its inception in 2005, Alstra's main business has been managing the alternative-investment assets for Max, a Bermuda reinsurance company that shares a common ancestry with Alstra. Both firms trace their roots to Louis Bacon's Moore Capital: Max was launched by a Moore-led consortium in 1999 in part as a way to boost the hedge fund's assets under management, while Alstra is run by Bacon's brother, Zack Bacon. At the beginning of 2008, Max accounted for about $1.2 billion of Alstra's $1.4 billion under management. Alstra runs a fund of funds for Max called Max Diversified Strategies, which according to a recent regulatory filing contains quot;materially allquot; of Max's alternative investments. In its annual report, issued last week, Max reported losing $233 million, or 19.3, on its alternative investments. Alstra said Max Diversified Strategies' assets under management fell to $749 million at yearend, suggesting that in addition to losses, Max redeemed some of its assets last year. Max said in its annual report that it was seeking to reduce its hedge fund exposure. The portfolio's decline in value last year took a significant bite out of the reinsurer's capital base. Those losses led to a reevaluation of the investments. Max decided to sever its quot;trading agreementquot; with Alstra in the last few weeks, according to a... http://www.hfalert.com/headlines.php?hid=139213 As the secondary market for hedge fund shares heats up, Neuberger Berman hopes to raise $500 million for an investment vehicle that would buy fund stakes at a discount. The offering is being crafted by staffers in Neuberger's fund-of-hedge funds group, led by Eric Weinstein. The New York money-management firm is an established player in the secondary market for private equity funds, running a $2.3 billion vehicle that targets stakes in buyout and venture capital funds. The secondary market for hedge fund shares is expected to grow as investors look to get out following the worst year in the industry's history. Neuberger is one of several firms with plans to target interests in hedge funds. London-based Permal Group, the fund-of-funds unit of Legg Mason, is about to launch Permal Hedge Fund Opportunities, which will buy hedge fund stakes in the secondary market. Some of Permal's funds of funds have been trading secondary-market shares for years, but this would be the firm's first investment vehicle devoted solely to that market. In the past, fund managers have discouraged investors from selling their stakes in the secondary market in order to maintain control over their investor base and avoid administrative hassles. But managers appear to be loosening their policies as they look for ways to help cash-strapped investors without being forced to liquidate assets in a depressed market. Plainfield Asset Management, for example, recently sponsored an auction to help investors unload their stakes. The auction, run... http://www.hfalert.com/headlines.php?hid=139117 Perry Capital is floating a plan to continue charging investors a performance fee, albeit at a reduced rate, even though its flagship fund remains well below its high-water mark. Richard Perry's New York firm is giving investors in Perry Partners International a choice: stick with the traditional high-water mark provision, which means no performance fees until the fund returns to its peak level, or join a new share class with a more-complicated fee structure. Investors in the new class would pay a performance fee of 10 - half the usual rate - on any gains after Jan. 2, 2009, even if the fund remains below the high-water mark. The incentive for investors is that the discounted rate would remain in effect even after the high-water mark is reached, until 250 of the losses have been recouped. The move is expected to be closely watched by investors and fund managers alike at a time when most funds remain far below their peak levels. For investors, the high-water mark is what sets hedge funds apart from other investment vehicles, ensuring that asset managers reap generous fees only when they generate positive returns. Perry's flagship fund, which manages $6 billion of the firm's $8 billion of assets, posted a 26.8 loss in 2008, the first annual loss in the firm's 20-year history. Like most of its peers, Perry Capital stands to see its revenue decline now that performance fees have dried up and all that's left is the standard 2 management fee. Depending on the extent of the losses and the strength of the... http://www.hfalert.com/headlines.php?hid=139007 A study six years ago found evidence of inadequate internal controls and compliance procedures at the fund shop run by Arthur Nadel, who was arrested and charged with fraud yesterday after disappearing for two weeks. The 16-page report, prepared by CarbonBased Consulting, was commissioned by Nadel's firm, Scoop Management of Sarasota, Fla. CarbonBased highlighted numerous operational shortcomings that it said were so obvious that they should have been apparent to sophisticated investors conducting their own due diligence of the firm. The report, which was obtained by Hedge Fund Alert, raised questions about Scoop's trade-reconciliation procedures, accounting, investor relations and other issues. It's unclear why Scoop commissioned the report or whether it acted on the findings or disclosed them to its investors. Brian Shapiro, president CarbonBased, confirmed Scoop had been a client, but declined further comment, citing confidentiality agreements. Among other things, the New York consulting firm found that Scoop's daily trading activity was reconciled only once a month. As a result, Scoop didn't have a clear idea of the assets it held in each fund. Neither the accounting nor the performance of the funds could be certified for accuracy, the consultant said. It recommended that Scoop hire a nationally recognized accounting firm and enter into a relationship with a prime broker. The consultant also found that Scoop allowed unqualified investors into limited partnerships with qualified... http://www.hfalert.com/headlines.php?hid=138906 The secondary market for shares of hedge funds is heating up. After suspending redemptions for its main fund, GoldenTree Asset Management has hired Credit Suisse to run an auction for investors wishing to sell their shares in the vehicle. Meanwhile, Morgan Stanley is getting ready to unveil a service that would match buyers and sellers of hedge fund stakes. Separately, an unidentified European bank is circulating a list of high-profile hedge funds for which it has lined up investors who would buy discounted stakes if they were to become available. Investors in GoldenTree Master Fund vehicles interested in selling their stakes must submit their asking prices by Feb. 6. Bids for fund shares are also expected to be due on that date. If any bids equal or exceed any of the offers, Credit Suisse will set a single price that will enable the most possible transactions to be completed. The auction appears to be similar to the one Credit Suisse is running for Plainfield Asset Management's Plainfield Special Situations Master Fund. In order to attract bidders, GoldenTree agreed that any shares sold at auction would be assigned a high-water mark that is above the purchase price - thus giving buyers an opportunity to avoid some performance fees. Credit Suisse followed the Plainfield blueprint in setting terms for the GoldenTree auction. Buyers of Plainfield shares will be assigned the most attractive high-water mark that exists for any current investor in the fund. The sale price will be set based... http://www.hfalert.com/headlines.php?hid=138794 After suspending redemptions two months ago, Plainfield Asset Management turned around and set up an auction to let investors in its $5 billion flagship fund sell their stakes on the secondary market. Though some fund operators have condoned secondary-market sales in the past, Plainfield's move may be the first time a fund shop has coordinated the effort itself. The rationale: An auction allows disgruntled investors to cash out without forcing the fund operator to sell off assets in depressed markets. The Greenwich, Conn., firm arranged the auction for investors in the Plainfield Special Situations Master Fund, a multi-strategy credit fund that was down 9 last year through October. By the end of October, investors sought to withdraw a whopping 30 of the fund's assets at yearend, prompting Plainfield to suspend redemptions in November. After that, the fund shop tapped Credit Suisse to organize a quot;modified Dutch auction,quot; according to a letter to investors. Investors interested in selling their stakes and potential buyers were invited to submit offers by early January. Credit Suisse would then set a clearing price that would allow for the maximum number of completed deals. Fund investors who were willing to sell at or below the clearing price would be matched with buyers whose bids were at or above that price. To attract bidders, Plainfield agreed to allow buyers of fund stakes to assume the fund's high-water mark, meaning they won't be subject to performance fees until the fund's assets return to their peak level. Buy... http://www.hfalert.com/headlines.php?hid=138689 Deutsche Bank's $4.5 billion fund-of-funds unit is shutting down one of its fund series and running into serious trouble with another. The bank's DB Advisors unit, which manages money for institutional investors, has suspended redemptions for its two main fund-of-funds lines: the Topiary series, which will be liquidated, and the DB Global Masters Fund, Deutsche's flagship multi-manager vehicle. In recent weeks, Deutsche also cut jobs in its fund-of-funds operation. People familiar with the operations say DB Global Masters will probably close as well, though a Deutsche spokeswoman denied that is the plan and insisted the bank remains committed to its fund-of-funds business. As of Nov. 30, the Topiary series had more than $1.3 billion under management, down from more than $2.3 billion at yearend 2007. DB Global Masters was managing more than $2.2 billion, compared with its yearend total of more than $2.5 billion. One of the largest Topiary funds, DB Topiary Trust, was down 19.5 last year through November. Global Masters fell 16.3 during the same period. Even some Deutsche investment advisors have lost faith in the fund-of-funds operation. During the final quarter of 2008, Deutsche's Private Wealth Management business removed both Topiary and DB Global Masters from its investment platform due to performance issues. Until five years ago, when Private Wealth Management began investing in outside hedge funds, almost all of the investors for DB Advisors' funds of funds came through marketers at the... http://www.hfalert.com/headlines.php?hid=138560 Fairfield Greenwich Group, which steered more investor capital to Bernard Madoff's con game than perhaps any other player, was pitching a new Madoff offering as late as Dec. 11, the day of his arrest. Only about two weeks ago, marketers for Fairfield Greenwich, a New York money manager, told a fund-of-funds operator that investors had already snapped up $300 million of a $500 million offering from Bernard L. Madoff Investment Securities. The pitches described a strategy that could return 14-16 a year - more than the returns from Madoff's typical strategy - but with more risk. Sales people said the opportunity would no longer be available by the end of January. Also during the week of Dec. 1, another hedge fund professional was pressured by Fairfield Greenwich representatives, who insisted Madoff would punish redeeming investors and those declining to participate in the fresh offering. The marketers said such investors would be shut out of future Madoff opportunities. A separate fund staffer was offered a chance to invest in a Fairfield Sentry fund - a Fairfield Greenwich vehicle allocated entirely to Madoff - at around 4 p.m. on Dec. 11. Madoff had been arrested that morning. As the fallout of Madoff's Ponzi scheme spread rapidly across the global investment community, a federal judge this week ordered a liquidation of his asset-management business. Fairfield Greenwich, established in 1983, is reported to have $7.5 billion of client money tied up with Madoff, which accounts for more than half of the ... http://www.hfalert.com/headlines.php?hid=138443 Fund operators SAC Capital and Diamondback Capital have created quot;side pocketsquot; to wall off a portion of their assets, but for different reasons. SAC, whose main hedge fund is down about 20 this year, wants to protect illiquid, hard-to-value assets from investor redemptions. The $16 billion Stamford, Conn., firm, which is run by Steve Cohen, notified investors within the past two weeks that it had set up a side pocket for about 13 of the fund's assets. The segregated investments include both fixed-income and private-equity assets. By walling off those holdings, SAC can exclude them from performance calculations until the positions can be sold or properly valued. Diamondback established a side pocket for about 14 of its assets to account for its exposure to Lehman Brothers, which filed for bankruptcy in September. The Stamford fund operator, headed by SAC alumni Larry Sapanski, Richard Schimel and Chad Loweth, initially estimated that it had $772.5 million tied up in Lehman's prime-brokerage unit. On Nov. 10, the firm wrote down the value of its Lehman assets to $518 million quot;due to increased concerns about the extent and timing of recovery.quot; Diamondback has told investors its Lehman holdings will likely have to be discounted further. The side-pocket provisions apply to investors in Diamondback funds before Nov. 1. No management fee will be charged on the covered assets. Including the Lehman securities, Diamondback has about $5.3 billion under management. Through November, Diamondback's main hedge f... http://www.hfalert.com/headlines.php?hid=138336 Even as it faces a flood of redemption requests, Millennium Partners is investing more than $1 billion of seed capital in three planned stock funds run by outside managers. The New York fund operator, founded by Israel quot;Izzyquot; Englander, is expected to be the exclusive investor in the three funds, at least initially. Julie Macklowe, who recently lost her job at SAC Capital's Sigma unit, will launch a fund on Jan. 1 with $250 million from Millennium. Former J.P. Morgan proprietary trader Brian Pinsker is expected to receive up to $1 billion of seed capital. And Jon Cheng, formerly of Perry Capital, is in talks with Millennium for a deal that would fall somewhere between the other two. Like Macklowe, Cheng and Pinsker recently lost their jobs as the financial markets collapsed. Cheng, a retail-stock portfolio manager, was laid off by New York-based Perry Capital in October, as Perry cut three-quarters of its equity investment staff. Cheng's fund, to be based in New York, will focus on the retail sector. Pinsker, whose trading group at J.P. Morgan was shut down in September, has started a New York firm called 11:11 Capital to launch a healthcare-focused fund. Macklowe, a consumer and retail-stock specialist, is setting up Macklowe Asset Management in New York. The fund will only manage Millennium money for at least a year before opening up to outside investors. At Sigma, part of Steve Cohen's Stamford, Conn., firm, Macklowe managed a similar-size portfolio from offices in New York. Millennium is borrowing half... http://www.hfalert.com/headlines.php?hid=138230 After losing about half of its value since it started last year, a Goldman Sachs distressed-debt fund is allowing investors to redeem all of their shares ahead of schedule, an option that limited partners in other hedge funds are sure to envy. Goldman Sachs Liquidity Partners 3, which launched in the summer of 2007 with $1.7 billion of commitments, also gave investors an opportunity to stick with the fund in return for reduced management fees and zero performance fees for a limited period. Those wishing to contribute capital are also eligible for reduced fees. But for LPs wanting out, Goldman is willing to waive a lockup provision requiring investors to leave their capital in the fund for at least two years. Goldman is outlining the options in a letter it expected to send to investors this week. The fund, housed in Goldman Sachs Asset Management alongside other bank-run hedge funds, is overseen by James Clark, a partner. The vehicle's management team also includes Roberta Goss, who heads bank-loan investments at Goldman Sachs Asset Management. Liquidity Partners 3, which invested in leveraged bank loans and subprime mortgage-backed securities, borrowed to boost its exposure to those markets. Toward the end of 2007, Goldman and many others believed the values of such assets were soon to recover. As it turned out, credit-market values were nowhere near their bottom, roiling the many players that began investing around that time. Loans issued to finance LBOs, for instance, have since dropped to 70 cents on the... http://www.hfalert.com/headlines.php?hid=138124 Chilton Investment let go about 30 staffers last week, as it scales back operations to cope with a $2.5 billion drop in assets over the past four months. The New York firm showed the door to about 20 of its staff, starting with the most-junior employees and working up from there. Most low-level staffers had been kept somewhat in the dark about the state of the company since the end of September, when Chilton cut off their access to its quarterly investment letter. The departed staffers included all but one member of Chilton's distressed-investment team. That worker stayed on to oversee the liquidation of those holdings. Chilton now has about 120 employees, which is where it stood before embarking on an ambitious expansion effort about two years ago. Like many fund operators, Chilton is being forced to cut costs as it struggles to survive the prolonged financial crisis. Chilton was managing about $6.5 billion of investments in early October, down from $9 billion at midyear. One of its biggest vehicles is the $3 billion Chilton Global Natural Resources Partners, which invests in stocks issued by companies in mining, energy and related industries. The fund suffered losses after taking mostly long positions. They turned out to be wrong bets a few months ago, when plunging commodities prices decimated the stocks of natural-resources companies Richard Chilton, who founded the firm in 1992, runs its flagship equities fund. His outfit has been putting down roots in Asia over the past 18 months... http://www.hfalert.com/headlines.php?hid=138022 Three large fund-of-funds operators in Europe are making it tougher for investors to withdraw their money, reversing the easy liquidity terms that helped fuel their rapid growth. The unprecedented defensive steps are being taken by Permal Investment of London, Thames River Capital, also of London, and Geneva-based Notz Stucki. Many others are expected to follow soon with their own defensive measures. quot;I think a lot of funds of funds will be doing this,quot; said the chief investment officer of a U.S. fund-of-funds manager. quot;It is not something we are doing, but I would be a liar if I told you it didn't cross our minds.quot; The three European firms are paying the price for the investor-friendly liquidity terms they offered during the years leading up to the financial crisis. Their monthly liquidity terms helped them raise capital quickly, particularly from wealthy investors who were eager to put their money to work in hedge funds. Such terms were looser than those imposed by most funds of funds, particularly U.S. vehicles that typically offer quarterly liquidity if notice is given 65 days prior to the end of a quarter. Permal, with $35 billion under management, is now requiring far more notice than it used to from investors wishing to redeem shares. It wants investors to request their withdrawals 95 days ahead of the redemption date, up from 20 days. The move had the effect of blocking redemptions from those who wanted out before yearend. Permal's next redemption date is Feb. 28, 2009, with notice due by Nov. 25.... http://www.hfalert.com/headlines.php?hid=137954 A leveraged fund of funds run by HRJ Capital lost 30.9 last month, leaving it down 53.5 for the year. The vehicle, HRJ Legends Multi-Strategy Plus Fund, invests with some of the highest-profile hedge fund managers in the world. Among them: Cantillon Capital, Centaurus Capital, D.E. Shaw, Farallon Capital, Ospraie Management, Perry Capital and Tudor Investment. HRJ Legends was overseen by Jennifer Coffey until Sept. 25, when she left HRJ to select investments at Lasair Capital - a new multi-manager shop run by former Financial Risk Management U.S. chief Carrie McCabe. The fund is now run by Michael Merrigan, who assumed Coffey's title as head of hedge fund investing. Merrigan started at HRJ in 2006, a few months before Coffey. Both previously worked in Credit Suisse's fund of funds group. Merrigan also oversees an unleveraged version of HRJ Legends, called HRJ Legends Multi-Strategy Fund. That vehicle lost 7.7 in September and 16 for the first nine months of this year. The leveraged version of HRJ Legends parks capital with 15 underlying managers overall, putting $1.90 of borrowed money to work for every $1 of investor equity. The fund's September losses reflected widespread beatings that hedge funds took amid turbulent financial-market conditions. Extreme volatility had already marked its track record, with four months of double-digit losses in 2008 alone. The entity caught the attention of industry players as the financial crisis was beginning in August 2007, as a shakeup among quantitat... http://www.hfalert.com/headlines.php?hid=137812 Multi-strategy shop Whitebox Advisors is suspending redemptions from the half-dozen or so hedge funds it runs - cutting off investors from some $4 billion of assets. The Minneapolis firm, run by Andrew Redleaf, has apparently been telling shareholders of its plans over the telephone while drafting a formal letter for release later this week. The move reflects at least some expectations of withdrawals, given losses the outfit took on convertible-bond investments last month and liberal terms that allow backers to pull money monthly. But the situation may be more closely tied to shifts in prime-brokerage terms. Word on the street was that Whitebox was in a strong position to fulfill any yearend redemption requests until this month, when Goldman Sachs ordered the firm to double the amount of collateral it puts up against margin loans used to trade convertible bonds. And sources say that Whitebox anticipates other prime brokers following suit. The result is a funding squeeze: The firm needs more of its already-devalued holdings to put up against its margin accounts, which it would otherwise be forced to repay. That means it can't sell the investments to meet redemptions, which is something it might want to avoid anyway as such a move might magnify losses. Hence, the severe measure of blocking off shareholders from their money. The undertaking places Whitebox among a slew of hedge fund managers that have been withholding investor capital in some fashion in recent weeks, some in...