Archive for July, 2010

Singapore Hedge Fund Start-Ups

Singapore Competing With Hong Kong for New Hedge Funds

Singapore is competing with Hong Komg to attract new hedge funds. New hedge funds are launching in Singapore after the country approved a new law that doesn’t demand a licensing requirement. This has allowed Singapore to compete directly with Hong Kong as a popular hedge fund destination.

Singapore hedge fund startups are on the rise after the central bank approved new rules that didn’t impose a licensing requirement on most funds.

 

Seven new hedge funds set up in May and June, according to Eurekahedge Pte, after the Monetary Authority of Singapore said in April that small funds can keep operating without a license as part of its review. The number of new funds last year fell 13 percent to 26, the lowest since 2003, as uncertainty over pending rule changes kept managers away, according to data from the Singapore-based industry researcher.

 

“Singapore did not shoot itself in the foot by putting up proposals that will kill off the business,” said Kher Sheng Lee, a senior associate in the financial services group at Philadelphia-based law firm Dechert LLP in Hong Kong.

 

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Related to: Hong Kong and Singapore Hedge Funds

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Tags: Hong Kong, hedge funds, singapore, singapore hedge funds, hedge funds in Singapore

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Actively Traded Long/Short ETF

Hedge Fund Launches First Actively Traded Long/Short ETF

A hedge fund has launched what it is billing as the first actively traded long/short ETF.  The hedge fund firm, Mars Hill Partners, launched the Mars Hill Global Relative Value ETF on the NYSE this month.

The Mars Hill Global Relative Value ETF debuted on the New York Stock Exchange earlier this month. Bethesda, Md.-based AdvisorShares said it was “the industry’s first actively-managed long/short ETF.”

“We are very excited to partner with AdvisorShares to package and launch GRV given the underlying merits of our long/short investment strategy when combined with the daily liquidity, fully transparent and tax efficiency benefits of an NYSE-listed ETF,” Mars Hill founder Jason Huntley said. “Historically, strategies like ours have been accessible primarily through separate accounts or private hedge funds, neither of which offers anywhere near the benefits of the ETF package which includes transparency.”

The new ETF invests in ETFs covering countries, sectors and industries deemed most attractive by Mars Hill. It then puts an equal amount of money into shorting what the firm sees as the least attractive countries, sectors and industries. Source

Related to: Actively Traded Long/Short ETF

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Tags: hedge funds, ETFs, Actively Managed long/short etf, ETF industry

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New York (HedgeCo.net) – Former hedge fund manager Paul R. Greenwood pled guilty to criminal charges involving a Ponzi-esque scam in which he is alleged to have cheated millions from four university endowments.

The Chronicle For Higher Education reports that Greenwood and his partner, Steven Walsh, may have used the $900 million as a personal fund. Walsh has pleaded not guilty, and Greenwood will testify against him at trial.

“The two spent at least $160-million on mansions, horses, rare books, and an $80,000 collectible teddy bear.” The paper reports.

Offering low risks and high returns, the team’s investors included the University of Pittsburgh, who invested $65 million, Carnegie Mellon University, $49-million, Bowling Green State University, $15 million, and Ohio Northern University who invested $10-million.

Greenwood’s assets will be auctioned off in an attempt to recoup some of the investor losses. He also faces a prison sentence of as long as 85 years and hundreds of millions of dollars in fines at his December sentencing, according to The Chronicle For Higher Education.

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Fund Managers Should Amend Subscription Documents

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”) immediately changed the definition of accredited investor. Prior to the enactment of the Act, an accredited investor could use the value of their primary residence to compute the $1,000,000 net worth requirement. Now, investors may not use the value of their primary residence to determine their net worth.

Revising Subscription Documents

Some managers have subscription documents which describe the prior manner of calculating net worth for accredited investors. Such managers should immediately revise their subscription documents. Additionally, if a manager accepts investments from previous individual investors who have declared they are “accredited investors,” the manager should have such investors verify they meet the new net worth requirement. Generally the manager can accomplish this through a fairly simple verification or confirmation form. For those managers who have administration firms process subscription documents, the administration firm should be providing these verification forms to the subscribing investors. With respect to individual investors who are not making additional subscriptions, there is no current requirement to verify their net worth under the new rules.

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Below are the Dodd-Frank laws dealing with the new accredited investor standard.

SEC. 413. ADJUSTING THE ACCREDITED INVESTOR STANDARD.

(a) IN GENERAL.—The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person.

(b) REVIEW AND ADJUSTMENT.—

(1) INITIAL REVIEW AND ADJUSTMENT.—

(A) INITIAL REVIEW.—The Commission may undertake a review of the definition of the term ‘‘accredited investor’’, as such term applies to natural persons, to determine whether the requirements of the definition, excluding the requirement relating to the net worth standard described in subsection (a), should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy.

(B) ADJUSTMENT OR MODIFICATION.—Upon completion of a review under subparagraph (A), the Commission may, by notice and comment rulemaking, make such adjustments to the definition of the term ‘‘accredited investor’’, excluding adjusting or modifying the requirement relating to the net worth standard described in subsection (a), as such term applies to natural persons, as the Commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy.

(2) SUBSEQUENT REVIEWS AND ADJUSTMENT.—

(A) SUBSEQUENT REVIEWS.—Not earlier than 4 years after the date of enactment of this Act, and not less frequently than once every 4 years thereafter, the Commission shall undertake a review of the definition, in its entirety, of the term ‘‘accredited investor’’, as defined in section 230.215 of title 17, Code of Federal Regulations, or any successor thereto, as such term applies to natural persons, to determine whether the requirements of the definition should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy.

(B) ADJUSTMENT OR MODIFICATION.—Upon completion of a review under subparagraph (A), the Commission may, by notice and comment rulemaking, make such adjustments to the definition of the term ‘‘accredited investor’’, as defined in section 230.215 of title 17, Code of Federal Regulations, or any successor thereto, as such term applies to natural persons, as the Commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy.

SEC. 415. GAO STUDY AND REPORT ON ACCREDITED INVESTORS.

The Comptroller General of the United States shall conduct a study on the appropriate criteria for determining the financial thresholds or other criteria needed to qualify for accredited investor status and eligibility to invest in private funds, and shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of such study not later than 3 years after the date of enactment of this Act.

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Other related hedge fund law articles:

• Regulation D Overview
• Hedge Fund Offering Documents
• How to Start a Hedge Fund

Mallon P.C. provides legal support and hedge fund registration services to all types of investment managers.  Bart Mallon, Esq. can be reached directly at 415-868-5345.

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“`The gist of the allegations: The brothers Wyly (Samuel and Charles J.) used their various board seats and a network of offshore accounts to trade and conceal their holdings… The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.”
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“MS report attached below), the GSEs and the FHA may be preparing to imminently launch an instant auto-refi program which would take millions of borrowers to current market rates overnight! In the process $45 billion of consumer savings would be created. Welcome QE 1.999.”
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” Even as the market has surged 10% in the last three weeks, just under $10 billion have been redeemed from mutual funds, completely invalidating the move and further justifying the skeptics who see absolutely no reflection to reality in the volumeless ramp orchestrated by a few momentum HFTs and a couple of Primary Dealers with some excess leftover Discount Window change. ”
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Commodity Trading Q&A

The Global View on Commodity Trading from Brazil

In the most recent issue of Opalesque Futures Intelligence, Gabriel Pellegrini of Global Edge Capital Management offers his view on commodity trading from Brazil. Pellegrini is a commodity trader from São Paulo, Brazil managing his own firm Global Edge Capital Management which returned 8.6% last year and 23.3% in 2008. In this interview, Pellegrini explains how he entered commodity trading, why he entered international markets, his investment strategy and gives a view on the industry from Brazil.

Opalesque Futures Intelligence: How did you get into futures trading?

Gabriel Pellegrini: My first job was at the Brazil futures exchange and I traded in only Brazilian markets for about four years. Then I started to trade in international markets. By 2003 I had learnt about systematic futures trading and looked for a firm that did this, but I could not find one in Brazil at that time. I traded Brazilian futures for myself and in 2008 opened Global Edge Management.

OFI: Why did you move to international markets?

GP: For quantitative trading, you need a lot of liquidity. We don’t have many liquid markets in Brazil. At the time, there was only one agricultural market in Brazil where I could do quantitative trading and that was coffee. But I traded the financials, including FX – the US dollar vs. the Brazilian real – and interest rates. Those are highly liquid. Source

Related to: Brazil Commodity Trading

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Tags: Brazil commodities, commodity trading, brazilian funds, hedge funds in Brazil, Gabriel Pellegrini of Global Edge Capital Management

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Hedge Fund Bonus Restrictions

FSA Moves to Impose Hedge Fund Bonus Restrictions

The Financial Services Authority–the UK’s financial regulating body–has moved to impose bonus rules on hedge funds. Initially it was thought that the FSA would give hedge funds a pass and only apply the restriction to banks. The proposal will require half of any bonus to be non-cash such as shares. Furthermore, 40% of this bonus will have to be distributed over 3 years and if it exceeds £500,000 then 60% must be deferred.

The U.K. Financial Services Authority plans to impose strict bonus rules on the country’s hedge funds, bringing Britain into line with recently-approved European Union restrictions.

The FSA said it would extend bonus rules that already apply to the country’s 27 largest lenders to more than 2,500 firms, including asset managers and hedge funds. Under the proposal, at least half of any variable remuneration must be paid in shares or some equivalent non-cash instruments. In addition at least 40% of bonuses will have to be paid out over three years; if the bonus exceeds £500,000, 60% must be deferred.

It is unclear exactly who will be covered by the new rules. The FSA said that those employees who “have a material impact on a firm’s risk profile” will have their bonuses subjected to the restrictions.

The regulator is welcoming comments on the proposals through October, and plans to implement the new runs on Jan. 1. Source

Related to: Hedge Fund Bonus Restrictions

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Tags: hedge funds, hedge fund bonuses, hedge funds, bonus, compensation, Financial Services Authority, FSA, UK, UK bonus

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