Archive for the ‘Hedge Fund Blogger’ Category

EU Hedge Fund Deal

European Union May Make Deal in Favor of Hedge Funds

The European Union is reportedly close to striking a deal over hedge fund regulation after the vote was again postponed. The deal, if it is finalized, would be more favorable to hedge funds than previous proposals.

Under pressure from the European funds industry, European pension funds and his own center-right party, Jean-Paul Gauzes, the French member of the Parliament guiding the legislation through that body, is reportedly pushing for a compromise that would allow individual countries to hold on to their own private placement rules—in effect allowing foreign hedge funds access to their markets, Financial News reports. A vote on the directive was delayed last week after the French again changed their position, demanding that the so-called “passport” be eliminated and that the private placement rules by preserved.

Under the passport provisions, funds that meet the more stringent EU guidelines—which include stricter reporting and custody requirements—would have access to all EU markets. The British and Germans are thought to support that provision, as well as one preserving the private placement rules.

A pair of potential compromises have been suggested, both of which would keep the individual private placement rules in effect for the time being. The first would phase them out over five years, the second would review the situation in five years before deciding what to do with them. Source

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Tags: EU Hedge Fund Deal, EU Hedge Fund Deals, European Union, European Union hedge funds, hedge funds in the European Union, Foreign pass

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Hedge Fund Leverage Increases

Hedge Funds Leverage Increases, Risk Appetite Low

The Bank of America Merrill Lynch (BAML) fund managers’ survey has found that hedge funds have increased the amount of leverage used. At the same time, managers responded to the survey with a low appetite for risk despite a full year of great returns and a mixed year in 2010.

The September edition of the survey found hedge funds had raised their gearing levels from 1.16 in August to 1.39, the highest level since March 2008. However average cash balances rose marginally to 4% from 3.8% in August and more respondents were overweight cash in September compared to the previous month as risk aversion increased.

Hedge funds also raised their weighted net long exposure during the moth, from 22% to 26%. However this remains well down from the December 2009 peak of 35%.

BAML Global Research European equity strategy head Gary Baker said the survey could not give any possible reasons for the increase in hedge fund leverage. He suggested hedge fund managers could be trying to recoup recent poor performance or were buying bonds, necessitating an increase in gearing. Source

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Tags: Hedge Fund Leverage Increases, Hedge Fund Leverage, Hedge Fund Risk Appetite, Hedge funds survey, managers survey, The Bank of America Merrill Lynch managers survey 2010

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High Frequency Trading

Hedge Fund Group Against High Frequency Trading Rules

One of the more important innovations in trading is high frequency trading. High frequency trading is a special rapid brand of algorithmic trading that some estimate makes up as much as 70% of trades. After the May 6th stock market flash crash, regulators have set their sights on such trading that many believe exacerbated that crash because high frequency traders pulled out of the market as stocks plummeted. The Managed Funds Association, a hedge fund lobbying group, issued a warning to regulators against cracking down on high frequency trading.

The U.S. hedge-fund industry’s biggest lobbying group urged regulators against cracking down on high-frequency trading, saying new rules would increase costs for all investors and make markets less liquid.

Requiring computerized traders to buy and sell shares during periods of market stress would reduce volume, Stuart Kaswell, general counsel of the Washington-based Managed Funds Association, wrote in a Sept. 12 letter to a panel advising the Securities and Exchange Commission and Commodity Futures Trading Commission. Investors would pay more for stock transactions as a result of the market maker requirement, Kaswell wrote.

“We respectfully urge that you proceed cautiously and introduce changes that are supported by empirical data,” Kaswell said in the letter, which was also sent to SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler. “Changes not supported by empirical data and directed at preventing rare market dislocations, could further harm investors.” Source

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Tags: High Frequency Trading, High Frequency Trading rules, High Frequency Trading  HFT, High Frequency Trading definition, High Frequency Trading what is, High Frequency Trading regulation, High Frequency Trading ban

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Velite Capital Commodity Fund

One Commodity Fund Beating Out the Competition

Many commodity hedge funds have struggled to make gains in the last several months with a still volatile economy. BusinessInsider follows one commodity hedge fund that is beating out almost every other commodity fund out there. The Houston-based fund, Velite Capital, was up 20% in August compared to other commodity funds that returned on average 0.4% last month. The fund had been relatively under the radar, it is led by David Coolidge who manages roughly $1 billion in assets under management. 

David Coolidge of Velite Capital, a Houston-based commodity fund with about $1 billion under management, is outperforming almost the entire hedge fund industry right now.

In August, Velite was up 20%, according to an e-mail sent to investors that was obtained by Bloomberg.

That means he outperformed other commodity funds, which are down on average of -1.5% this year and the entire hedge fund industry, which returned on average .4% on average in August, by a mile.

The fund wouldn’t answer any questions when Bloomberg called, and this fund has been under the radar until now, so we know barely anything about Coolidge or his strategy, other than the fund specializes in oil and energy trading and the guess out there is that he was pretty short 2011 natural gas. Source

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Tags: Velite Capital Commodity Fund, Velite Capital Commodity, Velite Capital Commodity Funds, Velite Capital, Commodity Funds

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Hedge Funds Oil Trading

Hedge Funds Bullish on Oil for First Time in 5 Weeks

Hedge funds have been cutting bets that the price of oil will rise for the last five weeks. Last week, however, hedge funds once again raised bets on gains from oil after dismal trading for weeks. Analysts say this is a sign that the U.S. economy is recovering from the recession.

Net-long positions on the New York Mercantile Exchange climbed 8 percent in the week ended Sept. 7, the first increase since the seven days ended Aug. 3, according to the weekly Commitments of Traders report from the Commodity Futures Trading Commission. The price of crude advanced 2.5 percent on the Nymex last week, the most since July.

Private payrolls excluding government jobs rose by 67,000 in August after a revised 107,000 gain in July that was more than estimated, the Labor Department said in a Sept. 3 report. Pending home sales increased an unexpected 5.2 percent in July, the National Association of Realtors said on Sept 2.

“Positive housing data came out, along with lower initial jobless claims,” said Hamza Khan, an analyst at the Schork Group in Villanova, Pennsylvania. A decline in stockpiles also “bodes well for demand because it shows traders are willing to take oil out of storage and send it to refiners,” he said. Source

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Tags: Hedge Funds Oil Trading, hedge funds oil, oil trading, hedge funds oil, oil price, hedge funds

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Fund of Hedge Funds SEC

SEC Reportedly Looking into Fund of Hedge Funds

Fund of hedge funds are facing scrutiny from the Securities and Exchange Commission. The fund of funds industry has suffered big losses and failed to recover as quickly as their hedge fund investments. Now, the SEC is conducting what is called a “sweep exam”, in which the regulator examines a number of funds (about a dozen fund of hedge funds in this case) and collects information to develop leads but this does not necessarily mean that anything improper has occurred at the funds.

The Securities and Exchange Commission is examining whether firms that collect fees for funneling investors into hedge funds are properly overseeing client money and dealing with potential conflicts of interest, people familiar with the matter said.

The inquiry has identified about a dozen investment-advisory firms for questioning but could expand, according to people familiar with the matter, making it one of the SEC’s broadest examinations ever of funds of hedge funds and advisers specializing in hedge funds.

According to documents reviewed by The Wall Street Journal, the inquiry is a “sweep exam” by the SEC’s Office of Compliance Inspections and Examinations. That office’s responsibilities include identifying fraud and other securities-law violations in investment firms, securities exchanges and Wall Street brokerage firms.

The sweep also could include alternative-investment advisers focused on private equity and other registered advisers catering to pension funds, people familiar with the situation said. Source

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Tags: Fund of Hedge Funds SEC, Fund of Hedge Funds SEC investments, Fund of Hedge Funds, Fund of Hedge Funds industry

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Harvard Endowment Hedge Funds

Harvard Endowment Returns 11% from Hedge Funds, PE

Hedge funds and private equity funds helped Harvard’s massive endowment fund recover from losses suffered in recent years. The $24.7 billion endowment fund returned 11% in the year ended June 30, thanks in big part to investments in hedge funds.

Harvard University’s giant endowment began to turn things around in its last fiscal year, thanks in large part to its hedge fund investments.

The Cambridge, Mass., school’s endowment, the largest in the world at US$27.4 billion, returned 11% in the year ended June 30. That trailed the median return of institutional funds over the period tracked by Wilshire Associates, but it’s a whole lot better than the 27.3% it lost in the previous fiscal year.

The endowment’s absolute return investments chipped in a 15% return, while private equity returned 16%. Still, Harvard, one of the pioneer investors in hedge funds and private equity, is cutting back on its use of the asset classes, slashing its p.e. investments by more than 40% and cutting its use of outside managers by 20%.
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Swiss Hedge Fund Recovery

Switzerland Luring Hedge Funds with Lower Taxes

Swiss hedge funds are growing more popular as Switzerland’s government looks to lure hedge fund managers with lower tax rates than rival countries. According to a Zurich University study there are currently 125 single-manager hedge funds in Switzerland managing $14 billion across 71 firms.

Swiss managers rank third in Europe, with 4 percent of the market, behind London’s 75 percent share and Sweden with 5 percent. Brevan Howard Asset Management LLP, Europe’s biggest hedge fund, and third-ranked BlueCrest Capital Management Ltd. have both opened offices in Geneva this year.

“Heavy competition between cantons has helped to keep tax rates low,” making Switzerland more appealing, Regina Anhorn, one of the study’s authors, said in a presentation in Zurich. “We have seen famous names move part of their institution to Switzerland. We may see many more to come.”

There are signs that fees charged by Swiss hedge funds fell over the past two years, from a typical 2 percent management fee and a 20 percent share of performance, according to the study. A 1 percent management fee is “increasing in popularity” together with a performance fee of 10 percent, it said. Source

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Tags: Swiss Hedge Funds, Switzerland hedge funds, Swiss hedge funds, hedge funds in Switzerland, Switzerland hedge fund tax rate.

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Goldman Sachs Group Hedge Funds

Goldman Sachs Group Ending Hedge Fund Business

Goldman Sachs Group (GS) is wining down its Principal Strategies group, the profitable hedge fund factory. The Principal Strategies group once churned out some of the most successful hedge fund managers. But Goldman Sachs is responding to the new regulatory limits.

Goldman is responding to a new financial law in the U.S. that limits banks’ ability to trade with their own money — known as proprietary trading.

The so-called Volcker rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also limits banks’ investments in hedge funds and private-equity to no more than 3% of their Tier 1 capital, a closely watched measure of financial strength in the industry.

Goldman is closing down the Principal Strategies group, its main proprietary trading business, in response to the new rules, a person familiar with the situation said Wednesday.

Banks have several years to comply with the new law, but traders in Goldman’s Principal Strategies group have begun talking with other asset-management companies about possibly moving to those firms, the person added on condition of anonymity. source

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Hedge Funds August Losses

Hedge Funds Limit Losses to 0.55% in August 2010

Hedge funds have cut losses in August with managers trading more conservatively.  In the month of August hedge funds lost less than 1% while the S&P 500 index by comparison fell 4.74% last month.

The Standard & Poor’s 500 Index slumped 4.74% last month, leaving it down 5.9% so far this year. The Barclays Aggregate Bond Index rose 1.29% in August and is up 7.83% year to date, Hennessee noted.

“Hedge funds started the month with reduced net and gross exposure levels, which allowed them to protect capital,” Charles Gradante, co-founder of Hennessee Group, said in a statement.

“Managers remain cautious given the global economic uncertainty, though the consensus is that we will likely avoid a ‘double-dip’ recession,” he added.

Gradante also noted that 43% of hedge funds reporting results to Hennessee generated positive performance in August. source

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Tags: Hedge Funds August Losses, Hedge Funds August data, Hedge Funds August 2010, hedge funds losses in August 2010, August 0.55%

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