Hedge Fund News: Harbinger, John Paulson, George Soros

Amid SEC Charges, Hedge Fund Manager Phil Falcone Attempts Audacious IPO (Forbes)
Phil Falcone, the embattled billionaire hedge fund manager, has put together an unorthodox IPO that will see his hedge fund firm contribute assets valued at $350 million to a blank check company that will trade publicly. In the deal, a special purpose acquisition company that is expected to trade on Nasdaq and be known as Harbinger Global Corp., will acquire a majority interest in an MGM-branded hotel and casino development in Vietnam and a minority interest in an iron ore producer working in Brazil. Funds run by Falcone’s Harbinger Capital Partners that are contributing the assets will get an ownership stake that could be as high as 96% in Harbinger Global and Falcone is slated to become executive chairman of the company.


Polar Capital posts inflows, hedge fund clients return (Reuters)
Investment manager Polar Capital enjoyed further inflows into its funds in the second quarter on the back of strong recent performance and said it has finally begun to see clients return to its hedge funds. The firm, which attracted more than $1 billion of net new money into its funds in the year to March, said it saw $374 million of net subscriptions in the three months to end-June, principally into its long-only funds.

Renaissance Technologies awarded best long/short equity hedge fund and single manager fund of the year (HedgeCo)
The best performing single manager and fund of hedge funds (FoHF) in the US, Canada and Latin America were recognized yesterday at the Hedge Funds Review Americas Awards 2012. Individuals were also honoured for their contribution to the hedge fund industry. Renaissance Technologies, York Capital, Pine River, Bridgewater Associates, Cerberus Capital Management, Titan Advisors and Blackstone Alternative Asset Management were among the big winners at the Hedge Funds Review Americas Awards 2012.

Hutchin Hill Starts Fund Focused on Long/Short Credit Trading (WSJ)
Hutchin Hill Capital, a New York-based hedge fund that manages $1.2 billion, has launched a new fund that concentrates on long/short credit trading, a successful strategy for the firm as demonstrated by its betting against J.P. Morgan Chase & Co.’s (JPM) “London Whale” with credit default swap trades. The new fund, called Hutchin Hill Liquid Credit Strategy and launched this month, is a “carve-out” from its main fund, Hutchin Hill Capital Master Fund, a person familiar with the matter said Wednesday. The new fund has already secured $100 million in anchor investment from an unidentified U.K. pension system, and is only expected to raise a “limited amount of capital” in the next few months, the person said.

China may open door to hedge funds (PeopleDaily)
China is likely to soon allow foreign hedge fund companies to raise money in the domestic capital market, Oliver Barron, general manager of Greater China at the London-based brokerage house North Square Blue Oak, told the Global Times Wednesday. If the government follows through with this plan, it would be one of the country’s boldest moves yet to create channels for Chinese capital to flow abroad, according to Barron, who claimed to be close to the matter.

Goldman Sachs scales down its prime brokerage business in Japan: Sources (IndiaTimes)
Goldman Sachs Group has scaled down its prime brokerage business in Japan, with the US financial company shifting part of its staff and operations to Hong Kong, sources with knowledge of the matter said on Thursday. The move underscores the plight of the Japanese hedge fund industry, which is struggling to attract investment into Japan-focused equities funds due to an ongoing slump in the Japanese stock market and long-lasting deflation in the country.

Torchlight Doubles Down in Greenwich (WSJ)
In early 2007, when the downturn was but a few wisps of clouds in an otherwise blue sky, it seemed like a no-brainer for a venture of Antares Investment Partners and a Goldman Sachs Group Inc. fund to buy a Greenwich, Conn., office building for $130 million and pack it with hedge funds and other financial-services companies. But that business turned out to be a fickle source of tenants. As global financial markets melted down, the building’s vacancies soared and revenue nose-dived.

Hedge funds take in lacklustre USD852m in May 2012 (HedgeWeek)
The hedge fund industry took in a lacklustre USD852m (0.05 per cent of assets) in May, but that was an improvement over April’s net outflows of USD3.2bn, according to data from BarclayHedge and TrimTabs Investment Research. Based on data from 3,001 funds, the May TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that the hedge fund industry assets stood at USD1.72trn in May, down 2.0 per cent from USD1.76trn in April and down 29 per cent from the peak of USD2.4trn set in June 2008.

Dumb Money: Hedge Funds Can’t Even Beat Bond Funds (CNBC)
They are supposed to be the smart money—the best of the best—yet they can’t even beat a basic Treasury bond fund. Hedge funds as a group are badly underperforming this year, which could lead to a series of redemptions, closings and rethinking of the lofty fee structures the managers of these alternative vehicles enjoy.

BetaShares Launches Listed Fund Hedging Against Australian Market Downturns (GlobalCustodian)
BetaShares has launched a listed managed fund that is negatively correlated to ASX200. The BetaShares Australian Equities Bear Hedge Fund trades under ASX Code “BEAR” and is designed to provide a return against a decline in the value of Australian equities. The fund is invested in cash and cash equivalents, obtaining short exposures via ASX SPPI200 futures contracts. Because it is ASX-listed, it is as liquid as an equity.

Hennessee Hedge Fund Index increased +0.06% in June (+2.10% YTD) (Opalesque)
Hennessee Group LLC, an adviser to hedge fund investors, announced today that the Hennessee Hedge Fund Index increased +0.06% in June (+2.10% YTD), while the S&P 500 gained +3.96% (+8.66% YTD), the Dow Jones Industrial Average advanced +3.93% (+5.42% YTD), and the NASDAQ Composite Index increased +3.81% (+12.66%). Bonds were also up, as the Barclays Aggregate Bond Index increased +0.04% (+2.37% YTD) and the Barclays High Yield Credit Bond Index increased +2.11% (+7.26%). “It looked like June was going to be another poor month for risk assets until the last trading day of the month. The agreement from European Union leaders towards a future banking union resulted in a short-covering rally,” commented Charles Gradante, Managing Principal of Hennessee Group. “The markets continue to be macro driven. Trading volume is down, volatility is up, correlation is high, and macro events are driving price swings. It remains a challenging environment for security selection. Most managers are not trying to time the market, as it is difficult to do consistently. Most are conservative, trying to generate alpha in specific opportunities.”

Goldin Hires Hedge Fund Vet Murray (Finalternatives)
Financial consultancy Goldin Associates has snared hedge fund founder and Babson Capital veteran Marti Murray. The New York-based firm said that Murray would become a managing director and member of its management committee next month. She joins from Murray & Burnaman, the financial consulting firm she founded after leaving Babson.

Context Capital Launches Bank-Focused Hedge Fund (Finalternatives)
Context Capital Partners has launched a hedge fund focused on the banking sector. Context BH Partners will invest in securities (primarily U.S. equities) issued by banks “well-positioned to take advantage of the continued flux in the industry,” particularly “the resurgence of healthy bank consolidation.”

$21 Million International Hedge Fund Fraud Case Results in Guilty Pleas (HedgeCo)
An investigation into hedge fund fraud that was initiated from a SAR resulted in guilty pleas, forfeiture, and in the case of the ringleader, a lengthy prison sentence. All of the victims were non-U.S. residents. Also highlighted were more than $1 million in questionable wire transfers. In the course of the investigation, more than $400,000 in victims’ funds were recovered and seized from bank accounts. Another $100,000 was seized from brokerage accounts. Investigators identified accounts overseas, including European countries known for their private banking services to non-residents.

From a credit swamp, recovery horizons lengthen (Business-Standard)
If it feels as though efforts to revive the world economy are continually running into the mire, that’s partly because policymakers are still trying to map the extent of the credit swamp. Five years to the month since the credit bubble popped, one of the striking aspects of the recurrent gloom invading households, businesses and investors is how the horizon for sustainable recovery is being pushed years into the distance. …And King’s is not the darkest voice out there. Hedge fund manager Jamil Baz from GLG Partners claims the western world’s deleveraging, or debt reduction, process could take another 15 to 20 years if the ratio of economy-wide debts to gross domestic product (GDP) in the United States and Europe is to be cut to anything like sustainable levels.

American Capital attracts Paulson, Luxor (MarketWatch)
On July 9, Luxor Capital Group, LP announced that it had accumulated over 17.5 million shares of American Capital , ACAS -0.60% giving them 5.3% of the shares outstanding — roughly the same percentage of the company held both by John Paulson’s Paulson & Company and Fortress Investment Group. ACAS has had an excellent year, up about 40%, and announced a share-buyback program at the end of June. Luxor’s buying indicates that they are either betting on this positive momentum to continue, or they find American Capital, a private equity firm that also provides debt financing both to their own buyouts and to other private equity firms, undervalued at a price-to-earnings ratio of 3.1.

Women are belittled in hedge fund work (BPS)
Women are not being taken seriously when working in hedge funds, new research has suggested. To be presented at the Gender, Work and Organisation Conference at the University of Keele, the study found females face many difficulties as they progress through adulthood. Investigators from the University of Leicester and the University of Essex revealed that while young males have fewer struggles to balance work and parenthood and are given plenty of opportunities to get to grips with corporate life, women find it harder to remain credible in the eyes of their colleagues once they have become a mother. Jo Brewis, Professor of Organisation and Consumption at the University of Leicester School of Management, said the findings suggest women are never considered to be the right age from an organisational perspective.

Hedge funds less trusting of prime brokers (FierceFinance)
Back in the pre-crisis days, the solvency of prime brokers was assumed. But that changed dramatically after the financial crisis. Now hedge funds worry that their prime brokers might run into Lehman Brothers-like troubles, which could easily make their lives a nightmare. This new reality is more than evident when it comes to cash holdings. While hedge fund once used to keep their cash with prime brokers, assuming it was safe, they now feel they have to transfer the cash to safer accounts. These days, endowments and other institutional investors want prime brokerages to sweep any excess cash into the safest of places, including Treasury bills held in custodial accounts, Treasury money market funds and direct deposit accounts at banks.

HedgeOp named Best North American Regulatory Advisory Firm (HedgeWeek)
HedgeOp Compliance, a provider of regulatory services and software for investment advisers in the US, has been recognised as Best North American Regulatory Advisory Firm at the 2012 Hedgeweek USA Awards. The Hedgeweek USA Awards acknowledge the best hedge fund managers and providers in the North American hedge fund industry, and are voted for by Hedgeweek’s 41,000 subscribers.

Arizona Public Safety commits to hedge fund, real estate (Pionline)
Arizona Public Safety Personnel Retirement System, Phoenix, committed up to $60 million to Southpoint Qualified Fund, a long/short equity hedge fund managed by Southpoint Capital Advisors, confirmed James Hacking, administrator of the $6.5 billion system. Funding comes from reducing a passive domestic equity portfolio managed by State Street Global Advisors, leaving it with about $790 million.

Healey Rules $400 Billion Empire With Stakes in 28 Funds (BusinessWeek)
One of the things Sean Healey missed most when he left Goldman Sachs Group Inc. (GS) (GS) in 1995 was his business card. Flashing it was a surefire way to convince people of his credentials. “People would say, ‘Oh, you must be a genius,’” Healey, 51, jokes. Then he moved to Boston to work for a three-person startup with a bland name and a big idea. Affiliated Managers Group Inc. (AMG) (AMG) set out to buy stakes in equities money-management companies, including hedge funds, and share their investment fees. In return, the owners got cash for the companies they had built.

‘Look the manager straight in the eye,’ say selectors (InvestmentEurope)
Despite staging a comeback in many portfolios, as low yields elsewhere fuel the need for returns, hedge funds still face demands for trust, transparency and track records. “I expect the hedge fund and absolute return industry to raise another $500bn over the next ten years.” Even as Marcus Storr, head of hedge funds at Feri, warns of some pitfalls of hedge fund investing, he is sure that investment managers will have to turn to them to find diversification and returns.

SEB London appoints new head of Prime Brokerage (InvestmentEurope)
Peter Herrlin is the new head of Swedish bank SEB’s Prime Brokerage division in London, succeeding Atilla Olesen who has transferred to Denmark to take up a position as head of Enskilda Equities with SEB. Herrlin joined SEB Prime Brokerage in 2010, working with UK and European Hedge Fund Sales, Securities Finance and SEB Prime Solutions – SEB’s Ucits platform, which launched in late 2010 and currently counts seven funds.

Comada selects Bermuda’s QuoVadis (RoyalGazette)
A leading hedge fund software specialist has just expanded its capabilities thanks to a new offering from a local technology firm. Comada, a company that provides transaction-driven software solutions for hedge fund investors announced yesterday it has migrated its servers to QuoVadis’ new next-generation data centre.

Botticelli May Aid Bankruptcy Of Imprisoned Salander (Bloomberg)
A painting attributed to Sandro Botticelli and valued at $9.5 million may provide some relief to creditors of Salander-O’Reilly Galleries, more than four years after they fell victim to New York’s biggest-ever art fraud. Earlier this week, a New York federal court judge ruled that although a consignor still owns “Madonna and Child” (circa 1500), state law may permit the bankrupt gallery to sell it to benefit creditors.

Blackstone Said To Bid For ING Asia With Ex-AIA Head (Bloomberg)
Blackstone Group LP (BX) is teaming up with Mark Wilson, the former head of AIA Group Ltd. (1299), and other investors in a bid for ING Groep NV (INGA)’s Asian insurance business, said two people with knowledge of the matter. The group, which includes reinsurer Swiss Re (SREN) Ltd., may make an offer of 5 billion euros to 6 billion euros ($7.35 billion) by July 16, the deadline for final bids, said one of the people, who asked not to be identified because the process is private. ING agreed to divest its insurance and asset management operations before the end of 2013 as a condition of receiving state aid.

ICAP Targets Retail Investors For Its First Bonds In Three Years (Bloomberg)
ICAP Plc (IAP), the world’s largest broker of transactions between banks, is targeting individual investors for its first bond sale in three years, according to a person with knowledge of the transaction. The six-year senior, unsecured bonds in pounds will pay a coupon of 5.5 percent, said the person, who asked not to be identified because the information is private. It’s the London- based broker’s first bonds denominated in pounds, data compiled by Bloomberg show.

Mizuho Financial likely to face civil charges in CDO case: WSJ (Reuters)
Japan’s Mizuho Financial Group Inc (8411.T) (MFG.N) is likely to face civil charges over the sale of a $1.6 billion mortgage bond deal five years ago, which led to losses for investors, the Wall Street Journal said, citing people close to the investigation. Investors who bought pieces of the mortgage bond called Delphinus CDO 2007-1 allegedly were not told that a hedge fund was betting that some of the subprime loans and other assets bundled together in the CDO would decline in value, the Journal said.

European shares weaken on Fed disappointment (Reuters)
European shares weakened on Thursday in a broad-based sell-off after minutes of the U.S. Federal Reserve’s June meeting dampened hopes for more risk-asset-boosting stimulus in the near term. The Fed minutes showed the world’s biggest economy would have to worsen before the central bank eased monetary policy further. A few officials thought more stimulus was justified, but the majority were unconvinced.

More Capital’s Answer to Too Much Bank Regulation (WSJ)
Banks complain about being swamped by regulation in the new post-crisis world. There’s a solution: higher capital ratios. A brief but incisive speech by Robert Jenkins, a member of the Bank of England’s Financial Policy Committee, highlighted the hollowness of many banking-sector complaints about regulation earlier this week. The complaints, he noted, boil down to three points: Regulation is too tough; it damages the banking sector and therefore social interests; and there is too much of it.

TMX in Talks to Buy Direct Edge (WSJ)
TMX Group Inc., Canada’s top exchange operator, is in talks to acquire U.S. exchange group Direct Edge Holdings LLC, according to people familiar with the matter, in a move that would add a significant international player to the competitive U.S. stock-trading industry. Talks still may fall apart, one of the people said. And negotiations aren’t likely to progress toward completion until TMX clears all remaining hurdles related to its own recent agreement to be acquired by a consortium of Canadian banks and pension funds. Late Wednesday, that tie-up won approval from the last two Canadian provincial regulators. It still needs shareholder approval, which is expected.

J8 and Pairstech to launch diversified liquid futures fund in October (Opalesque)
Two London-based companies, J8 Capital Management LLP and Pairstech Capital Management LLP, are launching the J8 Futures Fund, a CTA managed futures fund domiciled in Malta, in October 2012. The fund is open to Qualifying Investors with a minimum investment of $75,000 and will be marketed globally to institutional investors and high net worth individuals. The fund employs long and short proprietary algorithmic trading strategies in liquid futures and forwards and other derivatives. It invests in the global markets of commodities, equity indices, equity index volatility, interest rates, government bonds, and currencies. The portfolio is risk weighted and applies leverage control with a target volatility mechanism.

German Mittelstand offers lots of potential, Opalesque Frankfurt Roundtable (Opalesque)
David Zimmer, CEO at Altira Group, an asset management company focusing on alternative investment strategies for institutional and private investors, expressed huge confidence in the German Mittelstand, and described the small and mid-sized firms as a “huge force in Germany with lots of potential.” Guesting as one of the panelists at the latest Opalesque Frankfurt Roundtable sponsored by Eurex which took place at the Deutsche Borse in Frankfurt in June, Zimmer said he believes that the German Mittelstand market is extremely attractive, because the successful private equity funds grow very fast, and as soon as they grow, they have larger equity tickets, they need to invest.

Hedge funds get an app store (Opalesque)
New York-based, portfolio technology provider, Imagine Software has launched the Imagine Financial Platform (IFP) and the Imagine Marketplace. Together, the solutions provide a portfolio management platform for financial professionals in addition to an App Store-like marketplace for fund professionals to access and build applications for their portfolios and strategies. The Imagine Financial Platform leverages the full set of capabilities native to Imagine including its analytics and rich data universe to allow for the creation of apps that fulfill business needs in areas such as regulatory requirements, compliance, portfolio performance and monitoring, workflow automation, and reporting. Apps developed using IFP can be as simple as a pricing calculator or as complex as a comprehensive margining system and can be implemented in days rather than months.

NY Supreme Court Approves Distribution Of More Than $110 Million To Madoff-related Hedge Fund Victims (HedgeCo)
As the Receiver for Ezra Merkin’s two Madoff-related hedge funds, Gabriel Capital L.P. and Ariel Fund Ltd., hedge fund lawyer Bart M. Schwartz announced today his third round of interim distributions of more than $110 million of cash investments (bringing total recoveries to more than $500 million), to investors who suffered losses through the funds. “My team and I will continue in our efforts to maximize overall returns to investors, including through prudent, value-preserving liquidation of the funds’ remaining assets, and through pursuing additional recoveries.” Schwartz said. “We continue to make good progress in our ongoing value realization efforts, and we will seek Court approval for further interim distributions at the earliest prudently feasible date.”

Apollo’s Black Buyer Of Famous ‘Scream’ Painting (Finalternatives)
Apollo Global Management’s Leon Black isn’t the most well-known art collector in the alternative investments world. But he now owns what may well be the most famous single artwork in any of their collections. Black was revealed to be the buyer of Edvard Munch’s “The Scream,” paying an auction-record $119.9 million for the iconic painting in May, The Wall Street Journal reports. The identity of the buyer was not previously known.

Is former U.S. general and NATO commander Wesley Clark helping advance Hungarian-born billionaire activist George Soros’ political and economic interests overseas? Clark is now advising Romania’s controversial prime minister, Victor Ponta, who has led a campaign to depose the country’s president. Clark sits on the board of an energy company financed by Soros and works with the billionaire at the International Crisis Group, or ICG, which has supported the revolutions in the Middle East and North Africa.