Analysts: Hedge funds failing to handle choppy markets (Reuters)
Hedge funds are ending the quarter giving investors less than they would have got from simply buying stocks and hanging on to them, belying their reputation as being at the cutting edge of money-making. In some cases they have provided less return than from a retail savings account. It is a reflection both of getting caught by a reversing of investment flows from West to East and of being positioned for rises in financial markets when they suddenly turned choppy. Investment arms at Wall Street banks look to have been similarly hit, prompting analysts to slash their estimates for first quarter earnings. Such underperformance does not bode well for the coming quarters if, as many strategists suggest, volatility rather than a set direction for markets is going to be the trend.
Blackstone hedge fund seeder business gets traction (Reuters)
Wealthy investors are showing a healthy appetite these days for newly minted hedge fund managers, judging by the activity in one Blackstone Group (BX) managed portfolio. In about four months, hundreds of individual investors sank some $355 million into a so-called hedge fund seeder set up by the New York-based investment firm, a recent regulatory filing shows. While the bulk of money raised by Blackstone for its Strategic Alliance Fund II comes from pension funds, central banks and other institutional investors, fresh demand from the ultra-rich investors provides fresh evidence of how the $1.9 trillion hedge fund industry is roaring back to life after the financial crisis.
Makena Capital launches new fund with better terms (Reuters)
Investment firm Makena Capital, which oversees $13 billion for schools, colleges and other wealthy investors, has launched a new portfolio that gives clients faster access to their money. Inspired by lessons from the financial crisis, the Makena Liquid Endowment Fund promises to avoid illiquid investments like private equity and developmental real estate that have long been a hallmark for university investment pools. At the same time, the fund will offer clients, including foundations and sovereign wealth funds, the option of getting their money back within months, not years.
Spain’s Savings Banks Seek Hedge Fund, Investor Capital, FT Says (Bloomberg)
Hedge funds and private equity firms including Paulson & Co., Cerberus Capital Management LP and Apax Partners LLP have held talks with Spanish savings banks which are seeking to raise 15 billion euros ($21 billion) in new capital and avoid a state bailout, the Financial Times reported, citing unnamed bankers and investors. The firms have held talks with banks including Bankia and Banca Civica, the newspaper said. The low valuations placed on the banks by the investors have caused the process to stall, the FT said.
Northern Trust Agrees to Buy Citadel’s Omnium Business, WSJ Says (Bloomberg)
Northern Trust Corp. (NTRS) agreed to buy Citadel LLC’s Omnium, the fund administration business, the Wall Street Journal reported, citing an unidentified person familiar with the matter. The value of the purchase wasn’t included in the report.
The Daily Docket: Lehman Gets OK To Buy Notes (WSJ)
A judge on Wednesday approved a nearly $1 billion sale of notes to Lehman Brothers Holdings Inc. from its German affiliate, part of a larger settlement between Lehman’s bankruptcy estate and its second-largest foreign affiliate. Read the Daily Bankruptcy Review story here. Also in today’s DBR, companies in Dubai, Mumbai and Shanghai are increasingly turning to U.S. bankruptcy courts when hunting for new acquisitions, and hedge fund manager Tricadia Capital Management’s purchase of nearly a quarter of Corus Bankshares Inc.’s securities related to collateralized-debt obligations could break a deadlock in the Chicago bank holding company’s Chapter 11 case. In DBR Small Cap, Rock & Republic Enterprises Inc. won approval of its Chapter 11 plan, which contemplates a $57 million sale of the company’s intellectual property.
KKR Received Request From SEC in Sovereign Wealth Fund Probe (Bloomberg)
KKR & Co., the private-equity firm founded by Henry R. Kravis and George R. Roberts, said it has received a request from U.S. regulators for information about the company’s dealings with sovereign wealth funds. KKR received the Securities and Exchange Commission request in January and is cooperating with the agency’s investigation, the New York-based firm said in a March 7 regulatory filing. The SEC sought information regarding “investors and clients that are sovereign wealth funds and certain services provided by KKR,” according to the filing.
Goldman CEO says ex-director spilled secrets (Reuters)
Goldman Sachs Group Inc chief Lloyd Blankfein testified that a former director at Wall Street’s most powerful bank violated confidentiality by leaking boardroom secrets to hedge fund manager Raj Rajaratnam. Blankfein was called to testify by prosecutors in Manhattan federal court about Goldman’s (GS.N) results in 2008, and a crucial investment that September by billionaire Warren Buffett at the height of the financial crisis — secrets that prosecutors said were given to Rajaratnam. The Goldman CEO’s appearance on the witness stand for more than three hours on Wednesday intensified the focus on what is already the largest Wall Street insider trading case since the prosecutions of speculator Ivan Boesky and junk bond financier Michael Milken in the 1980s. Rajaratnam, a one-time billionaire, could face 20 years in prison if convicted.