Hedge Fund Exchange

In Observance of Memorial Day

The staff at the Hedge Funds Exchange would like to honor those who serve and have served our country.  We will be not posting any articles in observance of this day. We are thankful for our repeat readers, the ones that comment and everyone who is visiting the site for the first time.  We will be back on Tuesday with continuing coverage of all things compliance, regulation, audit and more.

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'Sophisticated' Investors and the Hedge Funds They Love

David Weidner, The Wall Street Journal, May 27, 2010

Hedge fund performance is in the tank but money continues to flow in

The market tumult of the last two years has taught us something about these so-called "sophisticated" investors we're hearing so much about these days: if we didn't know they were so smart, most of them could easily be mistaken for a bunch of dummies.

To be a sophisticated investor is not unlike becoming knighted. Loosely, a sophisticated investor is anyone – individual or institution – with a lot of cash who is anointed to play at Wall Street's high-rollers table. Regulators call them "accredited." Sophisticated or accredited investors know the rules and the game, maybe they have their own research arms or pay third parties to do their research. Maybe not. It's an exclusive club that allows anyone with a net worth of $1 million or more to play, and one that puts a greater liability on the investor.

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The Next Step in Catching Insider Trading?

Peter J. Henning, The New York Times, May 27, 2010

The arrest of an assistant to a Walt Disney Companyexecutive and her companion on insider trading charges reflects what seems to be a common perception about the ethics of these investors – even if most ply their trade legally.

This latest round of charges, which arose from the couple’s efforts to sell confidential earnings data to a number of hedge funds, comes on the heels of the Galleon Group case and highlights how information is the chief currency of Wall Street today.

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Wall St hikes pay for stake in physical commods

Reuters, May 27, 2010

(Reuters) - Wall Street commodity desks are investing more money and time than ever in building up their physical business as banks and hedge funds look for ways to make money outside of derivative markets facing regulatory reforms.

DEALS

Firms that once hardly ventured beyond the traditional bread-and-butter business of futures trading now boast of specialists who can buy and sell physical cargoes of liquefied natural gas, crude oil, iron ore and coal.

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Do Hedge Funds Have Chuck Schumer in Their Back Pockets?

Senator Chuck Schumer (above)

Zachery Kouwe, Dealbreaker.com, May 26, 2010

That’s basically the contention of Washington Examiner columnist Timothy Carney, who pins his thesis on a former Schumer staffer who went on to lobby for the hedge fund and private equity industries.

Three years ago, Sen. Chuck Schumer, D-N.Y., leaned on hedge funds to lobby more. The funds soon hired his banking staffer as a lobbyist. She began raising money for Schumer. Now he’s championing financial regulation that would benefit these hedge funds. “Racket” might be the right word here.

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Why hedge funds will not defect

Katherine Ryder, CNNMoney.com, May 26, 2010

(Fortune) -- Hedge funds have nowhere left to hide.

In November 2008 the top five U.S. hedge fund managers went to Washington to defend their business practices. With credit markets reeling, legislators demanded supervision of the notoriously secretive industry. Kenneth Griffin of Citadel Group called their bluff. "It breaks my heart when I go to Canary Wharf and I look at thousands and thousands of jobs in London in the derivatives market which belong in America," he said.

The implication was clear. Should Congress clamp down, U.S. hedge funds could always relocate.

The picture is now more complicated.

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Risk monitoring and transparency are the key drivers for 2010

Hedgeweek.com, May 26, 2010

The drive to provide hedge fund managers with the latest tools to raise operational efficiency and improve performance has been lent impetus by the industry’s roller coaster ride over the past two years. 

Despite dire predictions for the industry’s health in late 2008, the current signs are positive: following the losses suffered by most funds in 2008, the industry bounced back in 2009 with its best calendar-year returns in a decade. Returns of 3.1% (according to the Credit Suisse/Tremont Hedge Fund Index) in the first quarter of 2010 added to returns of 18.6% in 2009. The first quarter of this year moved the hedge fund industry a step closer to making up for the 19.5% drawdown between June 30 and December 31, 2008 and funds have now recouped 91.9% of all 2008 losses. 

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Citi assists clients with new money market fund regulations

Hedgeweek.com, May 26, 2010

Citi’s investor services business is launching a range of services to help fund clients comply with new money market rules put forth by the Securities and Exchange Commission.

The new offerings help funds with the implementation and monitoring of liquidity, maturity and credit quality limits as well as reporting and disclosure requirements as required by the new amendments to the Rule 2a-7 regulations.

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Mass. state fund chief leaving for hedge fund firm

Svea Herbst-Bayliss, Reuters, May 25, 2010

* Michael Travaglini joining Grosvenor Capital Management

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* Will market hedge fund firm's products to pension funds

BOSTON (Reuters) - The executive director of Massachusetts' $44 billion state pension fund, one of the first to make big bets on hedge funds, is resigning and moving to a Chicago-based asset management firm.

Michael Travaglini, 47, who has headed the state fund for six years, will join Grosvenor Capital Management LP in July as a managing director. He will market the firm's portfolios to public pension funds.

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Schumer's racket: Lobbyists and hedge funds

Senator Chuck Schumer (above)

Timothy P. Carney, Washington Examiner, May 26, 2010

Three years ago, Sen. Chuck Schumer, D-N.Y., leaned on hedge funds to lobby more. The funds soon hired his banking staffer as a lobbyist. She began raising money for Schumer. Now he's championing financial regulation that would benefit these hedge funds. "Racket" might be the right word here.

Here's the story: In January 2007, the month Democrats took control of Congress, Schumer invited hedge funds executives to dinner, where, the New York Times reported, he "had some simple advice for the billionaires in his midst: If you want Washington to work with you, you had better work better with one another."

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