Hedge Fund Exchange

Size acts as barrier to growth of Asian hedge funds

By Nishant Kumar and Kevin Lim for Reuters, December 30, 2010

Two smaller Asian hedge funds that have bet on Thai and Southeast Asian stocks have made a killing this year, racking up more than 80 percent gains and ranking among the world's 100 top-performing hedge funds.

The Thai Focused Equity (Class A) and Albizia ASEAN Opportunities funds, however, have received only a trickle of fresh inflows compared to the cash that global investors have been pouring into their larger rivals in Asia.

The fight for assets is likely to extend to 2011 as investors continue to shun smaller funds. Rising compliance costs will also crimp their ability to turn a profit and make it tougher for start-ups in Singapore and Hong Kong to grow.

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Three Hedge Funds Got Inside Data From Consultant, U.S. Says

_{James Fleishman, a sales manager at Primary Global, where the three men worked as consultants, also was arrested at the time. If convicted, all four face as long as 20 years in prison.} 

By Bloomberg, December 30, 2010

A former Primary Global Research LLC expert-networking consultant was charged by U.S. prosecutors in Manhattan with selling inside information to portfolio managers at three unidentified hedge funds.

Winifred Jiau, arrested in Fremont, California, as part of a national probe of insider trading, was accused of selling data on Nvidia Corp. and Marvell Technology Group Ltd., makers of computer components, through Primary Global, according to a filing yesterday in Manhattan federal court. The hedge funds paid her $200,000 through the firm, prosecutors said.

Jiau, 43, is the seventh person connected to Primary Global to be charged in a U.S. insider trading investigation that has ensnared company employees and consultants. The Jiau complaint shows prosecutors are gathering evidence of alleged insider trading against hedge fund employees.

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Massachusetts' Pension Fund Invested With Raided Hedge Funds

Massachusetts' state pension fund invested $66 million with two of the hedge funds the Federal Bureau of Investigation raided last month. Now state pension officials are looking at reviewing the way the fund does business.

The Boston Globe reports that the state's investments in hedge funds Level Global and Diamondback Capital Management were in "so-called funds-of-funds, vehicles that invest across many hedge funds but disclose little about exactly where the money ends up."

While the investments didn't lose money, and only comprised 2 percent of the state's $46.8 billion fund, the state's pension fund hasn't been so lucky in prior investments. The Globe reports that the state lost $12 million when Austin Capital Management, another fund-of-funds firm, invested with Bernie Madoff. In addition, Massachusetts lost $30 million in 2007 when Sowood Capital Management failed, and another  $50 million in 2006 from the collapse of Amaranth Advisors.

Now the state is looking into making sure they don't get burned again. Michael Trotsky, executive director of the pension fund, said that "as part of our strategic review, we intend to look at these and other investments." And in a recent letter to pension fund investors, Trotsky said the fund would do "everything we can to avoid a permanent loss of capital."

Incoming state treasurer and pension board chairman Steve Grossman told the Globe, "There’s no doubt that the hedge funds are one of a number of areas that we’ll look into." He takes office next month.

Lisa Swan, a former senior new media editor at the New York Daily News, is a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in Yahoo Sports, Huffington Post, Heater Magazine, and the upcoming book Graphical Player 2011.

UPDATE 3-Goldman trader Sze raising $1 bln-plus HK hedge fund

                                                       

Reuters, December 16, 2010

* Goldman trader plans team of up to 30 for HK-based fund

* Launch could be biggest since the credit crisis

* Goldman winding down prop desk in light of Volcker rule

* Sze discouraged from London by tax, regulation - source

(Releads, adds detail, background)

By Laurence Fletcher and Kevin Lim

Goldman Sachs (GS.N) star trader Morgan Sze's plans to raise over $1 billion for an Asia hedge fund could be a sign of things to come as traders who run own-account trading desks prepare for a Wall Street regulatory clampdown.

Hong Kong-based Sze, head of Goldman's Principal Strategies group, is to quit to form Azentus Capital, likely one of the biggest hedge fund launches since the onset of the credit crisis and which will have a team of close to 30.

Goldman Sachs declined to comment.

The move comes as Goldman and other Wall Street banks wind down their proprietary trading desks in light of the "Volcker rule", named after the former Federal Reserve Chairman who authored the regulation to limit the extent to which banks can bet with their own capital. [ID:nN04118596]

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Consultant Karl Motey Agrees to Plead Guilty in Insider Case, U.S. Says

                                                              

Bloomberg, December 23, 2010

Karl Motey, an independent consultant in California, pleaded guilty and agreed to cooperate with federal prosecutors in a widening U.S. investigation of insider trading on Wall Street.

Motey pleaded guilty in federal court in Manhattan on Dec. 14 to conspiracy and securities fraud, according to court papers made public today. He got secret tips from multiple sources at Marvell Technology Group Ltd. and provided the information to hedge fund clients, according to the charging document.

Motey agreed to tell prosecutors about an insider trading scheme that ran from 2007 to March 2009, court papers show. He will also disclose details of tips that he got from a source at Taiwan-based United Microelectronics Corp. and from “employees of a hedge fund located in California,” according to court records.

An accomplice who isn’t identified “provided inside information to Karl Motey” about “Marvell and Marvell’s customers,” according to the criminal information.

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Farallon receives mixed messages

Pensions & Investments, December 27, 2010

One of the hedge fund industry's veteran managers, Farallon Capital Management LLC, received a rash of redemption requests from institutional investors for its flagship multistrategy approach this fall even as it raised $750 million for a new Asia-focused special situations fund.

At least $223 million is poised to flow out of the multistrategy funds after the most recent redemption period, which ended in November, because institutional investors are nervous about staff turnover and the yearlong lockup period.

The bad news-good news scenario is not particularly unusual for a number of large, long-established multistrategy hedge funds, said investment consulting sources who spoke on condition of anonymity about San Francisco-based Farallon.

”Some firms don't age well,” said one consultant, whose clients are not invested in Farallon funds. “We wouldn't recommend them because the lockup is too long and a lot can happen in a year,” the consultant said.

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Goldman Sachs's Petershill Agrees to Buy Stake in Mount Lucas Hedge Fund

Bloomberg, December 27, 2010

Goldman Sachs Group Inc.’s Petershill Fund agreed to buy a minority stake in Mount Lucas Management Corp., a global macro hedge-fund manager with $1.8 billion under management.

Mount Lucas will keep autonomy over management, operations and investment strategies, the Newtown, Pennsylvania-based fund said today in a statement. The size and value of the investment weren’t disclosed. Andrea Raphael, a spokeswoman at New York- based Goldman Sachs, declined to comment on the Petershill investment.

Goldman Sachs’s Petershill fund is part of the firm’s asset-management division and invests in hedge-fund managers. The fund has acquired stakes in Capula Investment Management LLP, Trafalgar Asset Managers and Shumway Capital Partners LLC. Level Global Investors LP, a New York-based fund that sold a stake to Petershill in April, had its offices raided by the Federal Bureau of Investigation last month in connection with an insider-trading probe. The fund told clients that the government said it wasn’t a target of the investigation.

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Brevan Howard Loses Ground

Deal Book The New York Times, December 23, 2010

Brevan Howard, the well-known European hedge fund firm, lost ground in November on a bet that interest rates would fall — highlighting the challenges this year for investors that trade on broad economic trends.

Brevan Howard told investors that its BH Macro Limited Fund, a listed, closed-end fund that feeds money into Brevan Howard’s flagship Master Fund, lost 0.30 percent in November. Brevan Howard’s Master Fund “suffered losses in interest rate trading, mainly in directional strategies,” during the month, according to the November 2010 monthly shareholder report.

 Brevan Howard didn’t go into detail about the types of bets the fund took, but traders say the fund was betting that interest rates would fall after the Federal Reserve’s move to jump-start the economy through a second round of quantitative easing. Instead, interest rates rose on fears that QE II, as it’s known on Wall Street, would set off inflation.

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Citadel Founder Offers Thanks and Apologies on Anniversary

                           

Deal Book The New York Times, December 27, 2010

Kenneth C. Griffin, founder of the Citadel Investment Group, offered investors some thanks, apologies and wisdom on the 20th anniversary of his firm. In his year-end letter to clients, obtained by DealBook, he took the opportunity to outline the four main lessons gleaned over that period:

– Hire the best people and create a culture of opportunity.
– Take calculated risks.
– Embrace opportunities.
– Never lose sight of what is important.

Mr. Griffin’s letter, at times both personal and professional, reflects on the growth of the firm, which started with $4.6 million in seed money and today is a $12 billion behemoth.

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Goldman to Take Stake in $1.8 Billion Hedge Fund

                           

By New York Times Dealbook, December 27, 2010

Goldman Sachs’s Petershill Fund has agreed to buy a minority stake in Mount Lucas, a Pennsylvania-based hedge fund firm that manages about $1.8 billion — as industry deal-making remains strong.

In a statement, Mount Lucas said it would retain control over their management, operations and investment strategies. The terms of the deal were not disclosed.

Mount Lucas, which was founded in 1986, employs three strategies — one that focuses on a broad range of global investments, including stocks, commodities and currencies; another that invests in future indexes; and a third that buys stocks in the S.&.P. 500-stock index and holds them on average for a year.

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