Funds Hub
Money managers under the microscope
Theirs not to reason why…
Hedge funds have had a tough time since the onset of the credit crisis, what with some poor performance in 2008, looming regulations from the U.S. and Europe, and the general vilification of bankers and financiers in recent years.
However, their plight was thrown into a whole new light yesterday at this week’s Hedge 2010 conference in London’s Canary Wharf, where Caroline Hoare, CEO of hedge fund firm GLC, drew a comparison with the charge of the light brigade.
In Tennyson’s famous poem, the unfortunate 600 have to cope with “cannon to the right of them, cannon to the left of them, cannon behind them”, volleying and thundering.
“I think we’re in quite a tight spot,” Hoare told the conference, describing both her dislike of much of the new regulation that hedge funds are facing, and explaining how the industry is still perceived to be “secretive, overpaid and parasites”.
For those still confused by the analogy, the cannon to the right are the EU, in particular the AIFM Directive. The cannon to the right is regulation from the SEC. And cannon behind them are “the press, the general public, the taxman and our own troops wounding us with friendly fire”.
Of course, the moment in the poem that Hoare is describing, when cannon are behind them rather than in front of them, is not the Light Brigade’s charge but its full-scale retreat after the charge. Is this the hedge fund industry’s current position? And who was it who blundered?
Morning Line-up: Dog funds, Asian elites and growing hedges
News and views on the asset management industry from Reuters and elsewhere:
Hedge funds took in $3.8 billion in September - Reuters
Asian equity hedge funds outperform – Financial Times
Schroders beats forecasts, shares soar – Reuters
Worst performing funds revealed - This is Money
Bill Ackman’s Howard Hughes impersonation begins…
After years of breaking his way into corporate boardrooms, activist hedge fund investor William Ackman says he is ready for everyone to get back at him. Ackman is set to become chairman of Howard Hughes Corp, a spin-off of mall owner General Growth Properties Inc, which could emerge from bankruptcy as soon as today. Ackman, however, has spent years as an activist investor, targeting some of the world’s largest companies like Target Corp and J.C. Penney, through investments at his New York-based hedge fund Pershing Square Capital Management.
At the Directorship 100 Forum in Manhattan on Tuesday Ackman told a room full of corporate board members that he knows its his turn now:
“The good news for everyone in the room is beginning today I am now Chairman of the Board of The Howard Hughes Corporation, which is being traded on the New York Stock Exchange. So it’s a company you can buy stock in. You can throw out the board. The board is elected annually. You can call a shareholder meeting with 15 percent of the vote… So you know, you can get me back.”
The Howard Hughes Corp, named for the eccentric U.S. entrepreneur, will include General Growth’s master-planned residential community business and other development properties. It has already filed for an initial sale of stock and warrants, so as soon as HHC shares start trading, Ackman says he wants to hear from everyone — really — EVERYONE :
“I think it is going to be a useful thing , for once a year at least, for us to hear from a few of our shareholders, and actually I think it would be incredibly useful to hear from our short sellers. To the extent that someone who is short our stock is willing to come forward to explain what their concerns are, I think there’s almost nothing more useful than that discussion. Are they short because they think that our books are being cooked? Are they short because they just think we are doing a poor job? That’s the most candid feedback one could possibly get. ”
I right behind you Mr. Ackman, i am buying as you specking too your as of today and as a Shareholder
i belive in this new company; Howard Hughes Corp.
INSIDER-GLC launches two new UCITS strategies
GLC CEO Caroline Hoare tells Reuters Insider the hedge fund plans to launch two new UCITS-compliant vehicles to draw in new investors.
Manager warns of US government bond bubble
Those investors still gobbling up US government bonds as a nice defensive investment could be in for a nasty surprise, according to James Montier, a member of GMO’s asset allocation team.
Speaking at the CFA Institute’s European Investment Conference in Copenhagen, Montier said there was currently no margin of safety for investing in bonds as yields were just too low. “Rather than being a risk-free asset this could be about to become a return-free risk,” he said. “Historically, when people have bought bonds at these levels they have received a zero return or worse.”
Montier rejected the notion put forward by bond-bugs that the US was heading in the same direction as Japan 10 years ago, as the Federal Reserve has responded much more quickly than the Bank of Japan to fight deflation.
“Everyone loves government bonds at the moment because they have just delivered some incredible 10 year returns, but flows into bond funds are now higher than equity fund flows at the height of the TMT bubble,” he said, sending a shiver up delegates’ spines.
Montier also pointed to another lesson from history – Fortune 500′s “10 stocks to last the decade”, unveiled in August 2000, which included names such as Enron and Nokia. “The average P/E at the time of purchase was 347x,” he said. “Where was the margin of safety? It’s a similar problem today with US government bonds.”
As well as insisting on this margin of safety for investors, Montier proposed several other immutable rules of investing ranging from: “Be patient” to “Be leery of leverage”. Montier prefers cash at the moment to equities and bonds, which he said was was like trying to choose between two ugly sisters. “I’d prefer to hold out for Cinderella,” he said.
from Reuters Money:
6 healthy healthcare funds
The following column is by Tom Roseen, senior analyst for Thomson Reuters.
Prospects may be brightening for healthcare and biotechnology stocks, now that the election is over and earnings in that sector are strengthening.
Third-quarter earnings reports and advance guidance have been fairly good, according to our Thomson Reuters Proprietary Research team. With 58 percent of the healthcare constituents of the S&P 500 reporting thus far, 86 percent have beaten their consensus earnings estimates.
And with the 2010 mid-term elections finally in the history books, the political and regulatory risks for the sector may have receded—at least slightly—with Republicans’ taking over the House and making inroads in the Senate. The ambiguity surrounding healthcare reform had dampened the performance of these stocks. Investors have been concerned about the heightened regulatory scrutiny of the healthcare industry, and there have been mixed views about the impact the legislation would have on healthcare firms’ profitability and margins.
The sector was also hurt by the recession. Healthcare is considered a defensive play during downturns – after all, people can’t forgo critical care, delay the delivery of that new bundle of joy, or discontinue life-prolonging medication. But we know from firsthand experience that families will often put off a physical exam, purchase a generic brand of medication, or delay elective procedures when times get tough.
In the first 10 months of 2010, Lipper’s Health/Biotechnology Funds (up 5.68 percent) classification has underperformed the domestic equity funds macro-group (up 8.72 percent) by over three percentage points.
Investors who think this is a good time to add some healthcare exposure to their portfolios can use the Lipper Fund & ETF Screener to find funds that fit their needs. We follow two categories that invest in healthcare, medicine and biotechnology: Health/Biotechnology Funds (which invest at least 75 percent of their assets in domestic companies) and Global Health/Biotechnology Funds (which invest more than 25 percent of their assets in foreign companies.) Although they are relatively small groups of funds, both categories invest in a diverse group of sectors in the industry.
Merrion profits from UK housing malaise
October may have been a strong month for markets (and therefore, by implication it seems these days, for hedge funds), but that hasn’t stopped some short-sellers from profiting.
Mike Nicol, manager of the Merrion European Absolute Return hedge fund, says he did well out of new short positions in housebuilders Barratt Developments and Taylor Wimpey. Both fell around 21 percent during the month, while the FTSE 100 rose 2.2 percent.
“The UK housing market continues to struggle and we believe that this malaise will continue for some time,” says Nicol.
HFRX’s short bias index is down 17.4 percent so far this year while the average hedge fund is up nearly 6 percent to end-September, according to Dow Jones Credit Suisse (and probably more after October) compared with the FTSE 100′s 8 percent gain. At least Merrion’s update indicates hedge funds don’t have to be limited by overall market movements.
Morning Line-Up: Pacino, Man, SEC
News and views on the asset management industry from Reuters and elsewhere:
Five million reasons to be a hedge fund manager – WSJ Deal Journal
Hopes of client return boost Man Group shares – Reuters
Pacino moves into hedge fund world – Independent
SEC accuses LA hedge fund operators of bilking investors – LA Times
SAC Capital, Biovail finally bury the hatchet – WSJ Deal Journal
Morning Line-Up: CQS, takeovers, emerging markets
News and views on the asset management industry from Reuters and elsewhere:
French funds of hedge funds struggle to recover from the crisis – Financial News
Hintze fund snaps up farm – The Land
Hedge funds ready for takeover surge – Financial News
How to play emerging markets – WSJ
Castlestone launches automated trading service for hedge funds – HedgeWeek
