Funds Hub
Money managers under the microscope
from Reuters Investigates:
Financial cyber-bullying?
"They love a conspiracy theory on the boards," David Jones, chief market strategist at spread betting firm IG Index told UK correspondents Rosalba O'Brien and Matt Scuffham when they were reporting for "The stock, the web, the CEO and his lawyers" . It's a look at some of the shenanigans around highly speculative resource stocks when they are discussed on message boards like ADVFN and iii. Late-night gossip and personal insults are par for the course: some suspect organised short-sellers may be behind the talk. Given the high volumes of online trading in the UK, we wonder how long it will be before regulator FSA is forced to take a closer look.
Day-trader John Douce is sceptical about the boards' impact on stock prices
Morning line-up: Buffett quizzed, King’s pay, FSA powers
News and views on the fund industry from Reuters and elsewhere:
Chancellor to strip FSA of regulatory powers – Guardian
BOE’s chief refuses pay rise - Reuters
Buffett quizzed on credit agencies - Reuters
Morning Line-Up: Camelot, Man and the FSA swoop
News and views on the fund industry from Reuters and elsewhere:
Camelot to be sold to Canadian pension fund for £389 mln – Reuters
Man sounds out US hedge funds – Financial Times
FSA suspects made well-timed bets – WSJ
Investors should probe fees – Myners
Hedge funds found not guilty
Interesting research from the FSA out today, giving us the reassuring conclusion that hedge funds don’t seem to pose a systemic risk to the global financial system.
The two surveys, from October, show that funds were running a “relatively low level” of leverage relative to the assets investors have put into the funds and that risks were largely contained.
(They even contained a handy definition of systemic risk for those who were wondering: “A risk which, if crystallised without any form of intervention by the authorities, would mean a high likelihood of major, rapid disruption to the effective operation of a core function of the financial system (and so leading to wider economic impact).”)
The news is surely a boost to those — particularly the majority of the UK hedge fund industry — who oppose the EU AIFM directive, but it is far from enough to end the debate.
For a start, supporters of the draft plans can ask what the risks were at the height of the crisis — hard to assess as one of the two surveys is new. And they can point to issues such as investor protection and varying standards in different countries as reasons to bring in what has (controversially) been termed ‘a level playing field’.
Nevertheless, the surveys do seem to back up what many in the hedge fund industry have argued for years — that the really high levels of leverage were taken by the banks themselves.
All very British
The debate over the EU hedge fund directive at this week’s Edhec-Risk conference in London was in danger of becoming all a bit too friendly before one delegate’s intervention.
“Isn’t it the case that you’re all being terribly polite?” she asked, drawing widespread applause from the hedge fund industry audience with the suggestion that most of the panel secretly believed the controversial regulation may be driven a rather sinister rivalry between EU member countries.
The EC’s representative on the panel was forced to defend his position.
“I have no idea of member (states’) intentions,” he said. “(But) I don’t consider myself to be part of a Franco-German plot.”
Whatever the motivations behind the regulation and whatever political manoeuvring is going on behind the scenes, the UK’s FSA highlighted that things could still go badly wrong for London, Europe’s hedge fund central.
“I would not underestimate the significant risks that still exist in this draft directive,” said Dan Waters. “The parliamentary text is very far away from an acceptable position from the UK’s point of view.”
Morning line-up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Ex Goldman’s Carhart to launch his own firm – Reuters
EU rules may cost hedge funds, private equity over 3 bln euros – Reuters
Hedge fund start-ups approach UBS – Bloomberg
More hedge fund managers strike out on their own- Investment Week
Morning line-up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
US lawmaker drafts hedge fund bill – Reuters
SEC, FSA to coordinate data collection from hedge funds - Exec Digital
RWC Partners raises $480 million for US long short funds - Hedge Funds Review
FSA to enhance disclosure for significant short selling - Hedge Funds Review
Man Group assets rise on lower outflows – Reuters
Morning line-up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
How hedge funds are managing risk – Seeking Alpha
Citadel to meet all 2008 redemptions this year – Reuters
Penthouse of indicted Hedgie sells for $3.3mln – Palm Beach Daily News
Shadowlands
Executives in London’s Mayfair, home of the UK’s multi-billion dollar hedge fund community, could be forgiven for a few raised eyebrows after British Prime Minister Gordon Brown’s call yesterday to outlaw shadow banking systems and offshore tax havens.
“You are also restructuring your banks. So are we.” he told U.S. Congress. ”But how much safer would everybody’s savings be if the whole world came together to outlaw shadown banking systems and offshore tax havens.”
The terms are vague, but could be taken as a possible hint towards the lightly-regulated world of hedge funds.
The timing is hardly welcome for the hedge fund industry, coming as it does after recent calls by European leaders for more regulation of hedge funds, and ahead of concrete proposals from the European Commission next month.
However, hedge fund executives appear relaxed.
While pressure for tighter rules remains, executives believe that, whatever the comments mean, they don’t signal a major break with the UK FSA’s oversight of hedge funds — a framework viewed as relatively successful in monitoring this freewheeling industry so far.
Insurance policy
Shorting UK banks, it seems, is so last year.
Having profited from the implosion of the sector in 2008, many funds believe prices have fallen far enough, and in some cases are actually looking good value.
Outspoken star fund manager Crispin Odey this week revealed he’s now buying UK banks, having made money shorting them last year.
Instead, hedge funds have another sector in their crosshairs – insurers.
Many believe the sector will have to raise more capital or cut dividends. Figures from research group Data Explorers indicate increased shorting activity in the sector this month, albeit from a low base.
Hedge fund firm Lansdowne Partners has recently disclosed shorts in Legal & General, Aviva, Prudential and Old Mutual, while anecdotal evidence suggests others are taking similar bets.
After the battering that volatile markets and failed trades gave hedge funds last year, investors will surely welcome another potential source of returns.
