Money managers under the microscope
After draft laws from the European Commission, which have been attacked by almost the entire UK hedge fund industry, IOSCO‘s proposals — including registration of managers, disclosure of systemically-important information to regulators, registration and supervision of prime brokers — must seem like a walk in the park.
IOSCO’s principles follow the G20 pledge in April to regulate the hedge fund industry. While hedge funds did not cause the credit crisis, the group says, they may have amplified its effects.
However, with so much regulation being put forward at present, AIMA is being very careful to point out any potential problems.
This year’s GAIM conference was far smaller than the three previous summer events, with fewer organized events, no sponsored gala dinner and restricted cocktail sessions where two or three bar staff struggled to satisfy hundreds of thirsty conference-goers
The fact was duly noted, initially with some concern, by many of the investors and asset managers, several of them grumbling about the limited amount of liquid refreshment available to slake a healthy thirst worked up in the searing Monaco sun.
Maverick hedge fund manager Hugh Hendry is rarely far from controversy and his appearance at the GAIM conference in Monaco this week was no exception.
Having been scheduled to give a short talk on the future of capitalism before getting into a longer discussion with Lombard Street Research chief international economist Charles Dumas, Hendry proceeded to overrun his slot, giving his views on pretty much anything to do with the world of investment.
Journalists have not needed to persecute and cajole hedge fund executives into handing over their business cards at GAIM this year, a sharp contrast to conferences in less troubled times.
At past GAIMs, or the Global Alternative Investment Management conferences, certain hedgies went to great lengths to duck journalists, and many even expressed concern or irritation that journalists were allowed in at all.
It is not really such a surprise, and not only because the attendee list was visibly shorter this year than in 2008. Of the around 800 registered visitors, perhaps 500 have turned up.
Hedge fund manager John Paulson, who made a fortune currectly betting on the U.S. housing market collapse in 2007 and then the broader financial crisis last year, is starting to wield a Midas touch long associated with Warren Buffett.
Thanks to its bearish views, Paulson & Co over the past few years vaulted to the top ranks of the world’s largest hedge fund, multiplying its assets and earning Paulson a king’s ransom.
Brevan Howard Asset Management, Europe’s biggest hedge fund firm, has posted a 133 percent rise in operating profits to an astonishing 503 million pounds for the year to July 2008, demonstrating the benefits of being one of the (few) winners in last year’s market turmoil.
While the average hedge fund lost 19 percent last year, according to Hedge Fund Research, Brevan Howard’s main fund rose 21 percent.
It seems that investors will have long memories of how hedge funds behaved in the bad times when it finally comes to putting money back into the industry again.
The wipeout of 50, 60 or 70 percent of the industry that was predicted by some commentators last year hasn’t quite happened, partly because redemptions have slowed dramatically of late, partly because some smaller firms are still limping along in the hope that conditions will improve soon, and partly because many funds imposed gates last year, limiting investors’ ability to get their money out.
Plenty has happened since the UK brought in its temporary ban on short-selling financial stocks last year — Madoff, Weavering, hedge fund outflows, the EC’s controversial plans for hedge fund rules, and even a few hedge funds making money.
However, behind the scenes, the debate on how to handle this controversial practice rumbles on, and today the Investment Management Association published its response to the FSA’s discussion paper, now that the period for responses has closed.
Money managers were drawn by Madoff’s air of mystique, his stellar reputation as a market timer, the apparently steady returns with rock bottom volatility and the absence of fees, which some collected from clients anyway.