Money managers under the microscope
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.
And in his latest letter to investors, Hendry has smartly rebuffed any attempt to ‘save’ him from his bond investments.
There seems to be an endless wave of bad news hitting the hedge fund industry at the moment — gates and suspensions, record poor performance, the Bernard Madoff scandal and so forth – but there are still one or two reasons to be positive.
According to a survey of institutional investors by alternative assets data group Preqin, conducted in January (and therefore after the alleged Madoff fraud came to light), only 8 percent said they were no longer confident about hedge funds and would reduce investments.
It was the outcome most commentators were expecting.
But the defeat for hedge funds RAB Capital and SRM Global and other former shareholders claiming damages for the loss of their holdings in Northern Rock when it was nationalised last year is nevertheless a hard blow to bear.
But one top hedge fund manager believes that equities could soon be heading for a very sharp rally.
Cazenove’s Neil Pegrum — whose fund made 9.4 percent last year while markets were plummeting — believes UK equities could soon be enjoying a “March 2003″ rally.
Oh what a tangled web we weave when first we practise to deceive, wrote Scottish novelist Sir Walter Scott, and anyone looking into the alleged Madoff fraud may well understand what he means.
Funds, advisors, auditors, fund administrators and custodians are looking around nervously and trying to understand whether they are likely to face lawsuits. Some are pre-empting that by taking out lawsuits themselves.
from Global Investing:
Wealth managers at Citi Private Bank are telling their clients to stay neutral in their exposure to hedge funds at the moment, whether the strategy be event driven, equity long/short or macro. The main reason is that capital markets are still stressed and many hedge funds still need to deleverage.
The firm points out, however, that hedge funds had a good news-bad news kind of year in 2008. Based on the HFRX Global Hedge Fund Index, it was the worst performance on record. The index lost 23.3 percent. Its next worst performance was 2002 -- and that was only a 1.5 percent decline.