By Chris Clair

On Nov 10, Reuters HedgeWorld will present a 90-minute web seminar all about prime brokerage.

It’s been a little more than a year since the prime broking industry changed forever with the demise of Lehman Brothers and Bear Stearns … or did it change forever? Certainly there are more small and mid-size players in the space, but what has that actually meant for the hedge fund industry? Moreover, how can hedge fund managers ensure they’re choosing the right prime broker to suit their needs and get the most out of the relationship?

Joining HedgeWorld will be three experts on the subject: Sameer Shalaby, chief executive of technology company Paladyne Systems; Glen Dailey, managing director at prime brokerage firm Jefferies & Co.; and Craig Stein, partner at the law firm Schulte, Roth & Zabel LLP. Each will share his insight into:

* How many prime brokers are enough?

* What questions managers should ask themselves, and potential prime brokers, as they evaluate their options?

* What are the different roles prime brokers play today, and how much they charge?

* What do prime brokers do for different hedge fund strategies?

* What’s the importance of prime broker services in a new era of regulatory compliance?

* How can managers to marry their prime brokers to their technology?

… and much more.

To find details or to register for the program or the CD-ROM of the program, visit the registration page.

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

Mandelson says EU rules may choke recovery - Bloomberg

Insider trading probe catches 14 more - Reuters

Citi to relaunch hedge fund unit - FT

Man Group on slow recovery  path - Reuters

Aussie hedge fund plans move - The age

In Charles Dickens’ novel, Bleak House, a long-running dispute over a legacy only ends when the estate’s assets have been completely devoured to pay the army of lawyers involved in the litigation. Delighted, the lawyers move on to the next case, while one heir of the estate ends up a nervous wreck, his assets all gone.

Madoff investors may feel they are in a similar predicament, watching on helplessly as the scant assets so far recovered dwindle while liquidators and trustees wrangle over how to apportion them.

A recent dispute between Madoff trustee Irvin Picard and the liquidators of the Kingate feeder funds, which lost an estimated $3.5 billion in Madoff’s fraud, involved the trustee, the liquidators Zolfo Cooper and a phalanx of other legal advisors including the liquidator’s British Virgin Islands advisers Whithers BVI; and their US advisers Quinn Emanuel Urquhart Oliver & Hedges.

The liquidator advised investors to vote to settle the dispute with the trustee, reasoning that money tied up in legal action against the trustee could not be used in the attempt to recover investor funds or, via requests for restraining orders and the like, to prevent assets discovered from being spirited away.

Would it be naive to think they should all be on the same side, with the goal of recovering as much Madoff money as possible and dividing it among wronged investors?

In what looks like another legal red herring, shareholder group Deminor has announced it is considering bringing a class action, in Amsterdam, against auditor PricewaterhouseCoopers, funds administrator Citco and possibly other companies which provided services to the Fairfield funds, the biggest Madoff feeders with losses of $7 billion or more.

“But class actions against the service providers have already been lodged in the US against and have now been consolidated into one case,” complained one legal adviser.

“All Fairfield investors are covered by that action, not just those in the US, and the New York judges will apply Amsterdam law in the case.  A new action in Amsterdam won’t achieve anything more, but it could even spawn other lawsuits to decide who has jurisdiction over assets recovered, and will almost certainly mean investors have to wait much longer for their money, which protracted litigation will whittle away.”

Aye, there’s the rub. For every day that passes, liquidators, lawyers and a plethora of others attached to the affair have to be paid, leaving ever less in the pot for hapless investors.

For those tiring of the squabbling over the European Union’s AIFM directive, at least the rhetoric continues to impress.

The EU threat has certainly made pension funds more bullish, and this week they were threatening to gang up on “arrogant” hedgies to force through far stricter terms on performance fees. “Institutional investors are totally disillusioned with funds not delivering what was on the tin,” Philip Read, chairman of the British Coal scheme, told chastened managers at the Hedge 2009 conference.

And what’s this? Even the Welsh have waded in with an attack on what they see as needless bureaucracy from the directive.

But my favourite comments come from Anthony Hilton’s column in yesterday’s Evening Standard. He asks a “French mole” to explain the EU’s onslaught on the hedge fund industry when there is broad agreement that the hedgies were not to blame for the financial crisis. The mole does not disappoint.

“It’s like when there is someone in a pub that you have never liked. When a fight breaks out, you hit him anyway, not because he caused the fight, but because you have always wanted to.”

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

Swedes plan to scrap hedge fund leverage limits - WSJ

More than one witness in Galleon case - Reuters

Ex-UBS bankers plan Tufton tranport fund - Bloomberg

Touradji dismisses employee claims as lies - Reuters

The exact nature of the so-called ‘unforgiveable sin’ in Mark 3:29 has been a subject of debate for centuries, but maybe one fund executive has put his finger on it.

Speaking at this week’s Hedge 2009 conference in London, Fred Fruitman, managing director of family office Loeb Partners Corporation, referred to an FT article this week showing the Church of England’s pension scheme had a “huge great hole” after putting all its investments into stocks towards the end of the ’90s bull market. Financial blasphemy?

“It’s unforgivable,” he told the conference. ”Defined benefit schemes should take very low risks. They should promise their members modest returns and deliver that. There should be no excuse for under-funded pension plans.”

Fruitman said such funds used to invest in lower-risk assets such as government bonds, but said investment policies changed and they began to go after higher returns.

“Suddenly people were investing in hedge funds, private equity — they’re gambling. There’s a finite amount of returns to squeeze out of financial markets and it’s generally single digits. Everyone thinks they’ve got the magic sauce, and then they add leverage.

“If you just put 60 percent in bonds, 20 percent short-term and a bit in equities… There’s no excuse. You can’t outsmart the system.”

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

Hedge funds face investor war on fees - Reuters

Och-Ziff third quarter income falls - Reuters

Mark Kary to resign from Polar Capital - FT Adviser

Hedge fund adviser to lead SEC policing body - WSJ

Asian hedge fund asset on the rise - Bloomberg

Regulators are going after the wrong target by trying to impose stricter rules on hedge funds, according to Nassim Nicholas Taleb, high-profile author of credit crisis hit The Black Swan.

Taking a decidedly negative view of banks, Taleb told the Hedge 2009 conference in London today that a bank is essentially “a utility with a compensation scheme”, which the public has to bail out if it fails.

In contrast, “hedge funds are a good thing” (not a phrase that is heard very often).

With the possible exception of LTCM, taxpayers haven’t had to bail out hedge funds which, when they have failed, have generally done so quietly with relatively little effect on the general public, he says.

“They’re a great way for risk to be diversified … and they have the beauty that they’ve learned to fail fast. People in the street know about Lehman, but they don’t know about (which) hedge funds (have failed).

“The model of transferring risk to hedge funds needs to be favoured by governments. Now it’s being hampered by goverments, which are cracking down on hedge funds, not banks. I don’t understand.”

Hedge fund stories from the past 24 hours from Reuters and elsewhere:

Paulson gives his on own biog a kicking - Business Week

Degorce launches fund - FT

Ex-Dreier broker pleads guilty to fraud - Reuters

The Treasury hedge fund - Robert Peston

The $100 bln FX hustle - FT Alphaville

Today sees the start of the Hedge 2009 conference at the Hilton by Tower Bridge.

Speakers such as USS and Permal will assess what investors are looking for in hedge funds while Polygon and SVM will debate how funds put forward the right liquidity terms to investors.

Sushil Wadhwani will talk about how he uses Keynes’s theories about how financial markets work, Roger Bootle will discuss quantitative easing and Tudor Capital will talk about the benefits of quantitative funds.

After last year’s awful performance, money is slowing returning to the industry, but, after a series of frauds and funds locking up client money, investors are now cautious about who they give their money to.

Stay tuned to Hedge Hub to see what hedge fund executives have to say.