DealZone

from Funds Hub:

A loud and clear call

rtr1y8m4It may not have been a massive surprise, but ECB President Jean-Claude Trichet had an unwelcome message for hedge fund managers today.

The current crisis is, apparently, "a loud and clear call" to roll out regulation to all important market players, "notably hedge funds and credit rating agencies".

For those hedge fund managers who felt, perhaps with a degree of justification, that their industry had been relatively blameless in precipitating the current crisis, that call may have been somewhat quieter and more muffled.

But the drumbeat of those calling for greater hedge fund regulation is growing and it seems increasingly likely that hedge funds will face a new raft of rules in the not too distant future.

Hedge funds have attempted to justify the slow take up of volunatry codes aimed at staving off heavy-handed regulation, but day-by-day the industry looks like it may have missed the chance of a quiet life... well, relatively speaking.

from Funds Hub:

Staying positive

rtr23yfeThere 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.

By contrast, 26 percent said they would be increasing their allocations this year.

from Funds Hub:

Has the moment for greater UK hedge fund regulation passed?

Tuesday's grilling of UK hedge fund executives is likely to create plenty of noise but produce little in the way of new rules.

While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby's position may be weaker than it has been in recent years.

For one thing, many hedge funds simply do not have the financial clout -- and therefore carry the associated risks seen by some politicians -- that they once did.

A Killer Economy

This economy is a killer. Just ask New Yorkers on Craigslist. 

You may not have heard of the Killers, a music group from Las Vegas that’s been variously called the next U2 and the best Mormon rock band of all time. They are playing tonight at the Hammerstein Ballroom in New York City.

Tickets, at $45, sold out in a few minutes when they went on sale in late September, and have been reselling for 10 times that amount on the secondary market.  That’s where Craigslist, and a former hedge fund associate, come in.

A Reuters reporter was not willing to pay the $350 asking price per ticket to see the show, and emailed the seller, pointing out a recession is under way.  The former hedge fund associate emailed back: “I’m not a scalper. I’m a ticket arbitrageur.”  So we called him up.

Activist investor alert: Fisher Communications

kima.jpgCould investors in Seattle-based Fisher Communications be getting a little restless? The small broadcasting company recently disclosed it had received an unsolicited takeover offer from an unnamed party, which it turned down saying it wasn’t in the best interests of its shareholders.

Soon after, FrontFour Capital, a large shareholder, made public a stiff letter it sent to the company, expressing disappointment at the board’s unwillingness to engage in talks with the potential buyer. FrontFour, a New York-based hedge fund, said Fisher shareholders have suffered a 30 percent loss in the value of their holdings, even as the company spent money on acquisitions that have added little value. Fisher shares are down 38 percent since their 52-week high of about $51.99 August.

FrontFour also threatened “potential courses of action,” such as calling a special shareholders’ meeting or running a proxy fight at next year’s annual meeting.

Sam Israel’s wooded hideout

Prospect MountainGRANVILLE, Mass. — Hedge fund managers are known for having a taste for the world’s glamorous vacation spots. But for his time on the lam, fugitive and one-time millionaire Samuel Israel hid out in a place that typically caters to people of more modest means – a campground in rural Granville, Massachusetts, according to some of the camp’s current guests.

“It’s different, that’s for sure,” said Ken Cudworth, 37, as he moved his family into a site at the campground. Cudworth had been waiting for an opening at the wooded camp for a few days and got a call on Wednesday morning that one had opened up – the site that Israel, who was convicted of a scheme that defrauded investors of $450 million, vacated when he turned himself in at a local police station.

Cudworth“I’ll be digging some holes to see if he left anything,” Cudworth said.

Jim Cooley, 63, also staying at the camp, said he’d seen a man who matched Israel’s description pull out of the site on a motorscooter. That was the vehicle Israel rode to Southwick police station where he turned himself in after a four-week nationwide manhunt for the person who committed the longest-running fraud in the $2 trillion Campground Jailhedge-fund industry.

Restraining order

Zuberbuehler director of the Swiss Federal Banking Commission attends a news conference in BernAs if having the U.S. Justice Department on your back because your bankers may have been helping wealthy Americans avoid tax wasn’t enough, Swiss banking giant UBS also has to deal with grumpy regulators at home. The head of the Swiss Federal Banking Commission, Daniel Zuberbuehler (pictured), tells us that singling out UBS and Credit Suisse for tough treatment is justifiable and has laid down a tight timetable for new rules to restrain the two. The banks will be required to hoard considerably more capital, which will surely slow them down on Wall St. On Monday, the DOJ said it had asked a federal court in Miami to authorize the Internal Revenue Service to request information from UBS about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes. Coughing up tax fraudsters to the IRS could make the sell-off of UBS’s U.S. wealth management backbone – once known as Paine Webber – a tad trickier, but perhaps no less necessary.

A detailed blow-by-blow of the death of Bear Stearns by Vanity Fair’s Bryan Burrough casts current market rumors rumbling about the health of Lehman Brothers in an eerie light. The author, who DealBook notes co-wrote “Barbarians at the Gate,” takes aim at CNBC and hedge funds as it works to uncover what it posits could be the “murder” of the country’s fifth-biggest investment bank. This morning, CNBC’s Charlie Gasparino and DealBook editor Andrew Ross Sorkin are talking about the prospects for Lehman being “taken out”.

High in the “priced to move” column, commercial lender CIT Group agreed to sell its home lending business to private equity firm Lone Star Funds for $1.5 billion in cash to increase liquidity, and said it would take a related second-quarter charge of $2 billion. CIT also agreed to sell its $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance for about $300 million. “These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class,” Chief Executive Jeffrey Peek said. Lone Star will also be taking on $4.4 billion of outstanding debt and other related liabilities. Home lending may not be that far off the path for CIT, but getting out of the business certainly helped tax preparer H&R Block, which announced strong results and a better outlook yesterday, so any price is clearly worth it – CIT’s stock was up over 11 percent in premarket trade.

On the road with Sam Israel

The U.S. Marshals say this vehicle has been driven by fugitive hedge fund manager Samuel Israel, who is wanted for failing to surrender to serve a prison sentence. (REUTERS/U.S. DEPARTMENT OF JUSTICE/HANDOUT)BOSTON – It’s no Maserati. The fuel-hungry, possibly damaged 2007 Coach Freelander Recreational Vehicle is the antithesis to the flashy, often glamorous stereotype of powerful hedge fund managers.

But it appears to be the getaway vehicle of choice for fugitive former hedge fund manager Samuel Israel III.

And unlike the larger than life returns Israel promised investors, the vehicle is big. Really big.

Gloom and some doom seen for hedge funds, private equity

Not a lot of sunshine and rainbows this week at the Reuters Hedge Fund and Private Equity Summit, being held in Hong Kong, London and New York. Here’s a sampling:

    david-bailin.jpgThere will be more hedge fund collapses this year as many managers struggle to borrow the new money they need to trade with and face investors disappointed by recent losses, said David Bailin, who heads Bank of America’s alternative investment group, which has already fired roughly 15 percent of the hedge fund managers it uses. He predicted rough trading for specialized fixed income funds, and said that BoA execs are “not big funds of quant funds … People are willing to trust black boxes only when they work.”
    eugene-kim.jpgSmaller Asian hedge funds are in for a painful round of consolidation, according to Eugene Kim, chief investment officer of $250 million hedge fund manager Tribridge Investment Partners. “Investors are demanding more of managers in regards to operational infrastructure, compliance, risk management … you have to have a critical mass of assets under management to be able to pay for all of that,” he said. “A lot of marginal managers who have not been able to make it to the next level in terms of fundraising, in terms of size, are either going to have to merge or get bought out or shut down.”
    joshua-steiner.jpgPrivate equity deals will remain small in size and volume for some time compared to their 2007 peaks, as a logjam of debt prevents banks from adding more to their portfolios, Quadrangle managing principal Joshua Steiner told Reuters reporters and editors. The $34.1 billion takeover of BCE — still yet to close — may prove to be the high water mark for the foreseeable future, he said: “Deals of that size will take a long time to come back, if ever.”

Click here for full coverage of the summit. 

Reuters hedge fund and private equity summit

bubble.jpgHedge funds are ready to set records this year, but not necessarily the good kind.

“The bubble has popped and there is going to be a lot of pain,” said Bradley Alford, the founder of hedge fund advisory firm Alpha Capital Management. “There will be a massive reassessment of where money should go.”

Many investors expect the $1.8 trillion industry’s estimated 10,000 funds to be winnowed down by a few thousand in a few years. Funds that oversaw nearly $4 billion in assets have already closed their doors in the first quarter of 2008.