Unstructured Finance

Cheyne hedge fund spots RBS opportunity

M&A is on the up again and hedge funds are getting ready – last week we revealed Cheyne Capital had raised over $100 mln for an event-driven fund.

The fund will concentrate on ‘hard’ news (as opposed to rumours of deals), but, as suggested in their name, such funds can look at a wider range of events than just M&A, including restructurings, debt refinancings, asset sales, share buybacks and so on.

In Cheyne’s case, it has spotted what it thinks is a great opportunity in Royal Bank of Scotland debt.

Co-manager Michel Massoud explains:

“In RBS’s tier 1 instruments we’ve found two that had embedded in them the option, at the discretion of the holder, to
be redeemed at par if the bond is not called at its call date.

“We bought the bond at an average of 97 and we’ll get the coupon until it is redeemed. It’s a 16-17 percent unlevered annualized return for an investment that we think is very safe.”

Celeb connection in hedge fund move

It’s hardly a revelation to say the world of hedge fund managers and celebrities often overlap, but there’s a couple of interesting celebrity connections with our exclusive today that fund of hedge funds manager Cem Habib has left Cheyne Capital to work in investment banking. RTXEGIK

Tamara Beckwith (left) works on Stanbury's website

Habib is married to entrepreneur and former personal style consultant Caroline Stanbury. Reportedly once a girlfriend of Prince Andrew, she recently gave an interview (complete with slideshow) to The London Magazine about the couple’s opulent Kensington home.

She’s also the founder of upmarket gifts website Gift-Library, offering readers the chance to buy, among other things, Rolex watches, emerald necklaces and diamond rings.

Hedge funds: Greece is the word

This week’s Reuters Hedge Fund and Private Equity Summit gave us some new insights into how hedge funds are betting on Greece’s debt crisis and their attitude to talk that politicians and regulators may clamp down on their activities.

According to Cheyne Capital, for instance, buying Greek CDS is an “old trade” that many hedge funds have moved out of. Many have instead moved to short bets on the euro, as the single currency comes under pressure from the debt of some southern European countries.

Then again, two managers from GLG, ranked by Eurohedge this week as Europe’s 6th biggest hedge fund firm, said they are actually long the euro.

Apples, pears and Ucits

Ucits funds have undoubtedly benefited from the uncertainty surrounding the AIFM directive.

A number of hedge funds have opted to launch products in the Ucits format — automatically avoiding the directive, which focuses on non-Ucits funds — rather than wait and see how the long-running political battle plays out.

Man Group and Cheyne Capital are among those to have announced plans, while start-up Nexar has said it may launch funds using this structure.

The use of UCITS

Hedge funds are continuing to react to potentially seismic shifts in regulation.

rtr27xy2A number of firms, notably Man Group and Cheyne, are debuting onshore funds that will use the ucits structure — not only widening the potential pool of investors but also sidestepping the EU’s new draft directive on non-ucits funds and the surrounding uncertainty as the draft is debated.

Today Veritas said it is launching a long/short China ucits fund for top fund manager Ezra Sun, targeting an annual return of 15-20 percent.

In its own words, regulation and investors’ access to their cash are the deciding factors when it comes to fund structure.