To help our American readers celebrate the Thanksgiving holiday, we have harvested a bushel-full of news items that show an industry in such transition that it may soon become a leading cause of indigestion.
PE firms getting into the HF business: “…Private equity firms will need to become more like asset managers, offering buyouts as just part of their portfolio…large U.S. private equity firms, such as Blackstone, KKR and Apollo, have spread their wings into new fields like real estate, hedge funds and general asset management…”
HF firms getting into the PE business: “Hedge fund investors stuck in products with illiquid assets are increasingly seeing interest in their stakes from specialist private equity or other buyers as markets recover…”
HF firms getting into the banking business: “Hedge funds provided as much as 40 percent of the money raised this year by U.S. and European banks as they sought to offset losses and meet government capital requirements…”
Banks getting into the HF business: “…despite their moniker of ‘highly-leveraged institutions’, most hedge funds today operate with leverage less than a tenth that of the largest global banks…”
Traditional Managers getting into the HF business: “When Gartmore Group goes public next month, most of the proceeds will go toward paying down its debt. But the new capital will also be used to boost the firm’s hedge fund business.”
Meanwhile, investors dispensing with HF, PE and “traditional” labels: “Institutional investors are gearing up to integrate hedge funds into their equity and fixed-income portfolios, part of a growing trend toward allocating assets based on their sources of return — alpha and beta…”
Decoupling? Really?: “Emerging market decoupling accelerates in hedge fund industry…The HFRI Emerging Markets (Total) Index has gained 36.4 percent year-to-date through October, a sharp reversal from the record 37.2 percent loss suffered last year.”
Have they no shame? Gamblers gambling with their winnings: “The New York Lottery is proposing a gamble where the odds aren’t always in its favor — moving its $1.3 billion prize fund into investments such as stocks, corporate bonds, real estate and hedge funds and out of the safety of U.S. Treasuries.”
Who knew? Madoff’s fee model turns out to be a winner: “(A) pattern of higher-charging funds generating higher returns is repeated over three years. The one exception: funds without any annual management fees. They made 3.2% on average over the year to June, and 6.7% a year over three years – higher than anyone else.” (more coverage)
A perfectly Madoff-ian sales strategy…: “Anecdotal evidence supports the idea that investors are gaining fee advantages in return for giving into hedge fund demands in other areas…”
“Wide discrepancy” in HF quality or just a long left tail?: “The Hedgebay Global Hedge Fund Secondary Market Index showed the highest trade in October took place at net asset value (NAV) for the second time in three months. The lowest-priced trade was priced at just 40% of NAV…The average trade price was 86.73% of NAV…”
The financial equivalent of the old Saturday Night Live sketch,”The All-Drug Olympics“: Regulations on insider trading have gradually tightened over the years in the U.S. and many other countries, but some economists argue for a complete course reversal, making insider trading legal…”I think there are some libertarians who think we should allow it,” says Wharton finance professor Jeremy J. Siegel.
Hedge funds back to $1.75 trillion…: “Investment flows into hedge funds have turned net positive and the sector is heading toward having assets under management of around $1.75 trillion by year-end, according to Morgan Stanley.”
…then on to $2 trillion: “Hedge fund assets may top the previous $2 trillion high by the end of next year as double-digit average returns lure investors…”
– We’re back Friday, recovering from our tryptophan coma. Thanks for reading.