FiNTAG - Hedge Fund News, Views, Opinions and Gossip

THE FINTAG NEWSLETTER @ 06 July 2009

Finbar Taggit

FINTAG COMMENT

Finbar Taggit is away.

Following a recent change in brain activity, Hedge Fund guru Taggit is currently undertaking deep hypnosis and meditation techniques in a far flung place. For the next 4 weeks, til sometime in August, this blog will be in a state of flux and suspended animation. [Fintag: I see you have taken over the assylum ...]

The Editor.

THE FINTAG NEWSLETTER @ 03 July 2009

Finbar Taggit

FINTAG COMMENT

Enough said.

My brain is frazzled and it's time for a break. So please excuse me while I vacate this blog for the next 4 weeks. There are a number of books to read and places to see although Martha's Vineyard may get a tad dull after a couple of days.

So when I come back, will the world have a new reserve currency? Will the markets finally recognize that they are toppling off sucker's canyon? Will Oil reach USD100? Will hedge funds be regulated out of Europe?

Last night I was out with a Private Equity jockey who I haven't seen for 2 years. Nice to hear that despite a number of billion dollar funds at his disposal he had made only one investment and that was to launder some money through the funding of a football stadium. He looked more than well.

Let us hope I too feel refreshed and recharged and have a higher NAV when I get back.

Enjoy your caravan holidays and dinner parties on your Yachts.

THE CHILDREN'S INVESTMENT TRUST'S ANNUAL PROFITS JUMP 73PC

telegraph

The results, for the financial year to the end of last August, also showed that founder and controlling partner Chris Hohn more than doubled his pay to £1.7m,

Mr Hohn warned in the annual report: "Current market conditions will have a material impact on the income stream of the partnership over the following 12 months."

Fintag says
Too much volatility for my liking.

FEARS THAT MADOFF MAY BE 'TAKEN OUT' BY FELLOW INMATES

here is the city

Bloomberg reports that $65bn fraudster Bernie Madoff may need to look out for himself in prison. Bernie could be in danger from fellow inmates, as the majority of those banged up with him will be serving time for violent crimes.

The news agency quotes Steve Vincent, a former police officer who now runs Federal Prison Consultant Services, who said: 'If they (the inmates) see an opportunity to take that man out, and be in the paper and make a name for themselves, what have they got to lose ?'.

Fintag says
Give the guy a break. We want to read his memoirs about how he suckered all his greedy investors, both innocent and guilty of crimes against due diligence.

finalternatives says " SEC Ignored Internal Madoff Whistleblower, Too "

OCH-ZIFF LOSES $800 MILLION TO WITHDRAWALS FROM ITS HEDGE FUNDS

bloomberg

Och-Ziff Capital Management Group LLC lost about 3.7 percent of the money it manages in June because of investor withdrawals from its hedge funds.

Assets under management declined $800 million in the month to $20.7 billion, the New York-based company said today in a filing with the U.S. Securities and Exchange Commission. Investors had withdrawn a record $5.1 billion in the first quarter, when rival hedge funds restricted redemptions.

Fintag says
Wow, this is a non story. It only had a 4% drawdown? Most hedge funds would be delighted at such a low figure.

ROGUE TRADES COST OIL BROKER $10M

bbc

A rogue trader at a London oil broker caused his employer to lose $10m (£6m) after making unauthorised trades.

PVM Oil Futures said it was a "victim of unauthorised trading on Tuesday June 30" and said it was conducting a full investigation.

Fintag says

Bye for now.

I will be checking my emails so please entertain me while I am away.

finbar.taggit@fintag.com

THE FINTAG NEWSLETTER @ 02 July 2009

Finbar Taggit

FINTAG COMMENT

Goodbye Goldmorgan Stanley.

With news that that the golden couple have lost their crowns to European upstarts Credit Suisse and Deutsche Bank, the world of Prime Brokerage is in turmoil.

Thanks to Lehman, all things American were not deemed safe in 2008 and we all rushed to enjoy the security of socialist supported banks. We came for the leverage and new systems and the love and comfort one gets from a new relationship. Whether 2009 reflects the same feelings, time will tell because sometimes a second marriage doesn't last long and going back to one's first wife can make sense.

Today we look at a Bugatti, 1973 and USD76.2bn.

CREDIT SUISSE, DEUTSCHE BANK TOP PRIME BROKER SURVEY

wall street journal

Credit Suisse and Deutsche Bank ranked as the best prime brokerages of 2008 in a closely followed survey due out this week, a copy of which was reviewed by Dow Jones Newswires.

The annual survey of hedge funds, conducted by Global Custodian magazine, had about 25% fewer respondents than last year -- not surprising considering the global economic meltdown and shrinking of the hedge-fund industry.

Credit Suisse narrowly outscored Deutsche Bank, last year's winner, although Deutsche Bank got more "best in class" awards.

Fintag says
Apologies to Credit Suisse for not posting a picture of their offices but I appear not to have any. The last time I was in canary Wharf (a place worse than hell) the security guards at CS decided I was a terrorist threat and forced me to delete the offending photos.

So here is a picture of a Bugatti I spotted last night following a night on the town with Mischa Barton ....

daily mail says " Worse for wear Mischa Barton 'kicked out of ladies toilets' at Whisky Mist "

But the most extraordinary thing is I spotted another one a few yards down the road from the Westbury hotel. This one wasn't gold plated. Only in Mayfair...

GOOGLE TRENDS: STOCK MARKET SENTIMENT

traders narrative

Here's an interesting way to measure the general mood of the public towards the stock market: look at the frequency and trend of searching for related keywords. For example, “bull market” or “bear market”. Although not everyone knows that nomenclature. How about “stock market crash”? Everyone knows what that means.

Thanks to a new service from Google (GOOG) called Google Trends we can look at the popularity of various searches over time and even across different geographic areas. Persevering readers might remember that we first looked at this new measure of sentiment back in January 2008: Hunting For Sentiment Data.

Fintag says
History. Personally I just ignore it completely but without history my models would be useless.

INSTITUTIONAL INVESTORS PLACE $76.2BN INTO PRIVATE EQUITY

global pensions

The worldwide private equity sector has raised US$76.2bn from pension funds and other institutional investors in the second quarter of this year, according to data by Preqin.

This represents a 28% increase on the $59.6bn raised in the first quarter, despite being much lower than the quarterly levels reached from 2005 to end of 2008, such as $213bn raised in the second quarter of 2008.

Fintag says
Now why didn't that come our way?

3 TRADERS START HEDGE FUND HONORING THE WHO

dealbook

Three traders hailing from Brevan Howard Asset Management and RBS Greenwich Capital Markets are rocking out with their new government-bond hedge fund, 5:15 Capital Management.

The hedge fund, named after the track “5:15” on The Who's 1973 album “Quadrophenia,” begins trading today, armed with with about $60 million, Morris Sachs, one of the founders, told Bloomberg News.

Fintag says
I wonder if they will die before they get old?

SWEDISH BOOST FOR HEDGE FUNDS

telegraph

Although the industry recently won a stay of execution on the planned shake-up which many UK hedge funds claim could drive them overseas, it is organising a major lobbying effort to put its case.

Hedge funds' hopes of winning widespread support will were boosted on Tuesday by comments from Mats Odell, Sweden's financial markets minister, who suggested they should not be seen as scapegoats for the global economic crisis.

Fintag says
A new European axis of evil is being created. Who wants to join? We have Sweden, Holland and the Danes joining the UK led gang. Time to kick French-German butts.

CONSULTANTS AND NATIONAL AUTHORITIES NEW TARGETS FOR MADOFF LOSSES

global pensions

Law firms representing pension funds and other investors are targeting investment consultants and national authorities for their clients' losses in the Madoff scheme following the financier's conviction this week.

The members of the Global Alliance of Law Firms - which includes 40 law firms from 23 countries that coordinate legal action on the Bernard Madoff case internationally - said they were convinced one person could not be solely responsible of one of the greatest frauds in history.

Fintag says
Let the litigation begin. The winners will be ... the lawyers. As usual.

STATE STREET WHITE PAPER SHOWS THAT HF “REGULATION” DOESN'T JUST COME FROM GOVERNMENTS

all about alpha

Notwithstanding conciliatory overtures coming from hedge fund trade groups, many hedge funds remain nervous about the drumbeat of greater regulation. And if governments can't pull it off, then investors seem more than eager to take their place - acting as a form of informal regulator that could rival or even exceed government oversight. Whether formal or informal, a more tightly monitored industry means opportunity for those who administer these funds.

Fintag says
I tried to get excited about this article. I really did.

THE FINTAG NEWSLETTER @ 01 July 2009

Finbar Taggit

FINTAG COMMENT

Fund of Hedge Funds (FOHF).

What are they good for? Well actually they are good for a lot of Hedgies and are huge investors. Without them the hedge fund industry would be half the size.

Rumors were they would disappear post Madoff but not at all; they are just reinventing themselves. Its a game of survival as assets have plummeted.

Pre Madoff (PM) a FOHF bought Pertrac, created an asset allocation methodology (equally weighted mostly), hired a few keen and eager due diligence people who liked flying and staying in 1 star hotels, and entertained a few large Dutch pension funds. The money came in and for a scrappy newsletter the fees on fees just rolled in. It was a lifestyle business.

Post Madoff (PM - oops that didn't work), these FOHFs are having to moor up their yachts and do some actual work. They are morphing into mandated managed account platforms, marketing only, fiduciary liability is for others, houses. And this is good for change means survival and selfishly means assets for us Hedgies are safe.

Of course the funds we all want to have as friends are the SWFs and today we link to a table showing you the biggest ones. And they are big but alarmingly are in most cases based on oil assets.

Oil really is the new black. Again.

Quote of the day
“There was an implicit greed in not questioning and just accepting unnatural returns.” Hugh Hendry of London-based Eclectica Asset Management on Madoff Investors (CNBC)

TEN OR MORE FACE POSSIBLE MADOFF CHARGES

reuters

U.S. investigators say 10 or more people associated with imprisoned swindler Bernard Madoff could face criminal charges in the coming months, a law enforcement source said on Tuesday.

The source, who asked not be identified because of the continuing investigation into the multibillion-dollar Madoff fraud, said the FBI was "closer to the beginning than the end" of the probe.

Fintag says
Phew! None of us ever thought he could do this alone although his low grade clerical staff who did what they were told and fabricated statements must surely not be in the 10. Bets are his family are.

finalternatives says " Blaming The Victims? Hedgie Says Madoff Investors 'Greedy' "

CASH-STRAPPED STATES UP AGAINST BUDGET DEADLINES

reuters

California prepared on Tuesday to resort to issuing IOUs as the giant but cash-strapped U.S. state struggled to approve a new budget in time for the new fiscal year that begins on Wednesday.

The IOUs, which are notes promising payment to vendors and local agencies, or shutting down some public services, are among measures that California and other states may have to rely on as they contend with staggering budget gaps caused by the U.S. recession.

Fintag says
July 1 is here and bankruptcy looms ...

yahoo says " Immigrants in US are asking for money from home "

INVESTORS GO MOO

ft alphaville

The correlation coefficient for the S&P 500 and the Reuters/Jeffries CRB index of commodities has been at 0.74 for the last 60 days. A value of 1 means perfectly correlated, but to give you the historical significance of a reading of 0.74 — it's the highest correlation in at least five decades, according to Bloomberg.

The S&P is also increasingly moving in tandem with the price of crude oil, with the correlation value above 0.7 in June. The correlation between the S&P and the MSCI Emerging markets index is also apparently the tightest since Russia defaulted on its debt in 1998. While we're told the correlation between the S&P 500 and the HFRI index of hedge funds reached 0.5 per cent in April for the first time in almost five years.

Fintag says
That old commodities play is playing out again. Oil supply is up, demand is down but the price keeps on going upwards. Speculators, don't you just love 'em?

business week says " Oil up to near $72 on dollar fall, Nigeria attack "

financial times says " UK economy shrinks most in 50 years "

US SEEKS TAX CHEAT NAMES FROM UBS

bbc

The US has accused UBS of "systematically" violating US laws and insisted the Swiss bank reveal the names of suspected US tax cheats.

The US Justice Department is seeking the names of more than 50,000 US customers with Swiss accounts as part of a lawsuit against UBS.

UBS said that divulging the names would violate Swiss bank secrecy laws.

Fintag says
Nuke them, that it was I say.

BANK WOES DEEPENING IN EUROPE

new york times

When the financial crisis struck the global economy last autumn, European governments moved swiftly to keep their biggest banks from falling into an abyss — never mind fears over nationalization.

But now, as big banks on this side of the Atlantic show signs of recovery, a number of their counterparts overseas are sinking into a spiral of deepening losses that has prompted the European Union to consider a more aggressive approach to cleaning up its banking system.

Fintag says
Who cares? Markets are rallying and its boom time. Buy those spades ...

LARGEST FUNDS BY ASSETS UNDER MANAGEMENT

swfinsstitute (ht castle hall)

Fintag says
Coming in at USD627 is AIDA.

Number 3 is SAFEIC of China with a tiny USD347.1 followed closely by Norway's Pension Fund at USD326.

Shame they didn't publish the emails and cell numbers of the CIOs.

SEC ISSUES STATE STREET WARNING ON COMING CHARGES

global pensions

US - The Securities and Exchange Commission could bring charges against State Street Corp. in relation to sub-prime related losses in bond funds run by State Street Global Advisors.

Fintag says
Subprime - seems such a long time ago.

global pensions says " USS to hire 25 hedge funds as part of alternative investment programme "

THE FINTAG NEWSLETTER @ 30 June 2009

Finbar Taggit

FINTAG COMMENT

A man of the Union.

Capitalists can only prosper if the State encourages them, doesn't imprison them or as in many communist countries just turns a blind eye.

The UK government is contributing to over 60% of the GDP. This is more than Cuba, one of the last rampantly communist countries left in the world. Well now the UK has joined the soviet bloc.

So far, the private sector is being tolerated by the index linked wielding civil service. However it is slowing being strangled as capital flows are inefficiently diverted and wasted via the fat cat public sector.

What if you start a new business and want a loan from a bank? Whatever the banks say it is near impossible to gain one. I know a couple of entrepreneurs who have spent 6 months trying to borrow money and they have given up. We might as well all throw in the towel and all work for state for that is where it is going.

Us Hedgies are 100% capitalists. We make money for ourselves and our staff. We go where tax and red tape is low and are nimble enough to set up flexible structures at the flick of a lawyers invoice. Unfortunately the clouds of socialism looming over us in Europe are challenging our beliefs and ostracizing us from society. We are lepers. We are the new minority. But there is hope.The EU Directive that is to kill us off is being challenged hard and we have set up a trade union to cause trouble.

Our brothers and sisters in the Netherlands and Sweden are supporting our cause and helping us with donation raising, making placards and spamming twitter.

Hedgies are angry. We were victims of the credit crunch and we are being blamed for it.

So I have changed my name to Red Fin. I am a pacifist by nature but following a few weeks playing GTA on my xBox have decided to look for a fight.

Signup to my newsletter if you want to join in.

Sorry
Madoff. I am truly sorry on a number of counts. He didn't commit a fraud but the jury said he did. He was coming out in 2 years to write his memoirs but the jury said 150 instead. Crime really doesn't pay.

VICTIM: BERNIE SHOULD BE SENT TO 'MOUTH OF SATAN'

huffington post

Bernard Madoff was sentenced to 150 years in prison earlier today, a maximum sentence. In front of the Manhattan courthouse, Madoff victims spoke out. CNBC has collected some excellent videos. WATCH:

Burt Ross, the former mayor of Fort Lee, New Jersey, offered perhaps the most memorable reaction to Madoff sentencing. Ross suggested that Madoff should be sent to the type of hell depicted in Dante's Inferno.

Fintag says
Seems rather harsh. The man obviously has mental problems and should be given counselling. Even so, the people have spoken. Power to the people.

finalternatives says " Fairfield Greenwich Reopens New York Office "

TOWERS PERRIN AND WATSON WYATT TO MERGE

global pensions

Consultancy firms Towers, Perrin, Forster & Crosby and Watson Wyatt will merge, the two firms announced yesterday.

The US$3.5bn all stock deal will create a new publicly listed company called Towers Watson & Co. Some 55% of the revenues of the new company will come from its benefits practice.

Fintag says
Bye bye Watson Wyatt and hello err, Towers Watson. That will take some getting used to.

HEDGE FUNDS RALLY TROOPS TO RAISE FUNDS FOR EU CAMPAIGN

city am

A GROUP of hedge funds is putting together a fighting fund to battle the planned European Commission Directive on Alternative Investment Fund Managers that they say will unfairly punish the UK hedge fund industry.

The Alternative Investment Managers Association (Aima), has already put together a steering committee of funds, including BlackRock and Marshall Wace, to discuss ways to combat the proposals.

Fintag says
Red Fin to the rescue.

M&G'S DOBELL BLASTS 'SELFISH' HEDGE FUNDS

times

One of the most senior fund managers at Prudential has attacked hedge funds as selfish and devious and blasted derivatives as “the scourge of the modern age”.

Tom Dobell, who manages the £3 billion Recovery Fund for M&G, the insurer's asset management unit, made the remarks in letters sent this month to the fund's 100,000 investors.

Fintag says
Oh dear. So we have a long only lovin', 19th century once a year asset allocation committee veteran who doesn't understand what we do having a paddy. No wonder Prudential has yet again let its pension holders down so badly.

Off you go. Buy some real estate and long only retail stocks. Hold them for 10 years and you never know you might make some money.

Many of the Pru's rivals love us to bits. Especially the Dutch and American ones.

Time to short the Prudential meez thinks.

WARNING: BRITAIN FACES NEW RECESSION

independent

The world's central bankers have warned that the British economy faces relapsing into another recession - the much-feared "double dip" downturn.

A continuing drought in bank lending, evidenced in the latest figures from the Bank of England, and the threat that spiraling public borrowing will feed through to higher interest rates and inflation, are judged by international economists to be mortal dangers to a sustained recovery.

The Organisation for Economic Cooperation and Development (OECD), which comprises the 30 most advanced economies in the world, added to the gloom, saying that Britain remained "deep" in recession and faced a "bleak short-term outlook".

Fintag says
The dreaded W.

I like the W hotel in New York, but it's a bit small and trendy for me.

ANNALS OF UNINTENTIONALLY REVEALING PRESS RELEASES, HEDGE FUND EDITION

ft alphaville

The FT Alphaville team receives quite a few unsolicited and often irrelevant press releases, many of which we delete with nary a second glance - while others we lampoon mercilessly.

And others, we can't help but read - like the missive which landed in our inboxes, with the subject line, “Hedge funds bull**** on art” (censorship FT Alphaville's).

Fintag says
Spelling isn't a hedgies greatest attribute. That comes elsewhere and is useful in the bedroom [Editor: Steady]

PRIVATE BANKER MOVED FUNDS UNDETECTED

new york times

He grew up in elite circles in Buenos Aires, acquiring the polish and privileged connections that paved the way for him to become a star private banker in New York to wealthy clients at UBS and JPMorgan Chase.

BUBS quietly settled the Finra action for $1.44 million last December. In mid-June, UBS filed a broker report for Mr. Arbizu's successor, Mr. Decastro, saying that he had left the firm amid an internal investigation of “violations of firm compliance and client confidentiality rules.”

“I know I am stupid,” Mr. Arbizu said. “I feel that in all these years I had my head divided into two sections, in one small section all this problem and in the rest my 'normal' life.”

Fintag says
Pirate equity is full of crooks. I mean, they all know each other and play pass the parcel all day long. One fund launches and it buys its assets from another PE fund so why not do it personally? Maybe I was a bit too strong. They aren't all crooks in the biblical sense; more in the moral sense.

SPARX TO START NEW GLOBAL MACRO HEDGE FUND, PRESIDENT ABE SAYS

bloomberg

Sparx Group Co., Asia's biggest hedge-fund manager, plans to start its first global macro fund, adding a strategy that was among the few winners in 2008 when an equities rout led to the only annual loss in its 20-year history.

The fund, which will wager on trends in stocks, bonds and currencies worldwide, will be sold to institutional investors in the next few months as Tokyo-based Sparx expands beyond equity- related offerings, President Shuhei Abe said. He declined to give the fund's size, saying that and other details are still being worked out.

Fintag says
How can something so dull and irrelevant get a whole Bloomberg page?

Anyone can say they are launching a new fund. Raising real assets is the challenge and we never get to hear about whether they were successful or not.

TOP FIRM NOW SEEN AS REAL THREAT TO GOLDMAN

here is the city

CNBC reports that the size and strength of JPMorgan's balance sheet is now thought by many to put the firm in pole position to take market share from investment banking rival Goldman Sachs. Dick Bove, the well-respected bank Rochdale Securities bank analyst said last week that 'JPMorgan can (now) compete with, and beat, Goldman Sachs'.

In the meantime, Reuters reports that JPMorgan CEO Jamie Dimon has warned that the US financial services / markets industry could suffer if it has too many regulators. Writing in The Wall Street Journal, Dimon said: 'Any regulatory overhaul should ensure that government oversight of the financial system is efficient....(but) we should avoid the temptation to have multiple regulators just for the sake of having them. Three or four regulators looking at (and fighting over) the same issue is not a wise use of taxpayer money. Companies can't operate that way. Neither should the government'.

Fintag says
And why not? Goldman wasn't always the best just like BMW wasn't.

JP Morgan are the new Audi.

PROMINENT RESEARCHER FINDS “EXTREME VALUE THEORY” CAN TURN VAR INTO A BETTER CRYSTAL BALL

all about alpha

The risk-controlled portfolio also peaked 4 months after the S&P 500 Index during the technology bubble and began recovery 3 months earlier. In the present downturn, it peaked in July 2007, 3 months ahead of the Index. It remains to be seen where the bottom of the current decline will occur.

Taken together, VaR and CVaR allow both the forecasting and management of risk. Using Extreme Value Theory to estimate them is the only prudent approach in turbulent markets or in the risk management of hedge funds where fat tails are the rule rather than the exception.

Fintag says
Of course this assumes normal distribution. Which is not proven.

V@R died in 2007. It is a waste of time. It is meaningless. Any trader who trades using V@R won't survive very long. V@R keeps the academics happy and gives Risky Quants a reason to be in a job. Regulators like it because it sounds complicated. It is a long only measure and I don't even know why I am giving it any space.

The only people who make money form V@R are RiskMetrics. This listed company charges hundreds of thousands to produce pivot tables from positional information. Capitalism at its best.

economist says " The simplest behavioral finance model ever "