HedgeFundBlogger.com by Richard Wilson

Is Goldman Sachs Paying out $650,000 Per Employee in 2009 A Good Thing?

Richard@RichardCWilson.com (Richard C. Wilson) — Wed, 11 Nov 2009 12:30:50 PST

Goldman Sachs Compensation Structure

My response to the story below: Amen. Long live capitalism and rewarding those firms which actually do outproduce and do well over time...in an era of bailouts due to poorly ran companies and leveraged risk at the expense of tax payers I actually find Goldman's cash machine refreshing.

THE boss of Goldman Sachs yesterday defended the bank’s pay policies, insisting his staff were paid more because they were “among the most productive in the world”.

Lloyd Blankfein, Goldman’s chair and chief executive, also rejected calls to break up the bank and said the firm was easier to manage than its larger rivals.

“I often hear references to higher compensation at Goldman,” Blankfein told a banker’s conference in New York.

“What people fail to mention is that net income generated per head is a multiple of our peer average. The people of Goldman Sachs are among the most productive in the world.” source

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Hedge Fund Managers Not Guilty

Richard@RichardCWilson.com (Richard C. Wilson) — Wed, 11 Nov 2009 09:27:14 PST

Hedge Fund Managers Not Guilty

Hedge Fund Managers Found Not Guilty of Fraud

A jury has acquitted two Bear Stearns hedge fund managers today. The managers were accused of misleading investors about the subprime mortgage meltdown and financial crisis, supposedly costing investors $1.5 billion. The Brooklyn jury ruled in favor of the defendants, Ralph Cioffi and Matthew Tannin, in a case that could discourage the expected government prosecutions of hedge fund managers and financial professionals.

Ralph Cioffi, 53, and Matthew Tannin, 48, were acquitted of all charges on the second day of deliberations by a jury in U.S. District Court in Brooklyn, New York. Cioffi and Tannin left the courthouse with their smiling wives and relatives, some of them crying tears of relief.

Cioffi and Tannin managed two funds, crammed with subprime mortgage-backed securities, that lost institutional and individual investors a total of $1.6 billion when the funds collapsed in mid-2007 at an early phase of the Wall Street market meltdown.

The jury on Tuesday acquitted both men of conspiracy, securities fraud and wire fraud -- charges brought in a June 2008 indictment. Cioffi was acquitted of an additional charge of insider trading.

"The government clearly will need to rethink whether and when to assert criminal responsibility in connection with the financial meltdown," said Jacob Frenkel, former SEC enforcement lawyer and now a law firm partner. Source

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Hedge Funds Invest in Australia

Richard@RichardCWilson.com (Richard C. Wilson) — Wed, 11 Nov 2009 10:24:54 PST

Hedge Funds Invest in Australia

Hedge Funds Fill Funding Gap For Australian Companies

Australian companies are getting some help from hedge funds as banks are still reluctant to lend. KPMG estimates that Australian companies have some $200 billion of syndicated loans due to mature in the next four years. But a funding gap still exists even with increased investments by hedge funds.

Australian non-financial companies sold A$2.39 billion ($2.2 billion) of bonds in the nine months to September and face an “onerous” task refinancing their maturing debt, Fitch Ratings said an Oct. 7 report. Hedge fund assets may top the previous $2 trillion high by the end of next year as double- digit average returns lure investors, Barry Bausano, Deutsche Bank AG’s global co-head of prime finance, forecast this month.

Hedge funds are focusing on companies needing between A$25 million and A$75 million and may be able to fill a funding void borrowers can’t meet with bank loans or share sales, according to Heathcote.

“Companies would be better prepared by investigating all options and not necessarily going down the typically more expensive equity route,” he said.

Australian businesses raised A$120 billion from equity sales between July 2008 and September 2009, Belinda Gibson, commissioner at the nation’s securities regulator, said at a conference yesterday. Source

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When to Start a Hedge Fund

Richard@RichardCWilson.com (Richard C. Wilson) — Tue, 10 Nov 2009 10:40:11 PST

When to Start a Hedge Fund

Matthew Lynn: May be Right Time to Start a Hedge Fund

Matthew Lynn has written an interesting commentary for Bloomberg on hedge funds start-ups. Hedge funds have been in hot water after recent arrests and the industry's dismal performance in the recession so it may be surprising that Lynn writes, "It may be time to quit that safe job and start a hedge fund." He gives three justifications for this optimism:

First, you need to begin a fund when equity markets are cheap or fairly valued. The 20 percent fee that hedge funds typically charge only kicks in when the fund is in profit. It is only possible to make big money if you start the fund when the markets aren’t in a bubble. If you launch near the peak, you’ll be underwater for years, unless you start a short-selling fund.

Second, the “carry trade” is back. You can borrow money cheaply in the U.S. and the U.K., then reinvest the money in higher-yielding currencies and assets. For much of the last decade, the hedge funds were doing that with the Japanese yen. Now they can do it with the dollar and the pound as well.

Third, the determination of central banks to reignite the global economy by flooding the markets with printed money is creating asset bubbles everywhere. They are popping up so fast, and so obviously, even former Federal Reserve Chairman Alan Greenspan could spot them. You can take your pick from the Australian dollar, emerging-markets equities, or gold. Source

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Senate Hedge Fund Bill

Richard@RichardCWilson.com (Richard C. Wilson) — Tue, 10 Nov 2009 10:53:09 PST

Senate Hedge Fund Bill

Senate Introduces Bill Requiring Hedge Funds to Register

Senate Banking Committee Chairman Christopher Dodd has unveiled a bill regulating the financial industry that would force advisers or hedge funds and other private fund managers to register with the Securities and Exchange Commission. This follows a similar House bill revealed which recently passed the House Financial Services Committee (see this article).

The bill would impose new record-keeping and disclosure requirements for private advisers to help regulators patrol for potential risks that private funds may pose to the marketplace.

Investment advisers of hedge funds with $100 million or more in assets would be subject to federal regulation under the bill. That threshold would increase the number of advisers subject to state supervision by 28%, according to a bill summary.

The House Financial Services Committee approved similar provisions last month.
The hedge-fund-registration requirement in Mr. Dodd's bill includes some exemptions for advisers of venture-capital funds and those that advise private-equity funds. The commission is called upon to define who specifically is exempted within six months after enactment. Source

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