Hedge Fund Street

Merril Lynch's Hybrid Hedge Fund

Merril Lynch is planning to unveil a new product referred to as a "hedge fund in a unit trust." It is expected to be approved the Financial Services Authority shortly. In the past, hedge funds have generally been reserved for wealthier clients, but the new Merril Lynch product is geared to the middle class investor. This new Merril Lynch hybrid of a hedge fund and unit trust is expected to have the same freedoms of a typical hedge fund, but it will not be allowed to borrow. According to Timesonline.co.uk:

A PIONEERING product viewed as “a hedge fund in a unit trust” and sold without advice across building society counters is expected to be approved by the Financial Services Authority within days.

Read more: Merrill's hedge fund with a difference to hit high street

Wendy's and Hedge Funds

Pershing Capital Square, hedge fund, is attempting to "break up" Wendy International Inc. Wendy's is run by hedge fund manager, William Ackman, who stated that after amassing 9.3per-cent stake in the company, the plan is to break it apart. Ackman went on to say that Wendy's shares are underpriced and intends to meet with shareholders to talk about boosting up the price by potential spinoff ideas. According to Theglobaandmail.com:

Wendy's shares closed down $1.65 to $41.73 in heavy trading on the New York Stock Exchange yesterday. The stock recently hit a 52-week high amid speculation that it was the target of a leveraged buyout.

Read more: Hedge Fund Aims to Chew into Wendy's

Cadbury Company Accuses Hedge Funds

The ethics of various hedge funds have been questioned recently by John Sunderland, chairman of the Cadbury Schweppes Company. He argued that hedge funds have obscured information and have not been forthcoming as they should be in the corporate sector.

Sunderland also claims that research regarding hedge funds has been toyed with in order for hedge funds to appear more appealing to investors. With hedge funds already being scrutinized after prior accusations, Sunderland's claims are just adding fuel the the proverbial fire. According to Ethicalcorp.com:

Directing much of his attack against hedge funds, Sunderland questioned the short-term outlook in their day-to-day business. "It may be old fashioned, but I view a shareholder as a shareowner - someone whose interest in the success and prospects of the company lasts more than three weeks."

Read more: Hedge fund transparency please, say corporate chairmen

Investment Banks and Hedge Funds Under the Microscope

Investment banks in the UK are about to be put under a microscope due to allegations that inappropriate conduct has occurred regarding their association with hedge funds. The Financial Services Authority has been extremely vigilant over the past few months with hedge funds. A report will supposedly be published some time in June of their findings. The relationship between a London investment bank and their hedge fund client has been the topic of conversation and scrutiny ever since it was alleged that the relationship was a little too "cozy." The investment bank has since denied the allegations, but the damage has been done and a watchful eye has been cast in the direction of hedge funds and investment banks. According to Timesonline.co.uk:

The subject was thrown into the spotlight this week when it emerged that a dossier detailing the allegedly over-cosy relationship between one London investment bank and its hedge fund client was circulating in the investment community.

Read more: Banks face scrutiny over hedge fund links

Hedge Fund Investment Aids Pension Funds

Hedge funds have diversification benefits that can lower investment risk; conversely, hedge funds have risks associated with operational risk, key man risk, not to mention many others. However, hedge funds have proven to be a helpful aid to pension funds. The question that trustees of pension funds in South Africa must ask themselves is whether or not investing in hedge funds is worth the relatively high cost.

Hedge fund regulation is still unclear and it is thought that in the future pension funds will be able to invest a portion of their money into hedge funds, all the while adhering to the law. Due to many variables, pension funds have been turning to hedge funds to aid in bigger returns. Insiders say that the key to investing in hedge funds is simply understanding how the investment can affect your overall portfolio. According to www.Sundaytimes.co.za:

"Skillful diversification is driven by an expert system that is quantifiable, not just storytelling," he added. "One must look at return, risk, diversification benefits, and performance expectations."

Read more:
'Pension funds face hedge fund dilemma'

Hedge Fund Research Firm Launches Website

Asia's oldest hedge fund research consulting firm, GFIA, has launched www.fundhub.com. The new website enables hedge fund allocators to purchase objective research reports on Asian and Latin American hedge funds. This new service that is being offered by GFIA is the first of its kind in Asia and is a response to the ever increasing demand for hedge fund based research. Singapore based GFIA, says that fundhub will appeal to a large audience because of the top notch research that is being offered. Currently, there are 12 research reports on the site with more to come. According to Financeasia.com:

"We expect the service to appeal most to medium sized fund of funds, family offices," he says. "However, we've also sold packages to asset management and hedge fund services units of banks."

Read more: GFIA launches hedge fund research report website

Hedge Funds Converge With Private Equity

Hedge funds have created even more of a stir in Europe recently. European investment bankers are intending to reap the benefits of hedge funds as they invest in private equity deals. Because hedge funds are now seeking merger and acquisition services in Europe, investment bankers believe they can boost up hedge fund revenues.

In Europe, hedge funds have become an integral aspect in private equity deals. Now, it appears as if hedge funds and private equity are converging. Hedge fund activity in the merger and acquisition market has become a unique force in the European Market. According to Reuters.com:

Hedge funds, which manage an estimated $1 trillion of assets worldwide, have mushroomed as they are free to trade in different markets and make bigger bets than traditional asset managers.

Read more: Investment Banks Home in on Hedge Fund M&A Fees

Asian Hedge Funds Set to Register with the SEC

In Asia, hedge fund managers are debating whether or not they should register with the U.S. Securities and Exchange Commission (SEC.) Registering with the SEC could yield the potential for greater investor money, as well as greater SEC surveillance. Currently, the majority of Asian hedge fund investments come from European, Middle Eastern, and local investors.

Registering with the SEC would enable Asian hedge fund managers to have access to American pension funds and other institutions. The possibility does exist for the Asian Market to make more money with America Investors and resources; conversely, no money could be made, all the while the SEC watching over the Asian Market. According to Keralanext.com:

"One (option) is you're going to largely exclude the U.S. investor base and the fund of funds business," Shipman said. "Or you turn it into a positive spin and tell people you are registered and we can take your money."

Read more: Asian hedge fund managers mull SEC registration

Hedge Funds and the Proverbial Bubble

Matthew Lynn, columnist for Bloomberg News, declares that there is still much money to be made in the hedge fund industry. However, Lynn does warn that investors must take a smarter approach as opposed to last year. Many fund managers are making the switch to hedge funds because of the potential to make money, despite that they are already some of the most successful mutual fund managers.

And yet, comparisons are still being made to all the failed dot com business that emerged in 2000. Many are wondering if the new hedge fund managers that left their secure jobs as other fund managers will experience a fate similar to those involved in the dot com era. Both sides of the argument are widely debated. According to Bloomberg.com:

Some analysts reckon so many funds have been launched, the market has reached saturation point. Others say there is still plenty of scope for growth and much demand for skilled operators.

Read more: Is There Still Time to Catch the Hedge-Fund Bus?

London Becomes Dominant Force in Hedge Fund Industry

What is one of the fastest growing industries in Britain? The answer to that question has become apparent to investors over the past year. Hedge funds in Britain have grown by leaps and bounds in terms of dollars. Now a $190 billion industry, hedge funds are the new financial darling in the British Market. Increasing it global market share from 15% to 20%, London has made a name for itself as a dominant force in the hedge fund industry. According to Timesonline.co.uk:

London increased its global market share of hedge funds from 15 per cent to 20 per cent, while its share of the European market rose from 70 per cent to 74 per cent. The capital’s dominance was due to local expertise, the proximity of clients, a strong traditional fund management industry and favourable regulation,

Read more: Hedge funds prove good bet for capital

SunGuard Emerges as Hedge Fund Lifesaver

On June 1, London based company, Peloton Partners LLP, will utilize SunGard's FRONT ARENA solution to assist in the management of its new hedge fund. The new fund will focus on the macro and relative strategies aspect. Peloton Partners intends to benefit from cross-asset revenue opportunities being that FRONT ARENA has full support across asset classes. Peloton Partners is implementing SunGard's services to help them deal capture, manage associated pricing, position keeping, as well as many other strategies. A managing partner at Peloton Partners believes that FRONT ARENA will help with growth and the infrastructure of the fund. According to Bobsguide.com:

"We will work very closely with Peloton Partners to help ease the implementation process and provide support to the business, helping Peloton Partners to focus on establishing the new hedge fund,"

Read more: Peloton Partners Hedge Fund to Use SunGard's FRONT ARENA

Hedge Funds and the London Market

London's hedge fund market grew more than 20% last year. Because of lenient regulations, close proximity to high end clients, and being recognized as a financial mecca, London has drawn a big crowd of hedge fund managers. More funds were set up in London last year than there were in the U.S.

New York is still the number one hedge fund market, but London is in a close second. With 900 funds, London's hedge fund market grew to an astonishing $190 billion last year. Various districts in London have felt the effects of the ever growing hedge fund industry According to Bloomberg.com:

The city's share of the global hedge fund market grew to more than 20 percent last year as more funds were set up there than in the U.S., according to the organization, which promotes the U.K. finance industry worldwide

Read more: Lond Controls a Fifth of Hedge Fund Assets

Hedge Funds in the Asian Markets

Higher interest rates in the United States have sparked concern over the fund flows to Asian economies.  Many insiders are divided on this topic.  Asian bankers have expressed their concern over the possible repercussions the interest rates could have on their economy, while other insiders believe that this could have a negative effect on the U.S. markets.   Because of China's ever expanding population, the Asian economy will most likely not have many difficulties due to the interest rates. According to Yahoo.com:

Such an increase shouldn't have much negative impact on Asian economies, Kalirai said, adding continued strong growth in China's economy, which expanded 9.5% in 2004, will also help sustain demand for Asian exports regardless of further increases in U.S. interest rates.

Read more: Asia Fund View: Higher US Rates Won't Stem Asia Inflows

Hong Kong and Hedge Funds

Hong Kong, a new edition to the field of retail hedge funds, has experinced immense success recently. The success is a result of the normally high riske hedge funds being in a regulatory environment. The new envirnonment appears to be attracting many investors.

Man Investments, one of the world's largest hedge funds, is on the forefront in Hong Kong with about 42 billion in funds under management. Since less money is needed to be involved in a hedge fund in Hong Kong, it truly is more accessible to the common investor as opposed to the American Market. According to yahoo.com:

"Hong Kong is one of the most successful retail hedge fund spaces anywhere," Lee said. "Along with Singapore, Hong Kong was one of the first to embrace retail hedge funds in Asia. In the U.S. and Europe, demand has been primarily institutional."

Read more: Asia Fund View: Hedge Funds Popular Among HK Investors

Van Global Declares Hedge Funds Lose in March

Despite the fact that March was a tough month for hedge funds, the Van Global Hedge Fund index is up this month, making that three consecutive months of being up. The Van Global Fund index tracks the performance of the managers of more that 6,000 funds. The index is up 0.7%.

The losses in March can be attributed to equity market declines. Almost two-thirds of the funds that have reported in, have had negative results. Hedge funds that invested in emerging markets for the first two months of 2005 were the high performers, and that was simply not the case for the month of March. According to Marketwatch.com:

The Van Global Hedge Fund index, which tracks the performance of managers from the consultant's database of more than 6,000 funds, is still up 0.7% in the first three months of 2005, Van noted. In February, the index climbed 1.6%.

Read more: Hedge funds lose 0.9% in March: Van

The CFTC and SEC Debate Over Hedge Funds

Currently, hedge funds do not have to register with the Securities and Exchange Commission (SEC.) However, last year the SEC voted that hedge funds would have to register by February 2006 so they could be more closely regulated. The Commodity Futures Trading Commission (CFTC) is currently attempting to come to an agreement with the SEC regarding registering hedge funds that invest in commodities. The CFTC does not want some of its hedge fund registrants to have to register with the SEC.

The debate is on, but both sides remain optimistic that a resolution will be reached. The SEC could potentially mandate that hedge funds dealing in commodities have to register with them, but spokespeople for the CFTC argue that the stringent guidelines set by the SEC are geared toward mutual funds and don't necessarily make sense for hedge funds. So far, the SEC and the CFTC have not come to an agreement, but an announcement will most likely be made later this spring. According to Reuters.com:

SEC and CFTC staff members have met periodically -- most recently in March -- to determine if a "commodity pool" that invests not "primarily" in securities should also be regulated by the SEC, Brown-Hruska said.

Read more: US SEC,CFTC said near hedge fund registration pact

Hedge Funds Plateau

Hedge Fund popularity has risen immensly over the past couple of years, with hedge funds becoming more available to all kinds of investors and not just the super rich. Since the rise has been so great, investors and insiders alike are questioning when the descent of the hedge fund will begin.

According to Morgan Stanley, hedge funds have peaked although capital flows will continue to grow. The investment bank also believes that because of hedge fund influence institutional assets have been more robust than private clients. Comparatively speaking, Morgan Stanley declared that last year was more successful than this year regarding hedge funds. Business.scotsman.com reports:

The 15 per cent average took the assets under management in the hedge fund industry to around $1 trillion (£533 billion), double the amount estimated in 2000.

Read more: Hedge fund growth at peak, says Morgan Stanley

Hedge Funds Head South

According to Justin Dew, hedge fund analyst, hedge fund returns are down about 50 basis points for the year. The loosly regulated hedge fund industry is suffering losses due in part to uncertaintity in the credit markets. Emerging market hedge funds are down as well. There has been much hype this past year where hedge funds are concerned, and the disappointing results don't seem to be scaring the investors away. Industry insiders are asking "why." The Boston Globe reports:

For the loosely regulated $1 trillion industry, a weak first quarter will follow last year's disappointing results when hedge funds faced a lack of trends for most of the year and underperformed the broader market.

Read more: US hedge funds' gains meager in 1st quarter

Strategies and Hedge Funds

With hedge funds currently being in the financial world forefront, many mutual funds have taken notice and are beginning to offer similar investment strategies. Although mutual funds are attempting to follow comparable strategies to hedge funds, the two funds are far from identical. The list of differences starts with the way the funds are regulated. Mutual funds have to abide by much more stringent guidelines set by the Securities and Exchange Commission, while hedge funds don't even have to register with the SEC.

In the U.S., there are now about 8,000 hedge funds with 1 trillion under management. The popularity of hedge funds has risen tremendously over the past couple of years, so it is no wonder that mutual funds want to jump on the hedge fund band wagon. Still, investors remain weary since hedge funds have been compared to a "bubble" that could potentially "pop." Thestreet.com reports:

Staggeringly high minimum requirements and exotic-sounding investment strategies kept retail investors on the outside looking in.

Read more: Playing the Hedge Fund Craze