Hedge Fund Street

Hedge Fund Manangers Earn Nice Sum

According to a survey conducted by Greenwich Associates, hedge fund managers earned an average of approximately $1.2 million in 2004. The average salary of a hedge fund portfolio manager was shown as being $280,000 with a bonus of approximately $900,000. The bonuses are determined by the performance of individual investments as well as organizational performance. According to Signonsandiego.com:

"Salaries for buy-side investment, research, and trading professionals are on the rise," said the Greenwich report. "Portfolio managers, analysts and traders at hedge funds continue to out-earn their peers at other institutions by a wide margin."

Read more: Hedge fund managers in top earnings league

Hedge Fund Mananger Lies About Millions of Dollars

Jon Hankins, a 32-year-old hedge fund manager based in Tennessee, is facing fraud charges for allegedly lying to investors about hefty returns when in actuality there had been substantial loss. Hankins was removed from trading at Tenet Asset MAnagement as an emergency action to stop fraud while the SEC investigated the case. A receiver was put in place to manage the affairs.

After receiving approximately $22 million from 17 investors, Hankins launched the fund, placing the money in convertible arbitrage. While predicting that Google Inc's stock would fall, he lost around $20 million, while the stock steadily climbed higher. He then continued to lie to investors and fabricate documents, according to the SEC. According to Reuters.com:

As recently as last month, the SEC said Hankins tried to woo new investors by telling them the fund had earned a 32.4 percent investment gain between April 2004 and December 2004, while in fact the fund lost 24.5 percent during that time, according to the SEC's complaint.

Read more: SEC charges hedge fund manager with fraud for lying

Fortress Investment Group Bids on Priory Healthcare

The sudden hot commodity, Britain based Priory Healthcare, has garnered much attention over the last couple of weeks due to the bidding war that has ensued over the company. Fortress Investment Group, an American hedge fund, has placed a bid making the price sky rocket out the range it was initially in. New York based Fortress, is on a limited list of bidders that may include private equity firms BC Partners, Cinven, Charterhouse and Elektra. Priory is the most famous rehabilitation clinic in Britain. It also owns 15 psychiatric hospitals, seven teaching schools, and many smaller treatment centers. According to Timesonline.co.uk:

NM Rothschild, the investment bank, is selling Priory on behalf of its majority shareholder, Doughty Hanson. A deal could eventually realise as much as £750m.

Read more: Hedge fund enters Priory auction

FrontPoint: New Fund and Strategy

FrontPoint Partners LLC introduced Quantitative Equity Hedge Fund today. The $5.4 billion hedge fund firm appointed Rick Bookstaber to head the new fund. The new fund will utilize "computer models to generate trading ideas from historical pricing trends and anomalies." This will mark FrontPoint's eleventh investment and fifteenth strategy. The new Quantitative Equity Hedge Fund team includes Bookstaber as well as two other unknown individuals. According to Marketwatch.com:

"Rick and his team have a broad mandate at FrontPoint to develop a group of quantitative long/short strategies which will broaden our equity investing capabilities and complement our existing equity strategies," Philip Duff, FrontPoint's chief executive officer, said.

Read more: FrontPoint unveils new hedge fund

Hedge Fund Mananger Swindles Investors

Howard K. Waxenburg, a onetime successful hedge fund manager, shot himself in the head in his home last month. Waxenburg ran a hedge fund that through the course of 15 years managed to accumulate more than $73.7 million from approximately 200 investors. Despite Waxenburg losing his job in the 1980's for deceiving and stealing from his employer at the time, his clients regarded him as an honest man and placed their trust as well as their money in him.

Earlier this month the SEC froze Waxenburg's hedge fund accounts and confiscated his records. Waxenburg did not maintain accurate reports and he completely fabricated whole quarterly reports. Waxenburg delivered the false reports with handsome checks to his investors; the money coming from their initial investment, not the returns that they were led to believe they were receiving. The SEC reported upon seizing Waxenburg's records that 95 percent of the money he had received from investors was simply gone. According to Sptimes.com:

"I knew one day it would end, perhaps with a slight detrition," said Andrew Marias, a California investor who lost much of his employee pension IRA to Waxenberg. "I never expected anything like this."

Read more: The case for hedge fund oversight

Deephaven Capital Management Rejects MCI Deal

Deephaven Capital Management, a Minnetonka based investment firm, set out to gain ownership of the long-distance telephone company, MCI Inc. yesterday. Throughout the 12 years that Deephaven has been in business, it has managed to climb its way to being one of the world's 25 largest hedge funds with currently $3.75 billion under management. Approximately $411.2 million of Deephaven's assets are invested in MCI.

In an attempt to protect their 16 million shares, Deephaven has asked MCI shareholders to reject the proposal to sell out to rival, Verizon Communications for $8.5 billion. Deephaven was a proponent of Qwest Communications putting their offer of $9.85 billion on the table, but Qwest dropped out of the bidding war last month. In the past hedge funds have not publicly been involved in shareholder activism; however, the growing number of hedge funds compounded with the disappointing returns have started this trend. According to Twincities.com:

"We believe the MCI board made the wrong decision," said Deephaven portfolio manager Matt Halbower. The Verizon deal value's MCI at $26 a share while Qwest would have paid $30. But Halbower believes Qwest is a better fit overall. "It was $30, a lot of which was in stock of a combined enterprise that would have enjoyed tremendous upside from all the synergies."

Read more: Click here to find out more! Hedge fund opposes MCI deal

Marin Capital Hedge Fund Closes Funds

It was reported today that Marin Capital Partners LP, a convertible-bond, hedge fund management firm, has closed down funds and will be returning money to investors. Marin, with about $1.7 billion under management sent a letter to investors on Tuesday and explained their reasons for halting the funds. The main reason being, "a lack of suitable investment opportunities." Marin's Tiburon Fund was down 3.86 percent for the first five months of the year. The global convertible funds were down an average 6.95 percent as it was reported in May. According to Reuters.com:

The letter cited "a lack of suitable investment opportunities" and little prospect of coming up with winning bets -- or, in hedge-fund parlance, "an unfavorable risk reward situation in the relative value strategies we trade", the letter said, according to the Journal.

Read more: Marin Capital hedge fund shuts up shop - WSJ

Money Moved Into Hedge Fund Despite Loss

According to a report that is out, millions of dollars were moved into a high risk hedge fund despite the fact that it began to show substantial losses for the Ohio Bureau of Workers' Compensation. The Columbus Dispatch reports that an additional $125 million went into the fund after it was reported that it had already lost millions. MDL Capital Management of Pittsburgh handled the hedge fund. According to Onnews.com:

Hedge funds generally carry higher risks. Monthly reports from MDL to the bureau show the fund lost nearly 41 million dollars in February, March and April of last year, before 100 million was allocated to it in May.

Read more: Report: Money Moved To Hedge Fund After Losses

German Channcellor Pushing for Hedge Fund Regulation

"We want stable financial markets," said German Chancellor Gerhard Schroeder, as he explained how him and his country will seek unified international controls on hedge funds. As he addressed his Social Democratic Party in Berlin, he stressed the importance of having supervision over the ever expanding hedge fund industry. Schroeder hopes to come to a conclusion soon with other Group of Eight and European Countries. For the first time last year, hedge funds were able to run in Germany and investments have already surpassed one billion euros ($1.2 billion). According to Bloomberg.com:

The accumulation of risk capital in the $1 trillion hedge- fund industry has drawn scrutiny from politicians and central bankers globally. The funds' strategies, such as placing bets that securities will fall or pushing for executive changes at companies, have spurred calls for stronger controls within the Social Democratic Party in particular.

Read more: Schroeder Seeks Uniform Global Hedge-Fund Standards (Update2)

Sihpol Found Not Guilty in Hedge Fund Trial

Theodore Sihpol III, a former Bank of America broker, was found not guilty. Sihpol, who was charged for allegedly aiding a New Jersey hedge fund make trades after the stock market had closed, was acquitted after six days of deliberation. New York attorney, Eliot Spritzer began investigations in the mutual fund industry and Sihpol was the first to go to trial due to the investigations. Spritzer continues to investigate. According to Iht.com:

"This acquittal is a blow to Eliot Spitzer, who has been unable to prosecute Wall Street criminals successfully," said Jacob Zamansky, a New York lawyer who has represented investors in fraud suits. "By comparison, federal prosecutors have a strong record," he said. "Spitzer should concentrate on working to prove his cases rather than trying people through the press."

Read more: Spitzer loses hedge fund case

Hedge Fund Performance Improves

In May, hedge funds rose an average of 1.3% according to Hennessee Group LLC. a company responsible for tracking hedge fund performance. Hennessee also declared that the largest increases could be seen in growth and technology funds. After April’s staggering decline, Investors are feeling a bit more at ease, but remain wary.

Although Hennessee’s tracking supports the idea of an increase in hedge fund performance, other companies such as Merril Lynch and Co. have differing results. According to Merril Lynch, hedge funds declined .01%, while the Chicago based, Hedge Fund Research Co., show an increase of 1.14%. All three companies use different methods for tracking the funds.
According to Bloomberg.com:

In May, funds with at least 50 percent of assets in the technology sector jumped 4.88 percent, Hennessee said. Funds investing in growth securities rose 4.32 percent.

Read more: Hedge Funds Rose 1.3% in May After April Drop, Hennessee Says

Poor Hedge Fund Performance Won't Stop Investors

Despite the poor performance of hedge funds recently, analysts believe that institutional investors, like pension funds, will continue to invest in hedge funds because of their diversified nature as well as the risk adjustment. However, investors will most likely change their strategy when investing in hedge funds. Hedge fund returns in April were the lowest they ever have been, but with the General Motors Corp. credit downgrades, May is looking turbulent as well. According to Reuters.com:

But investors are likely to switch to strategies that focus on price inefficiencies between securities -- known as relative value -- and away from loss-making strategies in convertible bond and other credit markets.

Read more: Weak hedge fund returns won't dry up inflows

Gartmore Investment Management Proposes Better Regulation

London based company, Gartmore Investment Management, currently overseeing $6.3 billion in hedge funds is proposing that regulators institute constant rules for the industry as a preventive move to protect smaller firms. As hedge funds are being examined more closely than ever, more investors are hoping that the industry will adopt a set of rules, still nothing regarding this matter has materialized. London based regulators will put out more proposals regarding regulation later this year. According to Bloomberg.com:

Larger managers risk having their reputation damaged from the behavior of smaller unregulated funds because rules worldwide may not be as strong as those in the U.K. or U.S., according to Charles Beazley, who runs Gartmore's hedge fund unit.

Read more: Gartmore Says Regulators Should Adopt Uniform Hedge Fund Rules

Icahn Drops Suit Against Hedge Fund

After Mylan Laboratories Inc. halted their plans to buy King Pharmaceuticals for $4 billion, Financier Carl Icahn promptly dropped his suit against hedge fund Perry Corp., as well as Mylan. In Icahn's suit, he debates that New York based Perry simply bought shares in Mylan without any intention of having economic interest, rather to facilitate Mylan's purchase of King. Icahn, a Mylan shareholder, was wary of the deal from the beginning. According to Kansascity.com:

"In light of Perry's actions, we determined that there was no reason for us to proceed with this litigation at this time," Icahn said in the release.

Read more: Carl Icahn drops suit against Mylan, hedge fund