Hedge Fund Street

Cayman Islands is the Hot Spot for Hedge Funds

The Cayman Islands is an area in which many hedge funds have been surfacing within the last six months. The weakening of inflow of capital has not deterred the creation of hedge funds in this area, Walkers, an offshore law firm stated. The Caymen Islands continue to be a hot spot for the global hedge fund industry. The Cayman Islands Monetary Authority has 80 percent of the world's hedge funds registered with them. Although 2005 showed the smallest net quarterly inflow of assets into hedge funds since 2001, the area continues to flourish. According to reports, 2005 will be a record year for hedge funds being established in the Cayman Islands. According to Tax News:

"As money managers and investors, particularly those in emerging markets such as Asia, continue to have assets to invest and a need for strong returns, it's certain that the growth in Cayman's hedge fund industry will continue. With more than 795 new hedge funds established in Cayman through the end of June, Cayman's position as the leading offshore investment funds jurisdiction is well established," he added.

Read more: Cayman Hedge Fund Registrations' Record First Half

Eigen Hired on as Fund Manager by Highbridge

Highbridge Capital Management, an $8 billion hedge fund based in New York has announced that they have hired William Eigen. Eigen, who previously worked for Fidelity, was hired on by Highbridge as a managing director. Once described as an "up-and-coming star," by Morningstar, Eigen's exodus from Fidelity was viewed as a slight to the fund company. While at Fidelity Eigen managed Strategic Income and Fidelity Strategic Dividend. Highbridge's acquisition of Eigen is greeted with much anticipation. According to The Boston Business Journal:

Highbridge, the hedge fund Eigen has joined, was formed in 1992, and last December reached a strategic agreement with JPMorgan Asset Management. Highbridge has offices in New York, London, Hong Kong and Boston.

Read more: Fidelity's Eigen to join N.Y. hedge fund Highbridge Capital

Persaud's Currency Hedge Fund is Liquidated

The Global Asset Management Persaud Global Currency Fund, a foreign exchange hedge fund, has gone into liquidation. The fund, named after its manager, academic and currency expert Avinash Persaud, has been going through difficulties since 2004. Persaud is well known in the industry, although this was the only fund he managed. He acknowledged that other currency funds have closed and that it is a precarious time for taking a systematic approach. It is believed that 2005 has also been a difficult year for systematically managed currency hedge funds because according to BNP Paribas, they lost on average 1.3 percent in 2004 and 1.7 percent in the first half of 2005. According to The Financial Times:

“The performance was disappointing and didn’t make sense to wait it out,” added Mr Persaud, citing the small size of the fund, some $15m, as counting against it.

Read more: Currency hedge fund is liquidatedCurrency hedge fund is liquidated

German Channcellor Cautions Against Hedge Funds

Maintaining his belief that hedge funds need to be better regulated, German Chancellor Gerhard Schroeder criticized various hedge funds and cautioned how they could be a detriment to Germany's economy during a Bavarian radio interview on Tuesday. Schroeder believes that hedge funds are necessary, but is concerned that they could potentially strip companies of their assets which would, as he believes, devastate the German economy.

Earlier this year Schroeder and the chairman of his Social Democrats Party, Franz Muentefering, berated both investors as well as the funds. Interested in taking a more diplomatic approach, Schroeder stated that the debates should be conducted differently. Schroeder says he simply wants to make hedge funds more "transparent" and introduce U.S. style regulations. According to Reuters.com:

"When they buy, make tough cuts, then sell the company on to a second person, who then strips the company even further in order to sell just a little bit more, then I think it is justified to look more closely at what is going on," Schroeder said.

Read more: Germany's Schroeder slams hedge fund strategy

Hedge Funds Decline Worldwide

Investors invested $11.6 billion into hedge funds worldwide in the second quarter. According to Tremont Capital Management, this number actually represents a 53 percent decline from the first quarter. It is understandable that after continuous years of asset gains that the industry is losing momentum, if only for a little while. Despite the apparent decline in the hedge fund industry, Asian hedge funds were staggeringly high during the first six months of 2005 in number and size. Insiders are eager to see if this trend continues. According to The Herald Tribune:

"Growth in the industry is slowing, coming on the heels of several years of record asset gains," Bob Schulman, chief executive of Tremont, said in a statement. "The recent slowdown is largely attributable to lower performance in the first quarter, as well as trendless markets."

Read more: Funds in Brief: Hedge fund assets decline worldwide...

Summit Buys Stake in Coast that Could Lead to Public Trade

Summit Partners, a private equity firm based in Palo Alto, has acknowledged that they will buy a minority stake in hedge fund, Coast Asset Management LLC. This is a pivotal move that could define the development and union of the two asset classes. Summit intends to invest $126.8 million, which could enable the hedge fund to become a publicly traded company. This would be an unprecedented event for hedge funds in the United States.

Due to wrong trading strategies, some hedge funds have gone out of business. Still, many believe the industry is flourishing. Summit currently holds approximately a one-third stake of Coast Asset and will presumably hold at least one director's seat. The possibility of Coast becoming a publicly traded hedge fund company is what many insiders believe is the beginning of a trend that other companies may soon adopt. According to Reuters:

"If you look at size of the hedge fund space, a lot of people do believe that there will be some kind of shakeout. But even if there is, the leading companies in this field will remain attractive to investors," said Scott Carter, a principal at Palo Alto, California-based Summit.

Read more: UPDATE 1-Summit Partners buys stake in hedge fund

Philanthropy and Hedge Fund Managers

Hedge fund managers' wealth is quite evident when viewing their real estate to the much sought after items they have won at prominent auctions. It is refreshing to know that this wealth is not limited to attaining personal possessions, but rather extends over into a philanthropic direction. The Robin Hood Ball, a charity event aimed at fighting New York poverty, is a gala that attracts, New York's high society, stars, and yes, hedge fund managers.

Jaimie Niven, the vice chairman of Sotheby's auction house, was given the task of giving away a Ford Mustang that was the door prize at the Robin Hood Ball. The philanthropic nature was seen as the first accountant who won promptly donated it back. This trend continued as each winner after donated the car back. Ultimately, Niven announced that rather than give the designated door prize away since seemingly everyone was too generous for such a thing, he would auction it off to the next bidder for $50,000. Instead the car raised $390,000. The hedge fund community is growing in philanthropic terms and more money is being put towards various charitable causes. According to The New York Times:

"Whatever is evident from Robin Hood and Hedge Fund Cares and 100 Women in Hedge Funds is only a fraction of what they do," said Rob Davis, founder of Hedge Fund Cares, which has donated more than $15 million since 1998 to organizations fighting child abuse. "Most hedge managers are quiet and private. There are a lot of people who have private foundations and they send checks and ask not to have their names in the program."

Read more: Fund Managers Raising the Ante in Philanthropy

The Managed Funds Association Prompts Hedge Funds to be Forthright

On Tuesday The Managed Funds Association (MFA) published the latest version of its "sound practices" informational guide for hedge fund managers. The new guide contains information on new recommendations on trading, controls, risk management, disclosure to investors, and the valuation of complex financial products. The MFA's new guidelines appear to be influenced by a pertinent Wall Street-led report. In the report hedge funds as well as others involved in the financial market were prompted to upgrade their trade processing and risk management systems and allow their competition to be more aware of their trading positions. This new guide is being published at a very interesting time, as the unregulated hedge funds have been under the microscope recently. According to The Financial Times:

“Reasonable people [in the hedge fund industry] will embrace them,” said John Gaine, president of the MFA. He added that the recommendations should also be helpful to the SEC as it prepares to examine hedge funds that register with it next year.

Read more: Hedge fund guide urges openness