Opalesque Newsletter 10. September 2003
Corporate pension funds seen eyeing hedge funds
Corporate pension funds are changing their thinking about hedge funds, prompted by pension obligations being treated as debt, according to a new report by Morgan Stanley. “Many corporates, we believe, think that their strategic investments are or may be constrained by the volatility of the pension fund obligations and thus wish to lower this volatility.” “Consultants, risk aversion and fees have to date been a drag anchor on the adoption of hedge funds by pension funds and insurance companies, but sentiment is changing,” they add. But there were several factors which could hinder the speedy take-up. “Our research suggests volatility of outcome, fiduciary responsibility of trustees, lack of transparency, governance issues and lack of long track records will continue to make consultants reluctant to advise funds to increase their allocation to hedge funds too quickly.” They said European institutions had around a two percent exposure to alternatives, excluding property, at the end of the first quarter of 2003, with most of that being allocated to private equity. They saw a greater proportion of inflows into hedge funds coming via fund of funds.
http://www.ipe.com/default.asp?article=15305
Hedge Fund Hiring Trend Toward Technology And Risk Management
Hedge funds are slated for twenty five percent annual growth for the next several years, creating a bright spot in the capital markets hiring picture. “In general, the hedge fund industry is hiring because assets under management are increasing and there continues to be a number of hedge funds and funds of funds which are being established and are beginning to grow...
http://www.riskcenter.com/cgi-bin/article.pl?id=7256
Trading Technology: Electronic rivals put the squeeze on Nasdaq
Nasdaq's share of trading in its own stocks has fallen to a record low in spite of the introduction of SuperMontage, its high-technology execution platform. Instinet, the Reuters-owned electronic brokerage, has 27.5 per cent of the market, according to its filing to the Securities and Exchange Commission. Last year Instinet took over Island, the leading US electronic communications network. Archipelago, the number two ECN, has 19 per cent and a further 5-7 per cent of trades that it "touches" before sending on to other exchanges. Brut, the next biggest ECN, which was taken over by SunGard last year, has a share of 8-8.5 per cent. Nasdaq's market share has fallen to 16.4 per cent from 19.5 per cent in February.
SEC accused of turning a blind eye to mutual fund malpractices
The US Securities and Exchange Commission knew about, but failed to do enough to curb, at least one of the mutual fund trading practices under investigation by New York attorney general Eliot Spitzer, academics and investor advocates said on Monday. Mr Spitzer said last week that he was probing two types of trading in mutual fund shares. One is an arbitrage-style of market-timing, which is not technically illegal. The other is after-hours trading, in which shares in mutual funds are bought and sold after the market closes. That is against the law. A SEC lawyer acknowledged that the agency knew about the market-timing practice and said the commission has urged the fund industry to put a stop to the problem, with some success. But sources close to the SEC said it may also have known about after-hours trading and failed to take action, a more serious criticism..
http://economictimes.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=174422
Donaldson`s Testimony Concerning Implementation Of Sarbanes-Oxley Act
The following is the testimony of William H Donaldson, Chairman of US Securities and Exchange Commission, before the Senate Committee on Banking, Housing and Urban Affairs,September 9, 2003.
It has been just over a year since Congress passed and President Bush signed the Sarbanes-Oxley Act into law. Sparked by dramatic corporate and accounting scandals, the Act represents the most important securities legislation since the original federal securities laws of the 1930s. The Act effects dramatic change across the corporate landscape to re-establish investor confidence in the integrity of corporate disclosures and financial reporting. Your backing of the Act and the efforts to implement its sweeping reforms, along with the strong support of your counterparts in the House and our authorizing committees, demonstrates convincingly that the Congress is dedicated to ensuring the financial integrity and vitality of our markets. The first year of the Sarbanes-Oxley Act has produced an impressive record of accomplishments in an incredibly short period of time….
http://www.riskcenter.com/cgi-bin/article.pl?id=7261
The investment banks are turning into hedge funds, and the hedge funds are turning into banks
George Soros may be more interested these days in his charities, and in geopolitics and philosophy, than he is in finance. But, like an old sailor, the talent of smelling which way the wind is blowing has yet to completely abandon him. Last week, Soros Fund Management said it had hired Steven Mnuchin, the chief information officer at Goldman Sachs Group Inc. until last year, to run a new unit called SFM Capital Management. Its business: lending money to companies, in particular to ones running into difficulties. On the surface, it looks as if Mnuchin, like many other ambitious young financiers in the past few years, is jumping from banking to the faster-growing hedge-fund industry. But scratch below the surface, and a slightly different picture emerges. Mnuchin is, indeed, trading one industry for another, but not in the way you might imagine. In the past 12 months, the mainstream investment banks have been acting more and more like hedge funds. And the hedge funds? They are walking into territory traditionally occupied by the banks…
http://quote.bloomberg.com/apps/news?pid=email&refer=columnist_lynn&sid=azH2gaWzTasY
Franklin Templeton weaves alternative strategies into Tapestry portfolios
Alternative strategies are suitable for all types of upscale investors, according to Franklin Templeton Investments Corp. In all 11 of its Tapestry portfolios unveiled last week that will be sold through third-party brokers and dealers, a 15% target weighting has been set aside for alternative strategies funds. Requiring a minimum initial investment of $250,000, the Tapestry portfolios invest mainly in well-known mutual funds from the Bissett, Franklin, Templeton and Mutual Series brands that make up the Toronto-based Franklin Templeton family.
http://www.morningstar.ca/globalhome/Industry/News.asp?Articleid=ArticleID95200310231
Market-timing hedge funds see darker days ahead
Hundreds of hedge funds that earned millions by darting in and out of mutual funds may soon have to find a new way to make money, as regulators and fund companies crack down on a long-discouraged practice. "The future of market timing is not very bright," said John Trammell, chief operating officer at Investor Select Advisors, a New York-based fund that invests in hedge funds. So-called market timers are big investors who do exactly what some 95 million customers who are saving for college tuition and retirement are told not to do -- buy and sell a lot of mutual fund shares very fast. By trading in U.S. funds that often hold foreign stocks where active trading stops long before a closing price is set, many hedge funds carved out a lucrative business whose success depended a lot on not being noticed…
http://www.reuters.co.uk/newsArticle.jhtml?type=topNews&storyID=3415848
FRM Tutorial (Week 4) – Hedging Credit Risk With Credit Derivatives
Credit risk is an important aspect of financial risk management.There are a number of different ways of measuring credit risk, including the credit migration approach of CreditMetrics, the contingent claim approach popularized by KMV, the actuarial approach of CreditMetrics+, as well as reduced form models. Despite the methodological differences of these approaches, they all serve a common purpose of quantifying the credit risk exposure of a bank or company.
http://www.riskcenter.com/cgi-bin/article.pl?id=7253
German Corner:
Europäisches Parlament will Hedge Fonds regulieren
Das Europäische Parlament will Hedge Fonds zum Schutz von Kleinanlegern regulieren. Wie die Financial Times Deutschland (FTD (NASDAQ: FTDI - Nachrichten) ) (Montagausgabe) aus Parlamentskreisen erfuhr, sollen unter der Federführung des britischen Europa-Abgeordneten John Purvis neue Regeln für Hedge Fonds eingeführt werden. Zudem sollen die Werbevorschriften für Derivate harmonisiert werden. In dem der FTD vorliegenden Papier warnt Purvis: "Der Markt für Hedge Fonds ist wegen verschiedener nationaler Regulierungssysteme und unterschiedlicher Handelsplattformen stark fragmentiert." Es müssten gesetzliche Vorschriften geprüft werden, die ein höheres Maß an Offenlegung festlegen und Einschränkungen bei den unterschiedlichen Typen von Hedge Fonds vorsehen.
http://de.biz.yahoo.com/030908/36/3mkrv.html
London: Aus Bankern werden Kläger
„Früher wurden Mitarbeiter am Freitag gefeuert, und am Montag hatten sie einen neuen Job in der City“, erzählt Catrina Smith, Partnerin für Arbeitsrecht bei der Kanzlei Linklaters. Damals hätten Ressentiments und böse Stimmung gar nicht erst aufkommen können. Das ist heute anders: Die Londoner Banker werden immer klagefreudiger. Immer häufiger gehen sie mit juristischen Mitteln gegen ihre Ex-Arbeitgeber vor. Grund: Die schlechte Jobsituation und verbesserte Rechte für Arbeitnehmer.
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