HEDGE FUND NEWS
@ Wed 25 October 2006 : GMT

FINTAG COMMENT

After the beatings I have taken from the regulators recently, we see the FSA retreating and the SEC suffering a bloody nose from another Hedgie. Nice to see the tide is turning.

Parasites love Hedge Funds and that includes Consultants. So it is good to see a Consultant getting it wrong after all that slow and painful due diligence, and a fat fee, telling their client to invest in Amaranth. Nice one.

Despite YTD performance being quite poor for us and most Hedgies, unless you are Pickens where you have returned 120%, the money is still pouring into our multi-strategy fund and all my mates funds too. A case of the horse bolting after the gate is shut.

Today an almost dead Hedgie came alive. Perhaps the new HBO sitcom I reported yesterday can have some sketches on zombie Hedgies because there are plenty of them around it seems.

HEDGIES 1 BUSINESS PREVENTION POLICE 0

Goldstein Asks SEC for Hedge-Fund Filing Exemption - bloomberg
Phillip Goldstein, the investment manager who successfully blocked the U.S. Securities and Exchange Commission from requiring hedge funds to register, asked the agency to exempt him from stock disclosure rules.

SEC filings force hedge funds to publicly disclose valuable trade secrets, which is not permitted by the U.S. Constitution unless they are compensated for profits lost as a result, Goldstein said today in a letter to the commission. Managers with more than $100 million in equity assets must report their stock holdings each quarter on a form known as a 13F.

Fintag says
Oooof!

BLOODY CONSULTANTS

Pension fund to replace advisor post-Amaranth - financialnews-us.com
The San Diego County Employees Retirement Association, the Californian pension plan, is looking to replace the investment consultancy that recommended it put money in Amaranth Advisors, a move which lost the fund more than $100m (€79.6m).
Related Stories

The $7.6bn pension plan ended its agreement with Rocaton Investment Advisors last week and is expected to hire a new advisor within the next few days. San Diego hired Rocaton in August 2002 as a general investment consultant for the pension plan. Rocaton also advised on San Diego's alpha engine, which includes hedge fund investments.

Last week, San Diego hired law firm Bernstein Litowitz Berger & Grossmann to consider taking action after the pension fund lost more than $100m in the Amaranth collapse. The pension fund had invested $175m with Amaranth one year ago.

Amaranth, the Connecticut-based hedge fund, last month lost $6bn, or two-thirds of its assets, after making bets on natural gas prices.

Fintag says
Consultants are the bain of our lives. They know nothing and when they advise their clients, often after 2 years of painful due diligence, they get it wrong!

MONEY DOWN THE DRAIN

Hedge Fund Assets Surge, Performance Lags - banknet360
The volume of assets managed by hedge funds reached a new record in the third quarter, topping out at more than $1.34 trillion, according to Hedge Fund Research.

Inflows for the quarter were $44.5 billion, compared with $46.9 billion for all of last year.

While the volume of assets surged, performance in the third quarter lagged. On average, hedge funds returned 1% during the third quarter, and are up 7% for all of 2006.

Most of the new capital was invested in multi-strategy funds, equity hedge funds, and event-driven funds.

Fintag says
As a multi-strategy manager I like this story.

PASSIVE NO MORE

Hedge Fund wants Board Seat - hedgeco.net
Hedge fund Basswood Capital Management, a New York hedge fund with about $2 billion in assets under managements, is asking for a board seat with WCI Communities Inc., due to the company's “extreme underperformance”.

Basswood has about 2 million invested in WCI shares, or 5%. The hedge fund wrote in a letter that given WCI's “large inventory of entitled land in coastal Florida purchased prior to 2000,” Bosswood is entitled to private meetings with each of WCI's board members “a request it says has been previously ignored......and debate if WCI could be sold to a larger, better capitalized and more profitable home-building company.”

Fintag says
Hedge Fund traders like action and that is why they are so successful. Long only traders just sell; Hedgies sort out the problem.

BATMAN RETURNS

Berkowitz Opens Hedge Fund, Betting Big on Stock Market - nysun.com
David Berkowitz, whose Gotham Partners LP closed three years ago after investor withdrawals and a government probe, raised about $155 million for a hedge fund to invest in stocks.

Mr. Berkowitz and Joel Press, former head of global hedge funds at accounting firm Ernst & Young LLP, received $100 million from Reservoir Capital Group, a company that finances hedge-fund and private-equity firms, for their New York based Festina Lente Partners LP.

Fintag says
A Hedgie never dies. It may have taken Batman 3 years to return, but it only took Jabre of GLG fame a few months to launch a new fund after being beaten up by the FSA for Inside Trading.

CLEAR AS MUD PART 2

Grassley sees risk in pension hedge fund investments - cch.com
Senate Finance Committee Chairman Charles E. Grassley (R-IA) called on relevant federal agencies to report back on their transparency requirements for hedge funds, saying he was "alarmed" by the potential risk to pension fund holders who he claimed were in the dark about risks to their retirement savings.

In an October 16, 2006 letter to Treasury Secretary Henry Paulson and other agency heads, Grassley wrote that he was "particularly concerned that tens of millions of Americans may be unwittingly exposed to hedge fund investments through their participation in public and private pension plans, and yet would have no way of knowing it." The senior lawmaker stated that his staff's research into the recent collapse of Amaranth Advisors unearthed little information on their holdings, even from federal regulators. He asked each agency head to determine what steps are available to provide the public with more information on their pension investments in order to avoid leaving rank-and-file investors in the ditch if more hedge funds go bankrupt. Grassley also noted that such hedge fund investments also pose the risk of further losses to the PBGC.

Fintag says
As previously reported, 10's of millions of Americans are at risk of near death and bankruptcy from those nasty cowboy hedgies. Here is a question. Grassley - ask your mutual fund if you can see where your very-high-fees-for-low performance are going to [Editor: rebates - surely not?], what side letters they have in place and what sort of soft dollar agreements they have? Now that is lack of transparency that affects 10's of millions of Americans.

Hedge Funds are private companies with sophisticated investors who get so much daily information from us they often know more about our trading strategy than we do!

120% RETURN

Investing: Hedge funds ride out crash in commodities - iht.com
The hedge fund managers Boone Pickens and Michael Farmer have more than doubled their money this year even as the five-year commodities boom went bust.

A Pickens fund, the BP Capital Energy Commodity Fund, has gained 120 percent this year by anticipating the rise and fall of oil and natural gas prices.

The Red Kite fund managed by Farmer, former head of the world's largest copper-trading unit, purchased base metals and had advanced about 108 percent through September, according to investors who asked not to be identified because of confidentiality agreements. Farmer, who has traded metals for almost 40 years, declined to comment.

Fintag says
Some win and some lose mentioning no names. Well done to Pickens. Or should we be alarmed that these returns are very excessive and could indicate something is wrong? Well my energy fund has also performed well and that is because we didn't short anything. After Amaranth we have put everything into cash until the end of the year - our investors don't mind - they are as greedy as the next investor.

FSA 1 UN-INFORMED MEDIA 0

FSA Head Calls For Balance In Hedge Funds Regs - dailyii
A day after proposed tax changes in the U.K. fired up speculation that they would prompt hedge funds to move to friendlier locales, the head of the country's Financial Services Authority has stoked fears that unbalanced regulation of hedge funds could likewise lead to flight offshore and create new problems.

Speaking to the House of Commons, FSA Chief Executive John Tiner warned that 'if we had a disproportionate effect' on hedge funds, that they would 'take their business offshore, but they would still trade the markets in London, so then in a way we would lose touch and lose ability to actually intervene.' Tiner seemed to suggest that the current regime, which involves a specialist team monitoring the biggest players in the industry, would make more stringent controls were not necessary.

He did express concern, however, that hedge funds seem almost 'too keen' to be regulated, as if 'there is some sense that we are a badge of respectability and we just have to wary of that.' Tiner said that the FSA's lighter touch does not mean the agency will go easy on hedge funds; just last week FSA enforcement director Margaret Cole in New York suggested that it would in fact be prosecuting more insider-trading and market-abuse cases involving hedge funds. The FSA appears to feel it is setting the tone for other countries. 'Other regulators around the world are watching what we are doing with great interest.'

Fintag says
A big cheer all round for the FSA and their pragmatic approach to regulation. And it is true that Dubai, Hong Kong, and even the SEC have plagarised much of the FSA's 6000 page rule book - let us hope that it continues this way and we can move on from the hysterical reporting about lack of regulation in the Hedge Fund world to a world where investors enjoy a better pension.

However, it is not you we are afraid off, it's that Mr Gordon Brown who is forcing us to move to Singapore with threats of bringing our funds on shore and taxing us and our investors to the hilt. We live in a global economy where tax and regulation arbitrage is rife but that is another story.