30SEP08:
31DEC08 INDICES:
FTSE100:3550
DOW30:7550
# HEDGE FUNDS:4425 30JUN08: Oil to be USD200 by 30OCT08 USA Inflation to be 7.5% by 30OCT08
...oops 23APR08:
Next Rights Issue:
HBOS...yes
All & Lec ...
...1 Nil. 17APR08: Oil to be USD127 by 30SEP08
...16MAY08 losing my touch 27FEB08:
2 Banks go bust by 30JUN08
BS down, Lehman (a bit late I know) 20NOV07: Northern Crock to be sold for 15p
Nationalized 01NOV07: Oil to be USD103 EOM
...peaked too soon 08OCT07:
SEC to fine Goldman for pricing issues
...still waiting 15JUN07: ML to buy-out BS
JPM got there first 06JUN07: The Big Crash: 17OCT07
...well it's here
Having escaped the Priory feeling revitalised and fresh, I immediately went to the West End for lunch with a potential buyer of FiNTAG. Thank goodness he wasn't Australian, but with the shake of a handshake expect to see some radical moves later this year when FiNTAG diversifies and turns into the only place you will ever need to come for your Hedge Fund needs.
With news of a gay Lord losing his pension, a man called Rupert trying to take down a Wall Street and shocking news that left handed women have short lives, Hedge Fund news is thin on the ground. However we look at gearing, carbon trading and fortis selling gas to the UK.
News Corp tables shock Dow offer (bbc) Shares in Dow Jones have surged after Rupert Murdoch's media company News Corp made a bid for the newspaper firm that values it at about $5bn (£2.5bn).
Dow Jones confirmed reports that News Corp tabled a surprise $60-a-share offer in a letter two weeks ago.
But the family holding most of Dow's shares says it will oppose the sale.
Dow Jones is one of the world's biggest news companies, controlling the Wall Street Journal, Barron's, Marketwatch, the Dow wire services, and Factiva.
While News said it had made "a friendly offer", Dow Jones described the move as "an unsolicited proposal".
The Bancroft family, which owns 62.4% of Dow shares has indicated that it will not accept the offer - which analysts say may push the price higher - and possibly tempt other would-be buyers.
But it also "puts the onus on the family to prove to the shareholders that they can operate this business better than Murdoch could," said Todd Bourell, of the hedge fund ValueAct.
On Wall Street, shares in Dow Jones closed 47.5% higher at $53.60 on Tuesday.
Cost-cutting potential
While many of the world's top newspapers have struggled to move into a more digital age, the Wall Street Journal is one of a few that has managed to build a successful subscription-based online service.
Even so, the company's shares have been under pressure as investors have questioned the outlook for an industry that relies so heavily on advertising revenues.
Analysts said that News Corp, owner of The Sun and The Times in the UK, would only have made the offer if it believed that it could merge the two businesses and significantly cut costs.
It would also give Mr Murdoch a much bigger role in financial publishing.
Dow Jones said that while the offer was being considered, there could be "no assurance that this evaluation will lead to any transaction".
Fintag says With my favourite online newspaper Financialnews (recently acquired by the Wall Street Journal) to be taken over by everyone's friend Rupert Murdoch, I look forward to pictures of naked women on articles about what Hedge Fund managers are wearing this season.
TOP GEAR
Hedge funds lower gearing by 10% (ft) Hedge funds reduced their gearing last year by about 10 per cent, according to a private survey by British regulators, lowering the potential for the failure of a major firm to create a domino effect across the financial system.
The survey by the Financial Services Authority of prime brokers, the main lenders to hedge funds, found gearing dropped from 1.86 times net equity in April to 1.66 times in October, said people briefed on the results.
The survey is the only official data regularly collected on borrowing by hedge funds, lightly regulated investment funds that typically disclose little data on their investments.
The findings, discussed earlier this month with investment banks in a private meeting, may help take the heat out of a campaign by continental European regulators for increased disclosure by hedge funds.
A meeting of the G8 industrialised nations next month will be pressed by Angela Merkel, German chancellor, to demand more transparency from the industry.
Germany, facing stiff resistance from the UK and US, where most hedge funds are based, has dropped proposals for a global database of hedge fund holdings.
However, Britain plans to propose international co-operation to turn the biannual survey into a tool for monitoring any threat to the financial system from hedge funds.
The near-failure of Long-Term Capital Management in 1998 after the fund lost $4.6bn shook the financial world and prompted a bail-out organised by the US Federal Reserve. The FSA declined to give details of its findings. But it said: “The survey shows that leverage remains at moderate levels and lending is well covered by collateral.
“We will look to work with the industry and other regulators to improve the quality of information we gather through the survey.”
The FSA pointed out last year that LTCM was 25 times geared and reached 50 times before the bail-out. FSA officials are already in talks with Bafin, the German market regulator, the Securities and Exchange Commission, the US market regulator, and the US Fed, about exchanging information for the survey.
Two senior prime brokers said hedge funds were increasingly bypassing the prime brokerages on which they have traditionally relied for borrowing, so some of the leverage in the industry would not be seen by regulators.
The survey covered about half the total hedge fund industry, which is now estimated to be worth between $1,500bn and $2,000bn (£750bn - £1,000bn).
Fintag says ...snigger. Funds are continually levering up and down and a survey asking managers what their leverage is bound to be full of inconsistencies. The agency used by the FSA to collate this data are very persistent and I did choose to help them out but put the phone down after 10 minutes as I didn't have the time or inclination. I mean we use many prime brokers and most of them are not in the UK. Borrowing money from Goldman Sachs Prime Brokerage US is cheaper than Goldman Sachs Prime Brokerage UK as most of our funds are in USD. And we have multiple Prime Brokers and guess what, we also borrow short term money from Banks too.
Of course we would tell people we are not overly geared. We are limited by the Prospectus of the fund what we can borrow - but sometimes you forget.
Still, if it gives the impression that all is well and regulators start looking at the leveraging of Private Equity funds instead then good.
Japanese companies open up to foreigners (times) As of today, the corporate landscape in Japan could start to take on a decidedly different look. Laws come into effect that, for the first time, will allow foreign companies to acquire Japanese firms by using their shares.
For Christian Thun-Hohenstein, managing director and head of European investment banking for Nomura, the Japanese bank, the news could not have come soon enough. Although there has been plenty of activity the other way around - Japan Tobacco acquired Gallaher for £7.5 billion this year and last year Nippon Sheet Glass bought Pilkington for £2.2 billion - by most measures inbound mergers and acquisitions (M&A) activity has been slow.
Last year, for example, foreign companies spent $11.3 billion (£5.6 billion) buying Japanese firms, which accounted for just 0.3 per cent of global M&A. Activity has been muted for a number of reasons. In the past, a foreign company had to set up a Japanese subsidiary, list it on the Tokyo stock exchange and pay for an acquisition by using the shares of the newly listed company.
The procedure was complicated and, although it did not block overseas investors from buying Japanese corporates, it made the process cumbersome. “Now you can just forget about all that and pay for the company with your own shares,” Mr Thun-Hohenstein said.
Historically, most of the deals in the region have involved the acquisition of large stakes and, particularly in recent years, many of them have been driven by hedge funds and private equity groups that pay for their targets upfront and in cash.
Steel Partners, the American activist fund, has been aggressive in taking stakes in Japanese companies, including its recent unsolicited attempt to acquire Sapporo Industries, one of the leading brewers in Japan. However, corporates have also been busy, if more quietly so. This year, for example, Citigroup pulled off the biggest Japanese deal in history with the acquisition of Nikko Cordial, the investment bank, for $7.9 billion.
That deal has helped to put 2007 on track to be the biggest year of Japanese M&A transactions, with $27.5 billion already put to work so far, although that is still only about 1.5 per cent of global activity. Of that, $6.14 billion is from private equity firms such as Kohlberg Kravis Roberts, which offered to acquire Orient Corp this year for $2.45 billion.
Size is key, Mr Thun-Hohenstein said. If you look at a sales comparison between a Japanese company - Hitachi, for example - and its American or European rival, the difference in revenue is not that striking, but if you compare market capitalisations, the Japanese company will be far smaller. That is starting to change, as the Japanese stock market continues to rise and corporate earnings grow, but there is still a long way to go, Mr Thun-Hohenstein said, which means that Japanese corporates will remain vulnerable in the medium term.
The prospect of hungry suitors knocking down the door has sent Japanese companies, such as Sapporo, scurrying to protect themselves, putting in place so-called poison pills to fend off would-be buyers. Two years ago about 25 of the top Japanese corporations had defence advisers on standby in case of an unwanted approach. Today that number stands at about 250, Mr Thun-Hohenstein said.
“But that won't stop people trying,” he said, pointing to the steady increase of interest in Japanese M&A by many large European corporates. “They are actively now looking,” he said. “They've identified targets and, in some cases, they have even approached them.”
The rapid introduction of poison pills has caused an uprising among Japanese shareholders, in particular the Japanese Pension Fund Association, which told the corporate community this month that it intended to become much more vigorous about protecting shareholder value in the face of friendly or hostile bid approaches.
It was, in part, a kneejerk reaction to the continuing domestic takeover tussle between Oji Paper, the largest Japanese paper manufacturer, which offered to buy the rival Hokuetsu Paper Mills for $1.4 billion. That bid was rejected, and Oji, advised by Nomura, took its bid hostile - the first such move between two Japanese companies.
However, that bid also was rejected and the deal has failed.
Still, Mr Thun-Hohenstein said that foreigners should learn a lesson from Oji and get the “soft factors” right first before diving in with hostile bids. He said: “They all want friendly deals. This is going to be the beginning of a trend, but it will take time.”
Calls to sack ABN chief for holding out against RBS (guardian) Rijkman Groenink, ABN Amro chief executive, yesterday demanded clarity from a Royal Bank of Scotland consortium about how it will fund a possible £49bn bid for the Dutch bank as he faced calls for his resignation from rebel shareholders.
Mr Groenink, who will lose any day to day management role if an agreed take-over by Barclays goes ahead, was waiting for answers last night as he endured concerted pressure from investors to negotiate with the potential hostile bidders.
He is expected to start receiving information today from the consortium - which includes Santander of Spain and Fortis of Belgium. The consortium will attempt to assure ABN Amro that the £35bn of cash it needs will be raised through rights issues by Fortis and Santander and underwritten by US investment bank Merrill Lynch while RBS will issue up to £12bn of its shares to shareholders in the Dutch bank.
TCI, the London hedge fund which has led a shareholder rebellion against the Dutch bank's management, called for the board to "immediately terminate" Mr Groenink's employment. TCI also called on the bank's supervisory board, which has to approve strategic decisions, to take control of the sale process from the management board, which is led Mr Groenink.
ABN Amro has run into trouble with its investors after recommending a £45bn takeover by Barclays and a side deal to sell its US banking arm LaSalle to Bank of America for $21bn. Shareholders regard the LaSalle deal as a "poison pill" to deter the RBS consortium from bidding.
In a letter to Arthur Martinez, chairman of the supervisory board, TCI said that Mr Groenink did "not support the RBS consortium offer that we believe is a superior proposal to the Barclays offer" and criticised his public opposition to a break-up of ABN Amro, as suggested by the RBS-led consortium.
Pressure also mounted on ABN Amro after a class action suit was filed in New York demanding a halt to the sale of LaSalle. Filed by Halpert Enterprises, the suit describes the sale as "wrongful, unfair and harmful to ABN's public stockholders and respresents an effort by defendants to aggrandise their own financial position and interest at the expense of and to the detriment of ABN's public stockholders".
ABN Amro dismissed the suit, saying it "refutes it on multiple grounds and intends to seek a dismissal of it".
The Dutch bank has already faced a court case brought by domestic shareholder group VEB which is also trying to halt the sale of LaSalle. The outcome of that case is expected on Thursday and could lead to the consortium mounting an offer for ABN Amro the following day.
Fintag says Such arrogance can only lead to a downfall. The days of passive shareholders is well and truly over.
Hedge funds see carbon opportunities (hedgeweek) Rapidly developing carbon trading markets are creating a range of promising opportunities for hedge funds to participate in this new sector, says a report from Man Investments.
Carbon markets, already trading significantly, have sprung up as the result of measures taken to reduce carbon emissions, such as the sale of carbon credits. The European Union's Emission Trading Scheme last year saw financial volumes on exchanges and through brokers totalling EUR 14.6 billion, about three times the total for the previous year.
Thomas Della Casa, Head of Research for Man Investments and one of the authors of the report, says that, based on these opportunities, hedge funds have introduced, or are working on, new investment strategies, including: trading emissions, financing carbon projects, trading electric power, cross-commodity trading, long/short listed equity and private equity.
The report, An Update on the Carbon Market, is published in Man Investments' April Quarterly Review, which examines developments and trends in the hedge fund industry.
It observes that putting a value on emissions has now become mainstream financial thinking.
'Carbon trading is emerging as one of the most significant new sectors for hedge funds and we can expect continued rapid growth, particularly if the US and China in due course join in and establish their own carbon markets, as is widely anticipated,' said Della Casa.
Further conclusions of the report include:
* Thermal power production will remain dominant for decades, despite action taken and planned to use alternative 'green' energy sources and to reduce carbon emissions * Potential for innovative clean coal burning technologies is immense. Despite the push for clean energy, global energy use is still rising. Hence, emission-free thermal power plants are, potentially, revolutionary technology. * Carbon projects reduce emissions elsewhere and generate credits that can be given monetary value. * The carbon market aims to place a cost on carbon emissions and a value on reductions. * The price of credits and allowances is set by factors such as weather and fuel prices. In the longer term, scarcity of permits determines price
Fintag says Despite the carbon trading business being lambasted recently for being a total smoke and mirrors game, it appears the participants are still enjoying the party. I personally don't get it. If a manufacturer in the UK pumps carbon into the air but then closes the factory and buys the goods from China, his carbon footprint has been wiped out. China doesn't care two hoots as it doesn't play in the game.
IT'S A GAS
Fortis delivers natural gas in UK market for the first time (hedgeweek) Fortis has now started to 'deliver' this natural gas, representing over 300 deals with 13 different counterparts in April. Total flows were fully balanced before delivery, ensuring that no net delivery occurred to or from a client.
The physical delivery of natural gas is an important milestone for Fortis Global Markets' expanding energy activities. Energy has significant growth potential and its importance in terms of global macroeconomics has perhaps never been greater. Fortis is now an active participant in the physical natural gas market both in the US, via Fortis Energy Marketing and Trading, and in Europe, via Energy & Environmental Markets.
The UK gas market was the first to fully liberalise and started active trading back in 1998. It has developed into the most liquid of the European gas markets and is worth around GBP 15 billion a year. It continues to attract an increasing number of participants.
The gas market represents further opportunities for Fortis to offer clients specialist energy products and value-added services. In the future Fortis intends to leverage its knowledge and skills in the gas and power market to offer more complex and competitive services, investment and risk management products.
Fintag says What next? Naked woman in the Wall Street Journal?
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With my favourite online newspaper Financialnews (recently acquired by the Wall Street Journal) to be taken over by everyone's friend Rupert Murdoch, I look forward to pictures of naked women on articles about what Hedge Fund managers are wearing this season.