HEDGE FUND NEWS
@ Mon 01 October 2007 : GMT

FINTAG COMMENT

If you only read one website today, it has to be ft.com. It should be renamed "The Hedge Fund Times".

My bags are packed and my car is ready to take me to Heathrow for some meetings in of all places - Washington DC. So for those of you looking for predictions, acerbic wit or insightful commentary on the hedge fund world, come back tomorrow.

Hedge funds are back to their best raising billions, returning good performance and cleaning up the markets because of its ineffectivenesses.

The Useless Bank of Switzerland accounts for its subprime woes and bankers look forward to some winter gardening.

Inflation goes up in Europe above its threshold target - rates to rise, USD to fall further.

FT NEWS

Hedge fund appetite put to test >>>FT/yahoo
Investor appetite for hedge funds which weathered this summer's market storms will be tested by the announcement on Monday of up to £300m ($612m) of new money raising by two listed funds that specialise in investing in the sector...

The £600mn Ernst & Young pension scheme tilts to active management >>>bfinance
At first glance, the £600mn Ernst & Young defined benefit pension plan looks little changed. Following an investment review by trustees, the scheme's equity-bond allocation remained the same. Dig a little further, however, and it becomes apparent that the fund underwent one of its most significant overhauls in recent years. Some of those changes include maiden investments in commodities and property...

Private equity groups eye assets of Northern Rock >>>independent
The future of Northern Rock remains in the balance, with reports over the weekend suggesting that private equity groups had been given a "green light" by the Treasury to take on the stricken mortgage bank's assets. Lloyds TSB was also reported as having taken a "second look" at the Rock, after abandoning an earlier bid of 200p to 300p per share, but may not proceed with a takeover if the Government does not extend its guarantees to Northern Rock when it comes under new ownership...

Bank Credit Risk Rises Amid Concern Over Money Market Funding >>>bloomberg
Bank credit risk rose amid renewed concern lenders are having difficulty raising funds in the money markets, according to traders of credit-default swaps. Contracts on the iTraxx Financial Index of subordinated debt, a benchmark for the cost of protecting the bonds of 25 European banks and insurers against default, rose 4 basis points to 49 basis points, according to Deutsche Bank AG. The index increases as perceptions of credit quality worsen...

E&Y Report Says Private Equity Good For Business >>>finalternatives
Private equity firms, long seen as corporate raiders and vultures by the mainstream media and Hollywood, now have something more positive to hang their hats on thanks to a new report from Ernst & Young....

In other words, it is good for E&Y's fee income.

Most Read on Bloomberg: Goldman, Subprime Panic, Auto Workers >>>bloomberg
1. Goldman Sees `Bottom' as Wall Street Can't Yet Concur (9/24) 2. Subprime Panic Freezes $40 Billion of Canadian Paper (9/25) 3. GM's U.S. Workers Strike After Contract Talks Fail (9/24) 4. Fed to Cut Rates Again Before January, History Shows (9/24) 5. Merrill May Write Down Assets by $4 Bln, Goldman Says (9/26) 6. Fed's Rate Cut May Give Little Relief to Homeowners (9/24) 7. Lennar Reports Biggest Loss in Its 53-Year History (9/25) 8. BNP, UBS, Pounded by Forecast, Are Proving Prescient (9/24) 9. Las Vegas Devaluation Shows Home Market May Drop 6% (9/26) 10. Jim Rogers Sees `Skyrocketing' Prices for Commodities (9/24)...

NetBank collapses >>>alea
NetBank was closed by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
NetBank had “significant” losses last year from loan defaults, weak underwriting, poor documentation, lack of proper controls and failed business strategies...

Are Quants Relying Too Much On The Numbers ? >>>hereisthecity
With the dominance of high mathematics in the world of investment banking, it seems that computer models have become the 'fortune tellers' of the financial world. 'Quants'—those that follow mathematical models exclusively—like the numbers to tell the story or to predict the future. However, these methods alone can be a very dangerous way of managing and regulating financial risk. For all its apparent quantitative sophistication, much of the current approach to the management of financial risk rests on conceptually shaky foundations....

Does anyone live in the buy-to-let flats? >>>thisismoney
Locals are so accustomed to glass-clad monoliths rising in their midst that they no longer notice the roaring pile-drills and looming cranes. Manchester is the most extreme example of a decade of massive residential city-centre development. Others include Leeds, Newcastle, Nottingham, Swindon, Basingstoke, Southampton and Bristol. Now it is feared that some of the more grandiose schemes - fuelled by borrowers whose access to cheap money has vanished in the wake of the credit crisis - could stand for years as empty symbols of property obsession and greed. Last week, a flurry of warnings about new-build properties emerged from lenders, valuers and even developers. UCB Homeloans, part of Nationwide Building society, stopped lending altogether to landlords buying new flats. Building firm Barratt attributed a 'five to ten per cent fall' in sales to the Northern Rock debacle. Surveyors and agents across the country reported an increase in incentives - effectively price-cutting - being used by developers to shift new innercity flats.
And at auctions in London, the trickle of new-build flats under the hammer after lenders had repossessed them from stricken landlords, inevitably fetching lower prices than originally paid, went on growing. 'We definitely do have an increasing number of newly built flats on our books,' says Ben Dowman of auctioneer Andrews Robertson....

Market News Update: Euribor 3-month rate hits almost seven-year high >>>finfacts
Bank credit risk has risen in Europe and the 3-month Euribor rate, a key inter-bank lending rate, has risen to the highest level since December 2000. JPMorgan Chase & Co says that credit-default swaps on the iTraxx Financial Index of subordinated debt, a measure the cost of protecting the bonds of 25 European banks and insurers against default, rose 4 basis points to 48 basis points. The rise in the index comes as hopes of an early end to the credit crisis has abated....

Four out of five companies worldwide affected by fraud >>>castlehall

Asset flows from long-only equity to hedge funds intact >>>bfinance

Financial services firms pessimistic >>>independent

'Crying out' for cheaper money. But economists fear their pleas will fail >>>independent

New Jersey Pays To Play Alternatives In Credit Markets >>>finalternatives
New Jersey's State Investment Council this month approved a slew of investments for the state's $81 billion pension fund to invest in the credit markets via private equity and hedge funds....

New, acceptable faces of investment >>>ft
Hedge funds are growing up, turning from “two men and a Bloomberg” operations into financial powerhouses, complete with compliance officers, backup facilities, the occasional listing - and a clutch of City grandees and ex-politicians as advisers. Last week, it was revealed that GLG Partners, Europe's second-biggest hedge fund, had hired Niall Ferguson as the first history professor to become a consultant to a hedge fund....

Barred Hedgies' Lawsuit Against Lawyers Moves Forward >>>finalternatives
New York Supreme Court Justice Bernard Fried dismissed five of 11 claims against Akin Gump Strauss Hauer & Feld filed by the principals of the Veras series of funds, but gave the go-ahead to a fraud claim....

Basis seeks split in move to rescue fund >>>ft

Treasury will suffer most should hard times hit City >>>ft

Hungry for today's ultimate hedge >>>ft

130/30 funds falling short of promise >>>ft
What did we tell you?

SEC risks seeming perverse about risk >>>ft

Hedge funds bet on fall in house prices >>>telegraph
Big bets have been placed on shares in Persimmon, Britain's biggest housebuilder, taking a dive, The Sunday Telegraph has learnt. Speculators are also predicting that Grainger, the country's biggest quoted investor in residential property, will see its share price drop. The revelation comes amid mounting expectations that Britain's consumer debt bubble is about to burst as mortgage lenders raise interest rates in response to the global credit crunch....

Banks hooked on a numbers game that didn't add up >>>guardian

Fall Fuels Fund >>>nypost
A money management firm that specializes in subprime mortgage securities - and boasts that its returns are up this year - is launching a new fund designed to take advantage of a market collapse that has claimed many casualties. Carrington Capital Management is touting its new Stanwich Opportunity Fund as a way for investors to profitably play the widespread decimation taking place in the subprime mortgage market. The Stanwich fund, which has reduced its expected return target from 30 percent, will require investors to leave their capital in the fund for 18 months, according to trade publication Hedge Fund Alert, which first reported the news of Carrington's new fund....

Run a hedge fund, make $4 billion? >>>castlehall
One of the more interesting lawsuits we have seen in the hedge fund industry of late is the case brought by the principals of Veras, a hedge fund which was based in Houston, Texas, against the law firm Akin Gump Strauss Hauer & Feld. The principals allege that Akin Gump provided advice to Veras which enabled them to conclude that the strategy of late trading mutual funds was, in fact, a legal practice. The Veras funds were subsequently investigated by the New York attorney general's office and the Securities Exchange Commission, eventually paying some $36 million in penalties prior to shutting down....

TAX PAYERS CRY IN PAIN

New rules to guarantee savings (bbc)
A new scheme to protect savers with money deposited in banks or building societies has come into force.

Under the guarantee - introduced after the run on Northern Rock - customers' first £35,000 will be fully protected.

The Chancellor, Alistair Darling, is expected to tell business leaders in London the move is part of a new system designed to shield much larger sums.

It is thought he will announce that protection will be extended to £100,000 in the next Parliamentary session.

But the Association of British Insurers has warned that it could distort the savings market, drawing people towards cash savings and away from investment products.

BBC political correspondent James Hardy said that Mr Darling was stepping up efforts to restore public confidence in the banking system after Northern Rock's near-collapse.

Previously, the Chancellor had guaranteed protection for Northern Rock's savers, but the new guarantee applies to every bank and building society.

NEVER ONE TO LET YOU DOWN

Hedge funds stage recovery with September returns (financialnews-us)
Hedge funds shrugged off a disappointing August and made money again last month - though funds trading in credit continued to feel the impact of the credit squeeze.

The industry generated a positive return for investors of 0.85% net of fees for the month to September 26, according to the investable hedge fund index published by US data provider Hedge Fund Research.

Non-investable indices, which report after a delay, usually show returns that are higher than their investable counterparts.

The Hedge Fund Research investable index showed that, of the eight hedge fund strategies it details, six had made a profit in September. Global macro and managed futures was the best performer with a 3.24% return, while convertible arbitrage gained 2.34%.

The two losing strategies were equity market neutral funds which were down 1.48% in September, and distressed securities funds, which were down 0.62%.

Hedge fund managers and prime brokers, which finance hedge funds' trades, said they were pleased with last month's returns.

USELESS BUT HONEST

UBS latest victim of credit turmoil (ft)
UBS is on Monday expected to announce the departure of its investment bank head as it warns that it has written off billions of dollars on fixed-income assets, making the Swiss banking group the biggest casualty so far of the turmoil in the global financial markets.

According to people familiar with the matter, the bank is expected to say it has written down its fixed-income portfolio by more than SFr3bn ($2.6bn), triggering a third-quarter loss of at least SFr600m ($516m).

The losses, which far exceed those reported so far by other investment banks, are expected to trigger the departure of Huw Jenkins, who runs UBS's investment banking business. He will be the second top banking executive to fall victim of the market turmoil. Last month Warren Spector was ousted as co-president of Bear Stearns following the collapse of two mortgage hedge funds the bank managed.

The warning comes after a turbulent period for the bank, which earlier this year ousted its chief executive, Peter Wuffli, amid dissatisfaction over his handling of the bank's in-house hedge fund, Dillon Read Capital Management.

News of UBS's loss will prompt fears among investors that other investment banks have suffered similar setbacks in the past few months. In recent weeks, Lehman Brothers and Goldman Sachs reported better-than-expected results and Bear Stearns, the bank seen as most exposed to the US mortgage market, still recorded a profit.

INFLATION VERSUS BEING POPULAR

Eurozone annual inflation rose to 2.1% in September - above the target rate of the European Central Bank (finfacts)
Eurozone1 annual inflation2 is expected to be 2.1% in September 2007 according to a flash estimate issued by Eurostat, the Statistical Office of the European Communities. It was 1.7% in August.

The target inflation rate of the European Central Bank is at or near 2.00%

The rise in Eurozone inflation figures coupled with data on Thursday showing an acceleration in credit growth in the corporate sector, is a challenge for the ECB during the current period of credit turmoil in global banking systems.

Germany's annual consumer price inflation rate jumped to to 2.7% in September up from 2.0% in August on a harmonised European basis, according to De Statis, the country's statistical office.