Biofuels and droughts can't fully explain the recent shortages—hedge funds and small investors bear some responsibility for global hunger. Not long ago, Dwight Anderson welcomed reporters with open arms. He liked to entertain them with stories from the world of big money. Anderson is a New York hedge fund manager, and as recently as last October he would talk with enthusiasm about his visits to Malaysian palm-oil plantations and Brazilian grain farms. "You could clearly see how supply was getting tight," he said. In mid-2006 Anderson was touting the "extraordinary profitability" of field crops from corn to soybeans. He was convinced that rising worldwide hunger would be synonymous with highly profitable—and dead-certain—investment bargains. In search of new investments, Anderson sends dozens of his employees to visit agricultural regions around the world. Back in New York, at his company's headquarters on the 27th floor of an office building high above Park Avenue, they bet on agricultural markets from Peru to Vietnam. But in the towers above Manhattan's urban canyons, it's easy to lose touch with the ground. Hedge fund manager John Paulson was recently celebrated for achieving a record annual profit of $3.7 billion (€2.3 billion). Those who work in this environment have only one rule: Don't disappoint profit-hungry investors.   more »

Commodity markets regulator, Forward Markets Commission (FMC), is considering a ban on hedge funds and PE funds from trading on the country’s commexes, a top government official said. “Although hedge and PE funds play a major role in foreign markets, we would not like hedge and PE funds to come into our markets,” FMC’s chairman, BC Khatua, said reporters on the sidelines of a conference here on Tuesday. The government has recently allowed banks and MFs to participate in commexes. (ET)   more »

Globally, 391 hedge funds had assets of at least $1 billion, representing about 80% of the total assets in the industry. Of those funds, 255 are based in the U.S., with 144 in New York, up 17%. New York-based funds had $973 billion in assets at year-end, up 50% from a year earlier. The total assets of European hedge funds rose 25% to nearly $575 billion and London continues to be the dominant center in Europe, having nearly 60% of hedge-fund assets there. The market share of the top 22 European firms grew to 44% from 37%. Assets in funds based in the Asia-Pacific region grew 30% to $196 billion at the start of 2008. The study noted huge growth in China and India while Japanese funds had significant net outflows. Tokyo is declining as a hedge-fund center while Hong Kong and Singapore now have a total of 19 firms that manage assets of $1 billion or more.   more »

RAS Capital Management has launched an India-focused arbitrage-only fund of hedge funds. The RAS India Absolute Return Fund, which debuted in January, is a carve-out of the firm’s flagship multi-strategy fund of funds, RAS India Fund-of Funds, which launched in November 2006. In its first three months of trading, co-founder Robert Rahbari said the new offering is approximately flat. India Absolute Return is a multi-strat arbitrage vehicle with exposure to relative value, cash-futures, pair trading, statistical, volatility and convertible bond arbitrage. There are currently four managers in the portfolio. Rahbari said the fund is actively seeking new managers, but that it is limiting its exposure to five managers this year because “a lot of the trades tend to be similar.”   more »

Vision Global Investments is looking at launching a $200 million distressed debt fund in the near future. The move comes at a time when a number of other funds in this space are active in India like Clearwater, ADM Capital, WL Ross and DE Shaw. With the fall in markets and on the back of fears of a downturn in Asian economies, a host of funds are launching distressed funds targeting Asia. Most of the new distressed funds are targeting companies in China, India and Korea. Distressed debt funds come into play when companies get into difficulty in paying their debt obligations. In case of India, some of them would be BIFR cases or where they have gone through the corporate debt restructuring (CDR) mechanisms. These funds normally takeover the debt from the banks and restructure it through a mix of debt and equity.   more »

India-focused hedge funds have lost a jaw-dropping 26.6 per cent till date in 2008, after clocking returns of nearly 52 per cent last year. Hedge funds are believed to be able to generate positive returns, even when the stock markets fall as they use a host of strategies such as short selling, market timing and arbitrage to take advantage of every blip in the market. The loss suffered by these India-centric funds led by little-known ‘hedgies’ (hedge fund managers), dwarfs the losses made by similar country-specific funds in China (negative 13.7 per cent), Russia (negative 4.6 per cent), Brazil (negative 4.2 per cent), real-time estimates captured from hedge fund tracking firm HedgeFund.net (HFN) show. The developments are in line with the difficult period faced by funds such as Monsoon Capital, a $1.2 billion hedge fund firm, which lost over 40 per cent till March 20.   more »

HSBC Halbis Capital Management told Reuters on Monday that it plans to launch a long-short India mid-cap hedge fund because it sees good opportunities there and that it wants to launch more emerging market funds. Speaking at the Reuters Hedge Fund & Private Equity Summit in London, Bill Maldonado, head of alternative investments at HSBC Halbis, said the firm is looking to separate out an India mid-cap portfolio of up to $400 million from its main India market neutral fund.   more »

In August 2007, SEBI decided to regulate hedge funds by asking them to register as Foreign Institutional Investors. But before going into the debate of whether this was the correct move by the market watchdog or not we need to have an overview of the relevant provisions under which such registration is proposed. It was after the SEBI (Mutual Fund) Regulations of 1996, that the asset management business under private sector took its root in India. In the same year SEBI also notified Regulations and Rules governing Portfolio Managers who pursuant to a contract or arrangement with clients, advise clients or undertake the management of portfolio of securities or funds of the client. There is no information about any hedge funds domiciled in India. Further, on account of limited convertibility, offshore hedge funds (domiciled in Bahamas, Bermuda, The British Virgin Islands and the Cayman Island) have yet to offer their products to Indian investors within India. Although, Indian hedge funds are not known to exist, there is nothing to prevent a group of persons from pooling their resources to invest in stock markets, indulging in speculative trading and using leverage to enhance profits. As regards foreign hedge funds operating in India, this could be done through the Foreign Institutional Investor (FII) route (through their sub-accounts) or as they have been doing through instruments like Participatory Notes (PNs). SEBI (Foreign Institutional Investors) Regulations, 1995, regulate the funds through the FII route. Under these regulations (Regulation 2(f)), a Foreign Institutional Investor is defined as an institution established or incorporated outside India which proposes to make investment in India in securities.   more »

DMA facility will be open to institutional investors and the exchanges will have the discretion to allow other category of investors access to this in due course, a Sebi release said. The Sebi release said one of the advantages of DMA is that “clients can make better use of hedging and arbitrage opportunities through the use of decision support tools/algorithms for trading.” This makes it clear that algorithmic trading will be allowed. Earlier this year, Sebi had cleared the registration of the world’s largest hedge fund, Renaissance Technologies, which is an algorithmic trader. The Securities and Exchange Board of India (Sebi) has not specified any time frame to kick off the new system but said brokers would need to have software and systems in place that support direct access and take approval from the stock exchanges. All orders placed through DMA will be routed through the brokers’ trading system. The brokers will need to maintain a separate database of the orders executed and maintain an audit trail for five years.   more »