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Credit Suisse Veteran To Start SE Asian Hedge Fund

Mark Fuchs, chief executive of Singapore-based Fuchs Capital Partners, said in
an interview with Dow Jones Newswires that he is launching a hedge fund focused
on trading blue-chip, large-capitalized Southeast Asian stocks in the region in
two months.

Fuchs, the former head of Credit Suisse Group's (CS)
Southeast Asia equities division, has teamed up with two other Southeast Asian
veterans: Winston Loke, who was previously Credit Suisse's Chief Operating
Officer for Asia-Pacific ex-Japan, Australia equities and Mark Maroongroge, most
recently a portfolio manager with London-based hedge fund HBK Capital
Management. He declined to elaborate on the size of the fund, however, other
than to say it will start off “modest” in size but would eventually be
“significant.”

“Everyone is investing in China and India because of the
China-India story,” said Fuchs. “But they (India and China) have an impact on
the region's growth as well.”

Southeast Asian countries' tourism
industry benefits from increased outbound travel of Chinese tourists, he said,
and their low-cost labor pool will eventually benefit from foreign companies
switching out of China and India on cost concerns.

Fuchs – who until
June last year also served on Credit Suisse's Chairman's Board for the Asia
Pacific region – has been in the region for 15 years, and helped the Swiss bank
built its equities business in Singapore, Malaysia, Thailand, Indonesia, the
Philippines and Vietnam.Those are the areas, as well as Cambodia, eventually,
that the fund will be investing in.

While many investors are still wary
of expanding amid the economic slowdown, Fuchs said his experience in Southeast
Asia allowed him to look past the bad news.

“This downturn allows us to
get the first picks (of stocks and people),” he said. “The dislocation in value
is unprecedented.”

Even though the economic crisis this time around
originated in the West, Asian bourses have fared worse, falling 50% last year,
compared with the Dow Jones Industrial Average, which shed 34%.

Fuchs
added that the wide range of economies in Southeast Asia would allow the fund to
tap into businesses at every stage of the business cycle.

The Southeast
Asian long-short equity fund counts high net worth individuals and institutions
among its investors. Fuchs said the initial response from investors has been
positive, but declined to disclose names of investors.

The global hedge
fund industry has been marred by record investor redemptions, especially in the
second half of last year, forcing many hedge funds to sell investments into
falling markets or close. Hedge Fund Research said 693 funds, or 6.9% of the
industry, had closed down in the first three quarters of 2008 as losses were
compounded by record monthly withdrawals of about US$77 billion in September and
October.
Source: Dow Jones

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Taurus Launches Shriah Compliant Hedge Fund

West Palm Beach (HedgeCo.net) – India hedge fund manager, Taurus Mutual Fund,
launched India’s first actively managed Equity Oriented Shariah compliant fund,
the ‘Taurus Ethical Fund’.

With a minimum investment of INR 5000 ($100K), the open-ended diversified
equity fund opens on February 19, 2009 and closes on March 20, 2009.

Launching in Mumbai, the hedge funds has been certified by an independent
Shariah Board named TASIS (Taqwaa Advisory and Shariah Investment Solutions).

“It’s all about investing in the right businesses and Shariah compliance
ensures that,” Waqar Naqvi, CEO, Taurus Mutual Fund said, “The need to pick
businesses that foster wealth creation over the long term and distribute it
equitably forms the basis of Shariah investing. It also provides an effective
filter to identify and avoid speculative businesses. No wonder, Shariah
compliant businesses have weathered the sub prime crisis”.

Source: Hedge Co

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Fidelity launches Indian Fund of Hedge Funds

Beach (HedgeCo.net) – Fidelity International is launching the Fidelity Wealth Builder Fund through it’s Indian asset management arm, the new fund is an open ended fund of funds scheme offering asset allocation options with three plans.

The investment objective of the fund is to seek to generate reasonable returns based on the plan selected with minimum and maximum asset allocation between debt and equity. The fund manager will use a two-tier investment approach – asset allocation and fund selection – to invest in Fidelity’s funds. The NFO will be open from January 14 to February 5, 2009. The Fund will open for ongoing purchases and redemptions from March 2, 2009

“Asset allocation decisions can drive as much as 91.5% of investment returns variability, as studies have shown.” Ashu Suyash, Managing Director and Country Head – India, Fidelity International, said, “In the current market conditions of heightened volatility, a fund like the Fidelity Wealth Builder Fund provides investors a convenient route to benefit from disciplined asset allocation. We are in an environment where attractive returns are likely in the bond market and there is potential for bear-market rallies in equities on the back of increasingly attractive valuations.”

Ms. Suyash added, “To encourage investors who have turned risk averse, the Fidelity Wealth Builder Fund is a fund with no entry load. Whether investors invest through their advisers or directly, they will not be charged an entry load. Moreover, the Fund also offers investors free switch-in and switch-out facility between the Plans, if, over time, investors’ outlook for debt and equity changes.”

The Fund will offer Growth and Dividend options. A dividend is proposed to be declared, subject to availability of distributable surplus, on a Quarterly basis under Plan A and Plan B. Under Plan C, the dividend may be declared by the Trustee, at its discretion, from time to time subject to the availability of distributable surplus.

The minimum initial investment is Rs.5000.($100K )Investors can invest in the Fidelity Wealth Builder Fund even through the SIP route with a minimum amount of Rs. 500 per installment with the total of all installments not being less than Rs.5000. In addition, the systematic transfer and systematic withdrawal plans are also available.

FIL Fund Management Private Limited is the Indian arm of Fidelity International, one of the world’s leading global investment management companies with operations in 23 countries and more than $197.9 billion in assets under management.

Source: Hedge Co

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Party Is Over for Hedge Funds

U.S. hedge funds flooded into the City in the last decade, but now that business has slumped, some fund companies are shrinking their London outposts as a way to cut back on costs.

London is the second-biggest center for the hedge-fund industry after New York, with more than 400 hedge funds based in the U.K. capital, according to industry estimates.

But many hedge funds have had a rough year as markets have slumped and investors have withdrawn their money. Overall, hedge funds saw their returns fall 18% on average in 2008, according to Chicago-based Hedge Fund Research.

The focus on reining in costs stands in sharp contrast to the good times at many fund companies that set up shop in London in recent years, typically at some of the city's most desirable addresses.

After hundreds of new offices opened during the hedge-fund boom years of the last decade, the pace of closures is picking up.

IMS Consulting counts at least a dozen firms in recent months that have shuttered their London offices altogether. And some major names have let staff go and cut spending.

SAC Capital, the Stamford, Conn.-based hedge fund owned and run by U.S. investor Steven Cohen, has had a total of 16 departures in recent months, or roughly half its London staff. The fund, which is known for charging some of the highest fees in the industry, also has made a handful of recent hires, including appointing Deutsche Bank executive Drew Lubin to run the London business.

Magnetar Capital, an Evanston, Ill., fund company that racked up big profits in 2007 thanks to its trades tied to subprime-mortgage securities, has shut its London risk-arbitrage desk, eliminating four positions, according to a spokesman with the firm.

Another fund company, New York-based Atticus Capital, has made some cutbacks in London, according to a person familiar with the situation, though no executives or senior investors have left.

But at a time when some U.S. hedge funds are beating a retreat from the U.K. capital, one storied fund manager has decided that this is the time to move in. George Soros's fund company is opening offices in London this week and kicking things off with a party in the wealthy Mayfair district, where many hedge funds are located.

The irony of the Soros fund's arrival at the same time the U.K. pound is plumbing its lowest level in years won't be lost on many in the City.

Mr. Soros is best-known here for making more than $1 billion in 1992 with bets against the pound that eventually forced Britain to withdraw from the European exchange-rate mechanism, the precursor to the common euro-zone currency.

Source: WSJ

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India-focused hedge firms worst hit in Asia

The shrinking returns from hedge funds have hit the investors' confidence leading to the shutting down of many Asia focused funds. The India-focused funds were among the worst hit as the combined assets of 70 hedge funds have decreased by two-thirds in 2008.
“Every morning, there is at least one hedge fund shutting down in Asia,” Daniel McCormack, equity strategist at Australian financial house Macquarie Capital Securities told Mint. The investors have pulled out around $155 billion in the previous year as an aftermath of industry shrinking by one-fifth to $1.5 trillion. In India, the country-focused funds were among the worst hit in Asia as the combined assets of around 70 hedge funds aimed at India have decreased by at least two-thirds in 2008, reports Mint.

Hedge funds are part of the so-called shadow banking system that exists outside the range of regulatory oversight; they are secretive and do not report fund size (often leveraged several times through debt) and returns to outsiders. Funds like Boyer Allen India Fund and The Children's Investment Fund Foundation (TCI) were shut down in 2008. “Funds remain bearish on India as they expect corporate earnings to remain low, with the huge inventory pile-up in China and demand destruction in the developed world,” said Madhav Bhatkuly, former Indian joint venture partner of TCI.
Source: Silicon India

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DE Shaw or Symphony Capital to exit funds from DLF Assets

One of the two investment funds– US-based DE Shaw and UK-based Symphony Capital — who have put in money in DLF Assets (a pri-vately held firm floated by the promoters of DLF), is looking at exiting its investments, DLF vice chairman Rajiv Singh told analysts in a con-ference call on Monday.

DE Shaw and Symphony Capital have investments of around $400 million and $650 million respectively in DLF Assets(DAL), a company that buys IT SEZs developed by DLF.

“One of the two investors(DE Shaw or Symphony Capital) is looking at exiting DAL either at the time of listing or before that,” Mr Singh said, without naming the investor citing non-disclosure agreement. He added that the promoters are considering an initial public offer-ing(IPO) for DAL, but it could be contingent on market scenario and would happen only later next fiscal(2009-10). DAL 's plan to list as real estate investment trust on the Singapore stock exchange in 2008 was put off following the global economic tumoil.

Hedge fund DE Shaw which invested $400 million in DAL in 2007, is widely believed to be the fund looking to pull out of DAL. But this could not be independently confirmed. Lehman Brothers, which had earlier invested $200 million in DAL, has already exited in the July-September quarter. Lehman sold its investment to an existing investor Symphony Capital, which had invested $450 million in early 2008.

Mr Singh earlier told mediapersons that DAL was in discussion with multiple pivate equity players and was expecting to raise over Rs 2,000 crore through private placement in the current quarter.

DAL owes DLF over Rs 5,500 crore for the properties purchased ear-lier. Mr Singh said DAL will pay back around Rs 2,000 crore in the current quarter and rest by the end of this calendar year.

DLF is also looking at raising Rs 2,000 crore by selling its “non-strategic” assets, which may include its wind power business and land parcels that may not generate revenue for the next ten years. The company has raised around Rs 1,000 crore of debt recently and plans to raise an additional Rs 2,000 crore of long term debt to retire its short-term debt.

Mr Singh also expect property prices to correct by another 15-20% in the next few months. “The new launches will see a price point, which will be 15-20% lower than the current prices,” Mr Singh said.

Source: Economic Times

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Veda’s Multi-Strategy India FoF Drop 26%

An India-focused fund of funds set up lat year by an ex-Bear Stearns product manager is bleeding red. The Veda Multi-Strategy India Fund, the brainchild of Ridaa Murad, who built India-focused synthetic swaps, corporate finance and equities products for Bear Stearns, lost 26.52% between inception in September and December, according to data obtained by FINalternatives.

Murad launched the fund of funds in September with Bradford Matthews, who owns a broker/dealer in India. The fund’s initial stable of seven managers employ direct lending, debt lending, convertible arbitrage and distressed debt, according to Murad. The fund of funds also has exposure to futures and options arbitrage strategies, private equity and real estate, as well as long/short and long-biased managers.

“Given the market in India, we think the opportunities are not just in one part of the market cycle and the trick to investing in India is buying the sell-off,” Murad told FINalternatives prior to the fund’s launch.

Some more established India-focused hedge funds were also seriously hurt last year. Funds managed by Halbis Capital Management, Boyer Allan Investment Management and Permal lost between 28% to 71% last year, according to their performance data.

Source: Fin Alternatives

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US hedge fund opposes Hirco promoters’ merger move

QVT Financial, a US-based hedge fund which controls a minority stake in Hirco — a real estate fund floated by the Hiranandani group on the Alternative Invesment Market (AIM) of London — has opposed the merger resolution proposed by the Hiranandanis.

The merger, if implemented, would take the Hiranandani group’s holding in Hirco to over 50% from the existing 20%. Hirco got listed on the AIM in 2006 and raised more than £380 million for investing in residential properties in India.

Niranjan Hiranandani, chairman of the Hiranandani group, declined to comment on the issue. An EGM of Hirco, to be held on January 16 in Mumbai, will discuss the proposal. Many foreign funds own large stakes in Hirco, including the UK’s Standard Life (13.11%), HSBC Holdings (10.13%), Laxey Partners (10.05%), Halbis Capital (7.84%), Fortress investment (4.57%) and Lazard AM (4.57%). The Hiranandani group is not listed in India.

It is believed that several shareholders are likely to oppose Hirco’s proposal to merge two real estate projects — one in Panvel near Mumbai and another in Chennai (owned by the group) — with the company.

In a statement issued to PRNewswire, QVT said that it believes the resolutions are economically damaging to shareholders. They will dilute shareholder voting power and may remove the company from regulatory oversight.

At the same time, QVT believes, the resolutions are favourable to the company’s management — the Hiranandanis — who will have a financial windfall and voting control of the company. QVT is also concerned that the timing and remote location of the EGM may disenfranchise shareholders.

On December 18, the Hirco board had approved the acquisition of two SPVs owned by the Hiranandanis. These two companies are carrying out township developments at Panvel (near Mumbai) and Chennai.

The financial terms of the proposed resolutions are, in QVT’s view, extremely detrimental to shareholders as they both eliminate the preferred position of the shareholders and appear to commit shareholders to overpay the Hiranandani group for its interests in the company’s investments. Shareholders are currently entitled to receive their full cost basis, plus a 12% compounding dividend.
before the Hiranandani group receives any proceeds distributed from its interests in any company investment.

Source: Economic Times

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More hedge funds may fail amid bets on Madoff

For years, hedge fund manager Sandra Manzke trusted Bernard Madoff to deliver steady returns for her clients. Instead he may have delivered a fatal blow to her business.

Manzke's Maxam Capital and other funds of hedge funds recommended that wealthy clients invest with Madoff and his feeder funds at a time when the portfolios recorded small but predictable returns and sparked envy because most other investments were losing money. Feeder funds invested accounts for Madoff.

Madoff told FBI agents last week that he had ran a fraudulent operation, according to U.S. officials. By that point, Manzke and managers at hedge funds Austin Capital Management, Fairfield Greenwich Group, Kingate Management, Tremont Capital and Union Bancaire Privee, realized they too had lost hundreds of millions, according to people who are familiar with the investments but spoke anonymously because they were not authorized to speak for the firms. The list of Madoff victims also included banks and many wealthy individuals.

Manzke could not be reached for comment.

“Tremont was victimized by not just a person but also a scheme and a complex process designed to deceive individuals and organizations, managers and analysts, including some of the largest, sophisticated financial institutions in the world,” said Monthieth Illingworth, a spokesman for Tremont.

Austin Capital invested money for the Massachusetts pension fund, which lost $12 million on Madoff, the state said.

Calls to the other groups were not returned.

According to industry lawyers, forensic accountants and former prosecutors, the Madoff investors missed some red flags. But other investors saw the warnings and steered clear of the prominent 70-year-old Madoff, who had a loyal following among the country club set in Palm Beach and New York.

Now at best, the fund of hedge fund managers who promised to spread investors' risk for a heavy fee by vetting a handful of individual funds, will have trouble wooing new clients.

At worst, some may fail. A fund of hedge funds is a basket of funds selected by the manager to spread around risk.

“Any person who has taken on a fiduciary responsibility and may have allocated significant amounts of money to Madoff or his direct affiliates will materially suffer reputational damage,” said Ron Geffner who works with many hedge funds and investors as a partner at law firm Sadis & Goldberg.

“And as a result we would expect they would have a difficult time soliciting new assets,” Geffner added.

No one can say exactly how many of the world's estimated 2,463 funds of hedge funds will collapse by the end of 2008. But the year is already destined to set new records for worst-ever performance, most funds to fail, and most money ever withdrawn, industry lawyers said.

In October alone, investors took out $22 billion from funds of funds, according to data from Hedge Fund Research.

But with so many funds of hedge funds having fallen for the prominent, well-connected Madoff, who waved off potential investor questions with a smile, the $1.5 trillion hedge fund industry will suffer another black eye, the lawyers said. 

One reason managers apparently did not suspect the alleged fraud was that they relied on the assurances of other middle men who insisted that all was well with Madoff's funds.

“Clearly everyone believed that someone else had done the due diligence. And by relying on some small firm that Madoff employed rather than a big independent auditor was clearly a mistake,” said one person who asked not to be identified because several clients lost money with Madoff and he was not permitted to speak publicly.

Also, industry lawyers and investors who steered clear of Madoff said his investors felt safe because he had operated for years and reported only five months of losses out of 156 months.

If he had been running a fraudulent operation, they reasoned, it would have come to light sooner.

The alleged fraud came only months after failed hedge fund Bayou Group's fraud made new headlines this summer when its manager Samuel Israel staged a fake suicide to avoid prison.

With the two cases, people may become a lot more careful in selecting funds, industry insiders said.

“Investors pay funds of hedge funds to screen, select and perform due diligence and portfolio construction services on their behalf,” said Philippe Bonnefoy, chairman of the asset allocation committee at Cedar Partners, an investment adviser. “In light of the Madoff fraud, the industry will be under pressure to prove to institutional investors that all these services are worth paying for.”

Source: Reuters

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Hedge funds to shrink 25% by Dec

The global hedge fund industry, which has been hit by severe outflows and mark-to-market losses, is set to lose at least 25% of its assets in the last quarter, a global authority which tracks developments on these mystery players told DNA Money.

The industry, which has shrunk from $1.8 trillion at the end of the second quarter to $1.63 trillion in September 2008, is set to lose at least $470 billion more by the end of December 2008.

Aureliano Gentilini, global head of hedge fund research at Lipper, mailed, “Under a worst-case scenario, since the bulk of money outflows for the year will be recorded in the fourth quarter for a number of reasons, $30 billion outflows in Q4, combined with a negative performance reading of minus 10% for the broad hedge fund index in October through December, would lead to an overall reading of $1.16 trillion at the end of December 2008.”

He says, in the meantime, India must aggressively market itself as a great opportunity NOW and help investors understand that, on a company-by-company basis, there are many great opportunities NOW to invest and not to just look at it on a macro-basis.
Gentilini of Lipper feels strategies which received inflows in the third quarter will continue to be favoured.

“Looking at money flows as a proxy of hedge fund investors’ preferences in US-dollar terms, positive hedge fund sub-strategy inflows were experienced by the Global Macro, Managed Futures, Equity Market-Neutral, and Dedicated Short-Bias strategies.

Combined inflows across these strategies amounted to $4.60 billion, compared to $12.04 billion in the second quarter. I expect the strategies above, along with Option Arbitrage, might continue to post positive inflows in the last quarter of 2008.”

Freeman on the other hand feels most managers are holding more cash. They are also avoiding shares where FIIs can impact the price by selling heavily.

He says shorting is not hot anymore. “Some funds may be seeking to reduce downside by creating short positions, but I wouldn’t say it’s more popular. Besides, shorting in Indian stocks by FIIs can’t be done directly, just in F&O market. I think the bias is to stay in cash — some to go back into India and some to pay redemptions on completely non-Indian portfolios,” Freeman said.

Another hot idea is green investing. Hedge funds are now looking at socially responsible investing in emerging markets funds for foreign investors. These funds will target stocks of companies that comply with ‘social responsibilities’.

Managers like Freeman are still bullish on India. They feel the country offers an oasis of high growth that is almost impossible to find in the developed world, which is slipping into a recession. “However, the challenge is to find investors who understand “Buy Low, Sell High” to take advantage of great global emerging markets, especially India that are “On-Sale” right now,” Freeman said.

He warned that the outflows could be steeper as more investors press ‘sell’. “Outflows may well exceed the $30-billion mark… nevertheless I think performance for the broader index might be above the 10% negative reading level. But an AUM overall reading of $1.00 trillion at the end of December 2008 appears to be overly pessimistic.”

Experts feel things may not change dramatically in the new year too. Seth R Freeman, CEO of California-based EM Capital Management, LLC, which has substantial interest in India certainly thinks so. “No! January won’t trigger anything in particular. May be a little money will trickle in, but it won’t be until may be Q3 that we see some improvement.”
Source: DNA India

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