In suits filed in Illinois, the SEC and the Commodity Futures Trading Commission took emergency enforcement action against hedge fund manager Nikolai Battoo for allegedly exaggerating the value of the assets he managed and concealing major losses from investors during the 2008 financial crisis.
The SEC alleges that Nikolai Battoo claims to manage $1.5 billion on behalf of investors around the world, including at least $100 million for U.S.-based investors. But contrary to Battoo’s proclaimed track record of exceptional risk-adjusted returns for his investors, he actually suffered major losses in 2008 due to his investments in the Bernard Madoff Ponzi scheme and a failed derivative investment program.
“Rather than admit the losses to investors,” The SEC said, “Battoo has been overstating the value of his investments in a variety of ways. By boasting benchmark-beating returns, he has continued to attract new investors. However, during the past several months, investors have requested redemptions on their investments with Battoo. Instead of paying them, Battoo has provided a series of excuses ranging from the MF Global collapse to others placing a hold on investors’ money due to government investigations.”
The Eurekahedge Hedge Fund Index gained 0.47% during the month. Market sentiment was optimistic for most of the month, with prospects for QE3 increasing, positive signals from the Euro zone and stronger US economic data. The MSCI World Index was up by 1.64% in August.
Key highlights for August 2012:
- Hedge funds gained 0.47% in August and were up 3% year-to-date.
- Relative value hedge funds were up 7.34% August year-to-date and have attracted significant assets in 2012 – total AUM now stands at US$60 billion.
- Event driven posted their best return in six months – the Eurekahedge Event Driven Hedge Fund Index was up 1.65%.
- Distressed debt hedge funds also saw their best results in six months with the Eurekahedge Distressed Debt Hedge Fund Index gaining 1.07%.
- The Mizuho-Eurekahedge Emerging Markets Index rose 1.63% in August.
- CTA/managed futures funds have witnessed six months of net negative asset flows, losing US$16 billion since February 2012.
Most regional mandates finished the month in positive territory with managers allocating to the Americas leading the way. The Eurekahedge Latin American Hedge Fund Index was up 1.09% while North American managers gained 1.02% during the month. Although the markets posted a drop at the start of the month due to uncertainty about the Euro zone’s bond buying program, the trends reversed quickly on the back of positive comments from the ECB and strong US economic data. Positive sentiments regarding QE3 added further steam to the rally – the S&P500 was up 1.98% during the month.
European managers also posted a positive return of 0.62% amid healthy returns in underlying markets – the MSCI Europe Index3 was up 2.10%. Risk appetite was up during the month mostly through policy action expectation. Emerging markets and Asia ex-Japan hedge funds also finished the month in positive territory with gains of 0.88% and 0.63% respectively.
Most strategies were positive in August amid strong trends across a number of sectors. Event driven and distressed debt hedge funds posted their best returns in six months as market sentiment remained buoyant through most of the month. The Eurekahedge Event Driven Hedge Fund Index was up 1.65% in August while the Eurekahedge Distressed Debt Hedge Fund Index gained 1.07%. CTA/managed futures funds witnessed losses of 0.63% as some funds lost out on currency trades. Trend following strategies posted negative returns for the month with short-term systematic and fx traders seeing the largest losses.
Hedge fund Generation Investment Management, which was founded in 2004 by former Vice-President Al Gore and David Blood, has increased its stake in $3.2 billion market cap manager of real estate and investments, Jones Lang LaSalle Incorporated, to 2.3 million shares.
Generation now owns 5.3% of the company’s shares outstanding, making them the largest hedge fund holder of the stock. the hedge fund has filed a 13G with the SEC to disclose its investment.
Generation focuses on long-term investing, integrated sustainability research, and client alignment.
The SEC has alleged that Hyung Lim of Los Altos, Calif., received up to $15,000 and stock tips about a pending corporate acquisition for regularly providing a fellow poker player and hedge fund manager Danny Kuo, with nonpublic details ahead of Nvidia Corperation’s quarterly earnings announcements.
“The former Altera Corp. executive pleaded guilty to passing illegal tips about his company and Nvidia Corp., some which were relayed to a group of fund managers accused of running an insider-trading “criminal club.” Hyung Lim, 46, pleaded guilty today to conspiracy to commit securities and wire fraud before U.S. District Judge Richard Sullivan in Manhattan.” Bloomberg reports.
Kuo, a hedge fund manager, illegally traded on the information and passed it on to multi-billion dollar hedge fund advisory firms Diamondback Capital Management LLC and Level Global Investors LP. The SEC charged Kuo and the firms among others earlier this year as part of its widespread investigation into the trading activities of hedge funds.
According to the SEC’s complaint filed in federal court in Manhattan, Kuo and the hedge funds made nearly $16 million trading in Nvidia securities based on Lim’s inside information. The U.S. Attorney for the Southern District of New York also announced criminal charges against Lim.
Hedge fund manager Man Group has teamed up with investment bank Nomura to launch a computer-driven fund, The Nomura Man Systematic Fixed Income fund.
The fund uses algorithms from Man’s $16.7 billion flagship fund AHL, it will trade interest rate and bond futures, currencies and interest rate swaps globally.
“The world’s bond markets are roughly twice the size of the world’s equity markets yet much less money is managed by fixed income than by equity alternative investment managers.” Sandy Rattray, chief investment officer of Man Systematic Strategies, a division of Man running the fund, said. “In an environment where market participant risk-taking in interest rates has been considerably reduced since 2008, this creates attractive alpha opportunities.”
The fund will seek to latch onto trends in prices; spot distortions in yield curves and benefit by their reverting to normal; and profit from higher interest rates in emerging market currencies if it judges market conditions favorable.
The fund was seeded with $50 million and has been in the works since January 2010. A UCITS version may be in the works, Man said.
James Simons, the founder of hedge fund Renaissance Technologies and his wife Marilyn Simons, both Ph.Ds, have decided to fund open access scientific repository arXiv through an operating grant from the Simons Foundation.
The arXiv preprint server at Cornell University Library in Ithaca, New York, will receive up to $350,000 a year in funding for the next five years. The sum would include a yearly $50,000 unconditional grant, with the remainder being matched to funds provided by arXiv’s other donors.
The Simons Foundation, which was founded in 1994 by the duo, conducts autism research and works to advance the frontiers of research in mathematics and the basic sciences.
“For me and for a large fraction of the active researchers in mathematics, physics and computer science, interaction with the arXiv is a daily practice. arXiv has changed the way we access information. This new resource is even more important for the many scientists who don’t have direct access to great libraries,” said David Eisenbud, Director of Mathematics and the Physical Sciences at the Simons Foundation.
SEC commissioners voted 4-1 to invite public comment for the proposed rules of the Jumpstart Our Business Startups Act or JOBS Act. (Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act) to eliminate the prohibition against general solicitation and general advertising in certain securities offerings such as hedge funds and startups.
The SEC will take comments on the proposed rules for 30 days, then review the comments and determine whether to adopt the proposed rules.
“I believe that the proposed rules fulfill Congress’s clear directive that issuers be given the ability to communicate freely to attract capital, while obligating them to take steps to ensure that this ability is not used to sell securities to those who are not qualified to participate in such offerings,” said SEC Chairman Mary Schapiro.
Rule 506 is typically relied on by hedge funds and other private pooled investment vehicles when selling interests to investors.
The JOBS Act is a law intended to encourage funding of United States small businesses by easing various securities regulations. It passed with bipartisan support, and was signed into law by the President of the United States on April 5, 2012. It has been delayed by the SEC a number of times.
Co-Founder and Co-Chief Executive Officer of $160 billion hedge fund The Carlyle Group, David M. Rubenstein, will receive the 100 Women in Hedge Funds’ (100WHF) 2012 Effecting Change Award at the annual New York Gala to be held at Cipriani 42nd Street on November 14, 2012.
“We are delighted to honor David Rubenstein with the Effecting Change Award this year for his many professional and philanthropic accomplishments. Through his activities with numerous educational, artistic and historical organizations,” Mimi Drake, Chair of 100WHF, said, “David has demonstrated the importance of educating America’s youth as well as his dedication to helping others achieve success. In particular, his commitment to The Giving Pledge will ensure that his impact is felt by many generations to come.”
Rubenstein joins a prominent list of past U.S. Effecting Change honorees that includes Hillary Rodham Clinton, George Soros, Ray Chambers, Gary Cohn, Carl Icahn, Julian Robertson, Robert Rubin, Jessica Palmer, Ken Langone, Joel Klein, T. Boone Pickens and Peter G. Peterson.
“Romney had invested—at minimum—more than $10 million as of 2011 (that number is based on the low end of ranges he has disclosed—the true number is almost certainly significantly higher). Almost all of them are affiliated with Bain Capital, the secretive private equity firm Romney co-founded in 1984 and ran until his departure in 1999 (or 2002, depending on whom you ask). Many of them are offshore funds based in the Cayman Islands. “
The Guardian reports:
“The Romneys are also investors in Absolute Capital Return Partners, a Delaware-based partnership that uses a technique called equity swapping to avoid tax. Equity swaps allow investors to exchange gains and losses on investments without taking ownership of the asset. The Internal Revenue Service has expressed concerns that swaps may have allowed investors to avoid paying billions of dollars on dividends.”
Romney says he won’t disclose his financial records as his family does not want to show how much he has donated to the Mormon church.
“Our church doesn’t publish how much people have given,” Romney told Parade magazine. “This is done entirely privately. One of the downsides of releasing one’s financial information is that this is now all public, but we had never intended our contributions to be known. It’s a very personal thing between ourselves and our commitment to our God and to our church.”
Year-to-date, IVP has added 12 new hedge fund clients globally, driven largely by managers’ needs for greater efficiency and control in managing complex portfolios in an increasingly burdensome compliance environment. To further support the office expansion, IVP has hired over 50 new employees.
Currently, IVP boasts more than 250 employees assisting with London, New York, Mumbai, New Delhi & Noida operations.
Founded in 2000, Indus Valley Partners includes 15 of the top 50 global hedge funds among its client base and $500 billion, representing over 25% of global hedge fund AUM, is managed using IVP technology.