Hedge Funds Flocking To Ireland

The Irish Funds Industry Association (IFIA) is reporting an uptake in applications by fund managers seeking authorisation in Ireland under the new Alternative Investment Fund Managers Directive (AIFMD).

According to information released from the Central Bank of Ireland (CBI) to the IFIA today, applications from 72 fund management firms are being processed at present, with 11 AIFMs already authorized by the Central Bank of Ireland. In recent weeks 47 applications have been received.

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“With more than 40% of global hedge fund assets now serviced in Ireland, the news further highlights Ireland’s credibility as a domicile for alternative investment funds, and one of the top jurisdictions for accessing AIF passporting across the EU.” Pat Lardner CEO of the IFIA, said. “This is the first time the Central Bank of Ireland has released these figures and they clearly highlight that Ireland is going to be a domicile of choice for fund managers.”

The CBI now believes it will be exceeding its initial expectations and processing up to 90 applications between now and the deadline on 22nd July 2014. Ireland currently has over €1.5 trillion ($2.06 trillion) in alternative assets.

Countries, Hedge Funds

The Hedgemaster Reports on Ukraine’s Breakthrough

Hedge fund billionaire George Soros put out a statement obtained by HedgeCo regarding the violent uprising in the Ukrane:

“Following a crescendo of terrifying violence, the Ukrainian uprising has had a surprisingly positive outcome.” Soros said, “Contrary to all rational expectations, a group of citizens armed with not much more than sticks and shields made of cardboard boxes and metal garbage-can lids overwhelmed a police force firing live ammunition. There were many casualties, but the citizens prevailed. This was one of those historic moments that leave a lasting imprint on a society’s collective memory.

How could such a thing happen? Werner Heisenberg’s uncertainty principle in quantum mechanics offers a fitting metaphor. According to Heisenberg, subatomic phenomena can manifest themselves as particles or waves; similarly, human beings may alternate between behaving as individual particles or as components of a larger wave. In other words, the unpredictability of historical events like those in Ukraine has to do with an element of uncertainty in human identity.

People’s identity is made up of individual elements and elements of larger units to which they belong, and peoples’ impact on reality depends on which elements dominate their behavior. When civilians launched a suicidal attack on an armed force in Kyiv on February 20, their sense of representing “the nation” far outweighed their concern with their individual mortality. The result was to swing a deeply divided society from the verge of civil war to an unprecedented sense of unity.

Whether that unity endures will depend on how Europe responds. Ukrainians have demonstrated their allegiance to a European Union that is itself hopelessly divided, with the euro crisis pitting creditor and debtor countries against one another. That is why the EU was hopelessly outmaneuvered by Russia in the negotiations with Ukraine over an Association Agreement.

True to form, the EU under German leadership offered far too little and demanded far too much from Ukraine. Now, after the Ukrainian people’s commitment to closer ties with Europe fueled a successful popular insurrection, the EU, along with the International Monetary Fund, is putting together a multibillion-dollar rescue package to save the country from financial collapse. But that will not be sufficient to sustain the national unity that Ukraine will need in the coming years.

I established the Renaissance Foundation in Ukraine in 1990 – before the country achieved independence. The foundation did not participate in the recent uprising, but it did serve as a defender of those targeted by official repression. The foundation is now ready to support Ukrainians’ strongly felt desire to establish resilient democratic institutions (above all, an independent and professional judiciary). But Ukraine will need outside assistance that only the EU can provide: management expertise and access to markets.

In the remarkable transformation of Central Europe’s economies in the 1990’s, management expertise and market access resulted from massive investments by German and other EU-based companies, which integrated local producers into their global value chains. Ukraine, with its high-quality human capital and diversified economy, is a potentially attractive investment destination. But realizing this potential requires improving the business climate across the economy as a whole and within individual sectors – particularly by addressing the endemic corruption and weak rule of law that are deterring foreign and domestic investors alike.

In addition to encouraging foreign direct investment, the EU could provide support to train local companies’ managers and help them develop their business strategies, with service providers remunerated by equity stakes or profit-sharing. An effective way to roll out such support to a large number of companies would be to combine it with credit lines provided by commercial banks. To encourage participation, the European Bank for Reconstruction and Development (EBRD) could invest in companies alongside foreign and local investors, as it did in Central Europe.

Ukraine would thus open its domestic market to goods manufactured or assembled by European companies’ wholly- or partly-owned subsidiaries, while the EU would increase market access for Ukrainian companies and help them integrate into global markets.

I hope and trust that Europe under German leadership will rise to the occasion. I have been arguing for several years that Germany should accept the responsibilities and liabilities of its dominant position in Europe. Today, Ukraine needs a modern-day equivalent of the Marshall Plan, by which the United States helped to reconstruct Europe after World War II. Germany ought to play the same role today as the US did then.
I must, however, end with a word of caution. The Marshall Plan did not include the Soviet bloc, thereby reinforcing the Cold War division of Europe. A replay of the Cold War would cause immense damage to both Russia and Europe, and most of all to Ukraine, which is situated between them. Ukraine depends on Russian gas, and it needs access to European markets for its products; it must have good relations with both sides.

Here, too, Germany should take the lead. Chancellor Angela Merkel must reach out to President Vladimir Putin to ensure that Russia is a partner, not an opponent, in the Ukrainian renaissance.”

Uncategorized

$12 Million Fraud: Over 5 Years In Jail For Hedge Fund Manager

A NY hedge fund manager was sentenced to 5 and a half years in prison for defrauding investors in a $12 million scheme, Reuters reports this morning.

Lloyd Barringer pled guilty in July 2013 to four counts of fraud: securities fraud, conspiracy to commit securities fraud, mail fraud, and conspiracy to commit mail fraud.

The charges stem from his operation of the Gaffken & Barriger Fund LLC, which was based in Monticello, Sullivan County, New York. Barriger was the president of the hedge fund and the principal shareholder, director, and officer of G&B Partners, Inc., the fund’s managing member and sole common shareholder. He surrendered to the FBI in May 2011.

“Once again, belief in hedge funds by hopeful investors proved to be sadly misplaced,” Attorney Preet Bharara said, “Investors entrusted their hard-earned dollars to Lloyd Barringer, believing his promises that their savings would be safe and secure in his fund. But, as we have alleged, they were sorely mistaken. Even as problems with the fund multiplied, Barriger allegedly continued to lure investors in with his misinformation.”

Barringer raised approximately $12.6 million while lying to investors about the fund’s financial condition, according to federal prosecutors. They will seek the whole amount in forfeited assets.

The hedge fund manager faced a maximum sentence of 20 years in prison on each count. The Judge also ordered Barriger to forfeit $12.38 million and pay $9.37 million in restitution.

Fraud, Hedge Funds

SEC Files Court Brief to Protect Whistleblowers From Retaliation

The SEC filed a “friend-of-the-court” brief, arguing that whistleblowers are entitled to protection from employer retaliation, even if they report the wrongdoing only to their employer and not to the SEC. The SEC stated that a whistleblower need not have reported wrongdoing to the SEC to avail himself of Dodd-Frank’s anti-retaliation protections.

In 2013 the SEC awarded more than $25,000 combined for tips and information that three whistleblowers provided to help the SEC and Justice Department stop a sham hedge fund.

The WSJ reports that: “Companies have recently pushed back against those rules, arguing in court that individuals have to report suspected wrongdoing to the agency to qualify for whistleblower protection and that those who report internally only don’t make the cut. This would narrow the pool of individuals who can sue a firm over alleged retaliation.”

“The Commission’s whistleblower program both encourages whistleblowers to report wrongdoing and protects them when they do.  Today’s filing makes clear that under SEC rules, whistleblowers are entitled to protection regardless of whether they report wrongdoing to their employer or the Commission.”  Sean McKessy SEC Chief at the Whistleblower Office, said, “The Commission’s brief supports the anti-retaliation protections under the Dodd-Frank Act that I believe are critical to the success of the SEC’s whistleblower program.”

Hedge Funds

Deutsche Bank: Hedge Funds To Reach $3 Trillion In 2014

Hedge funds are expected to reach a record breaking $3 trillion by year-end 2014, up from $2.6 trillion in 2013, Deutsche Bank reports. The 12th annual Alternative Investor Survey is is based on investors’ predictions of $171 billion net inflows and performance-related gains of 7.3% (representing $191 billion).

Hedge funds continue to establish their growing position within the broader asset management industry, alongside some of the more mainstream asset managers.” Barry Bausano, co-head of global prime finance at Deutsche Bank, said, “The hedge fund industry is predicted to reach a record $3 trillion by 2014 year end driven by significant inflows, most notably from institutional investors.”

Other survey highlights include:

“With the majority of investors happy with hedge fund performance, we expect institutional investors to further strengthen their commitment to hedge funds. Last year’s respondents targeted 9.2% for their hedge fund portfolios, and hedge funds delivered – the weighted average return for respondents’ hedge fund portfolios this year was 9.3%. Looking forward, respondents are targeting 9.4% for 2014.” Anita Nemes, global head of the hedge fund capital group at Deutsche Bank, said.

This year over 400 investor entities participated, representing over $1.8 trillion in hedge fund assets and over two thirds of the entire market by assets under management (AUM).

Hedge Funds, hedge fund research

Hedge Fund Strategy: BNY Mellon Acquires HedgeMark

BNY Mellon has signed an agreement to acquire the remaining 65% interest of current affiliate and hedge fund risk analytic services company, HedgeMark International, LLC.,  Zacks Equity Research reports. BNY Mellon has held a 35% ownership stake in HedgeMark since 2011.

“As institutional clients continue their shift into alternatives, especially hedge funds, this acquisition will enable us to better meet demands for improved governance, risk reporting, and transparency,” said Samir Pandiri, BNY Mellon executive vice president and CEO of Asset Servicing. “We’ll be able to integrate HedgeMark’s capabilities with our Global Risk Solutions offerings to set a new industry benchmark on risk and transparency. It marks the next step in our strategy to provide sharper insight into hedge fund investments and enterprise risk across a client’s entire portfolio.”

BNY Mellon’s stock price movement following the news release depicted a positive market response. The shares closed at $31.80 on Feb 24, up 1.4% from the previous day.

Ken Phillips, HedgeMark’s founder and CEO, has announced his intention to retire when the transaction is completed. HedgeMark’s board of directors will appoint Andrew Lapkin, current president, as its new CEO. Lapkin will help supervise the transition and report to Pandiri after the closing.

Hedge Fund Strategy, Hedge Funds

Credit Suisse To Pay $196 Million In Fines

International banking firm Credit Suisse has agreed to pay $196 million and admitted to violating federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.

Credit Suisse provided cross-border securities services to thousands of U.S. clients and collected fees totaling approximately $82 million without adhering to the registration provisions of the federal securities laws, the SEC claims.

“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance.”

According to the SEC, Credit Suisse began conducting cross-border advisory and brokerage services for U.S. clients as early as 2002, amassing as many as 8,500 U.S. client accounts that contained an average total of $5.6 billion in securities assets.

“As a multinational firm with a significant U.S. presence, Credit Suisse was well aware of the steps that a firm needs to take to legally conduct advisory or brokerage business with U.S. clients,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being non-compliant with the federal securities laws.”

Credit Suisse agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a $50 million penalty.

Fraud

Activist Hedge Fund To Claw Back Its Breadsticks

One of the largest shareholders of Darden Restaurants, Starboard Value LP, has joined another activist investor, New York-based hedge fund Barington Capital Group LP, who said it is “evaluating all options” to provide a way “for shareholders to have their voices heard” on a plan to spin off Red Lobster.

Darden said on last week that it would sell or spin off its Red Lobster chain, which along with Olive Garden has been a drag on profits.

“While we are pleased that you recognize that Red Lobster could perform better with increased management focus, we do not believe the currently proposed plan to spin-off or sell Red Lobster, by itself, is in the best interest of shareholders.” The activist investors said in a letter to shareholders. “We believe the Company should more fully evaluate all available operational, financial, and strategic alternatives for Darden in order to create and execution a comprehensive plan to address all aspects of the business and to ensure the best possible outcome for all shareholders. This evaluation should include consultation with the Company’s financial advisers and discussions with shareholders such as Starboard.”

The hedge fund group goes on to say that the “Company (has an) extended record of disappointing operating performance, poor capital allocation,and missed expectations. Most notably, when adjusted for Darden’s extensive real estate ownership, the Company’s operating margins are well below peers.”

Hedge Fund Strategy, Hedge Funds

Hedge Fund People: Alexander Jansson appointed CEO of CB Asset Management

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Portfolio manager Alexander Jansson was appointed CEO of EU hedge fund CB Asset Management by the board of directors. Carl Bernadotte will continue as portfolio manager.

“It feels good to hand over the reins internally to Alexander, who is familiar with the company, our clients and the portfolio management. Alexander has the right qualities to manage and maneuver in an increasingly complex financial market that will continue to face major changes. To continue the work with the portfolio management together with Alexander and Marcus feels very inspiring. I welcome Alexander as CEO and look forward to keep on delivering good performance to our investors,” says Carl Bernadotte.

Alexander Jansson has been a portfolio manager since 2009. Prior to that he worked in private equity. Alexander is 30 years old and holds a M.Sc. in Business Administration and a B.Sc. in Economics from Uppsala University. Alexander will continue his work as portfolio manager.

“I am very honored by the trust Carl, as the company’s owner, and the board has given me and look forward to developing the company together with Carl and our colleagues. The company is in an interesting phase with strong AUM growth; good performance over time, and a tailwind for our core investment themes: Europe and the environmental sector. I see us as well positioned in an industry where cost consciousness and an active and ethical management are crucial for the customer,” says Alexander Jansson.

Hedge Fund Strategy, Hedge Funds

Joe Torre to Present manager of Marathon Asset Management with “Award for Caring”

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Former New York Yankees Manager, Chairman of The Joe Torre Safe At Home Foundation, and prior recipient of the Hedge Funds Care/Help For Children (HFC) award, Joe Torre, will present Marathon Asset Management’s Bruce Richards with the Award for Caring during the 16th Annual New York Open Your Heart to the Children Benefit. Mr. Torre was recognized in 2012 by HFC for his dedication to ending the cycle of domestic violence, and its effects on children, after experiencing abuse as a child in his own home in Brooklyn.

Mr. Torre is looking forward to presenting the award to Bruce Richards of Marathon. He said, “I was grateful to receive the HFC award two years ago. It is my honor to present the award on behalf of HFC to Bruce Richards.”

Mr. Richards is a Managing Partner and CEO of the multi-billion global credit market focused hedge fund Marathon Asset Management. His is a strong supporter of HFC, Safe at Home, Earth Day Network, UJA, the Birds Nest Foundation, the R Baby Foundation, and other vital non-profit organizations. Marathon was founded in 1998 and is headquartered in New York City with offices in London and Singapore.

The annual HFC benefit, one of the hedge fund industry’s premier charity events, will take place on Thursday, March 6, 2014 at Cipriani 42nd Street (110 East 42nd Street, New York City). The event will unite 1,000 hedge fund executives for an evening that will feature cocktails, hors d’oeuvres, networking, a silent auction, and live entertainment. Proceeds will fund programs focused on the prevention and treatment of child abuse in New York, New Jersey, and Connecticut.

The Co-chairs for this year’s gala are Dylan Curley, Managing Director and Head of Business Development, Hedge Funds America, at J.P. Morgan, and Gerry Polizzi, Managing Director and Senior Prime Brokerage Relationship Manager for UBS Prime Services.

Hedge Fund Philanthrophy, Hedge Funds