This week's top hedge fund news
Here is a summary of the biggest hedge fund news stories of the week ending June 7.
SAC Capital, the $15 billion Connecticut-based hedge fund run by Steve Cohen, confirmed it would continue to manage external capital amid rumours it might convert into a family office as a high-profile US government investigation into alleged insider trading continues to take its toll. The firm is likely to face redemptions of up to $4 billion, including a $550 million withdrawal by its biggest client Blackstone. The firm paid a $616 million settlement with the Securities and Exchange Commission (SEC) in May 2013 following accusations it netted $276 million in profits and averted losses from insider information pertaining to a drug trial. In May 2013, SAC Capital confirmed it would not cooperate unconditionally with investigators sparking considerable investor disquiet.
Quant hedge funds nursed huge losses over the last two weeks following hints from the Fed that it may ease quantitative easing. CTAs, which had been major investors into bonds, failed to anticipate a massive sell-off in bonds prompting a significant fall in value. AHL, the flagship $16.4 billion quant fund at Man Group saw losses totalling 11% prompting a 15% fall on Wednesday, June 5 in Man Group’s share price. Other funds to be caught out included Cantab, Aspect Capital and Geneva-based BlueTrend. Winton Capital weathered the storm reasonably well incurring losses of 2.5%, although this did not impact its positive performance year-to-date.
CQS, the $12 billion credit hedge fund founded by Michael Hintze, is planning to launch a long/short equity fund, according to the Financial Times. The London-based hedge fund will employ David Morant, a former portfolio manager at SAC Capital, to run the strategy. CQS’s expansion into long/short equity comes as brand-name managers diversify their strategies in response to significant capital inflows into the industry.
Goldman Sachs published its annual prime brokerage survey, which confirmed consultants continued to extend their grip on pension plans and insurers, while it reaffirmed the on-going fall from grace of funds of funds. Despite fees being at the forefront of managers and investors’ minds, 83% of investors told Goldman Sachs they paid full fees in 2012 instead of individually negotiated ones. Sixty-eight per-cent of pension funds paid full or non-negotiated fees to hedge funds despite being some of the most vocal opponents of the traditional 2% management and 20% performance fee. Nonetheless, the average fee structure, according to the survey, stands at 1.65% management fee and 18.3% performance fee, said the survey.
Several news outlets reported US hedge funds were putting their European expansion plans on hold, while others are considering pulling out of the EU altogether in response to growing concerns about the implications of AIFMD. US managers have been slow to wake up to the potential consequences of AIFMD, with many expressing alarm at remuneration restrictions and delegation of duties. Some highlight the declining importance of European investors could also facilitate a shift from the EU by US managers. Nonetheless, others point out speculation of a mass exodus is overhyped and highlight managers did not decamp to Switzerland as countless industry observers predicted when AIFMD was first proposed.