Hedge world: February 2011

Hermes BPK aiming to triple assets in 5 years

By Chikafumi Hodo

TOKYO | Tue Feb 8, 2011 5:20am EST

TOKYO (Reuters) - The fund of hedge funds arm of Hermes aims to boost
its assets by three times to $5 billion (3.1 billion pounds) in five
years by beating growing demand for alternative investments in
countries counting Japan, the head of the company said.

Hermes BPK is in suspense that its experience administration British
Telecom's (BT.L) (BT.L) pension scheme will help it win the
confidence of typically risk-adverse investors in Japan, the world's
following largest institutional market.

"Japanese institutional investors are very concerned as they were
scarred a bit by their experiences in 2008 (in the wake of the global
financial crisis) in the alternative industry," Matteo Perruccio,
chief executive and founding partner of Hermes BPK Partners, told
Reuters in an interview.

"Although that being said, they are smart investors and they know the
alternative space is vacant to be very fascinating in the next couple
of years."

The company, which manages more than $1.5 billion in assets in three
product classes, expects to service high amounts of money from a tiny
number of Japanese investors, Perruccio said.

Besides Japan, Hermes BPK is also focusing on drawing investors from
the United Kingdom, the United States, Switzerland and Australia.

Hermes BPK, established in 2008, is a partnership between its
directors and Hermes Fund Managers, an asset management group wholly
owned by the BT pension scheme. Hermes Fund Managers owns 61.5
percent and the partners hold 38.5 percent.

Source: Reuters.Com

BVI Hedge Fund Services 2011

Source: Hedgeweek.com

Stenham Global Resources ranked in top ten by BarclayHedge

_*Stenham Asset Management says Stenham Global Resources was ranked
number eight in the Top 10 Performing Fund of Hedge Funds category for
October 2010 by BarclayHedge.*_

Stenham Global Resources, a fund of hedge fund, focuses on commodity
related sectors such as water, agriculture and soft commodities.

The long biased fund of hedge fund is a concentrated portfolio of ten
to 15 managers with a target return of Libor plus six to eight per
cent and volatility of eight to 11 per cent per year.

The fund was launched in 2006.

Jaspal Phull, portfolio manager, says: "Continued global demand for
resources particularly from Plates, India and worldwide globalisation
is likely to be a tailwind for commodity prices. Investing in global
resources is a compelling investment opportunity due to growing energy
demands from an ever-increasing population."

Source: Hedgeweek.com

Hedge fund Elliott rejects DuPont's Danisco bid

COPENHAGEN | Fri Feb 11, 2011 4:20am EST

COPENHAGEN (Reuters) - U.S. hedge fund group Elliott Associates has
rejected U.S. chemicals giant DuPont's $5.8 billion (3.6 billion
pounds) offer to buy Danish food ingredients and enzymes maker
Danisco, a letter from Elliott showed.

Elliott Advisors, a London-based advisor to the Elliott group, said
that Elliott advises funds with about 1.0 percent of the voting
shares in Danisco (DCO.CO).

DuPont (DD.N) and Danisco announced the $6.3 billion deal, which in
which DuPont would also take over $500 million in Danisco debt, on
January 9 and the offer runs to February 22.

DuPont has said it will involve out the deal only if it gets
acceptance from shareholders with at least 90 percent of Danisco
stock.

Elliott Advisors said the 665 Danish crowns per share bid, which is
supported by Danisco's board, is too low.

"As advisor to shareholders in the company, we are at a loss to know
why the Board of Directors of Danisco ... should have seen fit to
recommend the offer," Elliott portfolio manager Franck Tuil said in
the letter to the Danisco board.

"A sale of Danisco at the price offered would represent a shameful
treachery of shareholders' interests, and we see very modest prospect
of shareholders accepting a price of 665 Danish crowns per share,"
the letter said.

Elliott said the offer price represented a "substantial discount to
the underlying economic value of the company, especially in a
takeover circumstances."

It said the price ignored the strength of Danisco's market spot and
the opportunities for significant margin improvements, took no
account of synergies available to a DuPont/Danisco combination, and
disastrous to attribute any control premium on a successful offer.

"Moreover, contrary to DuPont's claims, the Offer is not in line with
comparable transactions, but is at a material discount," it said.

Danisco has said the bid was the best of several offers and that it
provides the best possible value for shareholders.

Danisco chairman Jorgen Tandrup told Reuters on January 19 that the
deal maximises value for shareholders and that the board is "really
satisfied" that the auction process extracted the best possible value
for shareholders.

DuPont's Chief Executive Ellen Kullman has ruled out raising the
665-crowns bid..

(Reporting by John Acher; Editing by Hans Peters)

Source: Reuters.Com

Hedge funds rediscovering taste for Japan

By Nishant Kumar and Chikafumi Hodo

HONG KONG/TOKYO | Tue Feb 22, 2011 5:24am EST

HONG KONG/TOKYO (Reuters) - Hedge funds are turning attention to
Japan once again and are set to attract more capital on expectations
a pick-up in corporate activities there like M&A and share buy-backs
would yield strong returns.

The resurgent interest in Japan could mark a turn in the fortunes of
the country's hedge funds industry, which has seen a sharp drop in
assets and the number of funds since 2006 as the market peaked.

Hedge funds are betting the current environment is ideal for
strategies such as event-driven and long/short, given that many
companies are trading at low valuations and funding is cheap --
conditions ideal for M&As.

A stronger yen has prompted domestic firms to buy new production
plants abroad and go in for deals. In a symbolic move, Japan's two
major steel makers, Nippon Steel Corp (5401.T) and Sumitomo Metal
Industries (5405.T) have announced merger plans..

Other factors favouring a relook at Japan are the recent shift in
capital flows in favour of developed markets, strong corporate
profitability -- which has left companies with about a record $2.5
trillion in cash -- a rebound in exports driven by robust demand in
fast-growing Asia and hope that the economy is heading towards a
moderate recovery.

A vast liquid market and return of flows into Japanese stock mutual
funds are also seen as positive.

"The feedback from our Japanese prime brokerage client base as to the
opportunity set and expected returns for 2011 has been more positive
than previous years," said Marlin Naidoo, hedge fund capital group
head in Asia-Pac for Deutsche Bank (DBKGn.DE).

"Additionally we are also seeing pan-Asian managers materially
increasing their exposure to the Japanese market."

INFLOWS

While large inflows are not coming yet, money will start pouring in
the next two to three months as investors were conducting final due
diligence, several prime brokers said.

Many hedge funds have given up on Japan, with collective assets under
strategy plunging more than 50 percent from 2006 to about $20 billion
now, data from fund tracker AsiaHedge shows.

Their number has dropped by about a fourth to nearly 200 during the
period, according to data from Eurekahedge.

Still, there are signs of gradual improvement and many of those who
have survived are increasing assets. Eurekahedge sees assets of hedge
funds it tracks rising by two-thirds in 2011.

Hedge funds such as Instinct Capital and Symphony Financial Partners
earned 33 percent and 20 percent, respectively, in 2010 when the
benchmark Nikkei index .N225 was down about 3 percent, indicating it
was possible to make big returns in Japan.

In the latest vote of confidence, Tiger Management, founded by hedge
fund industry pioneer Julian Robertson, last month seeded Hong
Kong-based Nezu Asia with $50 million, part of which went to Japan
focused equity strategy Nezu Kuma Fund.

Source: Reuters.Com

Global financial markets ended 2010 with a positive tone

_*Global financial markets ended 2010 with a positive tone, with
strength across global equity, commodity and credit markets throughout
the month of December.*_

Fixed income yields rose despite continued subdued inflationary
pressures, measures of manufacturing and employment improved while the
US dollar declined against most major currencies. The HFRI Fund
Weighted Composite Index gained 3.15% for the month, bringing full
year performance to a gain of 10.42%; all strategies had a positive
contribution for the month, with the most significant gains in Macro
and Equity Hedge strategies.

Macro funds posted the strongest gains of the strategies with a
contribution from equities and commodities as both fixed income and
volatility declined. The HFRI Macro (Total) Index posted a gain of
3.73%, bringing its performance YTD to 8.41%. Both Discretionary and
Systematic strategies had similar positive contributions, with short
fixed income, long commodity and short US dollar positions
contributing to gains for the month. Recovering from November's
losses, persistent trends across many asset classes contributed to a
gain of 4.45% for the HFRI Macro: Systematic Diversified Index, with
these ending 2010 with a gain of 9.48%.

The HFRI Equity Hedge (Total) Index posted a gain of 3.46%, with
strong contributions from Fundamental Growth, Energy/Basic Materials
and Emerging Markets exposures. The HFRI EH: Energy/Basic Materials
Index gained 4.71%, bringing full year 2010 performance to 15.98%,
eclipsing several other strategy indices to become the leading areas
of hedge fund performance for the year. Gains across Equity Hedge were
strong across nearly all sub-strategies with Quantitative Directional,
Technology/Healthcare and Equity Market Neutral all contributing
positively. Short Bias funds once again posted a sharp loss, with
these declining by 8.51%.

The HFRI Event Driven (Total) Index posted a gain of 2.77%, with all
sub-strategies having positive contributions led by gains in Special
Situations and Activist funds. Risk tolerance declined and capital
market issuance and strategic acquisition activity remained strong,
contributing to gains of 3.82% in Special Situations and 2.68% in
Distressed/Restructuring; Merger and Credit Arbitrage also posted
gains for the month.

The HFRI Relative Value (Total) Index posted a gain of 1.41%, the
seventh consecutive monthly gain and 23rd in last 24 months, ending
2010 with a gain of 11.81%. All Relative Value sub-strategies
contributed tvo gains, with Fixed Income Corporate, Multi-Strategy and
Yield Alternatives having the most significant positive contributions.
Yields rose as investors shifted to riskier assets, offsetting fixed
income losses with spread gains. Fixed Income: Asset Backed funds
added 0.98% to end 2010 with a gain of 14.32%, while FI: Corporate
posted a gain of 1.93% for December and credit-focused Multi-Strategy
funds gained 1.95%.
The HFRI Fund of Hedge Funds Index posted a gain of 1.97%, while the
HFRI Emerging Markets Index gained 2.77%, with the largest
contributions from fund exposure in Russia/Eastern Europe and the
Middle East.

Source: Hedgeweek.com

London Hedge Fund Services 2011

Source: Hedgeweek.com

IFR-Pricing sliding in US leveraged loan market

Mon Feb 21, 2011 1:44pm EST

(The following tale appeared in the Feb. 19 issue of
International Financing Review, a Thomson Reuters publication)

By Michelle Sierra Lafitte

NEW YORK, Feb 19 (IFR) - Pricing is sinking as liquidity
pours into the US leveraged loan market. Companies are
exploiting this surplus liquidity in a rapid and aggressive
refinancing round and more are lining up to cut borrowing costs.

Some $87 billion of loans have been issued to refinance
existing debt in 2011 so far, which makes up just under 60
percent of the $151 billion of US leveraged loans issued in the
year to date, according to Thomson Reuters data.

Refinancing volume is nearly three times higher than
new-money borrowing this year and is expected to maintain its
pace - at least until the M&A wave starts to roll again.

Liquidity is pouring into the market. $926.6 million of
institutional inflows hit the market in the week ending February
16 from bank loan mutual funds, according to Lipper FMI.

Inflows have averaged $700 million per week in the past
seven weeks, which has brought more than $4.3 billion into the
market this year.

Two weeks ago, the loan market saw a confirmation weekly inflow of
$1.05 billion into mutual funds, Lipper said.

LIQUIDITY WAVE

This cash needs to find a home and US leveraged loan
pricing, which was historically high after the credit crunch
has collapsed by up to 200 basis points (b.p.) since December in
a fall that one older leveraged financier described as the
market's most dramatic go in 15 years.

"We are scratching the surface because everything - mostly
all of the deals placed in 2009-2010 - are overpriced," a banker
said. "Given all this liquidity, there is no reason why every
single one of them wouldn't refinance right now."

Repayments from high-yield bonds have left investors flush
with cash that needs to be reinvested and they have flocked to
leveraged loans, attracted by current yields, the appeal of a
floating-rate instruments at a time of rising interest rates and
the potential of some upside in the lesser market.

A limited amount of new issuance has exacerbated this trend
and too much money is now chasing too few deals.

A window of opportunity is now wide open for issuers.
Spreads have come down to 300-325 b.p. over Libor from 450 b.p.,
bringing substantial savings that are making it worthwhile for
issuers to return to the market, in some cases after only two or
three months.

Source: Reuters.Com

Barclay Hedge Fund Index up 0.52% in January

*Hedge funds gained 0.52% in January according latest figures for the
Barclay Hedge Fund Index compiled by BarclayHedge.*

"Equity markets in the USA and across Europe continued to rally for
a fifth consecutive month," says Sol Waksman, founder and president
of BarclayHedge. "Concern over the unrest in Egypt took a back seat
to an humanizing macro economic picture."

Overall, 14 of Barclay's 18 hedge fund indices gained impose a
curfew in January. The Barclay Convertible Arbitrage Index was up
2.13%, Fixed Income Arbitrage gained 1.97%, Distressed Securities were
up 1.63%, Technology rose 1.64%, and the Multi Strategy Index gained
1.28%.

"High yield bonds rallied even though yields on the 10 and 30-year
Treasuries rose," says Waksman. "The humanizing economic outlook
simultaneously raised concerns of Fed tightening and reduced dread of
defaults."

The Equity Small Bias Index was down 0.49% in January, Global Macro
lost 0.58%, and Emerging Markets slid 0.47%.

"In developing nations where prices for energy and food make up a
larger percentage of monthly expenditures, inflation concerns
negatively impacted equity markets," says Waksman.

The Barclay Fund of Funds Index gained 0.27% in January.

Source: Hedgeweek.com

Canada private equity deals regain stride in 2010

Fri Feb 18, 2011 12:04pm EST

* Deal volume and value rise for first time since 2007

* Huge deals included CPPIB investment in 407 highway

* Investment exits up sharply vs 2009

* Fund-raising slowed to C$1.4 billion

By Pav Jordan

TORONTO, Feb 18 (Reuters) - The value of Canadian deals
involving private equity rose in 2010 for the first time in
three years, as investors regained some of the confidence lost
during the global financial crisis.

About C$4.9 billion ($5 billion) in private equity was
invested last year, industry data shows, counting the Canada
Pension Plot Investment Board's C$900 million hold of a 10
percent stake in the 407 toll highway near Toronto.

The volume of deals rose 7 percent to 130 transactions,
according to the data, compiled by Canadian Venture Capital and
Private Equity Association (CVCA) and its research partner
Thomson Reuters.

"Private equity has been on the upswing around the world in
2010, and Canadian firms are fully participating in this rising
activity," said CVCA President Gregory Smith, also a administration
partner at Brookfield Financial. "We are convinced that there
are significant prospects for future growth."

By deal value, the top transactions were in transport,
followed by mining, oil and gas, information and media.

CPPIB, Canada's largest pension fund manager, was the most
aggressive private-equity investor. In addition to raising its
stake in the 407 highway to 40 percent, it had a hand in the
third and sixth-largest deals reported last year.

In the following-largest deal, Macdonald Dettwiler and
Associates (MDA.TO) sold its material goods information business to
private investment firm TPG Capital for C$850 million.

Mid-market activity was also strong, with 64 percent of
told deals valued at less than C$500 million.

The 1,800-member CVCA, founded in 1974, said so-called
exits - funds promotion stakes - more than doubled in 2010.

But fund-raising slowed, with new partnerships totaling
only C$1.4 billion, or about half the C$2.7 billion raised in
2009.

That's far small of the C$9.9 billion raised by private
equity funds in 2006, before the financial crisis sapped
invsetor confidence.

($1=98 Canadian cents)

(Reporting by Pav Jordan; Editing by truthful McGurty)

Source: Reuters.Com

Sweet spot in Mexico earns second look from investors

Fri Feb 18, 2011 4:10pm EST

* Mexico in "sweet spot" with growth without inflation

* Potential in developing air force, equity markets

* International investors returning to Mexico

By Patrick Rucker

MEXICO CITY, Feb 18 (Reuters) - Mexico's humanizing economic
prospects, coupled with low inflation, are winning the country
a following look from international investors and fund managers.

Investors see potential in Mexico's air force sector and in
enticing more companies to market, and are also bullish about
new financial tools which could send billions of dollars into
infrastructure and private equity deals.

Expected economic growth of about 4 percent this year,
combined with inflation of about 3.5 percent, compares well to
regional peers, many of which are tightening monetary policy to
fend off surging prices. [ID:nN20ATAMRA]

"In our view, the Mexican economy is very much in a sweet
spot," Lupin Rahman, older vice president of emerging markets
portfolio management at bond giant Pimco, told a LatinFinance
summit this week.

"In terms of output, in terms of growth, in terms of
inflation, all these dynamics point to a very positive 2011 for
the Mexican economy."

Mexico's apparent comeback in the sentiment stakes follows
several years in the shadow of Brazil, which weathered the
global crisis better but is now wrestling with high inflation.

Emerging market investors surveyed by Bank of America
Merrill Lynch in February place Brazil at underweight for the
first time in the survey's description, while preferences for
Mexico are increasing.

But Mexico still has some homework to do.

The economy depends heavily on manufacturing exports to the
United States, and while the recovery in U.S. consumer demand
has prompted economists to lift forecasts for Mexican growth,
investors also look for diversification and for structural
reforms.

"If Mexico can turn the engines and start opening its
service sectors it will be a fantastic run for the economy,"
said Alfredo Thorne, head of global markets at Banorte bank.

"It can seriously not only grow at 6, 7 percent but
really perform much better than the BRICs." Brazil's growth
is expected to slow in 2011 to 4.5 percent, according to the
International Monetary Fund.

Thorne estimates Mexico's drugs war, which has killed more
than 34,000 people in the last four years, is cutting 1-2
percentage points from annual growth, but says it will be worth
it. "If Mexico manages to win this war, it will be the most
vital structural reform," he said at the summit.

Source: Reuters.Com

Indicted hedge fund trader linked to Cohen, Druker

By Svea Herbst-Bayliss and Matthew Goldstein

BOSTON/NEW YORK | Fri Feb 11, 2011 4:15am EST

BOSTON/NEW YORK (Reuters) - Steven Cohen and Neil Druker are at
opposite ends of the spectrum when it comes to hedge fund fame and
trading prowess.

But both wealthy hedge fund managers now find themselves linked to a
U.S. insider trading investigation because of the criminal conduct of
the same former employee.

Noah Freeman, a Boston-based tech analyst and trader who first worked
for Druker's Sonar Capital Management and then for Cohen's
better-known SAC Capital Advisors, pleaded guilty this week to
charges of trading on illegal tips from industry consultants.

The plea by Freeman, 35, inscription the first time a former analyst
or trader at Cohen's $12 billion (7.5 billion pounds) Stamford,
Connecticut-based fund has been charged with engaging in illegal
trading. The Harvard University graduate, who worked at SAC Capital
for a modest over a year, is cooperating with centralized prosecutors
in hopes of receiving of lighter sentence.

Freeman's cooperation could be helpful to authorities in gathering
evidence against others who worked for Cohen -- something U.S.
prosecutors have been trying to do since at least 2007, sources have
told Reuters. Cohen is one of the top traders in the $1.9 trillion
hedge fund industry.

But Freeman's cooperation may pose more of an pressing danger to
Druker and his fund of under $100 million than it does to Cohen,
according to a court document and a person familiar with the
investigation, who declined to note because he wasn't authorized to
speak to the media.

'CO-CONSPIRATOR'

While Cohen's hedge fund firm has many offices and employs roughly
800 people, Druker's firm is far smaller. Also, Druker worked
shoulder by shoulder with Freeman every day, people familiar with the
matter said.

The criminal complaint that Freeman pleaded guilty to describes the
president and owner of "Hedge Fund A" as a "co-conspirator," who
"exercised primary power" over trading decisions.

The source familiar with the investigation confirmed that Hedge Fund
A is Sonar Capital, but declined to note on who else may or may not
be a target of centralized authorities.

The time period Freeman worked at Sonar also coincides with the
period that prosecutors charged he engaged in illegal activity at
Hedge Fund A.

Druker, but, is described in various regulatory filings with the U.S.
Securities and Exchange Commission as either the "president" or
"manager" of Sonar. Some of those regulatory filings also say Druker
has "voting and investment power over the securities" owned by the
fund.

Druker, who did not respond to an send by e-mail or telephone calls
seeking note, has not been charged with any wrongdoing. Calls to
lawyers who have worked for his firm in the past were also not
returned.

On Tuesday evening, Druker sent a letter to his investors in which he
sought to place distance between himself and his former top tech
analyst.

Druker, 43, said in the letter that "any violation of law by Mr.
Freeman was unauthorized and nameless to Sonar." He added that
Freeman was fired in May 2008 and the fund "continues to provide
information to the government in its investigation."

Source: Reuters.Com

REFILE-Investors' foreclosure appetite grows, headaches arise

Fri Feb 18, 2011 5:24pm EST

(Deletes extra word in 2nd section)

By Al Yoon

NEW YORK Feb 18 (Reuters) - Investors are flocking to home
foreclosure sales in California and other states where banks
have rescheduled auctions postponed last year to fix loan
servicing flaws.

But often their intentions to hold the distressed
properties are still stymied by disagreements over a honest price
or as auctions are simply canceled.

In California, bank-set "opening bids" won 14,068
properties from auctions last month, a 51 percent rise over
December, ForeclosureRadar.com said in a report this week.
Investor buys rose more than 50 percent to 3,272, but were
dwarfed by the 12,279 auctions canceled, it said.

"There's just not a lot of inventory" made available, said
Sadie Gurley, a administration partner with New York-based GreenLake
Investment Partners, a new access into the meadow of investors
seeking to profit from the "shadow inventory" building up on
bank books.

"It's like a funnel," she said.

The trend is similar in other high foreclosure states, such
as Arizona and Nevada, according to ForeclosureRadar.com.

Distressed material goods sales have accounted for a significant
share of the housing market, rising to 36 percent in December
from 32 percent a year earlier, according to the National
Association of Realtors. The buys can be made by investors
or banks, which have ramped up "small sales" in which they
agree to sell a home below the weigh on the mortgage.

Investors -- who typically aim to buy, fix and re-sell the
houses -- are lining up as banks restart foreclosures from
moratoriums imposed last year to review faulty processes, such
as "robo-signing" of court affidavits or other document
issues.

Revelations of shoddy servicing further muddied the
foreclosure process, which to investors is key to cleaning up
surplus inventory and aiding housing's recovery.

Banks have limited sales to others by keeping their opening
bids above what the local markets will bear, investors said.

On average, in California, investors are paying 25 percent
below market value when winning the auction, versus a 15
percent premium bid of banks that take properties into their
"real-estate owned," or REO, portfolios, said Sean O'Toole,
chief executive officer of ForeclosureRadar.com.

"In California, the average foreclosure is $150,000 upside
down in the mortgage, so if the bank doesn't drop the bid from
the amount owed, there's no opportunity the investor is vacant to
hold it," O'Toole said.

Many others are canceled as banks redouble efforts to
modify loans, conduct a small sale or if they find problems
with documentation, he added.

In January, more than 12,000 were canceled in California
alone, up from December but down from a year earlier.

Source: Reuters.Com

GLOBAL MARKETS-Stock highs on earnings; oil up on Mideast

Fri Feb 18, 2011 1:01pm EST

* World stocks reach more than 2-1/2-year highs

* Plates raises bank reserve requirements

* Middle East tensions boost oil; gold at 5-week high

(Recasts, updates prices, adds details, note)

By Wanfeng Zhou

NEW YORK, Feb 18 (Reuters) - Major stock markets rose to
over 2-1/2-year highs on Friday as upbeat corporate earnings
offset Plates's latest tightening go and oil prices rallied on
concerns Middle East political tensions could disrupt supply.

The MSCI all-country world stock index .MIWD00000PUS rose
0.4 percent to 348.21, after hitting its highest since late
July, 2008.

Robust corporate earnings and merger activity have fueled a
rally in developed stock markets. Some analysts cautioned that
a pullback may be possible, though they added that any retreat
would be limited.

U.S. stocks edged higher, with indexes headed for a third
week of gains, though volume has been light in the most recent
leg of the rally.

"I've never seen a market like this," said Paul Mendelsohn,
chief investment strategist at Windham Financial Air force. A
market watcher for 35 years, he is taking profits in every area
but commodities.

No matter where we start out in the morning, buyers come
in," he said. "I'm showing by every technical and quantitative
standard I have, this market is at extreme levels."

The Dow Jones industrial average .DJI was up 45.79
points, or 0.37 percent, at 12,364.01. The Standard & Poor's
500 Index .SPX was up 2.50 points, or 0.19 percent, at
1,342.93. The Nasdaq Composite Index .IXIC was up 6.73
points, or 0.24 percent, at 2,838.31.

Caterpillar Inc (CAT.N) rose 1.5 percent to $104.81 after
the equipment maker said machinery sales through dealers
accelerated in the three months through January. For details,
see [ID:nN18186151]

"My outlook is cautiously optimistic," said Don Wordell,
portfolio manager of RidgeWorth MidCap Value Fund in Orlando,
Florida.

World equities earlier came under difficulty after Plates
raised banks' required reserves half a percentage point to 19.5
percent for the largest banks, the following such increase this
year as government continues the fight against inflation.
[ID:nTOE71H068]

Source: Reuters.Com

Institutions make hedge funds focus on risk, cut fees -survey

HONG KONG | Fri Feb 11, 2011 4:22am EST

HONG KONG (Reuters) - Hedge funds are taking risk management far more
seriously, cutting fees and increasing transparency to woo
institutions that contribute the most assets to the $1.9 trillion
(1.18 trillion pounds) hedge fund industry, a survey shows.

Preqin, which surveyed 60 hedge funds that collectively manage $95
billion in assets, said capital sourced from institutional investors
had grown to 61 percent of hedge fund assets from about 45 percent in
2008.

Nearly half of the respondents said the amount of capital coming from
institutional investors had increased since the financial crisis in
2008, a sign that confidence was returning to the asset class.

Nearly half of the respondents said the fact that institutions had
invested more money had caused them to place in place tougher risk
management controls. Some 42 percent also said the rising
institutional base of clients had led to a reduction in the fees they
charged on their funds.

"The consensus is clear: hedge fund managers are witnessing large
inflows of capital from institutional investors, and are adapting
their fund strategies and marketing accordingly," Amy Bensted,
manager of hedge fund data at Preqin, said in a proclamation.

Hedge fund managers predicted institutional money will become more
vital to the industry over the next 12-18 months, with nearly 85
percent expecting a rise in the proportion of their assets coming
from institutional investors over the period.

Hedge funds, started as a tool for the wealthy to earn huge returns,
are increasingly turning towards institutional investors, which have
trillions of dollars of investable assets, as they look for larger
investments and stable sources of capital.

Preqin also highlighted that smaller funds received less capital from
institutional investors, with 70 percent of the respondents adage
their largest challenge in raising institutional capital was
overcoming requirements that funds maintain a smallest level of
assets under management.

"The mean AUM requirement of a hedge fund investor is around $320
million," the firm said, citing a study based on data from 2,500
institutional investors in hedge funds.

Source: Reuters.Com

China gets first official hedge fund

By Samuel Shen and Kazunori Takada

SHANGHAI | Mon Feb 14, 2011 6:23am EST

SHANGHAI (Reuters) - Plates's hedge fund industry took a tiny but
significant step on Monday as Guotai Junan Securities Co readies a
$45 million (28 million pound) hedge fund, the first such product
approved by securities regulators.

The go, if successful, could spur other brokerages, fund managers and
even trust firms to follow suit, sowing the seeds for Plates's own
George Soros or James Simons.

The maiden hedge fund, to be managed by Guotai Junan's asset
management unit, intended to bring to somebody's attention 300
million yuan initially and would use index futures to mitigate
systematic market risks, President Zhang Biao told Reuters in an
interview.

Although many privately-run Chinese fund managers with no licenses
call themselves hedge funds, with some also using derivatives to
hedge risks, none of them have been approved by regulators.

Plates launched index futures and allowed small promotion for the
first time last year, enabling investors to profit from falls in
stock prices and paving the way for the emergence of hedge funds,
which typically use derivatives to hedge investment risks.

But, Chinese regulators have been cautious about approving hedge
funds, partly because of the apparent negative role they played in
the financial crisis.

The launch of Guotai Junan's hedge fund comes at a volatile time for
Plates's stock market, with investors worries about inflation,
monetary tightening and a possible slowdown in economic growth.

Meanwhile, the authorities stepped up a crackdown on the real estate
market, leaving investors balking at buying material goods.

"There's huge demand for hedge funds in Plates, with the market awash
with cash seeking modest, but stable returns," Zhang said, adding
that the product embattled wealthy individuals with a subscription
threshold of 2 million yuan.

Zhang, who aspires to become Plates's James Simons, the well known
fund manager at Renaissance Technologies, said the fund would adopt a
so-called market-neutral strategy, aiming to maintain a close weigh
between long and small positions.

Targeting an annual return of 10-15 percent for its first hedge fund,
Guotai Junan intended to launch identical funds later to bring to
somebody's attention up to 5 billion yuan, he said.

Zhang brushed aside concern that hedge funds could play a
destabilising role in Plates's stock market, adage: "The door is just
open. Hedge funds in Plates are rabbits and sheep now, not wolves and
tigers.

(Additional reporting by David Lin; Editing by Chris Lewis)

Source: Reuters.Com

BNP Paribas Securities Services offers integrated financing and asset servicing solution for FoHFs

_*BNP Paribas Securities Services has become the first custodian to
offer funds of hedge funds an integrated liquidity management
solution. Fund managers now have a committed financing and FX hedging
service which is fully integrated with their asset servicing needs
across the entire trade lifecycle.*_

The comprehensive solution is delivered through a new integrated
platform that helps mitigate the complexities of liquidity forecasting
and supports the fund manager by streamlining the creation,
administration, and evaluation of investment performance.

Key features of the offer include: completely scalable committed
financing and FX solution that brings together dedicated structuring,
hedge fund research and loan administration teams - unique among
custodian banks; full transparency on credit scoring and monitoring of
underlying hedge fund holdings, supported by a dedicated hedge fund
database; a sophisticated web-based reporting tool that provides
clients with a comprehensive suite of trade order management,
liquidity forecasting, accounting, investor and regulatory reports;
and web-based trade order capture tool combined with late-hour trading
facilities in all time-zone.

This solution is the latest development within BNP Paribas' AlphaSuite
full range of fund services for alternative fund managers. AlphaSuite
is designed to respond to the rapidly changing alternative fund
industry. As one of the world's strongest banks and largest
custodians, BNP Paribas offers fund of hedge fund managers long-term
service commitment, delivered by a bank whose diversified and
integrated business model has continued to perform throughout and
beyond the financial crisis.

Commenting on the launch, Jacques Bofferding, Head of Alternatives
Financing says: "This solution meets the needs of funds of hedge
funds as they readdress their risk profile in today's post-crisis
environment where safety, liquidity and end-investor protection are
paramount."

Source: Hedgeweek.com

Ex-JPMorgan star unveils Rothschild hedge funds JV

By Sinead Cruise and Tommy Wilkes

LONDON | Thu Feb 17, 2011 11:42am EST

LONDON (Reuters) - Former JPMorgan banker Bill Winters is teaming up
with Lord Jacob Rothschild, a older member of one of Europe's most
revered banking dynasties, to launch an asset management and hedge
fund business in London.

Winters is background up the venture, to be called Renshaw Bay, with
Rothschild's London-listed RIT Capital Partners and Reinet
Investments SCA, chaired by entrepreneur Johann Rupert.

Winters is the latest in a series of high-profile financiers to set
up a 'boutique' investment firm after quitting older roles on Wall
Street and in London's Square Mile financial hub.

These independent companies -- sheltered from the full glare of
public and regulatory scrutiny on pay and performance -- tend to
manage pools of niche assets on behalf of a tiny number of elite
clients, often through a partnership structure.

The launch ends Winters's brief absence from the front line of the
financial air force industry after leaving JPMorgan in 2009 following
a diminishing out with Chief Executive Jamie Dimon.

"Our objective is to build a global alternative asset management and
advisory business ... for our founding shareholders as well as other
sophisticated investors who value our strong focus on risk management
and alignment between investors and investment managers," Winters
said in a proclamation.

Winters, RIT and Reinet are expected to plough substantial sums of
their own capital into Renshaw's funds and investment vehicles and
may also seek to build out or buy investment management capabilities
after achieving authorisation from Britain's Financial Air force
Power.

Winters will continue to serve as one of the five members of the UK
government's Commission on Banking while Renshaw is being set up.

He will initially own 50 percent of the Renshaw Bay business, with
the weigh owned by RIT and Reinet, the Luxembourg-listed investment
vehicle.

The commission is due to make recommendations on the future structure
of the industry in September.

RISE OF THE BOUTIQUE

Heavier regulation and lower bonuses at large banks and asset
managers could lead to an increased flow of staff leaving to join or
start boutique firms.

"We will see more boutique business foundation than businesses being
bought, partly because we will see very older employees or whole
teams leaving banks to start their own firms," said Daniel Pinto,
chief executive at boutique Stanhope Capital.

Since the financial crisis, many experts have predicted rising cost
and regulatory burdens would break down boutiques into the arms of
larger 'multi-boutique' houses wanting to boost assets during weak
markets.

But boutiques, trading off the appeal of their independence, claim to
be fighting back and winning business.

Source: Reuters.Com

Fund View: Food inflation boosts farm input firms - First State

LONDON | Wed Feb 16, 2011 5:50am EST

LONDON (Reuters) - Producers of seed, fertilisers and other
agricultural inputs are the beneficiaries of rising food prices as
farmers scramble to increase output, according to fund managers of
First State's Global Agribusiness Fund.

"Given where soft commodity prices are, farmer economics are more
attractive. We expect strong growth in demand for farm inputs and
expect to see acreage expansion," said Renzo Casarotto, a co-manager
of the fund.

Global food prices are at confirmation levels and are likely to
remain so in the months to come, according to the U.N.'s Food and
Agricultural Organisation.

The fund, which is domiciled in the UK and managed from Australia,
invests in companies involved in the production, processing,
distribution and marketing of agricultural products counting seed,
fertilizers, crop protection and machinery. It has around 22 million
pounds in assets under management.

Rising food prices helped the fund achieve returns of 26.7 percent in
British pounds in 2010 following its May launch.

Any investors in the stocks of farm input companies, but, should also
be wary that high commodity prices could dampen demand, Casarotto
said.

"Food inflation is something that could lead to demand destruction."

For now, there are no signs that prices are success levels high
enough to trigger this result, said Skye Macpherson, co-manager of
the fund.

"The main difference from the 2008 spike is the oil price is lower,
and you need oil to process, distribute and package food. Oil has a
large impact on food inflation," Macpherson said.

Casarotto said food inflation was likely to be an ongoing concern in
emerging markets, where a higher proportion of income is spent on
food.

That includes Plates, where the government recently raised interest
rates in a bid to tackle high inflation. People are waiting to see
whether Plates's economic slowdown will have an impact on demand for
commodities, Casarotto said.

"I would reckon that the largest issue the Chinese government fears
is social unrest. They will do everything they can to make sure
there's adequate supply of reasonably affordable food," he added.

Plates's growing demand has led it to become a net importer of some
commodities, for which it had been self-sufficient.

"Last year Plates imported 2 million tonnes of corn, and this year it
could be importing as much as 9 million tonnes," Casarotto said.

FERTILE INVESTMENTS

Toronto-listed fertiliser company Potash Corp (POT.TO) is the fund's
largest holding and is attractive due to its ability to adjust
production according to demand, Casarotto said.

Source: Reuters.Com

IFR-Private equity firms refinance as yields hit 6-yr low

By Rachelle Horn and Joy Ferguson

Wed Feb 16, 2011 10:56am EST

by Rachelle Horn and Joy Ferguson

NEW YORK, Feb 16 (IFR) - Privately owned retail chains
Burlington Coat Factory and Claire's Stores are the latest in a
collection of lower rated corporate borrowers taking advantage
of confirmation-low yields in the junk bond market to refinance
existing debt at more favorable levels.

Yield levels hit a six-year low on Tuesday as investors'
unrelenting search for yield continues to prop up prices, just
weeks after the high-yield spread to Treasuries broke the 500bp
barrier for the first time in more than the three years. The
Bank of America Merrill Lynch U.S. High Yield Master II Index
now puts the yield-to-worst at 6.87%, matching its previous
historical low set in December 2004.

After scrapping its intended dividend deal last November,
discount clothes retailer Burlington Coat Factory (BCF.N) is
back in the market, this time for a USD400m eight-year non-call
four offering.

Along with a proposed USD1bn term loan due 2017, proceeds
will be used to refinance bank debt and repurchase its
outstanding 14.5% older discount notes due October 2014 and
11.125% older notes due April 2014 older unsecured. In
addition, proceeds of the deal will be used to provide a
USD250m dividend to equity sponsor Bain Capital.

Burlington, bought by Bain Capital in 2006 for USD2.06bn,
pulled its intended USD500m eight-year non-call four dividend
deal in November after it disastrous to take advantage of a
rallying high-yield market that had allowed Dunkin' Finance to
drive-by with a dividend deal earlier that week. As conditions
promptly turned south amid market fatigue, Burlington place its
plans on hold after refusing to pay the 11.25%-11.50% level
that the market required.

Costume jewelry and accessories retailer Claire's Stores is
also looking to price a USD400m eight-year non-call four following
lien offering via Credit Suisse, JP Morgan and Goldman Sachs
later this week to repay bank debt.

Claire's US$3.1bn LBO by Apollo Management APOLO.UL in
2007 was funded with bank debt and a USD935m three-part bond
offering, counting a USD250m Caa1/CCC+ rated eight-year
non-call four older offering that priced at par to yield
9.25%. The company also priced a PIK toggle eight-year non-call
four tranche and a 10-year older sub tranche as part of the
buyout.

Further than of the retailing sector, communications company
Clear Channel, owned by Bain Capital and TH Lee, also sought a
refinancing deal, pricing an upsized USD1bn 10-year non-call
five priority guaranteed notes offering yesterday afternoon.

The Caa1/CCC+ rated notes priced at 9% at par, from talk of
8.75%-9%. Clear Channel was last in the market in December
2009, through its higher rated subsidiary Clear Channel
Outdoor, and strong demand led leads to upsize the eight-year
non-call four older unsecured deal from USD750m to USD2.5bn,
allowing the company to pre-pay its entire inter-company note.
Those notes, rated higher at B2/B, were sold at a 9.25% coupon
at par.

YIELD MATTERS

Retail money continues to surge into the asset class. In
the week ending February 9th, USD1.29bn was added to high yield
funds, marking the 10th consecutive inflow and the largest
inflow since June 2010.

According to analysts at UniCredit, the first four weeks of
2011 totaled USD2.9bn; nearly double that of the first four
weeks of 2010. The year-to-date inflow is now USD4.6bn.

With Treasury rates still exceptionally low -- 10-year
notes are yielding less than 4% versus historical averages of
6.8% -- the current levels in the junk bond market are not
expected to impact demand anytime soon, although recent
softness in the primary market may mean that leveraged entities
will not be able to push the terms on new issuance.

"These deals will come down to price. They are all highly
leveraged entities, but I reckon there will be appetite for
them," said one bond investor. He added, but, that they
likely won't be able to get away with loose covenants, which
have shown up in some recent new deals.

Any potential future gains in the asset class will be
limited, according to Oleg Melentyev, a credit strategist at
BofA Merrill Lynch, although Melentyev adds that the
yield-to-worst could fall to 6.75% -- a new confirmation low.

"This would also translate into 1.8% capital gain in the
average high yield price to USD104.75, another confirmation," said
Melentyev in a BofA Merrill Lynch Global Research report. "The
fact that high yield is about to potentially set two new
records is certainly notable."

(Rachelle Horn is a older IFR analyst; Joy Ferguson is a
reporter for International Financing Review, a Thomson Reuters
publication)

Source: Reuters.Com

Barclay Hedge Fund Index up 0.52% in January

*Hedge funds gained 0.52% in January according latest figures for the
Barclay Hedge Fund Index compiled by BarclayHedge.*

Overall, 14 of Barclay's 18 hedge fund indices gained ground in
January. The Barclay Convertible Arbitrage Index was up 2.13%, Fixed
Income Arbitrage gained 1.97%, Distressed Securities were up 1.63%,
Technology rose 1.64%, and the Multi Strategy Index gained 1.28%.

"High yield bonds rallied even though yields on the 10 and 30-year
Treasuries rose," says Waksman. "The improving economic outlook
simultaneously raised concerns of Fed tightening and reduced fear of
defaults."

The Equity Short Bias Index was down 0.49% in January, Global Macro
lost 0.58%, and Emerging Markets slid 0.47%.

"In developing nations where prices for energy and food make up a
larger percentage of monthly expenditures, inflation concerns
negatively impacted equity markets," says Waksman.

The Barclay Fund of Funds Index gained 0.27% in January.

Source: Hedgeweek.com

M.Stanley funds face Tokyo property debt deadline

Wed Feb 16, 2011 6:06am EST

* MSREF faces loan deadlines on two $1 bln-plus Tokyo bldgs

* Loans on Shinagawa Grand Central Tower due April 15-sources

* Debt on former Shinsei headquarters matures in July-sources

* Blackstone would get sales rights to one if default-sources

By Junko Fujita

TOKYO, Feb 16 (Reuters) - Morgan Stanley funds could lose the
keys to two prime office buildings in Tokyo when the debt matures
in the next few months, sources said, the latest fallout from a
series of highly leveraged investments in the run-up to the
financial crisis.

Morgan Stanley (MS.N) was one of the most aggressive
investors in global property markets during a debt-fuelled boom
that fizzled out in 2008. Japan was one target region for
investments made through funds known as MSREF.

MSREF V, a $4.2 billion fund, faces an April 15 repayment
deadline for loans on the 32-storey Shinagawa Grand Central
Tower, which it bought for 140 billion yen ($1.67 billion) in
2004, two sources with direct knowledge of the transaction said.

Also, the $8.8 billion MSREF VI is confronting a decision on
the former headquarters of Shinsei Bank (8303.T) when debts on
that building -- bought in 2008 for 118 billion yen -- mature in
July, three sources familiar with that deal told Reuters.

The value of the properties has fallen well below that of the
debt, analysts and sources said, raising the prospect that the
funds will fail to repay or refinance the loans and hand control
of the buildings over to lenders.

Private equity firm Blackstone Group LP (BX.N) holds the most
junior portion of the debt on the Shinagawa building and
therefore would gain the right to market the building for seven
months from April if MSREF V defaulted on the loans, sources
said.

The sources spoke on condition of anonymity due to the
sensitive nature of the matter. A Morgan Stanley spokeswoman in
Tokyo declined to comment.

A default would not likely come as a major surprise to
industry watchers. About a year ago, Moody's Investors Service
cut its ratings on securitised bonds which market experts say are
backed by the Shinagawa tower.

The most senior debt, or class A debt, was cut by two notches
to Aa2 (sf), class B debt was lowered by four notches to A3 (sf),
and class C downgraded six notches to Baa3 (sf).

"We downgraded the bonds based on an assumption that the
borrower may not be able to refinance the debt," said Koji
Kumamaru, an analyst at Moody's, which as a general policy does
not identify the specific properties backing rated bonds.

International Asset Management launches CTA fund of funds

*_International Asset Management, an independent fund of hedge funds
manager, has announced that it will launch the IAM Trading Fund to
capture opportunities in the CTA strategy in a diversified manner._*

The launch is the conclusion of more than 12 months of research into
the optimal way in which to invest in CTAs.

The IAM Trading Fund will be a dynamically managed portfolio of hedge
funds and will initially allocate to between ten and 15 holdings. It
is being launched on 30 January 2009 with more than USD100m in assets.

IAM has a 19-year track record of creating portfolios of hedge funds
and has been investing in CTAs since 1994.

IAM's team has conducted extensive research and due diligence on 345
CTAs funds in the last 14 years, and has made investments only in
funds that have proven their ability to manage through bull and bear
markets.

The IAM Trading Fund will only invest in CTAs funds which IAM has
approved.

Morten Spenner, chief executive at IAM (pictured), says: 'We have
launched the IAM Trading Fund in response to client demand and market
conditions, as well as to further strengthen our existing product
range and portfolios. The CTAs strategy has consistently been IAM's
favoured strategy during 2008 based on the attractive risk/return
profile, and we continue to be positive on the outlook for returns
going into 2009. This fund will capture the opportunities present in
the CTAs strategy while better diversifying risk for investors.

"CTAs have high returns but low correlation to other hedge fund
strategies and to equity markets. During the current turmoil,
volatility has not risen in CTAs as it has for most other strategies.
At the same time, managers have been able to extract returns from the
volatile environment. Importantly, we also regard the strategy as
having ample capacity: as of Q3 2008 the Global AuM of CTAs was
USD226bn.'

Spenner says the other benefits of CTAs are that they utilise futures
which are highly regulated and liquid, with low trading transaction
costs and minimal counterparty risk.

'Our ability to construct a successful portfolio enables the fund to
diversify across trading models, time horizons, markets, and
underlying assets which will greatly reduce the risk contribution of
any one particular manager,' he adds.

Source: Hedgeweek.com

Goldman to wind down global macro trading desk-WSJ

NEW YORK | Tue Feb 15, 2011 8:19pm EST

NEW YORK Feb 15 (Reuters) - Goldman Sachs Group Inc (GS.N)
is winding down its Global Macro Proprietary Trading desk, the
Wall Street Journal said on Tuesday, citing a person familiar
with the matter.

The trading desk has made bets with Goldman's capital in
foreign exchange markets, interest rate markets, stocks,
commodities and other fixed-income markets, and will close its
trades in the "coming days," the newspaper said, citing the
person.

Goldman was not immediately available for note.

Some members of the eight-person trading desk will leave
the company, with Karl Devine and others on his four-person
London-based staff in discussion to go to hedge funds in that
city, the newspaper said, citing people familiar with the
circumstances.

Like other banks, Goldman has been curtailing trading to
comply with the so-called Volcker rule, part of last year's
Dodd-truthful financial regulation overhaul calculated to limit the
risks that lenders take with their own capital.

According to the newspaper, Goldman has said it has no
plans to unwind a larger proprietary-investment unit called the
Special Situations Group, which it said complies with the
Volcker rule because it is mainly a lending unit. (Reporting by
Jonathan Stempel; Editing by Gary Hill)

Source: Reuters.Com

ETF Investing: Surging prices lift cotton-futures ETN

By John Spence, MarketWatch

BOSTON (MarketWatch) — An exchange-traded note indexed to
cotton-futures contracts has jumped about 15% so far this year and
remains a top-performing product in the commodity complicated despite
a pullback late last week.

The iPath Dow Jones-UBS Cotton Subindex Total Return ETN
/quotes/comstock/13*!bal/quotes/nls/bal
(BAL
*97.78*,
+3.53,
+3.75%)
has surged 156% for the 12 months through Feb. 3, according
to investment researcher Morningstar Inc. It sports the highest return
for any exchange-traded product for the period with the exclusion of
ProShares Ultra Silver
/quotes/comstock/13*!agq/quotes/nls/agq
(AGQ
*153.96*,
+0.55,
+0.36%)
, a leveraged fund.

!! Public Investors in Privately Held Companies !!

Interest is brewing in start-ups that allow investors to trade in
shares of non-public companies. MarketWatch's John Letzing interviews
Thomas Foley, founder of Xpert Financial Inc.

The spike in cotton prices, as with many other soft and agricultural
commodities, is "like nothing we have ever seen before," said Dan
Wantrobski, director of technical research at Janney Montgomery Scott
LLC.

Cotton prices are at their highest levels since the 1860s and there
are reports that some businesses are hoarding the material. Futures
tracking the commodity have approached $1.80 a pound in the latest
push, fueled by rising demand and dwindling supply. Rising prices are
pressuring mills and crimping profit margins at retailers and clothes
companies that use cotton in their products.

"Any commodity market where one has to go back in time to the U.S.
Civil War to find higher prices has to be considered one of the
classic bull markets in recent description," said Mike Zarembski,
older commodity analyst at optionsXpress.

Limiting Speculation

IntercontinentalExchange Inc.
/quotes/comstock/13*!ice/quotes/nls/ice
(ICE
*126.74*,
-3.72,
-2.85%)
last week took steps to rein in speculation in
cotton-futures markets. Participants who expect to involve positions
in surplus of 300 contracts will need to file an exemption request and
must show the requested spot limit is "economically appropriate,"
ICE said in a proclamation. See previous tale on ICE's moves at
WSJ.com.

The announcement on Thursday hit prices, and the cotton ETN shed more
than 3% in Friday's session. The note is managed by Barclays
/quotes/comstock/23s!a:barc
(UK:BARC
*328.75*,
+18.00,
+5.79%)

/quotes/comstock/13*!bcs/quotes/nls/bcs
(BCS
*21.23*,
+1.27,
+6.36%)
and is relatively tiny in terms of assets with a market
capitalization of about $78 million. It charges a yearly fee of 0.75%
and was launched in June 2008. ETNs are debt instruments issued by
financial institutions, so they involve credit risk. The products are
calculated to provide the return of an index, minus fees, taxes and
other costs.

The remarkable rally in the cotton ETN has pushed the portfolio more
than 60% above its 200-day moving average, the highest level of
separation from this indicator for any exchange-traded fund or note.

Cotton has been leading the surge in soft commodities such as coffee,
sugar and cocoa. The iPath Dow Jones-UBS Total Return Subindex ETN
/quotes/comstock/13*!jjs/quotes/nls/jjs
(JJS
*87.36*,
+0.09,
+0.10%)
was up 71.4% for the 12 months finished Feb. 3, according
to Morningstar.

The soft and agricultural commodity sector is "set to be one of the
largest tales of 2011," said Wantrobski at Janney.

"Some have become ridiculously overbought by technical standards —
but momentum remains strong and as we all know, the global central
banks continue to flush unprecedented amounts of liquidity into the
system," the strategist wrote in a Feb. 2 note.

Therefore, this corner of the commodities markets "could continue to
daze watchers in the months ahead," he added.

/quotes/comstock/13*!bal/quotes/nls/bal

BAL
*97.78*,
+3.53,
+3.75%

Sugar high

For traders, the inquiry is whether prices will right or continue to
march higher. "In any consequence, the stage is set for fireworks in
this sector — this year," Wantrobski predicted.

On the supply side, poor weather in Plates, India, Pakistan and
Australia has contributed to rising cotton prices. Egypt, which has
been racked by anti-government protests, is also an exporter.

Meanwhile, rising demand from the world's emerging economies such as
Plates could continue to fuel further price gains, analysts say.

Yet some observers reckon prices are stretched too far and due for a
breather.

"The cotton-price rally looks like it contains elements of panic
now," wrote commodity analysts at Commerzbank in a note last week.
"We believe the price of cotton is already in a phase of
exaggeration and expect a sharp fall in price in the coming
months."

John Spence is a reporter for MarketWatch in Boston.

Source: Marketwatch.Com

Comment: Funds of hedge funds defy predictions of extinction

_*Funds of hedge funds were widely predicted to become one of the
principal casualties of last year's annus horribilis for the hedge
fund industry. While most hedge fund indices reported average declines
in 2008 of up to 20 per cent, fund of funds benchmarks did even of
poorer quality.*_

That double layer of fees, it turned out, did not buy sufficient
diversification to shield investors from hedge fund managers'
miserable performance; investors found themselves deprived of
liquidity because fund of fund managers' were unable to redeem
underlying investments; funds of funds that had leveraged up to boost
returns found it was losses that had been turbo-charged; and to cap it
all some managers had placed significant slugs of their investors'
money with Bernard Madoff.

The demise of funds of hedge funds has been forecast for years,
prompted by the lower fees and supposedly superior performance of
multistrategy funds as an alternative as well as the increasing
sophistication of institutional investors who, it was predicted, would
shift their capital from funds of funds to single-manager vehicles as
they became more comfortable and knowledgeable about alternative
investments. Surely last year's slump would deliver the coup de
grâce?

It remains ahead of schedule days, but it seems that the death of
funds of hedge funds may have been greatly exaggerated. Many funds of
funds ran into distress last year, of course, but anecdotal evidence
suggests that investors are often keen to go along with restructuring
proposals rather than settle for grabbing what they can from the
wreckage. Last year's outflows of capital have slowed to a trickle,
and there are even reports of the odd new fund of funds being
launched.

Why should this be? A lot of the lustre came off multistrategy funds
last year. By some reckonings they underperformed both funds of hedge
funds and single-manager funds; certainly there was modest evidence of
consistent ability to reallocate capital successfully in response to
market conditions. At the same time, the events of 2008 did modest to
reassure smaller institutions in particular about their ability to
make their own choices of strategy and manager.

So there still seems to be a place for funds that offer somewhat
diversified exposure to the hedge fund universe, although investors
will be demanding superior evidence of due diligence on underlying
managers and may well require fund of funds managers to get by on a
lower level of fees.

Place together, these trends point to consolidation in the sector, as
only managers with a substantial asset base will have the resources to
research and investigate underlying funds with the thoroughness that
will be required. Many members of Switzerland's substantial fund of
funds industry, much of which consists of vehicles with less than
USD100m in assets under management, will need to seek merger partners
to survive, according to Peter Meier, head of the centre for
alternative investments and risk management at the Zurich University
of Applied Science.

Swiss fund of funds do face problems that are not universal in the
industry; some of them have extremely low smallest investment
thresholds, which bring them within the ambit of more onerous and
constrictive retail investment regulation. Fund of funds managers as a
whole are facing up to significant changes to their business models as
they seek to regain investors' trust and also to start earning the
level of fees required for their firms to thrive. Still, it's better
than the alternative.

Source: Hedgeweek.com

Finance industry "almost lawless", says Toscafund

By Laurence Fletcher

LONDON | Tue Jan 25, 2011 6:06am EST

LONDON (Reuters) - The financial air force industry is practically
"further than the law" and needs better regulation of individuals
entering the sector, a partner at Toscafund, one of the UK's most
high-profile hedge fund firms, said on Monday.

Savvas Savouri, partner and chief economist at Toscafund, has called
for tighter scrutiny despite a wave of recent regulation tackling
bank capital requirements and bonuses as lawmakers try to avert a
repeat of the credit crisis.

"Finance is nearly further than the law. The nature of regulation is
so light touch that it may as well not be there at all," Savouri said
at the London School of Economics' Alternative Investments
Conference.

"It (the financial air force sector) is like medicine in the 18th
century -- it's full of frauds ... and is very poorly regulated...
You need to be that much better (than your rivals) if you don't
perform underhand or insider trades."

Savouri's comments make Toscafund one of the few hedge fund firms to
argue the case for more regulation following the European Union's
Alternative Investment Fund Managers directive which seeks closer
supervision of hedge funds even though many regulators say they were
not directly responsible for the crisis.

But, Savouri said adaptable people, rather than trying to cap
bonuses, would be a far more effective method for controlling the
sector.

"What should be happening ... is rather than (adaptable) bonuses, you
regulate the human capital. Graduate trainees turn up (to a new job)
and far too soon they're given control over assets."

"Because they look the part ... that can be very perilous."

Savouri also told Reuters on the sidelines of the conference that he
favoured positions in capital goods stocks and resources for his
funds, but was avoiding consumer-related stocks because of difficulty
on their margins.

Toscafund's main portfolio suffered huge losses in 2008 during the
credit crisis but its funds have since rebounded strongly.

(Editing by Sinead Cruise and David Cowell) (To read the Reuters
Funds Blog click on blogs.reuters.com/fundshub; for the Global
Investing Blog click here)

Source: Reuters.Com

University pension fund pushing into emerging markets

By Cecilia Valente

LONDON | Wed Jan 26, 2011 7:14am EST

LONDON (Reuters) - Britain's following-largest pension fund is
putting more money into emerging markets and hedge funds, as it moves
to dilute exposure to stocks that left it reeling in the financial
crisis, its chief investor said.

The 31.6 billion pound Universities Superannuation Scheme USS.L is
pouring an extra 320 million pounds into emerging market equities,
while paring allocations to global equities from 62 percent to as low
as 55 percent, Chief Investment Officer Roger Gray told Reuters.

Exposure to emerging markets will rise to 7.5 percent from 6.5
percent and is likely to rise further still, he said.

"I would not say 7.5 percent (in emerging markets) is the ultimate
goal, but it is as far as we have set it at the moment. We should set
that against the context where our overall equity exposure is
reducing," Gray said.

The realignment inscription a significant departure from the habitual
strategies pursued by the fund, which is following only to the BT
(BT.L) pension scheme in size.

Before Gray took the job in late 2009, the USS allocated about 70
percent of assets to global equities but lost about 7 billion pounds
in the stock market slump following the credit crisis. Emerging
market exposure was only around 5 percent of the fund.

HEDGE FUNDS

As it moves away from equities, the scheme will also invest at least
1.5 percent or close to 500 million pounds in hedge funds, aspiring
to a longer-term target of 5 percent. The fund may even go a bit
further than that, Gray said.

So-called alternative investments such as hedge funds fell from
favour after the financial crisis as some proved illiquid, exposing
investors to steep losses. In extreme cases such as the Bernard
Madoff scandal the funds turned out to be frauds.

Gray said the USS's extra commitment to hedge funds is backed by
closer scrutiny of their corporate governance practices.

"The area where over the last few years we have evolved is applying
that (corporate governance scrutiny) to the full range of our
investments, counting hedge funds, he said.

"Is the board of the hedge fund constituted in a way which gives us
assurance that they are really acting in the interest of the limited
partners rather than in the pocket of the managers?" he said.

An increase in the scheme's strategic allocation to fixed income,
which is also part of the diversification plot, has been "progressing
slowly" towards its target of 15 percent.

Having reached 12.5 percent, Gray said it was "only a inquiry of
timing when the next go takes place ... It will be incremental steps,
rather than dramatic steps." (Editing by Chris Vellacott and David
Holmes)

Source: Reuters.Com

Credit Suisse Issues About $6 Billion in Contingent Bonds

Credit Suisse said on Monday that it had issued Qatar Holding and the
Olayan Group about six billion Swiss francs' worth of contingent
convertible bonds, a honestly untested debt instrument.

The debt residency with the Qatar sovereign wealth fund and the Saudi
conglomerate will take care of half of the contingent capital it has
to bring to somebody's attention under new Swiss rules meant to
strengthen bank weigh sheets in the consequence of crisis.

In an exchange for bonds the two investors already held, Credit Suisse
is issuing bonds in two currencies — $3.5 billion and 2.5 billion
Swiss francs; they pay a coupon of 9.5 percent and 9 percent,
respectively.

Contingent convertible bonds, known as CoCos, are like normal bonds
but except that they would be converted into equity by a trigger
consequence. In this case, the consequence would be a decline in the
bank's Tier 1 capital ratio to less than 7 percent.

Such bonds are intended to boost a lender's equity in a crunch
through the commitments of private sector investors, rather than have
banks be saved with taxpayer money, as so many were in the recent
crisis. By converting the bonds at a crucial moment, the lender would
at once have less debt and more equity, alleviating the conundrum of
too-huge-to-fail financial institutions.

Announcing the issue, Credit Suisse said the go would partially
satisfy "the proposed Swiss T.B.T.F. regime."

Brady W. Dougan, the bank's chief executive, said it had "worked
in close cooperation with our primary regulator, Finma, to make sure
that the buffer capital notes will qualify under the future Swiss
capital rules as contingent capital."

The new capital requirements are set to take effect in 2019.

Credit Suisse lowered its outlook for the year last week and missed
expectations for the fourth quarter.

Mr. Dougan added that the issue demonstrated CoCo bonds could be "a
material source of capital for the banking industry" as well as an
"attractive investment" for people already holding hybrid
instruments.

Not everyone in Swiss banking is as positive about the bonds.

Oswald Gruebel, the head of Credit Suisse's major rival, UBS, said
in an interview with the Swiss weekly Sonntag that he feared CoCos
would prove dilutive to bank shares, and proposed an alternative.
"I'm thought of bonds that lose half their worth when certain
capital threshholds are crossed," he said.

Source: Forbes.com

Indicted hedge fund trader linked to Cohen, Druker

By Svea Herbst-Bayliss and Matthew Goldstein

BOSTON/NEW YORK | Fri Feb 11, 2011 4:15am EST

BOSTON/NEW YORK (Reuters) - Steven Cohen and Neil Druker are at
opposite ends of the spectrum when it comes to hedge fund fame and
trading prowess.

But both wealthy hedge fund managers now find themselves linked to a
U.S. insider trading investigation because of the criminal conduct of
the same former employee.

'CO-CONSPIRATOR'

The criminal complaint that Freeman pleaded guilty to describes the
president and owner of "Hedge Fund A" as a "co-conspirator," who
"exercised primary power" over trading decisions.

The source familiar with the investigation confirmed that Hedge Fund
A is Sonar Capital, but declined to note on who else may or may not
be a target of centralized authorities.

The time period Freeman worked at Sonar also coincides with the
period that prosecutors charged he engaged in illegal activity at
Hedge Fund A.

On Tuesday evening, Druker sent a letter to his investors in which he
sought to place distance between himself and his former top tech
analyst.

Source: Reuters.Com

Volatile trading on hedge fund market likely to extend in 2011

_*Prices on the hedge fund lesser market remain volatile, according to
the latest data from Hedgebay. *_

A lack of price stability has been the recurring theme of 2010,
evidenced once again when the average trade price dropped to 74 per
cent in November after registering the highest average in six months
during October.

October's high of 81 per cent was the third time in a row the index
had risen, suggesting that consistency might slowly be returning to
the market after a turbulent year. But, the drop shown in November has
cast doubts over that theory, with the volatility now expected to
extend into 2011.

The Hedgebay Index has been inhibited by a distinct absence of funds
trading near par over the last year, suggesting a continued lack of
confidence in the market. A relative lack of pricing transparency has
also bent uncertainty in the market, although Hedgebay believes that
its newly launched Pricing and Valuation Consultancy Service will help
to bring superior insight to this area.

Elias Tueta, co-founder of Hedgebay, says: "In many ways, this
month's results have been typical of 2010. After an unsettled year
of trading on the lesser market, the general sentiment among investors
is one of caution. This has bent an artificial 'cap' on the price
they are keen to pay, and the fluctuations in the index have reflected
that. Every time the price looks as though it is rising consistently,
we saw a fall in the index. There is currently modest to suggest that
that will change in the ahead of schedule part of 2011."

Tueta has also pointed to the recent governmental interventions at
several large hedge funds as a reason for November's drop. The
interventions have made investors nervous that their managers, or
managers on offer on the lesser market, could face the same behavior.

Meanwhile, Hedgebay's Illiquid Asset Index which measures trading in
gated or floating funds rose quite significantly to 44.09 per cent.
Notably, the majority of transactions in November took place in this
part of the market. Hedgebay believes that the surge of trading in
these illiquid assets shows a renewed determination among investors to
clean their portfolios. Two years on from the credit crisis, the
ongoing cost of servicing illiquid assets has proved to be a drain on
investor capital, making the disposal of such assets a necessity.

Tueta says: "There is something approaching fatigue in the illiquid
end of the lesser market, as investors try to start anew in 2011. A
clean portfolio free from illiquid assets will allow investors a clean
bill of health vacant into the first quarter of next year, and free up
capital for some of the funds that have shown excellent performance
this year. This sample of trading will likely continue throughout
December."

Source: Hedgeweek.com

Ayaltis Acantias Offshore fund is launched

Ayaltis has launched the Ayaltis Acantias Offshore fund, a fund of
hedge funds focused on undervalued assets in the stressed and
distressed credit space.

The fund aims to capture value in all credit markets investing across
all seniority levels following through the current period of strong
technical versus essential dislocations expected to last for the next
few years.

The fund is very concentrated, investing in between six and eight
seasoned distressed credit hedge funds with proven investment skills,
leadership, innovation and management talent.

The fund's target is an annualized return of 18 to 24 per cent per
annum with a volatility of eight per cent per annum over a three to
five years investment horizon. The fund is up 8.35 per cent
year-to-date and since its launch in March 2010.

Ayaltis, the investment adviser of the fund, has also hired Guillermo
Worlicek (pictured) and Massimo Martino to strengthen its team.

Worlicek has joined from Harcourt Investment Consulting where he
worked for five years, most recently as executive director. He will be
a partner and is responsible for implementing a risk and quant
management framework within Ayaltis.

Martino has joined from Banca del Ceresio where he spent more than six
years as fund operations manager of its six fund of hedge funds
managed by the bank. At Ayaltis, he will be responsible for the
complete life cycle of the fund operations service.

Ayaltis is a fund of hedge funds adviser with focus on fixed income
and credit strategies based in Zurich, Switzerland.

Source: Hedgeweek.com

China gets first official hedge fund

By Samuel Shen and Kazunori Takada

SHANGHAI | Mon Feb 14, 2011 6:23am EST

The go, if successful, could spur other brokerages, fund managers and
even trust firms to follow suit, sowing the seeds for Plates's own
George Soros or James Simons.

Although many privately-run Chinese fund managers with no licenses
call themselves hedge funds, with some also using derivatives to
hedge risks, none of them have been approved by regulators.

But, Chinese regulators have been cautious about approving hedge
funds, partly because of the apparent negative role they played in
the financial crisis.

The launch of Guotai Junan's hedge fund comes at a volatile time for
Plates's stock market, with investors worries about inflation,
monetary tightening and a possible slowdown in economic growth.

Meanwhile, the authorities stepped up a crackdown on the real estate
market, leaving investors balking at buying material goods.

Targeting an annual return of 10-15 percent for its first hedge fund,
Guotai Junan intended to launch identical funds later to bring to
somebody's attention up to 5 billion yuan, he said.

(Additional reporting by David Lin; Editing by Chris Lewis)

Source: Reuters.Com

Citi launches technology platform for funds of hedge funds

_*Citi's global transaction air force unit has launched a global
technology platform specifically calculated for servicing funds of
hedge funds.*_

The new service, which integrates into Citi's global operating
platform for hedge fund air force, enables Citi to provide a suite of
fund of hedge fund solutions through a single front-to-back online
service.

"For the benefit of servicing fund of hedge fund managers around the
world, we have pulled together the entire client experience under one
seamlessly integrated, globally consistent platform," says Neeraj
Sahai, global head of securities and fund air force, Citi. "Managers
have direct, on-line access to our custody air force, our suite of
middle-office solutions and all standard administrative reports,
resulting in greatly improved efficiency, accuracy, transparency and
risk mitigation."

Citi's fund of hedge fund air force product suite offers clients a
modular end-to-end solution, supporting the entire trade lifecycle:
middle office, custody, securities finance, back office, cash and
liquidity.

The new technology platform delivers the following types of customised
tools for portfolio managers:

• Analysis of liquidity terms of underlying hedge fund investments
• Ability to track and analyse underlying fund performance
• "What-if" trade scenario analysis
• Pre and post trade compliance reporting against investment
guidelines
• Real-time dynamic NAV reporting
• Automated FX hedging functionality for share classes denominated
in non-base foreign currency

Citi entered into an agreement with youDevise to ticket the platform.
youDevise is the developer of an online platform used by fund of hedge
funds and administrators for front, middle and back office management
information.

Source: Hedgeweek.com

IFR-Investors seek return in stressed loans

Mon Feb 14, 2011 12:06pm EST

(The following tale appeared in the Feb. 12 issue of
International Financing Review, a Thomson Reuters publication)

By Michelle Sierra Lafitte

NEW YORK, Feb 12 (IFR) - Investor appetite for US leveraged
loans has pushed average bids to a four-year high in the
lesser loan trading market which is encouraging portfolio
managers to consider buying stressed or distressed loans in the
hunt for yield.

Buyers' attention focussed on troubled buyouts struck at the
peak of the market such as Energy Future Holding TXEFHE.UL
(formerly TXU) and Harrah's Entertainment HAMLEO.UL last week
after Clear Channel Communications'

Headstart Fund of Funds tops rankings

_*The investable Headstart Fund of Funds, advised by Headstart
Advisers, has claimed its place at the top of the leader board of the
Investhedge rankings for multi-strategy funds of hedge funds over the
last three, six and 12 months.*_

The fund has a year to date return of 13.94 per cent to the end of
November 2010.

Headstart's performance this year compares favourably with fund of
funds indices such as the HFRI Fund of Funds Composite Index (+3.43
per cent year to date), the Barclay Fund of Funds Index (2.85 per
cent) and the EurekaHedge Fund of Funds Index (2.6 per cent).

The fund has been advised by Headstart Advisers' chief investment
officer Najy Nasser since it began in November 1999.

Its 11 year track record has an annualised return of 6.82 per cent
with a volatility of 8.01 per cent per cent. An investment at the
inception of the fund would have approximately doubled by now, whereas
the S&P 500 index is down 13.18 per cent in the same 11 year time
period.

Since January 2009 the Headstart Fund of Funds has had an annualised
rate of return of 16.62 per cent with a volatility of 6.68 per cent.

Nasser says: "Our fund has performed consistently during 2009 and
throughout 2010 after what was a difficult 2008 for nearly everyone in
our industry.

"We are particularly pleased with our outperformance against the
indices we are most usually compared. In what has been a difficult
year for hedge funds with a wide disparity of returns, all of our
underlying positions are positive for the year to date which is a
strong testament to the quality of the funds within the portfolio."

Source: Hedgeweek.com

AIS launches web portal for hedge fund document management

_*AIS Fund Administration has launched AIS IR Manager, a secure
document management and investor relations web portal calculated
expressly for the firm's hedge fund clients.*_

AIS Fund Administration provides outsourced middle and back office
support and fund administration to the alternative investment
industry.

The AIS IR Manager allows managers to post fund documents, newsletters
and marketing materials.

IR Manager is hosted by both the hedge fund manager and AIS on a
restricted, password protected website.

Financial statements are uploaded directly by AIS to make sure that
all information is secure and confidential. Managers are able to
authorise their investors and prospects with access to their available
information and track how information is being used by activity logs
and a secure tracking encryption.

"We've seen tremendous demand from our clients for such a platform
on two fronts," says Paul Chain, AIS president. "First, compliance
minded CFOs want a way to satisfy regulatory scrutiny, maintain a high
level of confidentiality and demonstrate control over the fund's
marketing efforts. Following, managers want an efficient and secure
way to distribute newsletters, offering documents, marketing materials
and statements to existing and potential investors. IR Manager ensures
that only the intended party views the material they are permitted to
view. Answering both needs on one platform, controlled by AIS as the
third party administrator, provides a valuable solution for our
clients."

Source: Hedgeweek.com

Stenham Global Resources ranked in top ten by BarclayHedge

_*Stenham Asset Management says Stenham Global Resources was ranked
number eight in the Top 10 Performing Fund of Hedge Funds category for
October 2010 by BarclayHedge.*_

Stenham Global Resources, a fund of hedge fund, focuses on commodity
related sectors such as water, agriculture and soft commodities.

The long biased fund of hedge fund is a concentrated portfolio of ten
to 15 managers with a target return of Libor plus six to eight per
cent and volatility of eight to 11 per cent per year.

The fund was launched in 2006.

Source: Hedgeweek.com

Global financial markets ended 2010 with a positive tone

_*Global financial markets finished 2010 with a positive tone, with
strength across global equity, commodity and credit markets throughout
the month of December.*_

Macro funds posted the strongest gains of the strategies with a
contribution from equities and commodities as both fixed income and
volatility declined. The HFRI Macro (Total) Index posted a gain of
3.73%, bringing its performance YTD to 8.41%. Both Flexible and
Systematic strategies had similar positive contributions, with small
fixed income, long commodity and small US dollar positions
contributing to gains for the month. Recovering from November's
losses, persistent trends across many asset classes contributed to a
gain of 4.45% for the HFRI Macro: Systematic Diversified Index, with
these ending 2010 with a gain of 9.48%.

The HFRI Equity Hedge (Total) Index posted a gain of 3.46%, with
strong contributions from Essential Growth, Energy/Basic Materials and
Emerging Markets exposures. The HFRI EH: Energy/Basic Materials Index
gained 4.71%, bringing full year 2010 performance to 15.98%, eclipsing
several other strategy indices to become the leading areas of hedge
fund performance for the year. Gains across Equity Hedge were strong
across nearly all sub-strategies with Quantitative Directional,
Technology/Healthcare and Equity Market Neutral all contributing
positively. Small Bias funds once again posted a sharp loss, with
these declining by 8.51%.

The HFRI Consequence Driven (Total) Index posted a gain of 2.77%, with
all sub-strategies having positive contributions led by gains in
Special Situations and Activist funds. Risk tolerance declined and
capital market issuance and strategic acquisition activity remained
strong, contributing to gains of 3.82% in Special Situations and 2.68%
in Distressed/Restructuring; Merger and Credit Arbitrage also posted
gains for the month.