alternative investment

Hedge funds and the new president

Jim Kim — Wed, 05 Nov 2008 13:16:48 -0500

You've got to wonder how the hedge fund industry will fare under President Barack Obama. In some ways, hedge funds serve as a proxy for all of Wall Street. At times, the president-elect's populist appeal seemed to target Wall Street fat cats--directing a lot of attention to wealthy Wall Streeters who aren't paying enough taxes. And at one point, he tried to paint John McCain as the candidate of "Joe the Hedge Fund Manager."

Rhetoric aside, he hasn't been a notable Wall Street regulatory reformist, notes FINAlternatives. But he has favored laws that would close off some tax benefits for alternative investment firms. He also supported laws that would require hedge funds to set up anti-money laundering programs. At the same time, he received lots of campaign contributions from the industry. My sense is that the most heated reform proposals will come from the House.

For more:
- here's the FINalternatives article

More hedge funds to tap capital markets?

Jim Kim — Mon, 28 Jul 2008 14:47:12 -0400

The KKR move to become a publicly traded company throws the spotlight, once again, on alternative investment companies and the public markets. We may see more private equity companies try to somehow follow suit. The case for more hedge funds tapping the markets seems even more compelling. Financial News Online notes a recent Celent study that found more hedge fund firms seeking permanent capital to get through the fallout from the ongoing credit crunch. The fact is that prime brokers haven't exactly turned the leverage spigots back on, and it's unclear if they ever will. So more might follow Citadel, which became the first hedge fund firm to issue bonds in 2006. Others will seek to follow the likes of Man and Fortress and become public companies. While the benefits of a public offering are obvious, it's unclear whether investors will readily snap up such issues. At some point, hopefully sentiment will change.

For more:
- here's the Financial News Online article

Related Article:
KKR to go public after all

Alternative investment firms take lumps in aftermarket

Jim Kim — Tue, 24 Jun 2008 21:43:24 -0400

The window for an initial public offering closed pretty quickly for most alternative investment firms, which were lining up to follow the likes of the Blackstone Group, Och-Ziff and Fortress Investment Group. In hindsight, for the few that managed to sell their shares, it's unclear whether the IPO was a blessing or a curse. They sold their shares at a decent price, but the aftermarket, as Fortune notes, has not been kind. Fortress and the Blackstone Group are down about 50 percent, with Och-Ziff not far behind. Still, you have to wonder whether this is a buying opportunity. There are those who believe the worst is over and that the top alternative investors are laying the groundwork for a revival of sorts, via distressed funds for example.

For more:
- here's the article

Can the alternatives boom keep on booming?

Wed, 14 May 2008 06:59:59 -0400

When you get down to it, the private equity and hedge fund industries were built on the backs of millions of hard-working folks earnings civil servants wages--police officers, teachers and others. Obviously, the main source of funding for many alternative investment firms were working the public pensions.

State governments are falling behind in their race to cover the retirement benefits they have promised, to the tune of $750 billion. Local pensions are likely in the same boat. (Corporate pensions, the ones that still exist, are faring a lot better. Still, the funded ratio dropped last year to below 100 percent.) The GAO has found that the percentage of public pensions that are severely underfunded has risen to 40 percent.

The kicker is that, according to the Washington Post, a lot of pensions use accounting methods that make the problem seem less severe. Many would argue that they use really rosy return assumptions.

So you've got to wonder what the answer is? I really don't see an obvious one. You can't just snap your fingers, change policies and expect everything to work out. I applaud the PBGC decision to allocate more to equities over the next decade or so. But is chasing the returns the answer? You can be a great hedge fund and private equity fund picker, but the returns aren't likely to bridge the gap meaningfully. There might have been a time when the prospect of better returns would have made a difference, but for a lot of pensions, even significantly higher returns won't matter all that much.

So at some point, we'll have to acknowledge reality, and have a serious national discussion about slashing benefits. Wall Street is no longer the answer; we're way beyond that now. - Jim

Citigroup continues to tinker with execs

Tue, 18 Mar 2008 07:59:55 -0400

Vikram Pandit is not shy about tinkering with his talent. The New York Times notes that the elevation of John Havens to head the newly combined investment banking and alternative investment group is the third big executive shake-up at Citigroup in six months. The move also represents the latest sign that Pandit feels most comfortable with old Morgan Stanley chums. Havens is the polar opposite of Pandit in terms of personality, the Times notes, but they have worked together for 20 years. The issue for many is whether all this tinkering will bear any real fruit. Will it meaningfully affect the company's ability to manage its way through the current crisis? There are plenty of skeptics.

For more:
- here's the New York Times article

Related Articles:
The paradox of a mortgage collapse. Article
How bad will job cuts be at Citigroup? Article
No honeymoon for Pandit. Article
Street growing ever more bearish on Citigroup. Article
Wow! Pandit takes major action already. Article

SPOTLIGHT: Alternatives Rally

Thu, 28 Feb 2008 06:59:52 -0500

It seems Super Return 2008 has been good for the shares of alternative investment providers. Not that the industry has a lot to celebrate right now. Article

ALSO NOTED: Bank of America plans mortgage unit changes; Criticism of Citigroup's new alternative investment chief; and much mo

Fri, 01 Feb 2008 06:59:50 -0500

Company News:
> Signature bank delays results. Article
> Bank of America plans mortgage unit changes. Article
> Nasdaq beats estimates. Article
> MBIA writes down $3.5 billion. Article
> ICE to buy YellowJack software platform. Article
> Greenhill hikes dividend. Article
> Criticism of Citigroup's new alternative investment chief. Article

Industry News:
> Impact of downgrades could be massive. Article

Regulatory News:
> Fla. probing Countrywide. Article

And Finally... Get paid to go on job interviews. Article

Fortress and Bear Stearns deal talks to revive soon?

Fri, 11 Jan 2008 06:59:55 -0500

We've noted before that Jimmy Cayne was determined to keep Bear Stearns independent. While he listened to the many suitors, some think he was never really interested in a merger. The price was always too low. With Alan Schwartz now in charge, will all those suitors come back into the picture? An intriguing possibility: Fortress Investments. The Financial Times notes there were some detailed discussions underway. The deal never went through, but if the logic were compelling enough, who knows? It might rise again. Fortress may benefit from Bear's larger (albeit shrinking) balance sheet. Bear Stearns might benefit from Fortress's alternative investment prowess; it could sorely use some help.

For more:
- here's the Financial Times article

CalPERS takes stake in Silver Lake

Wed, 09 Jan 2008 06:59:58 -0500

Think the future of the private equity industry is cloudy? CalPERS doesn't. It just took a 9.9 percent stake in Silver Lake Partners in a deal that values the firm at 5.8 times assets, according to the New York Times. That compares with a 4.6 times assets valuation for the Blackstone Group. If there has been one institution that has really validated the alternative investment approach, it has been CalPERS. The pension fund is yearning for noncorrelated returns, and this is one of the few ways to get it. CalPERS apparently sees the current downturn as an investment opportunity. Other PE firms are in need of capital: Apollo And Carlyle Group have each sold stakes to Abu Dhabi investors while Kohlberg Kravis Roberts seems to be pressing ahead with its IPO.

For more:
- here's the NY Times article

Citadel to go public in 2008?

Tue, 08 Jan 2008 06:59:56 -0500

Ken Griffin, the 38-year-old head of Citadel Investment Group, is already worth about $2 billion. That could head much higher in 2008 if he manages to take his alternative investment powerhouse public, something that Business Week Online says is likely. This would qualify as a contrarian move for a firm that cannot stay out of the news. You can't really look to offerings by Fortress, Och-Ziff and the Blackstone Group for reasons why Citadel would be well received. But the great investors strike when no one else sees the opportunity. Griffin's legend will either be burnished or burned. It should be interesting one way or another.

For more:
- here's the Business Week Online article