Brazilian CTA Fund & Hedge Fund Networking Event

Brazilian Fund Managers Event

Our team is putting together a few networking events in Sao Paulo, Brazil and probably Rio as well in late 2009 and early 2010. If you are a CTA fund manager, hedge fund manager or trader which is planning to launch a fund and you are based in Brazil please let us know. We would like to hear from you so we can choose an appropriate networking event location and add you to our networking event email list for Brazil.

If you would like to attend Brazil-based events for fund managers attend please complete the form below and select "Brazil 1.29.10" as the networking event choice:

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Corus Bank of Chicago, IL Seized by Regulators

Corus Bank

Below is something on Corus Bank of Chicago. I just saw come out a few moments ago while preparing for our networking event in Chicago next week.

Federal regulators seized Chicago-based Corus Bank on Friday, marking the first major bank to be undone by deteriorating construction and commercial real-estate loans during the current downturn.

The branches and deposits of Corus will be assumed by MB Financial Inc., which has more than $8 billion in assets and over 70 branches in Chicago and its suburbs. MB Financial earlier this month took over the assets, branches and assets of InBank, a small bank based in Oak Forest, Ill. Source

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Lehman Brothers Assets Frozen | Update

Frozen Assets

Below is a quick update on the Lehman Brothers frozen assets situation:

Despite a legal setback, the administrators of Lehman Brothers’ European arm still hopes to expedite the return of billions in frozen prime brokerage assets to the collapsed investment bank’s former clients.

Steven Pearson and Tony Lomas of PricewaterhouseCoopers told The Wall Street Journal that they plan to meet with Lehman’s clients, including hedge funds, today in an effort to find a way to speed the return of their money. If no deal can be reached, PwC has warned it could take years to unfreeze the assets at Lehman Brothers International Europe. source

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Hedge Funds Fee Structure

What is the Fee Structure for a Hedge Fund?

Our team is currently re-writing this article, please check back soon for more information.

- Hedge Fund Blogger Team

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SEC Inspection Notes from Madoff

SEC Inspection Notes

Below is a short article on how Madoff avoided detection for so long:

A newly-released transcript of a phone call between Bernard Madoff and a feeder hedge fund offers new details of how the arch-fraudster escaped detection for so long.

“You know, you don’t have to be too brilliant with these guys because you don’t have to be,” Madoff told the FFG employee, warning him that, “obviously, first of all, this call never took place.”

“You’re not supposed to have that knowledge and, you know, you wind up saying something which is either wrong, or, you know, it’s just not something you have to do.” source

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4 Steps to Investor Pipeline Development

Investor Pipeline Development

I was making my way through some marketing training materials last night from Mr. Frank Kern and came across a marketing process which may seem somewhat like common sense, but helps to think about to ensure that you are presenting a complete marketing message to your potential fund investors. Within the marketing training program Kern suggests you follow this process while moving your prospects through different phases of engaging your firm:

Interest and Desire: Provide a white paper, speech, update your perspective of the markets which catches the attention of your potential investor
Trust: Develop a relationship with the potential investor, build trust by providing client quotes, industry recommendations, and comparison analytics between your fund and others.
Proof: Show proof that your fund has a high degree team, detailed consistent investment processes in place, and an advantage of some type which can be tangibly displayed or confirmed.
Sample: Allow the investor to start with a small minimum investment, provide examples of what other investors like them have done in the past, or present case studies on three different types of typical investors that you serve so they can imagine then being in that position.

The descriptions next to each bold word above is less important than the process itself. If you can grab the attention of the investor, build a relationship with them, provide proof of your abilities and performance, and then combine that with a sample you will be several steps ahead of much of your competition.

Learn more about capital raising within our Hedge Fund Marketing & Sales Guide, or at ThirdPartyMarketing.com.

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August Hedge Fund Performance Figures

August Hedge Fund Performance

Hedge Fund Performance Figures for August 2009

Hedge funds returns have increased again in August by 1.85%, the sixth month in a row. If the industry's recovery continues hedge funds are posed to have the best year in a decade. While hedge funds produced solid returns they underperformed the U.S. stock market. The S&P 500 index rose 3.36%.

After the worst year for hedge fund performance, hedge funds are now on par for the best year since 1999 when hedge funds gained 31.3%. Even with six straight months of positive returns investors are still hesitant to keep money with hedge funds.

Still, investors were somewhat skittish about leaving their money with hedge funds according to recent data showing that clients pulled nearly three times as much money away from funds in July than in June.

Since January, the average hedge fund has gained 17.30 percent, the Hennessee Group reported while HFR puts the year-to-date gains at 14 percent. During the same time the S&P 500 gained 12.99 percent.

Managers who bet on emerging markets and financial stocks plus media and telecommunications offerings last month scored the largest gains and helped boost the overall index.

So-called short sellers who bet exclusively that stock prices will fall lost 1.23 percent in August, leaving them as the industry's biggest losers this year, with a year-to-date loss of 11.47 percent.

Despite strong returns this year, investors have continued to withdraw money from hedge funds this summer after having removed a record $152 billion in the last quarter of 2008. Source

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Capital Raising Methods & Focus

Capital Raising Methods and Focus

Below is a paragraph excerpt from a book I am writing on hedge funds, which will be published through Wiley in 2010. It shares some advice on targeting different types of investors. While other consultants in the industry charge $250-$400/hr to provide this advice to hedge fund managers I give it away here on my blog for free and soon in my book because my business is based on being a source of genuine education and valuable resources instead of just press releases and news re-runs. If you are looking for more free advice on capital raising please see our Hedge Fund Marketing & Sales Guide or ThirdPartyMarketing.com.

The method by which Tassini Capital Management was raising capital was not effective. In addition to not using an Investor Relationship Management System the team had somewhat randomly been approaching many different types of investors from large European banks to small seed capital providers. The third party marketing firm consulted Chris and Brian Tassini and found that they were both un-willing to part with equity ownership in the management company of the fund in exchange for capital. They also reviewed past notes and confirmed that all efforts to work through institutional investment consultants had been stalled due to sub $100M AUM levels.

The result was a much more focused method of systematically approaching a mix of investors which included 10% institutional investment consultants, 50% wealth management firms, 20% multi-family offices, and 20% high net worth individuals. While institutional investment consultants were not going to invest any time soon they were kept in the mix so that the team could continue to receive valuable institutionalization feedback from the consultants.

Learn more about capital raising within our Hedge Fund Marketing & Sales Guide.

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Networking Tips - Upcoming Event

Networking Event Tips

Below is a guest post by Theo O'Brien of Private Equity Blogger.com:

If you're looking to enter the hedge fund industry either working directly for a firm or as a service provider to one, networking events and conferences are a great way to get your foot in the door. On September 16th, hedge fund professionals will be meeting at the W Hotel in Chicago for a few short speeches and a few hours of networking (see Hedge Fund Premium.com for details). Whether you are attending these events or not, this article will give you some advice on attending networking events and investment conferences.

Many professionals fail to take advantage of these opportunities, even those who attend. Here are 5 tips that should prepare you for attending a networking event or conference:

Don't Be Shy: it's a good start to attend a hedge fund event but you do not gain anything if you do not talk to other attendees, speakers and sponsors. The event is only valuable if you make it valuable, so network and socialize with those around you.
Don't Scare People Off: Another mistake is to be too forward when approaching managers or service providers, especially those looking to land a job in the hedge fund industry. Instead of sharing insights and thoughts on the industry, many young professionals will focus entirely on their own needs (a job) and ignore those managers or executives that are not currently hiring. This is the wrong mentality. Assuming you have been following the industry and paid good attention to the speaker, you will have a good starting point for initiating a conversation. Ask questions when appropriate and listen when the other person is speaking. If you are looking for a job, don't start a conversation with that problem. Those who work in the industry are not paying to hear someone complain about not working in private equity. But you should mention it if the timing is appropriate.
Get Your Name Out There: If you cannot find a hiring firm or no firms are interested in your product or service, don't despair, get your name out there. It may just be an inconvenient moment or the person you are talking with is not the right person at the firm; for example, if you are marketing your auditing service to a principle in charge of evaluating deals, he may not be interested. Give him your business card regardless, in a quarter the firm may be looking for a new auditor and still have your card. Even if you do not directly land a client through this method, it boosts your firm or your own name recognition. If you're looking for a job (from analyst to executives) give your card out, when the firm is eventually hiring they will probably have your name on file.
Prepare an Elevator Pitch: It may not sound great, but you are a product that needs to be sold. Therefore you need to have a great elevator pitch that comes out effortlessly. Whether you are looking to network, marketing to investors or job seeking, a solid elevator pitch is necessary. Be concise and include only essential information. To learn more about crafting a great elevator pitch see these articles, Developing an Elevator Pitch and Elevator Pitch Essentials (also the title of a helpful book on the subject).
Look and Act like a Professional: Even though you are not at work when you're attending an event or conference, act like you are. You are meeting potential clients and partners, so you essentially are working. Wear a suit and if it's hot, as many crowded events are, at least make the initial effort and take off your coat once you sit down. So, look your best (haircut, shave and a suit) or no one will take you seriously. It's better to be overdressed than underdressed. Remember your manners, especially if it is catered event and use language that you would be comfortable using in the office.

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Fund Administration Q & A

Fund Administration Question & Answer

A couple months ago I sat down with Eric Warshal of Fund Associates in Atlanta to talk about the fund administration business and the hedge fund industry. Here is one question I asked him and his response:

Question: What are the top 3 reasons why you see hedge fund managers using independent fund administration firms like yours?

Answer: The top three reasons why hedge fund managers are making use of independent fund administration firms are: 1) Provide investor confidence 2) Convenience/Utility 3) Cost Savings

Providing Investor Confidence: In today’s post Madoff/Stanford environment investors are demanding a new level of objective, independent review of existing and emerging hedge funds so as to be confident that the manager is properly trading and allocating the funds in an appropriate and ethical manner. By having a third party administrator who regularly interfaces with both the Fund’s broker and bank, the investor is able to be confident that their investment is secure. Having a third party administrator also allows the Fund Manager to hold themselves out as a manager who is looking out for the best interests of his investors and operates in an ethical fashion.

Convenience/Utility: A Fund Manager’s primary role is to efficiently and effectively execute the trading strategy of the Fund so as to provide optimal returns. By having to focus on administrative duties, Fund Managers are distracted from their prime role within the hedge fund. Additionally, although many fund managers are skilled traders with years of experience, often times, they do not have the fund accounting experience that is necessary to properly administer the fund. By employing the skills of a third party administration services firm, the Fund Manager is able to focus on what they excel at, i.e. trading, and allow the admin firm to accommodate for the administrative aspect of the fund.

Cost Savings: By outsourcing the fund administration to a third party, the Fund Manager is able to decrease his costs by not having to invest in an accounting technology platform and not having to invest in fund accountants. Additionally, the Fund Manager is able to save the costs associated with his time that would be better spent addressing the strategy and trading of the fund.

Eric Warshal will be answering more of my questions on fund administration in the future.

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Hedge Fund Sales Careers | Investor Access

Hedge Fund Sales Careers

Below is a short guest post by Mark Goormastic of Goormastic Executive Search. This is straight advice from someone who works daily with placing hedge fund professionals within the industry. The only thing I would personally add to this post is that you must have multiple forms of proof that you have raised capital before in the form of current investor contacts, referrals, or letters of recommendation.

I get a lot of inquiries from sales professionals. The question is usually "I would like to get a salaried Director of Marketing position at a small hedge fund. Can you help?"
Maybe. My clients tend to be small hedge funds with investor assets under $100M. When they are willing to pay a salary, they expect results quickly - within six to nine months at the very most.

To bring in, say $5M, within this time frame your book and career history should look like this, from the perspective of a small hedge fund that might consider hiring you:

- You've successfully raised money for another small (<$100M) hedge fund and were successful. - We'll define "successful" to mean that you brought in a meaningful volume of allocations, let's say $10M, in the first eighteen months. Not commitments. Actual checks in the bank.

- The hedge fund you successfully raised capital for employed a strategy such that the investors who allocated to that fund would logically have an interest in the fund that is considering you.

If those conditions are true then you might be a great fit for a small hedge fund looking for a Director of Marketing.

Tags: Hedge Fund Sales, Hedge Fund Marketing, Hedge Fund, Hedge Funds, Alternative Investment Marketing, Raising Capital for a career, how to become a hedge fund marketer

Hedge Funds Investing in Banks

Hedge Funds Investing in BofA and other Banks

Bank of America's stock has steadily climbed in the last six months from under $4 in the beginning of March to just above $17 today. Hedge funds are betting big on this bank, JP Morgan and others.

20 top hedge funds have increased their holdings in financial institutions in the second quarter of 2009 signaling confidence in the troubled banking industry and a hope that banks will generate long-term profits to shareholders. With low stock prices, banks are seen as a safe investment as hedge fund managers do not expect share prices to fall any lower than they already have.

The following chart illustrates the rise in Bank of America (BAC) stock price in the last six months (click to enlarge):

John Paulson's hedge fund has led the charge by investing long in Bank of America, buying up 168 million shares. CitiGroup is apparently too risky of a bank to invest in or there is not enough profit-potential to entice hedge funds, as several top hedge funds dropped holdings in Citi.

The group of 30 hedge funds in the analysis increased their exposure to the financial sector by 56 percent to $59.5 billion in the second quarter compared to the first.

Filings showed at least five of the top funds bought into Bank of America, led by Paulson's purchase of 168 million shares. Shumway Capital Partners, run by Tiger Management alum Chris Shumway, bought 24.1 million shares and Timothy Barakett's Atticus Capital bought 26.9 million.
Hedge funds are probably looking for companies that are strong in traditional lending roles instead of former profit centers such as structured debt, said Nadia Papagiannis, an analyst at Morningstar in Chicago. Analysts cautioned that revelations in public filings probably do not tell the whole story. For example, the 30 hedge funds included in the analysis dropped 44.8 million shares of Citigroup Inc (C.N), more than in any other company last quarter, the filings show. Source

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Chicago, IL Hedge Fund Networking Event

Chicago Hedge Fund Event

Seminar Networking Event: Hedge Fund Premium and the Hedge Fund Group are offering a seminar networking event for hedge fund managers and CTA funds on September 16th, 2009. The event will run from 5PM - 8PM CST in the Blue Room at the W Hotel in Chicago, IL.

At this networking event Bilal Malik from the Malik Law Group and Richard Wilson from the Hedge Fund Group will be speaking on industry regulations and capital raising best practices. The 2 educational talks will last 20 minutes and will be followed by 2 hours of open networking time where fund managers may meet with others in the industry.

Admission is $25 at the door, or free if you are a registered member of Hedge Fund Premium.com. The W Hotel is located at: 172 West Adam Street Chicago, IL 60603 (Please see the RSVP form below for a local area Google Map of the location).

View Larger Map

Pictures: Here are some pictures of where the event will be held:

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Erin Callan Swiss Investment Bank

Erin Callan

Interesting to see that Erin Callan is now leading the hedge fund business division for a bank in New York. In the past she has been referred to as the most powerful woman on Wall Street.

We know one hedge fund client that's not likely going to be seeking business from Credit Suisse anytime soon. David Einhorn's Greenlight Capital.

That's because Erin Callan, who was demoted from her job as chief financial officer of Lehman Brothers last month, has found a new gig in the New York office of the Swiss bank as head of its global hedge fund business.

Callan and Einhorn, you might recall, didn't exactly see eye-to-eye on Lehman's financial stability. Einhorn was publicly short Lehman stock and tearing apart its 10-Q while Callan struggled to paint a pretty picture for anxious shareholders. source

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Hedge Fund Logo | Branding Help

Hedge Fund Logo

If you are looking to improve the branding for your hedge fund or setup a new hedge fund I would strongly recommend using Design99.com for the work. Here is how it works.

You go to Design99.com and start a new contest for $300, you get dozens if not hundreds of logo proposals from designers all over the world. You provide them feedback as they compete with each other for the $300 payment. If you like one of the logos enough after a week you choose them as the winner and that one designer gets paid $300. It is a very inexpensive way to review dozens of ideas and then pay only for what you like.

I am not an affiliate of Design99, I do not get paid in any way for writing this post. I simply have found this such a valuable resource that I believe this will help many hedge fund managers improve their marketing and branding efforts. Hope this helps.

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27,000 Members! | Chicago Event

27,000 Members

Hello everyone, this is Richard Wilson here. I am excited today because our networking association, the Hedge Fund Group just broke 27,000 members.

The non-stop stream of incoming emails combined with my first real vacation in the last 12 months has resulted in being massively behind on responding to everyone's email...as a quasi-solution I will soon start answering some typical questions by posting a few original video blog posts over the next few weeks, in this way I will try to answer many emails within a single video discussion.

Thank you for everyone's support over the past few years.

Hope to see many of you in Chicago on September 16th at our networking event. More details to come tomorrow.

- Richard

Richard Wilson

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What Investors Want

What Investors Want From Hedge Funds Today

As much as hedge funds want to move on from the last 12-18 months, investors may not be so willing to forget and forgive. Some managers may believe that with returns back at respectable levels in the first half of 2009 the recession is over and investors will be as eager as they once were to invest in hedge funds. Standard & Poor's Ratings Services suggests that potential and current limited partners will be reluctant to return unless hedge funds meet some high expectations such as greater transparency and communication with investors, lower leverage, and higher liquidity.

Investors and many hedge funds agree on the benefit and need for greater transparency and communication with investors, but those reluctant funds may see a dip in investors if they do not open up to their limited partners:

Many funds have realized that the benefits of being transparent outweigh the potential cost from the outset, enhancing investor goodwill. After all, during times of uncertainty, such as the recent financial crisis, investors' focus seems to shift to return of capital from return on capital...Investors will likely increasingly judge a hedge fund based on the transparency of its dealings with all its business partners.

S&P Rating Services also highlights that investors are looking for less leverage after the credit crisis and the fall of highly-leveraged investment banks like Lehman Brothers. Additionally, this may draw attention from regulators looking to ensure that financial institutions are not too leveraged that they pose a "systemic risk."

Most rated hedge funds with a 10-plus year history have generally understood that they can succeed or fail by leverage -- borrowings or embedded leverage in instruments that can magnify both gains and losses -- and have accordingly used it sparingly. Some funds have come to shun the use of leverage altogether because of its inherent risk.

In general, we believe investors will be more attracted to hedge funds that use low to modest balance-sheet leverage relative to their investment strategy in conjunction with a strong risk management system, which should enable them to respond to market changes more promptly. source

A consistent push by investors has been for greater liquidity after some hedge funds collapsed in the credit crisis because they had such a high concentration of illiquid positions in their portfolios. Furthermore hedge funds that simplify their operations--by reducing staff, number of strategies implemented and a greater focus on the core elements of the hedge fund's strategy-- may be more attractive to investors. With a refocus by hedge funds on the strategy that made consistent returns S&P Rating Services believes that hedge funds will regain investor trust and win big in this volatile market.

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Hedge Fund Investors Lock Up

Hedge Funds Investors Lock Up

Cerberus Funds Set Strict Lock Ups for Investors

Cerberus is launching two new hedge funds and these funds may bar investors from withdrawing their money for at least 3 years in exchange for lower management fees. Cerberus' two multi-billion dollar funds will specialize in distressed investments. The use of a lock up period is controversial because investors are unable to take their investment out if the fund starts to do poorly. Yet managers insist that it will be better long-term because it allows a hedge fund to invest without fear that limited partners will take back their pledged capital. Lock ups are employed so that investors do not leave a fund en masse causing it to collapse or sell assets for a low price in a down market. Watch the video here:

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Longer Hedge Fund Lock-Up Periods

Hedge Fund Lock-Up Periods

Interesting story came out in Reuters today about how Cerberus Capital Management is now putting three year lock up periods on all new funds. While investors have been demanding more flexibility and transparency I believe hedge funds are trying to balance liquidity vs. gating clauses. If you are going to have to enact a gating clause to stop assets from leaving a few of your funds you are better off putting a longer 2-5 year lock-up period in place perhaps so at least investors know what they are getting into.

Cerberus Capital Management LP CBS.UL said on Wednesday it will prohibit investors in new hedge funds from withdrawing money for three years.

Earlier on Wednesday, the Financial Times reported Cerberus planned to bar withdrawals in two new funds to prevent the outflows that followed its loss-making acquisitions of carmaker Chrysler and financial services company GMAC.

"The three-year lock-up period will apply to all new hedge funds," Timothy Price, managing director and spokesman for Cerberus, said in a statement to Reuters.

On Tuesday, Cerberus dismissed market speculation that some of its hedge funds were in danger of default. source

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Certified Hedge Fund Professional (CHP)

In 2007 the Hedge Fund Group started developing a professional training and certification program for professionals who work with hedge funds. This project began after realizing that all other programs were designed for risk or analyst professionals and none of these fit the learning objectives we had sought.

In 2008 we opened the doors to our hedge fund training and certification program for the first time, we had just under 100 participants. In 2009 so far we have had over 385 participants join the Certified Hedge Fund Professional (CHP) Program, and we expect to close down registration to new members as we reach the 400th new member this month.

Many hedge fund managers have heard about our program and even participated in it, but delivering a clear message about our objectives, structure and team to an industry of over 150,000 professionals can be a challenge. Below is a short summary of the CHP Designation, what participants learn, and how it is being improved:

Mission: The mission of the CHP Designation is to grow our globally recognized training and certification program into the trusted #1 source of educational for hedge fund professionals.

Structure: The CHP Program is split into two levels, much like an M.B.A. program. Level 1 of the CHP program lets you learn about hedge fund fundamentals and basics while Level 2 allows you to specialize within one area of their choice, including Portfolio Analytics, Marketing & Sales or Due Diligence.

Delivery: Participants complete the program by reading the required books, watching our premium video content available through HedgeFundPremium.com (free to CHP members), and using our CHP Study Guide. Participants may also contact our team for career advice, resume editing or networking advice.

Limitations: The CHP Program does not substitute for any licensing or legal registration requirements. The program is limited to an exclusive set of 200 professionals during each of the two sessions which are held each year.

We have spent over 2,000 hours working on this program, improving it, incorporating feedback and adding video content. If you have any feedback as a potential, current or past participant please email us directly at Team@HedgeFundCertification.com.

To learn more please see http://HedgeFundCertification.com

Tags: Hedge Fund Certification, Hedge Fund, Hedge Funds, Hedge Fund Training, CHP Designation, CHP Designation Difficulty, Certified Hedge Fund Professional (CHP)

Hedge Fund Industry Winners

Hedge Fund Industry Winners in the Recession

If HSBC AI is "the biggest loser" then there has to be some winners too. George Soros' hedge fund firm, JP Morgan Chase, Paulson & Co. and Bridgewater have emerged from the recession as the biggest winners according to rankings by AR.

Here are the 10 largest hedge fund firms by assets:

Bridgewater Associates
JP Morgan Chase Asset Management
Paulson & Co.
D.E. Shaw Group
Soros Fund Management
Goldman Sachs Asset Management
Och-Ziff Capital Management
Baupost Group
Farallon Capital Management
Angelo, Gordon & Co.; Avenue Capital Group; Renaissance Technologies

Soros Fund Management boasted $24 billion in assets in July, an increase of 14% from the end of 2008 and 41% from the year before that. Soros Fund Management is now the 5th largest in the hedge fund industry, moving up one from the 2008 rankings. George Soros is one of the handful of investments managers who anticipated the financial crisis, leading his Quantum Endowment fund to gain 10% in 2008 when many hedge funds were failing to stay afloat.

Another "winner" is John Paulson of Paulson & Co. He was able to create big returns by predicting the mortgage-backed securities, then by betting against financial institutions in the recession. Despite losses in assets under management, Paulson's fund is the 3rd largest hedge fund firm in terms of assets and his funds were up as much as 16.38% in the end of July.

Ray Dalio's Bridgewater Associates is still holding onto its title of largest hedge fund firm in the world, managing $37 billion in assets.

The asset-management division of J.P. Morgan Chase also kept its position as 2nd largest hedge fund firm, increasing its assets 9.4% from the end of 2008 and falling just $1 billion behind Bridgewater. D.E. Shaw Group lost 6.6% of its assets from the end of last year and stayed in 4th place. Goldman Sachs' asset management arm moved up to 6th place managing $20.8 billion.

Och-Ziff Capital Management (OZM) was seventh in AR's rankings. The firm, run by Dan Och, lost 6.33% of assets in the first half of 2009, bringing its total to $20.7 billion, AR said.

Baupost Group, run by Seth Klarman, became the eighth-largest hedge fund firm, with assets of $19 billion, up 13% in the first half of 2009, AR said.

Farallon Capital Management, headed by Thomas Steyer, saw assets fall 10% to $18 billion in the first half of this year. That left the San Francisco-based firm ninth in AR's rankings.
Angelo, Gordon & Co., Avenue Capital Group and Renaissance Technologies tied for tenth... Source

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HSBC Hedge Fund Losses

HSBC Alternative Investments Takes Biggest Losses

The hedge fund industry suffered heavy losses during the recession, unfortunately making the "biggest loser" a more competitive category than years past. HSBC Alternative Investments took the worst hit in terms of outflow.

The fund of hedge funds business failed to retain investors and lost 4.2 billion Swiss francs (almost $4 billion) in the first six months of this year. Since HSBC Alternative Investments hit its peak last September, its assets under management has fallen a staggering 52% from a combination of redemptions and losses on investments. The fund of hedge funds industry has been one of the hardest hit during the recession.

The Geneva-based fund of hedge funds business of HSBC reported the single-largest outflow, in absolute terms. Investors yanked 4.2 billion Swiss francs from the private bank in the first six months of the year, the Financial Times reports. That, combined with huge investment losses, leaves the firm’s fund of funds business with just US$22.27 billion, 52% less than it managed at its peak last September, when it boasted US$46.28 billion.

HSBC AI blamed its decision not to chase market share or deposits by increasing rates and lowering margins for the continued first-half redemptions, according to the FT. But CEO Alexandre Zeller said high-net worth clients are again finding a taste for risk and are looking to return to the market. Source

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Do I Need an Audit

When Should Hedge Funds Have an Audit?

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China Investment Corporation

CIC Invests "Many Times" More in Hedge Funds

Sovereign wealth funds are a relatively new type of alternative investor and with sovereign wealth funds holding billions of assets ready to invest in alternative investment funds, substantial capital could be allocated to hedge funds. The China Investment Corporation is a massive sovereign wealth fund with 297.5 billion in assets and it plans to devote a significant percentage of its assets to hedge funds.

In June, China Investment Corporation reportedly invested $500 million in hedge funds and private equity. Now the CIC's Chairman Lou Jiwei has said that the sovereign wealth fund has invested "many times" that initial $500 million and it hopes to invest $6 billion in hedge funds by the year's end.

The CIC is also investing in fund of funds, good news as the industry struggles to find investors. Lou said that the fund's performance "has not been bad" after 2008's 2.1% decline in its global investments. The fund took a hit to its portfolio from investments in Blackstone Group LP and Morgan Stanley, yet the CIC boosted its stake in Morgan Stanley by purchasing $1.2 billion of shares.

CIC aims to allocate $6 billion to hedge funds by the end of 2009, company adviser Felix Chee said in June. Chee, who is a special adviser to the chief investment officer of CIC, said he will initially run CIC’s hedge fund and proprietary trading effort.

The fund has also been buying shares in the property and resources sectors in recent months. It plans to buy shares of Songbird Estates Plc, a London-listed company that controls the owner of more than half the buildings in the city’s Canary Wharf financial district, Songbird Chairman David Pritchard said on a conference call yesterday. Songbird, which is selling shares to institutions to repay 880 million pounds ($1.4 billion) of bank loans, said CIC will buy a significant stake.

CIC is interested in boosting its Canadian presence after buying a stake in Teck Resources Ltd. in July, the country’s Finance Minister Jim Flaherty said in an Aug. 11 interview. Source

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