Podcast: TradingScreen Top Hedge News – Week of 08/20/2012

This is the TradingScreen Top News Coverage Wrap for Hedge Funds, looking back on the week of August 20, 2012.
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Hedge Fund Exit Requests Are On The Rise, Even As Overall Funds Under Management Reach New Highs. The media cannot decide whether it’s good times or bad times for the hedge fund industry, with HedgeCo.net, citing the August Eureka Hedge report, reporting that funds under management have reached $1.2 trillion in North America, a record high, and $1.7 trillion for the industry overall. To be sure, we have Reuters and others reporting that hedge fund redemptions reached their second highest level for the year in August due to lackluster performance. To paraphrase Tom Waits, as long as the big print continues to giveth more than the small print taketh away, Hedge Funds have nothing to worry about.

Churches, Pensions and Charities Finally Warm To Hedge Funds. While experienced hedge fund investors may be making an exit due to lower than expected returns – 1.1 percent according to the EurekaHedge index, and significantly below the return of the less-risky S&P – newbies are piling into hedges to capture returns that they don’t think are available from more traditional investments. Reuters noted the trend, raising questions about whether the conservative attitude of these investors might tone down the freewheeling strategies of hedge funds.

FSA Signs Off On Health of Hedge Funds. Despite the increasing exposure of conservative investment vehicles to hedge funds as noted by Reuters above, the Financial Services Authority, the UK’s equivalent of the SEC, says that hedge funds pose limited risk to financial stability. FSA officials say that that funds are properly margined, and that they have a “strong ability to manage the liquidity of their assets and liabilities.” Since hedges are handling more and more of the funds of the funds of the most pensioners, widows, orphans, priests, and biomedical researchers, let’s hope so.

Some Hedge Funds Target Greek Bonds. A Group of fundsare now increasing their stakes in Greek Bonds, in anticipation of a happy ending to the debt deal being floated by politicians in Athens and across Europe.

Hedge Holdings In Fixed Income Sees Major Increase. Hedge Funds have been developing a bigger appetite for fixed income overall, with TheStreet.com citing a Greenwich Associates report that showed that U.S. hedge funds accounted for nearly a quarter of fixed income trading there, up from 13 percent a year earlier. Many hedge funds are following the market away from equities, with Fixed Income offering increasing spreads and volatility as Banks abandon a market-making role under new regulations… just the type of environment where fearless hedge fund traders thrive.

The move comes as returns on equities, and volumes, decline, with many smaller investors abandoning equity mutual funds. The move prompted Bill Gross, the founder of fund company PIMCO to say in his August Investment Outlook that “the cult of equity is dead…” Not that equities are dead, as has been widely misreported, but that the long term outlook for equities has mellowed.

Other Top News In Brief:

UBS’s Eric Rosen is leaving to start a hedge fund, as the fallout from a $2.3 billion trading scandal which took place last year continues to ripple through the organization. Speaking of fixed income, Rosen plans to start a credit hedge fund.

Doug Whitman was convicted of insider trading after less than a day of jury deliberations after the founder of Whitman Capital took the stand in own defense.

George Soros revealed his 7.85% stake in Manchester United Class A shares.

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