Hedge Fund News Wrap: Week Ending 10/18/13

Hedge Fund Overview: Hedge Funds Gained 3.24% in Q3

According to the latest data from Preqin research, hedge funds gained 3.24 percent in Q3 2013 and are up 7.17 percent year-to-date—a clear improvement after struggling to return 0.06 percent in Q2.

“Hedge funds enjoyed a robust recovery from a subpar Q2 2013, with single-manager funds eclipsing their near-neutral second-quarter returns by more than three percentage points,” wrote analysts from Preqin.

This year’s September gains are similar to the 7.37 percent gains of September 2012. Preqin believes that the hedge fund industry is on track to similar results for the rest of the year.

Hedge funds’ performances in July and September were among the three best months this year.

Preqin also found that investor sentiment about hedge funds has significantly improved over the past twelve months.

However, hedge funds continue to lag behind the S&P 500, which is up 16.72 percent year-to-date.


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Hedge Funds Not Rushing to Advertise

The ban that prevented hedge funds from advertising was officially lifted on September 23rd, but hedge funds are not rushing to advertise their offering to the general public anytime soon.

Advertising could draw regulatory attention to hedge funds, as they would need to disclose their solicitation materials to the Securities and Exchange Commission.

However, advertising could provide small hedge funds with the exposure needed to raise capital.

“The Goliaths in our industry are not going to advertise,” Anthony Scaramucci, founder of Skybridge Capital, told Financial Times. “They think it is gauche and declasse, and their partners already have their private planes and their beachside mansions in the Hamptons, so why disrupt the business model?”

However, SkyBridge has considered advertising, and believes that this will “present an opportunity for the Davids to come in with their slingshot…if you choose the right weaponry, you can take out Goliath.”

According to FINalternatives, the small New York-based firm, ff Venture Capital, was the first firm to take advantage of the end of the 80-year-old ban. Other small funds are said to follow in ffVC’s footsteps.


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Financial Times

Business Insider



SAC May Strike $1 Billion Deal with Prosecutors

Steve Cohen’s embattled hedge fund, SAC Capital, may have reached a deal with federal prosecutors to settle criminal insider-trading charges, according to a source for Reuters.

Prosecutors were seeking as much as $1.8 billion in the settlement, but The Wall Street Journal reports that the payment will be between $1.2 and $1.4 billion.

It is unclear whether SAC will admit wrongdoing as part of the settlement. Also, the agreement is tentative and could change, as SAC has until early November to reach a deal.

Right now, SAC is in the process of returning much of the $5 billion in outside investments it manages. The other $6 billion of the firm’s money belongs to Cohen and his employees.

This year, SAC is up 13 percent year-to-date, while the average hedge fund is only up about 7 percent over the same period of time.


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Huffington Post





SEC Fines Hedge Fund, Knight Capital, $12 Million

The Securities and Exchange Commission has fined the hedge fund, Knight Capital Americas LLC, $12 million for a trading glitch that disrupted the U.S. stock market in August 2012. The trading glitch violated the SEC’s market access rules and resulted in a $460 million loss for the firm.

After a thorough investigation was conducted, the SEC released a statement stating that, “Knight Capital did not have adequate safeguards in place to limit the risks posed by its access to the markets, and failed as a result to prevent the entry of millions of erroneous orders. Knight Capital also failed to conduct adequate reviews of the effectiveness of its controls.”

Knight’s losses required the firm to seek emergency financing, and it eventually merged with Getco to form KCG.

According to Bloomberg News, the firm now has a 24-hour risk management center that includes automated alerts, stronger testing and certification, and a chief risk officer.


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Forex Magnates 

Bloomberg News