<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>And Ho Jinx is heavily into them. Sporns should do well to diversify away from the Peesai dollar?
Investors pulling out of hedge funds
</TR><!-- headline one : end --><TR>Redemptions force funds to sell stocks, causing wild market swings </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
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US regulators have concluded they need more power to gather information about what kinds of risks hedge funds are taking and what risks they pose to the financial system. -- PHOTO: BLOOMBERG
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->LONDON: Investors, typically giant institutions and wealthy individuals, are pulling money out of many money-losing hedge funds.
That, in turn, appears to be contributing to the wild swings in markets, analysts say, as these redemptions force the funds to sell stocks and other assets, and unwind other complex investments.
Rumours swirled in the markets last week that one of the world's largest and most powerful hedge fund firms Citadel had seen two main funds losing 35 per cent since January.
However, Citadel on Friday denied the rumours that the United States Federal Reserve had spoken to the hedge fund's counterparties specifically about Citadel and possible problems with its debt.
The Wall Street Journal reported a spokesman saying that Citadel continues to have more than 30 per cent of its investment capital in cash.
The hedge fund industry, a once-unstoppable profit machine that has already lost more than US$200 billion (S$299 billion) in value this year, could shrink by a quarter or more as the global financial crisis deepens, according to industry analysts and fund managers.
Officials at Hedge 2008, an industry gathering in London, said last week that a quarter to a third of hedge funds could go out of business in coming months.
'In a fairly Darwinian manner, many hedge funds will simply disappear,' said Mr Manny Roman, co-chief executive of the New York-based GLG Partners.
Analyst Mamoun Tazi at MF Global Securities in London predicted the global hedge fund industry, based largely in London and New York, could see its assets cut by 25 per cent in the coming months.
That record contraction would have a deep impact on a broad range of private investors, government and corporate pension funds, insurance companies, banks and other financial institutions that have relied on hedge funds as a lucrative way to diversity their portfolios.
Although hedge funds have not been a significant cause of the global financial crisis, the events of recent weeks are leading regulators around the world to lean towards more extensive oversight of the industry, which has US$1.7 trillion in assets under management.
Momentum towards regulation is also building in Washington.
'Hedge funds can be major forces in the global financial markets, but very little is known about how they operate and the types of systemic risks they may generate,' said Representative Henry Waxman, chairman of the House Oversight Committee. 'The question we will be asking is whether this is an area where more transparency and oversight would be beneficial to the markets.'
Hedge funds use a wide range of investment strategies to try to get high returns for investors. Some simply pick which stocks they think will do best, while others have highly complex strategies based on trading futures, options, currencies, debt products or commodities.
In congressional testimony last week, Securities and Exchange Commission (SEC) chairman Christopher Cox said the agency wants lawmakers to grant it that oversight authority explicitly. He also said he would favour folding the Commodity Futures Trading Commission, an independent agency that regulates futures markets, into the SEC to better coordinate regulation.
Regulators at the Federal Reserve, SEC and beyond have increasingly concluded that they need more power to gather information about what kinds of risks hedge funds are taking and what risks they pose to the financial system as a whole.
Using its existing legal authority, the SEC attempted to require hedge funds to register as investment advisers, but a court ruled against that decision in 2006.
Leaders of the Federal Reserve, meanwhile, are broadly re-examining their views on financial regulation in light of the crisis. Among their concerns is that light regulation could be worse than none at all, as it could give hedge funds the implicit protection of government oversight even if officials lack the tools to actually guard against risks to the system. WASHINGTON POST, REUTERS
Investors pulling out of hedge funds
</TR><!-- headline one : end --><TR>Redemptions force funds to sell stocks, causing wild market swings </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
US regulators have concluded they need more power to gather information about what kinds of risks hedge funds are taking and what risks they pose to the financial system. -- PHOTO: BLOOMBERG
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->LONDON: Investors, typically giant institutions and wealthy individuals, are pulling money out of many money-losing hedge funds.
That, in turn, appears to be contributing to the wild swings in markets, analysts say, as these redemptions force the funds to sell stocks and other assets, and unwind other complex investments.
Rumours swirled in the markets last week that one of the world's largest and most powerful hedge fund firms Citadel had seen two main funds losing 35 per cent since January.
However, Citadel on Friday denied the rumours that the United States Federal Reserve had spoken to the hedge fund's counterparties specifically about Citadel and possible problems with its debt.
The Wall Street Journal reported a spokesman saying that Citadel continues to have more than 30 per cent of its investment capital in cash.
The hedge fund industry, a once-unstoppable profit machine that has already lost more than US$200 billion (S$299 billion) in value this year, could shrink by a quarter or more as the global financial crisis deepens, according to industry analysts and fund managers.
Officials at Hedge 2008, an industry gathering in London, said last week that a quarter to a third of hedge funds could go out of business in coming months.
'In a fairly Darwinian manner, many hedge funds will simply disappear,' said Mr Manny Roman, co-chief executive of the New York-based GLG Partners.
Analyst Mamoun Tazi at MF Global Securities in London predicted the global hedge fund industry, based largely in London and New York, could see its assets cut by 25 per cent in the coming months.
That record contraction would have a deep impact on a broad range of private investors, government and corporate pension funds, insurance companies, banks and other financial institutions that have relied on hedge funds as a lucrative way to diversity their portfolios.
Although hedge funds have not been a significant cause of the global financial crisis, the events of recent weeks are leading regulators around the world to lean towards more extensive oversight of the industry, which has US$1.7 trillion in assets under management.
Momentum towards regulation is also building in Washington.
'Hedge funds can be major forces in the global financial markets, but very little is known about how they operate and the types of systemic risks they may generate,' said Representative Henry Waxman, chairman of the House Oversight Committee. 'The question we will be asking is whether this is an area where more transparency and oversight would be beneficial to the markets.'
Hedge funds use a wide range of investment strategies to try to get high returns for investors. Some simply pick which stocks they think will do best, while others have highly complex strategies based on trading futures, options, currencies, debt products or commodities.
In congressional testimony last week, Securities and Exchange Commission (SEC) chairman Christopher Cox said the agency wants lawmakers to grant it that oversight authority explicitly. He also said he would favour folding the Commodity Futures Trading Commission, an independent agency that regulates futures markets, into the SEC to better coordinate regulation.
Regulators at the Federal Reserve, SEC and beyond have increasingly concluded that they need more power to gather information about what kinds of risks hedge funds are taking and what risks they pose to the financial system as a whole.
Using its existing legal authority, the SEC attempted to require hedge funds to register as investment advisers, but a court ruled against that decision in 2006.
Leaders of the Federal Reserve, meanwhile, are broadly re-examining their views on financial regulation in light of the crisis. Among their concerns is that light regulation could be worse than none at all, as it could give hedge funds the implicit protection of government oversight even if officials lack the tools to actually guard against risks to the system. WASHINGTON POST, REUTERS
