April 30, 2007
Hedge Funds Losing Luster Among Ultra-Wealthy
The New York Times Dealbook (http://dealbook.blogs.nytimes.com) is heavy on hedge funds lately. The blog covers a Bloomberg story that talks about how hedge funds seem to have fallen out of favor with some institutions and ultra-wealthy individuals.
In fact, while 38% of "wealthy investors held hedge funds in 2005, last year, that number slipped to 27%. Those with more than $25 million are fleeing fastest, according to a study by the Spectrem Group.
"What some individuals say is that hedge funds have become too risky, and it's unclear to them where the returns are being generated," George H. Walper, Jr., president of Spectrem, told The Times.
The blog also follows up on a story first reported on Dealbreaker.com, noting that hedge funds are getting more political. Among the recipients of hedge fund money is Senator Christopher J. Dodd (D-Conn.), who collected $175,000 from SAC Capital. And although Dodd's hopes for the White House are a long, long, long shot, his hegemony on the Banking Committee make him a target for fund managers.
Republican Rudolph W. Giuliani, Senator Hillary Clinton (D-N.Y.) and Senator Barak Obama (D-Ill.) are all also likely to gain from the recent political activism of various hedge hunds, but all eyes are on former Democratic N.C. Senator John Edwards. After his failed bid for veep in 2004, he did consulting for Fortress Investment Group.
So why the sudden interest from hedgehogs? "They're being threatened with regulation," according to Larry Ribstein of Ideoblog.org.
Alternatives Feel the Heat
BusinessWeek's Deal Flow (www.businessweek.com/the_thread/dealflow/) notes that the fees charged by alternative investment managers are under pressure. Although advocates argue that, in the private equity markets, fees are well justified because the work is arduous, critics counter the proof is in the...well, returns.
"Private equity returns have likely peaked," writes Steve Rosenbush "And if that's the case, I wouldn't be surprised to see fees heading lower as well." If private equity fees lose ground, might hedge funds follow?
Kick the Cronies and the Celebrities Off the Board
It's hard to imagine a mutual fund board that can consider the best interests of investors when it consists of the fund company CEO and other top executives, their friends and celebrities, according to mutualfunds.about.com.
Better choices, according to the blog, would be investor advocates, former regulators, retired fund executives and university professors. "Rather than seeing the new SEC regulations as a thorn in their side," it maintains, "fund companies should see this as an opportunity to prove to gain further trust of their shareholders."
Money Goes Into Action'
When Hollywood produces a film about money, it's typically about bank robbers, but there are a couple of movies centered around Wall Street and investing that stand out, according to mutualfunds.about.com.
In "Trading Places," Dan Aykroyd plays a commodities trader whose bosses force him to switch places with Eddie Murphy, a homeless con artist. "Boiler Room," starring Ben Affleck gives a great glimpse into high-pressure cold calling.
And who can forget Michael Douglas, playing the ruthless venture capitalist Gordon Gekko in "Wall Street" in which he delivers the infamous "Greed is Good" speech?
In "Secret of My Success," a remake of the 1960s hit "How to Succeed in Business Without Really Trying," Michael J. Fox is a Kansas farm boy who comes to New York and lands a job in a corporate mailroom. He begins posing as a company executive, and with the CEO's wife, masterminds a plan to take over the company.
Coming in at No. 5 is "Other People's Money," which has Danny DeVito as yet another Wall Street predator trying to take over a company.
Now, if only they'd make a movie about Canary Capital and the market-timing and late-trading scandals with James Caan playing Eliot Spitzer.
Northwestern Mutual: Don't Worry, Be Happy
Roy Weitz, publisher of fundalarm.com, mentions a website of Northwestern Mutual Life Insurance called www.wreckyourworries.com. Individuals put their concerns in writing and then destroy their worries with the tool of their choice, either a hammer, a golf club, a lighting bolt or a wrecking ball.
Weitz wryly writes that one of his concerns is he "might be tempted to buy a Janus fund."
The top 10 worries on the site include: "Will we have enough money to retire early?", "Is the plumber ripping us off?" and "Does my boss know I am playing with this website?"
The $500 Million Ignored
You've seen the New York Lottery television commercials showing a couple blase about buying a ticket because the windfall is "only" a couple of million dollars. As kasina.com sees it, asset management firms essentially make the same mistake, with the average firm missing $500 million in sales every year. The problem is ineffective sales strategies. Specifically, mishandled leads, ineffective marketing and sub-optimal branding.
Why? A serious communication gap among the sales, marketing and national accounts teams. If firms were to add a "CDO" (chief distribution officer) to the C-suite to set goals that apply to all three departments and bring them together in meetings, they'd collect some of that lost money, kasina says.
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