Week in Review
April 14, 2008
Hedge Fund Managers Have Rough Month
Hedge fund managers had a tough month in March, lagging equity and bond benchmarks but outperforming equity markets, according to firms that monitor their performance.
The Hennessee Hedge Fund Index was down 1.9% in March and another 3.5% in 2008. The Standard & Poor's 500 index dropped 0.6% and was down 10% overall for the first quarter. The Nasdaq Composite Index and Lehman Aggregate Bond Index each saw a gain of 0.3%, while the Dow Jones Industrial Average remained relatively unchanged.
Funds run by Appaloosa Investment LP, Maverick Capital Ltd., Moore Capital Management and Tudor Investment Corp. all lost more than 3% in March, according to HSBC's private bank database.
Other hedge funds, like Bridgewater's Pure Alpha fund (which gained 3%) and David Einhorn's Greenlight Capital (which rose 1.7%) managed to generate gains in March.
IMF Calls Global Credit Crisis Significant Threat
The global credit crisis remains a significant threat to economic growth, despite recent improvement, according to the International Monetary Fund.
"Financial markets remain under considerable strain, now compounded" by the slow economy and widespread efforts to unload debt, the organization said.
Financial losses stemming from the U.S. mortgage and credit crises could reach $1 trillion, the IMF said, with $565 billion stemming from the residential mortgage market and the remainder from commercial real estate, consumer credit and corporate debt markets.
"The deterioration in credit has moved up and across the credit spectrum to prime residential and commercial mortgage markets, and to corporate credit markets," Jaime Caruana, director of the IMF's Monetary and Capital Markets department, told the Associated Press.
Investments by government-run investment funds and sovereign wealth funds have helped, but more may be needed to restore the lending capacity of major banks, Caruana said. In late 2007 and early 2008, funds from China, Singapore and the Middle East have invested more than $40 billion in Citigroup Inc. , Merrill Lynch & Co. Inc. and UBS.
Spurned Bear Employees Start Sending Out Resumes
While those at Bear Stearns who've lost their positions are flooding Wall Street with resumes daily, federal data for the finance jobs in NYC for the 12 months through February paint a picture of an industry faring not too badly.
But others know better. It's not just former chairmen of the Federal Reserve who are lambasting Alan Greenspan for the interest rate debacle they say he set in motion. Recruiters and economists are brusquely speaking of worse days to come.
"Relatively to the country, New York City is not doing badly," says Emmanuel Egbe, a business and economics professor at Brooklyn's Medgar Evans College, speaking with the New York Post. Indeed, for the trailing 12 months through February, a scant 2,300 financial sector jobs were cut from businesses in NYC's five boroughs. On the other hand, the leisure and hospitality industry lost 16,000 jobs. At this point, jobs are holding steady, according to federal data. The government has 8.49 million workers in its books for New York.
"The unemployment rate is not that high - yet," Egbe said. "Compared to a year ago, the rate of job growth is low, and has begun to slow down. That provides an indication that we may be going toward a recession."
Ever since the March 16 buy-out offer of Bear by JPMorgan Chase, Michael Karp, CEO of the financial recruitment and consulting firm Options Group, said 10 to 15 resumes a day from former Bear employees trickle in from around the world.
Fidelity Launches 130/30 Large Cap Fund
Fidelity Investments announced the launch of the 130/30 Large Cap Fund to help quell the hunger of retail investors and advisors and to keep up with competitors.
"Investors are expressing interest in funds that adopt institutional-like strategies for achieving attractive risk-adjusted returns," said Sanjiv Mirchandani, president of Fidelity Personal and Workplace Investing Growth Business.
"Fidelity has a more than 15-year record in shorting via portfolios available to institutional clients," said Keith Quinton, who will manage the fund.
Competitors Legg Mason Inc. and Vanguard have already launched their own funds that use some kind of shorting.
John Hancock Begins Quiet Cursor' Ad Campaign
John Hancock Financial Services has launched its new "Cursor" advertising campaign, featuring three ads that show how people talk about financial topics like saving money for retirement and protecting their family legacy.
The premise of the campaign is that these important conversations, which once took place in person, are increasingly conducted via e-mail or instant messaging, and often late at night or on the go.
"The Cursor ads evoke John Hancock's longstanding advertising legacy of depicting real people, grappling with important financial concerns, in an intimate and truthful way," said Jim Bacharach, vice president of advertising. "A strength of this campaign is that it brings up the uncertainty consumers feel, and makes the viewer or reader think about their own financial situations."