Sat, 21/07/2007 - 15:12
Bear Stearns was the bearer of more bad news last week. Investors in its High-Grade Structured Credit Strategies Fund shouldn't have any hope of recovering much of their money. In a letter to investors, it said the fund's assets have 'very little value left.' However, remaining assets should cover the USD1.4 billion it owes to Bear Stearns, which as a creditor would get paid before investors. Things were even bleaker with High-Grade Structured Credit Strategies Enhanced Leverage Fund, which is now worthless.
While Bear Stearns feels the sting of the sub-prime meltdown, others are on the prowl for distressed assets. Walnut Creek, Ca., manager Black Pearl Asset Management plans to pick up such securities at a fire sale. The firm, run by Jim Midanek and John Pak, wants to amass USD500 million portfolios focusing on the smaller sub-prime segment.
Banks, meanwhile, are tightening margin requirements for hedge funds that invest for securities that are backed by mortgages.
Meanwhile, the US Securities and Exchange Commission indefinitely postponed action on a proposal that would raise the minimum wealth threshold to USD2.5 million from USD1 million for investors that can allocate to hedge funds. The USD1 million requirement was instituted back in 1982. Separately, Senate majority leader Democrat Harry Reid reportedly said there's no legislative initiative on the cards for this year that would increase taxes on hedge funds, buyouts and real estate entities. It may get considered next year.
It looks like activist manager Third Point's planned initial public offering on the London Stock Exchange had a slight hiccup earlier in the week. It faced a daylong delay because it fell short of its investment target of 500 million euros.
Citigroup and Lehman Bros. have been asked for more information about their use of complex derivatives for their hedge fund clients and others. The Internal Revenue Service wants to see if taxes on US stock dividends were sidestepped in such deals.
BNP Paribas has started a global synthetic prime business and has installed Rich Sansaricq, director of US equity finance sales, as its head. Meanwhile, Credit Suisse lost its co-head of financial institutions investment banking, Charles Murphy, to Fairfield Greenwich. Murphy has joined the USD15 billion New York outfit as a partner.
On the private equity front, Apollo bypassed the typical IPO route for now, choosing instead to sell its shares through the Goldman Sachs Group's exchange for institutional investors. It's eventually expected to go public in the first three months of 2008. Abu Dhabi government has taken a stake in the company. California Employees Retirement System is seen as another possible backer.
Private equity is in on cruise control to set a new fund-raising record this year, according to latest industry data. In the first half, it raised USD137 billion in 199 funds. That's a 42% jump over USD96 billion for 147 funds in the same period last year. Venture capital, on the other hand, fell 40% during the first six months to USD12.7 billion while investments in distressed debt gained nearly USD24 billion, which is ahead of the USD19 billion for all of 2006.
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