Fri, 24/08/2007 - 06:56
Private equity giant Kohlberg Kravis Roberts is delaying its USD1.25bn initial public offering. The firm had been expected to list on the New York Stock Exchange next month, with Citigroup and Morgan Stanley as underwriters of the IPO, but the float has had to be put on hold after investors showed no appetite for its stock.
Both retail and institutional investors have become wary of investments in the hedge fund and private equity sector after the collapse of the sub-prime mortgage and overall debt markets. News of the delay comes on the heels of KKR's disclosure of steep losses in its KKR Financial Holdings affiliate. Separately, Carlyle Group has announced that it has no plans to float this year due to the market turbulence.
Leading US politicians and officials have promised to hold up the credit markets. Federal Reserve Chairman Ben Bernanke said earlier this week that the central bank would use all the tools available to respond to market volatility. In a meeting with Treasury Secretary Henry Paulson and Senator Christopher Dodd, Bernanke discussed the flailing financial markets and what could be done to shore up homeowners that have taken out mortgages they are finding it hard to repay, and who have also seen property values fall.
Quant funds confess losses to investors
Atticus Capital posted an 8 per cent loss during the first 10 days of August, according to a letter to investors. Atticus European, an event-driven fund that has USD9.1bn in assets, recorded the worst loss since its launch in 2001, although the fund has delivered an annualised gain of 28.4 per cent since its inception.
Clifford Asness's quantitative shop AQR posted a 13 per cent decline last month, but managed to reverse around half of that loss during the first 10 days of this month and was remained at break-even level for the year.
JW Henry's Financial and Metals Portfolio also reversed some of its losses that it incurred last month due to unprofitable yen carry trade transactions. The firm has suffered heavy redemptions so far this year, with assets falling to USD500m from USD2.5bn around a year ago as persistent losses prompted clients including Merrill Lynch to withdraw their capital.
Carlyle shores up newly-floated fund
Private equity and hedge fund manager Carlyle Capital has put aside a USD100m loan to cover any future margin calls for its Carlyle Debt Fund, which it floated early last month with USD300m. The move was aimed at helping ensure that the fixed income fund can meet its margin calls after being hit by shockwaves from the US mortgage debt crisis. The fair value of the entity's underlying assets has dropped primarily due to diminished demand for these securities in the market. It has drawn on USD10m of the loan so far.
Meanwhile, Citadel Investment Group has purchased about USD500m in discounted assets from troubled Sentinel Management Group of Chicago, in a move contested in the courts by Sentinel creditors. Sentinel claims to have been hit by the liquidity crisis in credit markets and shut off access to its funds on Monday, but the Securities and Exchange Commission has accused the firm of false reporting and misappropriating client assets. Citadel recently also picked up assets from the now-defunct Sowood Capital, and last year took on the energy portfolio of the collapsed Amaranth Investors.
Hedge fund manager Jana Partners has bought a stake in investment bank Goldman Sachs. The firm, led by activist shareholder Barry Rosenstein, has acquired 0.2 per cent of the bank's outstanding shares for USD158m. The USD6bn outfit disclosed the move in a 13F filing with the Securities and Exchange Commission. Houston Exploration, Time Warner and TD Ameritrade are among other high profile stakes by Jana. Lansdowne Partners is another hedge fund that holds a stake in Goldman Sachs.
Funds fight Arcelor Mittal squeeze-out
Two hedge funds are fighting in court to obtain a better deal from the Arcelor Mittal alliance. SRM and Trafalgar said this week that a squeeze-out of minority shareholders following the merger that created the world's biggest steel company has short-changed them of 153m euros. The funds allege that they are being forced to sell their shares in Arcelor at a cheaper price than other shareholders were offered. They will take the matter to the Dutch court next week.
Harvard University has reported a 23 per cent investment gain in its financial year ending in June. The biggest endowment in the US now has USD34.9bn of assets. The gain, totalling USD5.7bn, came from emerging market stocks, real estate and private equity.
Abhijit Chakrabortti, who was a global equities strategist at JP Morgan, will join Morgan Stanley in November. He will work as a global and US equities strategist, replacing Henry McVey, who is now at Fortress Investments, and will report to Steve Penwell, head of US research. JP Morgan is yet to name a replacement for Chakrabortti.
Placement agent CP Eaton has hired three new executives. Daniel Vene has been hired from Allegiance Capital Partners for CP Eaton's real estate practice. Jeffrey Eaton, who previously worked at Constellation Energy Commodities Group, now works on private equity funds for the Rowayton, Connecticut, firm. Thomas Knechtel, previously at Channel Capital Group, has been brought onboard to work on third-party hedge fund mandates.
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