Fri, 21/12/2007 - 19:07
Hedge fund manager Ralph Cioffi left Bear Stearns amid an investigation by US prosecutors into whether he pulled USD2m of his own money from two funds before their July collapse. Cioffi left his post as adviser at the New York firm last week for undisclosed reasons. His duties as fund manager of the High Grade Structured Credit Strategies Fund and High Grade Structured Credit Strategies Enhanced Leveraged Fund were taken away from him in June when the two funds began to falter as a result of sub-prime investments.
The US Attorney in Brooklyn and the Securities and Exchange Commission are looking into Cioffi's withdrawal of one-third the amount he had invested in one of his funds to commit the money to another fund he had set up. Cioffi had been at Bear since 1985 and rose to become head of structured credit products before moving on to managing assets in 2003.
Goldman Sachs expects its hedge fund business to continue to falter in 2008. The New York bank's finance chief David Viniar told analysts in a fourth-quarter earnings call he expects investors to redeem more than USD3bn from its quantitative funds. During the fourth quarter, redemptions totaled USD3bn, more than half of which came from its once high-flying Global Alpha Fund. This year, the fund's assets have fallen roughly 60 per cent, or USD6bn, to USD10bn
Its Global Equity Opportunity Fund, meanwhile, dropped 30 per cent in value in August alone, which prompted a USD3bn capital infusion by its parent. Despite the decline in assets, its asset management unit's quarterly revenue rose 25 per cent to USD1.17bn while assets under management rose by USD72bn, or 9 per cent, to USD868bn, helped in part by strong inflows in its money market funds.
Goldman may start its newest equity long/short fund, dubbed Goldman Sachs Investment Partners, with as much as USD10bn in what would be the largest debut in the industry's history. The entity will by managed by its proprietary traders Raanan Agus and Kenneth Eberts and is set to open January 1. Makena Capital of Menlo Park, California, currently holds the biggest debut record with its USD7bn launch.
Meanwhile, Lehman Brothers could face legal action from Australian municipal councils over certain sale of collateralised debt obligations linked to the US sub-prime mortgages originated by the Wall Street bank by Grange Securities, its local unit.
Former Morgan Stanley advisers Darryl Goldstein and Christopher O'Donnell have been sued by the SEC for defrauding about 50 mutual fund companies by hiding certain hedge fund trades worth billions of dollars between January 2002 and August 2003.
Tudor Investment of Greenwich, Connecticut, lost USD1bn of assets from its Raptor hedge fund after it saw a loss of 8.5 per cent this year. Raptor, managed by James Pallotta from Boston, had about USD8bn of assets before the outflows. However, its biggest fund - BVI - rose about 5.5 per cent through November. Founder Paul Tudor Jones considered reducing its size from USD10bn to improve performance.
New York-based USD750m outfit Searock Capital, run by Seth Turkeltaub and Rick Lodewick, is liquidating and closing shop. The duo set up Searock one-and-a-half years ago after leaving BKF Asset Management.
The USD7.8bn purchase of Alliance Data Systems by Blackstone Group may not close in 2007. As of December 14, 186 deals worth USD220bn were still outstanding as banks and institutions shy away from leveraged finance.
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