Fri, 01/02/2008 - 06:00
Carlyle Group's chairman Louis Gerstner sees the current private equity world beset by a correction, not a crisis. Excesses had built into the market and as a result the industry needed a correction, he told delegates at the Dow Jones Private Equity Analyst Outlook conference in New York.
Armed with USD30bn of dry powder with which to strike more deals, Carlyle is turning toward the developing world where deals are less leveraged. Gerstner also told the conference there would be fewer secondary buyouts in which portfolio companies are switched between private equity managers. He anticipates that the best deals of the next five to 10 years will be struck this year and next.
Stung by multi-billion-dollar losses, Merrill Lynch said it planned to exit the collateralised debt obligation, sub-prime and structured credit businesses. Instead, the once-thundering herd will turn its attention to commodities and emerging markets in its bid to overcome the setbacks suffered on the watch of now-departed chief executive Stanley O'Neal.
According to O'Neal's successor John Thain, commodities businesses were down in 2007 and that is where he wants to focus. 'We see a lot of opportunities and we will beef up our trading talent,' he announced at Citigroup's 2008 Financial Services Conference. More than half of its global markets and investment banking revenues come from outside the US and shouldn't suffer at least through this year even if the US economy continues to slow down. The bank also plans to expand its wealth management business outside the US.
In an interview with French business school and asset and risk management research body Edhec, Securities and Exchange Commission commissioner Paul Atkins said hedge funds did not contribute to the sub-prime mortgage problems but would play an important part of its solution.
California Public Employees' Retirement System, the world's biggest public pension fund, and the asset management unit of Swiss bank UBS are jointly producing a guide on hedge funds for investors, to be published by the London-based Alternative Investment Management Association. A group of UK hedge funds came up with voluntary standards on transparency and valuation of assets this month, and a similar move is underway in the US as part of the President's Working Group on Financial Markets, due to report next month.
Investors in failed Australian hedge fund Basis Yield Alpha can pretty much write their investment off. The fund managed by Sydney-based Basis Capital was stung by bad credit bets and can hope to return only USD62m, its co-liquidator Grant Thornton said. The USD700m vehicle is valued at 2 cents on the dollar. Meanwhile, the manager is retooling its surviving Basis Pac-Rim Opportunity Fund.
Daniel Marino, former chief financial officer of the now-defunct hedge fund manager Bayou Group, was sentenced to two decades in prison for his role in defrauding investors of USD450m, which led to the firm's demise. Judge Colleen McMahon of the US District Court in Manhattan ordered him to begin serving the sentence immediately. Co-founder James Marquez was sentenced last week to a sentence of four years and three months and was ordered to pay USD62.5m in restitution. The third founder, Samuel Israel III, awaits sentencing.
Citigroup has hired Edward 'Ned' Kelly, who previously worked at Mercantile Bankshares and the Carlyle Group, as president of its alternative investment unit. Also on board is Goldman Sachs alumnus Jaime Yordan, who becomes vice-president for global banking for Latin America. Meanwhile, Menta Capital's co-founder George Patterson has left the USD750m San Francisco quantitative shop for personal reasons.
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