London-based Endeavour Capital has shed 28 per cent in value during the first three weeks of this month due to extreme gyrations and vast movements in Japanese bonds.
London-based Endeavour Capital has shed 28 per cent in value during the first three weeks of this month due to extreme gyrations and vast movements in Japanese bonds. The firm’s USD2.9bn relative value Endeavour Fund has now offloaded most of its Japanese government debt after seeing its losses mounted as the spread between yields on seven- and 20-year bonds widened to 1.44 percentage points on March 17, the largest in almost nine years.
Investors jumped on short-term debt as the benchmark Nikkei 225 stock index fell 13 per cent during March. Paul Matthews, the former head of global fixed-income arbitrage at Salomon Smith Barney, established Endeavour eight years ago with Paolo Kind, Salomon’s former head of fixed-income arbitrage research and risk management. The fund gained 11 per cent in 2007 and was up 0.74 per cent for the first two months of 2008. Its next redemption period is at the end of June.
In the US, John Meriwether, the former head of bond trading at Salomon Brothers who is best known as founded of the ill-fated Long Term Capital Management founder, has seen his USD1.2bn Relative Value Fund tumble 24 per cent. The fund, run by his Greenwich, Connecticut-based firm JWM Partners, was hurt by other embattled bond managers selling securities in order to meet margin calls. All told, Meriwether manages six funds.
The Securities and Exchange Commission is looking into possible violations of securities law involved in Bear Stearns’ in extremis sale to JP Morgan for USD236m. The US regulator’s enforcement division has sent Bear Stearns a letter concerning an investigation and possible future enforcement action, noting that JP Morgan would be liable for any possible penalty stemming from this review.
The SEC typically scrutinises a 60-day window before the public announcement of a merger or acquisition for possible signs of insider trading or manipulation of markets through the distribution of false or misleading information to investors by companies or market participants.
Bear Stearns chief executive Alan Schwartz and executive committee chairman Alan Greenberg both publicly denied that the New York bank had liquidity problems in the weeks leading up to the intervention by the US Federal Reserve. Meanwhile, the deal makes JP Morgan the third world’s largest prime broker, after Goldman Sachs and Morgan Stanley.
Alternative Asset Management Acquisition Corp. has acquired New York-based hedge fund manager Halcyon Asset Management, which manages USD11.5bn in assets. The deal, which will bring Halcyon a stock market listing, values the firm at roughly USD974m.
Halcyon’s owners will receive USD50m in cash and notes, and their interests in Halcyon will be exchangeable into the acquisition vehicle’s shares on a one-for-one basis. They will initially own about 43.6 per cent of the fully diluted ownership interest of the new entity, which will be called Halcyon Management and will be listed on the New York Stock Exchange.
Carlyle Group says other areas of its business remain unaffected from the collapse of Carlyle Capital Corporation, an Amsterdam-listed publicly traded mortgage-backed securities fund that is being liquidated after it failed to meet margin calls and the fund’s lenders seized its assets.
The group has assured its investors that neither it nor other funds it sponsors owned shares in Carlyle Capital, which had a majority of independent directors on its board, although Carlyle Group principals and employees own 15 per cent of the publicly-traded fund and will share the pain of other shareholders, which are expected to lose their entire investment. The group, but not outside investors in its funds, also stands to lose USD150m that it lent Carlyle Capital in a vain attempt to help it through its liquidity crisis. Carlyle Group manages a total of USD81.1bn.
Eight out of 10 investment consultants expect to focus their searches on alternative managers this year, according to the 2008 Consultant Search forecast by Casey Quirk & Associates and eVestment Alliance. One-third of the consultants surveyed say they will concentrate exclusively on hedge funds and funds of funds.
According to the authors of the survey, the new push into alternative investments is coming from first-time investors who see the current market dislocation as a good opportunity for an initial foray. Long/short, multistrategy, real estate and foreign equity will be among the most popular searches, the report says.