The consolidation trend in hedge funds was off to a flying start this year.
The consolidation trend in hedge funds was off to a flying start this year. Rockwater Hedge of Newport Beach, California, acquired the USD450m municipal bond manager Charles Fish Investments of Irvine, California, to create Rockwater Municipal Advisors.
ING Investment Management bought a piece of Lincoln Vale, a manager of hedge funds and private equity in Lincoln, Massachusetts, created by Goldman Sachs alumni Phil Cooper and London-based Katherine Priestley. ING will invest in Lincoln Vale funds and become its primary distributor.
SunTrust Banks subsidiary Trusco Capital Management took a minority stake in Alpha Equity Management, a manager of quantitative hedge funds and 130/30 products founded by Kevin Means.
Meanwhile, New York-based Drake Management has limited withdrawals from its flagship USD3bn Global Opportunities Fund after investors tried to pull out nearly USD1bn during the first week of January. The firm said it had enough cash on hand to meet the requests, but wanted to maintain a comfortable cash cushion to protect remaining investors.
The fund was among the top performers for 2005 and attracted a lot of new money, but hit troubled waters in October and November of last year when a series of its trades failed to perform. Drake, which manages USD13bn, was established in 2001 by BlackRock alumni Anthony Faillace and Steven Luttrell with backing from Icelandic bank Kaupthing.
The former co-chief investment officer of troubled Mallorca-based hedge fund firm Absolute Capital Management has been sued in the US District Court for the District of Colorado by investor and oil and gas developer Jack Grynberg.
The complaint filed against Florian Homm and his colleague Todd Ficeto claims that the duo defrauded clients by investing more than promised in penny stocks through Hunter World Markets, a brokerage they owned. Grynberg invested USD12m in four Absolute Capital funds. Homm, one of the co-founders of the firm, abruptly walked out from the firm in September, resulting in a collapse of its share price. Meanwhile, Absolute Capital finance director Darren Sisk has resigned, saying he felt ‘frozen out’ by the firm’s new management team.
Former hedge fund manager Albert Hsu of New Canaan, Connecticut, was sentenced to 30 months in prison for plotting to have a former lover abducted and raped by placing a fake request on a sado-masochistic internet site. He formerly worked at Anchor Point Capital.
Chicago-based Hedge Fund Research said hedge funds on average gained 10.4 per cent during 2007, but seven of the 10 biggest firms came up short of that mark, including a several leading quantitative managers. The winners included Paulson & Co, Harbinger Capital, Shumway Capital, Citadel Investment Group and Pequot Capital. Among big names to end the year in the minus column were Goldman Sachs and James Simons’s Renaissance Institutional Equities Fund.
Separately, Dow Jones estimates that equity long/short and merger arbitrage were the big winners in 2007 with respective gains of 20.3 per cent and 16 per cent. For 2008, Lipper predicts distressed securities are likely to perform the best.
Michael Ho, a veteran hedge fund manager, has returned to his former employer Mellon Capital as investment chief, replacing Thomas Hakuza. Ho most recently ran Kevian Capital Management, the USD300m outfit he founded and is now closing. He previously logged seven years at Mellon.
Finally, despite tribulations in the credit markets, assets raised by US private equity rose 19 per cent to USD302bn during 2007. Leveraged buyouts and corporate finance funds accounted for three-quarters of all commitments, thanks in part to Blackstone Group’s USD21.7bn Blackstone Capital Partners V fund.