Hedge Crunch Financial

Dennis Pollack, partner and senior managing director at Laurus-Valens, an investment management firm specializing in investments in small and micro cap companies, announced that Jay Drezner has joined Laurus-Valens as a senior investment analyst. Mr. Drezner has an extensive 9 year background in the finance and investment banking industry.

“I am truly pleased that Jay will be a part of our team. Jay’s background in both domestic and international investment banking will offer Laurus-Valens new insight and opportunities as we seek sound and profitable investments for our portfolio,” said Dennis Pollack.

Mr. Drezner will be responsible at a senior level for analyzing, structuring and executing new transactions as well as working with existing Laurus-Valens portfolio investments to maximize value and return potential. Prior to joining Laurus-Valens, Mr. Drezner spent nine years at Credit Suisse Securities (USA) LLC, most recently as a director in the Leveraged Finance Group where he covered companies in the aerospace and defense, satellite services, and air transportation sectors and executed a broad variety of leveraged finance transactions.

Prior to moving to the Leveraged Finance Group, Mr. Drezner was in the Buyside Insights Group at Credit Suisse, where he worked with corporate clients in the consumer products, business services and mid-cap industrials space to enhance equity values through the use of value-based management consulting techniques. Other roles Mr. Drezner had at Credit Suisse included serving as a vice president in Credit Suisse’s Australian investment banking operation, covering media and telecommunications companies, and two years as an Associate in Credit Suisse’s New York office in the Media & Telecom coverage group. Mr. Drezner began his professional career in the early 1990’s with D’Arcy Masius Benton & Bowles, Inc., an advertising agency, as an assistant media director handling major corporate consumer product clients. “I am thrilled to join Laurus-Valens and look forward to the challenges ahead. I am eager to work with such a knowledgeable and esteemed group of finance and investment professionals,” said Mr. Drezner.

Mr. Drezner holds a BA in Psychology from Cornell University and an MBA in Finance from Columbia Business School.

TCM reports:

“The housing crunch continues. The Los Angeles Times Land Blog has a stunning report on just how bad real estate prices have fallen in California during the past year. According to the California Association of Realtors press release, the median sales price of an existing home fell by a whopping 26.2% from a year earlier. The unsold inventory reached 14.3 months compared with 8.2 months for the same period in February 2007. Nationally, prices fell over the past year at a rate of $338 per week; in California, prices apparently fell at a rate of $2,788 per week. Such declines do not yet show signs of decelerating or even bottoming.

According to  WSJ article, “The credit crunch and market volatility have roughed up other multibillion-dollar hedge funds, which on average have lost about 3.35% this year, according to Hedge Fund Research’s daily global performance index. Platinum Grove Asset Management, the $6 billion hedge-fund firm run by LTCM alumnus Myron Scholes, has lost 13% this month on credit trades, putting it 10% down for the year, according to a person familiar with the fund.

Also, Farallon Capital Management LLC in San Francisco, which manages about $36 billion, has lost 5.6% this year through last week in its flagship Farallon Capital Partners fund.

Bridgewater Associates comment on the credit crunch effecting the hedge funds;

For the most part, hedge funds have gotten through the credit crunch relatively unscathed. For example, the average hedge fund generated a return of 12.5% last year and 2.5% in the fourth quarter. And private equity funds generated an average return of 11%. The main reason that these two groups held up as well as they did is because the equity market has not fallen nearly as much as the bond markets (i.e., spreads), and the majority of the risk allocation of these funds is in the equity market. And because their performance held up, they have not been forced into much asset liquidation to speak of. But stock market action is beginning to pressure the hedge funds and private equity players.

Hedge funds used to be a lot more hedged than they are today. Today, just about anyone who wants higher fees based on total return calls themselves a hedge fund, even if they are just a buyer of assets. And the fat cash flow yields in global stocks have also attracted a number of hedge funds into net long equity positions. As a result, hedge funds are now heavily long the equity market. Based on fund by fund holdings data we estimate that hedge funds are net long about $150 to $200 billion in U.S. equities (foreign equities are not included in this figure).

Hedge funds are also highly leveraged. Losses raise a fund’s leverage ratio, which requires asset liquidations to bring the leverage ratio back to normal.