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.
Laurus – Valens Hedge Fund Adds partner – Kendall Raine
Laurus-Valens, a New York-based firm specializing in hedge funds that make private investments in publicly traded small and microcap stocks has hired a managing director from A.G. Edwards.
These private transactions typically give the Laurus funds warrants for the right to purchase stock at a discount to market prices. The funds seek double digit returns with lower volatility than the broader markets.
Dennis Pollack, senior managing director of Laurus-Valens, said Thursday that veteran investment banker Kendall Raine has joined the firm as a partner and senior managing director.
“
Raine, who will oversee a variety of strategic and capital markets initiatives, joins from A. G. Edwards, where he was managing director in the investment banking department. At A.G. Edwards, he was responsible for more than 100 advisory and capital markets transactions for business development, mortgage, and consumer finance companies, private equity firms and other specialty finance companies.
Prior to Edwards, Raine worked for Bear Stearns as associate director responsible for investment banking relationships with
Laurus-Valens, one of the nation’s largest investors in penny stocks, has approximately $1.7 billion in assets under management. Laurus invests in private investment in public equity, or Pipes, a financing vehicle for small, cash-strapped companies. Hedge funds use Pipes to buy shares at a discounted price and can quickly resell them.
Last March, Laurus Capital Management LLC launched Valens Fund to invest in publicly traded small and micro-cap companies seeking cost effective growth capital.
Laurus-Valens Plucks MD From A.G. Edwards
Laurus-Valens, a New York-based firm specializing in hedge funds that make private investments in publicly traded small and microcap stocks has hired a managing director from A.G. Edwards.
These private transactions typically give the Laurus funds warrants for the right to purchase stock at a discount to market prices. The funds seek double digit returns with lower volatility than the broader markets.
Dennis Pollack, senior managing director of Laurus-Valens, said Thursday that veteran investment banker Kendall Raine has joined the firm as a partner and senior managing director.
“Kendall’s background will offer Laurus-Valens new insight and opportunities during this volatile time in the market,” said Pollack.
Raine, who will oversee a variety of strategic and capital markets initiatives, joins from A. G. Edwards, where he was managing director in the investment banking department. At A.G. Edwards, he was responsible for more than 100 advisory and capital markets transactions for business development, mortgage, and consumer finance companies, private equity firms and other specialty finance companies.
Prior to Edwards, Raine worked for Bear Stearns as associate director responsible for investment banking relationships with Midwest depository institutions. Before that, he was chief executive officer of Los Angeles-based United Pacific Bank and senior executive to the banks’ parent company. Raine began his banking career as a calling officer in the Asia division of Chemical Bank.
Laurus-Valens, one of the nation’s largest investors in penny stocks, has approximately $1.7 billion in assets under management. Laurus invests in private investment in public equity, or Pipes, a financing vehicle for small, cash-strapped companies. Hedge funds use Pipes to buy shares at a discounted price and can quickly resell them.
Last March, Laurus Capital Management LLC launched Valens Fund to invest in publicly traded small and micro-cap companies seeking cost effective growth capital.
By Natasha Gural, Editor