Kullberg & Spiik vs FI

The regulatory actions against the Swedish equity hedge fund Kullberg & Spiik receives heavy criticism from the former lawyer of the Swedish Financial Authorities. This is most likely an event that will end up in the courtroom. If K&S is acquitted, then there may be a very odd situation, where the regulators have taken away a profitable business from the partners of the firm. Lets see where this ends up.

Currency Trading and Hedge Funds

DI.se, one of my favourite sources for news, reports that only three Swedish hedge funds takes currency positions. This is very likely to be a clear underestimation of the true number of hedge funds that trade in the currency market. One additional fund would for instance be GMM Alpha that is a specialist currency trader (although with low assets). In the Swedish Hedge Fund league, Pecuinia is on the bottom with a double digit loss while Radar is on top with some 30%+ year-to-date (end of October 2006).

Bergsgård Petersson Goes Global

HedgeNordic reports that Bergsgård Petersson is to launch a Global Macro fund investing in currencies, fixed income and commodities. The fund will not be managed by the small-cap due, but by Pekka Kääntä, a former writer for the Swedish newspaper Affärsvärlden. Perhaps in line with the experience of the founds of Bergsgård and Petersson with a background in the stock-picking press. Let us see if Mr Kääntä is able to transform paper trading into real returns. It is also reported that Bergsgård Petersson is to expand its fund offering with additional new launches in the comming quarters.

Brummer closing Racepoint

AFV reports that Brummer and Partners have to close yet another fund, the American based hedge fund, RacePoint, which did not succeed in either attracting capital or generating returns. For hedge funds, this is probably the single most common reasons for why a fund closes, it fails to attract capital and the fund sponsors runs out of patience.

The Swedish Central Bank on Hedge Funds

Lars Nyberg, of the Riksbank (Central Bank of Sweden) recently gave a speech on hedge funds for the CFA society of Sweden. The layout of the speech is relatively traditionally, beginning with the history of hedge funds (a la Jones), but later continuous into the LTCM and Amaranth stories where he compares the market impact and differences between them. Correctly, he makes the comment, that banks, in the normal case is much more leveraged than hedge funds. Banks falls under his mandate, it is much more important to focus on that kind of systematic risk, rather than focusing on the individual risk certain hedge funds may have. In aggregate, at least the Swedish ones are much much smaller than the exposure that the banks carry. The conclusion is actually excellent, where he, contrary from many other regulators, wants to improve the monitoring and regulations for banks rather than for hedge funds. Neither are hedge funds a threat to the economy as a whole. This spells well for the Swedish markets.

Sardus

AFV reports that Prior & Nilsson have bought a fair chunk out of the Swedish food producer Sardus. With the entry (?) of P&N, three different hedge funds now control more than 17% of the Sardus' capital. In addition to P&N, Case Asset Management and Tala Investment LP own capitals. Lets see if the stock pickers are right about Sardus or if it will continue to fall. YTD Sardus is down some twenty percent.

Pecunia - Pia Rudengren Joins

DI.se reports that Pia Rudengren has joined the L/S Equity Fund Pecunia. She will be joining a fund that has encountered some difficulties, with a double digit negative result (-10.4% as of end October). The founder of the Fund, Peter Edwall, will according to the same article, resign in the beginning of February next year, leaving the fund in the hands of Ragnild Wiborg. Given the management shift, the board has also decided to open up the fund for new investors, let us see if there is capacity left in the fund or if this is a move to enhance cashflows for the management.

Hedge Fund Critique

Hedge Nordic reports: Knut Kjær, executive director of Norges BankInvestment Management, the manager of Norway's 1.5 trillion NOK (182billion Euro) state pension fund Norwegian Pension Fund, believes thatmany hedge funds are overpriced beta suppliers.Kjær delivered his opinions at a recent address to the NorwegianPolytechnic Society. To the audience, Kjær said: "Unfortunately, mostmanagement products are delivered as an unclear mix of beta and alphaexposures. Even in the hedge fund industry, which has expanded sharplyover the past ten years, many of the products are more like disguisedbeta exposures than pure alpha exposures. Customers pay anunnecessarily high price for a product that they could easily havemanaged themselves or bought as an index product."He added that the same could be said of many equity funds, moneymarket and bond funds. Kjær informed his audience that the fund iscurrently on a search for investment talent, meaning alpha generation,on both internal and external levels.

Private Equity

The news flows seems to be dominated by Private Equity funds, whereeither Christer Gardell or EQT seems to be selling their funds ratherheavily. Gardell and Cevian is preoccupied with denying that he is ashort-term player while EQT is opening up for wealthy investorsthrough Carnegie.So far, PE funds have had a lot better returns than the average hedgefund, but here we should remember that PE is usually a leveragedinvested into equities (which have been the right bet since 2002...)and most likely not a true portfolio diversifier.

Trouble at Brummer?

Brummer & Partners, the Swedish hedge fund giant, seems to have run into a spell of weak performance. After the closure of the Fixed Income Fund Latitude, the internal FOF Helios have delivered a negative result of 0.9% YTD. The shining stars this year is Zenith, Manticore and Avenir with results above the risk free rate. The table is from AFV.se and Brummer & Partners.

Will write a text on Swedish hedge fund failures someday, and will make sure to include Latitude as an example. But is good to see that the failure of Latitude did not totally bring down the performance of the Helios fund, which invest in other Brummer funds.

Falling Salmon Prices

DN.no reports that the price of salmon is going lower. So far, I have not heard about any hedge funds that are active in the fish markets. Perhaps, here is a good place to really talk about alternative investements. :)

Sandell - an ex Swedish fund manager

Reuters report that SEC are preparing to bring charges against Sandell Asset Management, run by Thomas Sandell (with a Swedish background). Sandell manages around 7 billion USD. Charges are related to naked short selling...

New L/S Equity

According to DI.se a new L/S startup fund has been set up by an ex-Carnegie employee. Starting capital is low, around 2 mio USD (20 SEK). Will probably enjoy some great returns in the beginning due to the small size, but the small cap focus is likely to be a limiting factor in the long run. Especially given the difficulties of implementing large short positions in small illiquid companies.

The name of the fund is HealthInvest Global Long/Short Fund.