February 2008

Fund of hedge funds group Financial Risk Management (FRM) has launched a new business to provide seed capital to early-stage hedge fund managers. Group chairman Blaine Tomlinson cites the need for managers to reach critical mass through partner ventures as the reason for the creation of the new platform. The business, FRM Capital, will also provide investment opportunities for existing fund of hedge funds clients. Industry participants say that the number of seeding funds is increasing as entering managers find it harder to attract capital, and as firms such as FRM seek to diversify their business.

The Republic of Turkey, emerging Europe’s most prolific issuer in the international debt markets, made a strong start to 2008 with the reopening of its 2018 6.75% dollar Eurobond for $1 billion.

Fitch Ratings has placed Sigma Finance’s senior note programme on negative watch, in a move affecting $31.6 billion of medium-term notes rated triple A and some $2.3 billion of F1 rated CP.

Euromoney has been informed by a source claiming to have been close to an eight-figure deal that cash-rich Saudi Islamic bank Al Rajhi entered into with troubled US bank Bear Stearns just before Christmas.

FSA gets mixed response to proposals on disclosure while LSE plans to trade the instruments on its orderbook.

Aureos Capital’s Aureos Latin America Fund has held its first closing, with $140 million in committed capital. The fund is expected to close at $300 million in June and will focus on investments of between $2 million and $10 million in Mexico, central America, Colombia and Peru.

Bolsa de Mercadorias & Futuros, the Brazilian derivatives exchange, has announced that it will introduce a new electronic platform to trade spot US dollar/Brazilian real. The venture is a joint initiative with the Brazilian Federation of Banks and the Banco Central do Brasil. BM&F says it is currently responsible for the registration and settlement of about 95% of transactions in the domestic dollar/real market. About 85% of this is traded OTC. The exchange says the addition of transparency and easier access to the market will improve efficiency and facilitate the execution of arbitrage and hedge strategies. The platform is scheduled to go live in the second quarter of 2008.

CFTC and NFA are being inconsistent with the rules for futures and forex traders.

A strong pipeline of deals keeps ECM bankers optimistic for 2008.

The credit crunch has opened up opportunities for hedge fund managers with lending capabilities. Helen Avery talks to Arch’s Stephen Decani about his firm’s asset-based lending activities.

Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.

We asked leading debt market officials what products they thought would be hot in 2008.

In a sign of growing economic cooperation between Russia and China, VTB, Russia’s second-largest bank, has become the first bank from the country to receive a licence to open a branch in China. VTB’s Shanghai branch will primarily service Russia-China trade, big industrial inter-state projects and the investment projects of Russian and Chinese companies.

Regulator considers allowing foreign exchanges to operate in the US without registering and rules to make it easier for foreign issuers.

Redecard, a merchant servicing business in Brazil that Citi holds a majority stake in, plans to undertake a follow-on secondary offering. The announcement came within hours of Citi announcing write-downs of $18.1 billion in the fourth quarter of 2007.

The average cost of using a prime broker is slowly increasing, say those in the industry, but do hedge funds really care?

We all know that Iraq is bad but to hear many experts tell it, Afghanistan is the genuine headache of the age, military and economic. With the struggling economy as much a battleground for hearts and minds as the caves of Helmand province or Tora Bora, you’d expect the brightest minds at the IMF and World Bank to be poring over the stricken country, keeping vital but fragile institutions such as the central bank tightly clasped under their intensive care, right? And, with $30 billion of western aid – your taxes – sloshing around the place, at least making sure its books are done properly. Think again.

After a stop-start year of asset-backed securities issuance in 2007, Fitch Ratings expects European emerging market securitizations to perform comparatively well in 2008. However, it says that a prolonged credit squeeze could hit demand for structured bonds. "Borrowers with hard-currency refinancing needs have so far weathered the liquidity crunch remarkably well but their funding needs will become more acute if the international capital markets remain closed for another two or three quarters, and local markets are not deep enough to provide alternative funding," says Jaime Sanz, head of European emerging market securitization at Fitch in London.

Hedge fund M&A activity on the rise.

Venezuelan president Hugo Chávez raised the regulated price of milk and threatened to seize dairies that tried to charge more as he attempted to increase milk supplies.

Structured finance departments have taken a bit of a battering in the past few months but in southern Africa there is still belief in and appetite for the business. The domestic market in South Africa is growing rapidly, partly to meet political pressure to transfer assets to people with little money and no equity. Electricity shortages might well also be a key driver of new deal flows.

Lehman’s new loan modification programme reveals its pessimistic view of the UK housing market.

Goldman Sachs has taken a minority stake in Kiev-based investment bank Dragon Capital via a share capital increase. "This development is recognition of the professionalism and success of our 120-strong multinational team and of our track record of triple-digit returns on equity," says Tomas Fiala, Dragon Capital’s managing director and controlling shareholder.

Hedge funds are on the verge of large-scale direct recruitment of talented graduates, a recent student-organized LSE alternative investments conference suggests. Neil Wilson reports.

Ambac’s inability to issue surplus capital notes could mean that the writing is on the wall for this entire sector.

Mizuho Corporate Bank and its German subsidiary have together bought a Russian bank, Michinoku Bank (Moscow), completing the purchase of 100% of all 10 million outstanding shares on January 21.

Managers are still learning the ropes.