Opalesque Exclusive: While investment banks look to change pay structure, hedge funds are expected to maintain the bonus culture

The anticipated 50% salary raise for a number of Citi employees has generated almost 600 news articles dissecting, debating and many denouncing the bank’s decision. Under the proposed plan, first reported by the NY Times, Citi will raise base salaries for investment bankers and traders whose compensation is typically skewed towards bonuses rather than yearly salary. Employees in risk management, consumer banking and credit card areas will see much smaller increases.
This increase in base pay likely marks a shift within the banking industry as firms such as Bank of America and Morgan Stanley plan to follow suit, but it is not one that is likely to be echoed within the hedge fund industry.
“Citi needs to [increase pay] to retain their talent and due to the uncertainty regarding the firm’s future,” Deborah Markus, Founding Partner at New York-based executive recruitment firm Columbus Advisors told Opalesque.
Meanwhile, the hedge fund industry appears to be cycling out of a period of loss and the general consensus is that firms that survived 2008 are well positioned to move forward.
“What is driving compensation in hedge funds right now is the historical performance of the fund, the size of the fund, marketability, and funds future plans.”
Trends for the currently employedWhile there is less job hopping in general due to the decrease in opportunity across the hedge fund industry, people still have their ear to the ground for more appealing situations.
Individuals considering moving from a current position are doing much more in terms of due diligence on a firm’s background. “They want to make sure that they are going to a fund that has not only performed well in the past, but is also positioned to perform well in the future,” says Markus. “Candidates ideally want to move to a fund that has strong infrastructure and relationships, smaller less institutional focused funds are less appealing than they have once been.”
Full Story: http://www.opalesque.com/53086/While_investment_banks_look_to_change086.html

Rallying commodities drove Morningstar Emerging Market Hedge Fund Index 13.5% gains in May,but some indecision has returned in the first half of June

The Morningstar 1000 Hedge Fund Index posted its largest monthly increase in May since its January 2003 inception, rising 6.7 per cent for the month and 9.7 per cent for the first five months of the year.
May was a strong month for the asset-weighted, currency-hedged Morningstar MSCI Hedge Fund Index, which also posted its largest one-month increase since January 2003, rising 3.7 per cent in May and 5.5 per cent for the first five months of the year.
European and developed Asian equity markets outpaced the US in May, but the real surge came from the rebound of emerging market equities. The unhedged Morningstar Emerging Market Hedge Fund Index increased 13.5 per cent, while the currency-hedged Morningstar MSCI Emerging Markets Hedge Fund Index rose 9.8 per cent. These indexes rose 25.2 per cent and 17.6 per cent, respectively, over the last five months.
The US dollar declined against many currencies in May, including those of emerging market countries, triggered by fears of a US government debt downgrade. Potential International Monetary Fund funding also whetted investors' appetite for risk in emerging market countries. The strongest performance was in India, Russia, Eastern Europe, and Brazil, driven largely by their financial and energy sectors.
"Emerging markets saw a large run-up in May, fuelled by US inflation expectations and commodity supply concerns. Hedge fund managers trading in these markets remained cautious, though, believing that the emerging world is still very risky, and sharp corrections are possible," says Nadia Papagiannis, Morningstar hedge fund analyst.

Full Story: http://www.opalesque.com/52946/Rallying_commodities_drove_Morningstar_Emerging_Market_Hedge946.html

Opalesque Exclusive: Review of hedge fund launches, closures, trends, regulatory and legal events - week 23

Monday, June 08, 2009

By Benedicte Gravrand, Opalesque London: A roundup of last week's hedge fund launches, closures, index performance, trends, regulatory, legal and financial events pertaining to the alternative investments world.

Last week, we heard of fund launches from Saba Capital; Brummer; Universa (hyperinflation); Commoditrade (energy); Ecofin (China Power & Infrastructure); Helios (India); 36 South (high-risk inflation); RWC Partners (L/S); Pia Capital (macro); Och-Ziff (energy); Brevan Howard (Ucits); Aladdin (managed accounts); J.Chahine Capital (L/S equity); Julius Baer (Russia); Epic (Japan); Jericho (L/S telecom/media/tech); and GLG (event driven).

Full story: http://www.opalesque.com/52592/Review_of_hedge_fund_launches_closures_trends592.html

Opalesque Exclusive: Small cap stocks may be indicator of economic recovery notes long/short manager Midwood Capital (fund +29% YTD)

From Kirsten Bischoff, Opalesque New York:
While ways to verify the much discussed “green shoots” are debated, one indicator may be the performance of small caps, which Chuck Royce CIO and Portfolio manager at Legg Mason recently said “should lead in the early phase of a prolonged recovery in stocks…”
In fact, while small caps leading recovery may be a historic rule of thumb, the Midwood team led by portfolio managers David Cohen and Ross DeMont has seen few industries where meaningful signs of economic recovery are evident. In its frequent discussions with public companies the team has been hearing comments such as, “Things are somewhat less bad,” or “We think we are near the bottom”.

Full Story: http://www.opalesque.com/52543/Small_cap_stocks_may_be_indicator543.html