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Hedgemedia’s AltInvestment Global News Round-Up: Focus Capital becomes latest casualty of market turbulence

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Focus Capital of Geneva and New York is considering liquidation after seeing much of its Swiss mid-cap equity investments wiped out.

Focus Capital of Geneva and New York is considering liquidation after seeing much of its Swiss mid-cap equity investments wiped out. The USD1bn firm is yet to determine the total extent of the losses, which occurred during the past few weeks amid a decline in Swiss mid-cap stocks, but one estimate puts the losses at 80 per cent of the Focus Capital Fund’s value.

Tim O’Brien and Philippe Bubb, who launched Focus in April 2005 and achieved a return of 112 per cent the following year, blamed the losses on ‘violent short-selling by other market participants’ which resulted in the fund missing margin calls, after which its two largest lenders forced it to liquidate assets.

Focus joins London-based Peloton Partners’ among growing ranks of recent high profile debacles. Peloton had to shut down its USD2bn ABS Master Fund, which gained 87 per cent in 2007 but got hammered this year after the firm betting that the market for asset-backed securities would recover.

The level of investments coming into the US from foreign sovereign wealth funds is raising concerns in Washington. Top Bush administration officials are keeping tabs on the billions of dollars coming from Asian and Middle Eastern government-run funds. The concern is whether some of these investments are being made for political considerations such as access to sensitive technology rather than pure financial gains. Last week, European Commission officials called for greater accountability from sovereign wealth funds.

Millennium Capital Management has acquired the assets of London multi-strategy firm Castlegrove Capital. A number of Castlegrove employees will join Millennium’s London affiliate Catapult Capital Partners. Chairman Israel Englander said the transaction helps expand the USD13bn firm’s European base and gives Castlegrove backing in a number of key areas.

A new study by Pertrac Financial has found that the number of hedge fund start-ups has dropped sharply as environment for new launches becomes progressively tougher. At the same time, the software company found that the top 350 hedge funds control USD950bn in assets, almost half the industry’s estimated total of USD2.1trn.

A biannual survey by Absolute Return indicated that the industry’s aggregate assets rose by 10 per cent between last July and December, the smallest half-year percentage gain recorded by the survey. It also reported that three top hedge fund managers lost USD24bn in assets. Goldman Sachs, which previously ranked second in terms of assets, fell to seventh place following a 27 per cent decline to USD29.2bn.

Morgan Stanley has promoted Mike Kelly and Dan Waters to the newly-created posts of co-chief executives of its FrontPoint Partners hedge fund unit. Gil Caffray, the Tiger Management alumnus who helped establish the hedge fund firm, will remain chairman.

Morgan Stanley acquired FrontPoint in December 2006 and has helped increase its assets under management by around 70 per cent to USD9.3bn. Kelly will retain the title of chief investment officer. Waters previously worked as head of Morgan Stanley’s US institutional advisory group, a job that’s now going to Steve Radakovich, who formerly worked at Goldman Sachs.

Pequot Capital’s venture capital arm is seeking to split from its parent. Pequot Ventures, which runs USD1bn in assets, is lobbying limited partners to approve a deal that would allow the unit to break free of Pequot Capital, the hedge fund management firm in Westport, Connecticut. If the change is approved, Pequot Ventures will be renamed FirstMark Capital and will comprise some 12 investment professionals.

The separation would have the blessing of Pequot chief executive Arthur Samberg. Lawrence Lenihan jr, managing director and founder of the venture arm, said Pequot’s investments have moved away from the technology area, making a split logical. If approved, the separation could occur by June 30. Gerald Poch would become the new entity’s chairman and Brian Kempner its chief operating officer.

Blue River Asset Management has attracted more than USD100m from existing investors to avert the collapse of its Blue River Muni Bond Opportunity Universal Unit Trust, which was forced to sell assets amid steep losses last week.

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