Back to Value in 2012

2011 was one of the most difficult investment years that we have encountered but for me highlighted the fact that we need to go back to basics of investment and to stop following economists, news feeds and other fads..

Investment is a business activity and we need to get back to the basic principles of how to look at a business opportunity;

I am convinced that their will be Major opportunities in 2012 and will be looking for them following the principles as first outlined by Benjamin Graham, all those years ago in his classic: The Intelligent Investor

We will be following our guiding principles:

1. Margin of Safety
2. Buying a good business at a reasonable price
3. Owner operators
4. Strong balance sheet

etc.


I think that 2012 will bring buying opportunities that we might not see again for a generation..


Good Luck

And may all your trades and investments be prosperous in 2012..

How To Become A Hedge Fund Manager

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Home Page > Finance > Investing > How To Become A Hedge Fund Manager How To Become A Hedge Fund Manager Posted: Aug 17, 2008 | Views: 39,408 |

Becoming a hedge fund manager certainly has its perks... if you are successful. The King of the Hedgies is currently John Paulson who raked in £1bn for a years work shorting the sub prime markets and others certainly are not poor.

Can you do it?

The answer to that question is a yes and no. Just like it is possible for everyone to be a sports star. If you have the right physical capacity, the mental toughness and the commitment you can get to the top of your game, and of course, there is an element of luck in everything.

The first thing to know about hedge funds is what they are. There are many resources on the web that will go into chapter and verse but the simple explanation is that, typically, a hedge fund is a set up as a company, lets call it XYZ Ltd, which is set up in a tax efficient jurisdiction such as the Caymans or BVI, for example.

The company generally has two classes of shares (it can have more) one are mangement shares (so you own the company) and the other shares are investors shares (which carry no voting rights).

This company will have various service providers such as:

Prime brokerage: Prime brokers provide a range of customised services to hedge funds. Current services include handling trade execution, clearing and settlement, providing financing and technology services, risk management and operational support facilities, securities lending, and making introductions to sources of capital.

Fund Administration: Some hedge hedge funds conduct administration internally while others choose to outsource certain functions such as their accounting, investor services, risk analysis or performance measurement functions to third party administrators. Some outsourcers offer independent pricing of a fund's portfolio of securities.

Custody: Hedge fund assets are generally held with a custodian, including cash in the fund as well as the actual securities. Custodians may also control flow of capital to meet margin calls.

Of course there will also be a manager of the fund. Assuming you are the one looking to set the fund up, that would be you.

This all sounds a little complicated but there are plenty of administrative services that could put this set-up together for you for around $70,000.

The set up, however, is not the problem. Getting money into the fund is.

Lets say you have a fund set up, you have even managed to get yourself a fund management company properly licensed, you are ready to go as a newly fledged hedge fund manager. Problem now is that you have to get money into the fund and this is where your problems start.

The continuing fees from your administrators above are payable on an annual basis so your overhead is there. Covering these overheads will be the fees you get from your fund. Fees are the now notorious '2 & 20' meaning that there is a 2% annual fee and 20% of the profits.

Lets say your overheads are £100,000 per annum, you will need at least £5mn into your fund for the annual fee to cover your overhead. In anyone's language, that is a large chunk of change. To get this you will need to prove to potential investors that you know what you are doing.

Sarah Butcher, editor of eFinancialCareers.com agrees. "You can't just be someone off the street and set up a hedge fund," she says. "Investors want to put their money with someone who has a track record."

When speaking with investors you need to be able to show them your performance and the strategies you use. Gaining this experience is the key.

Going the traditional route you will either train with an investment bank or directly with a hedge fund company. Investment banks are looking for someone with a good degree, maybe in maths or physics, they want someone who is tough minded, a quick learner and someone who has the capacity to make trading decisions based around sometimes complex structures.

Finding your way directly into hedge funds can be hard, they are notoriously secretive. By far the more tradional route is through working as a trader with an investment bank.

So if you have missed the boat as far as becoming a new boy at an investment house are your dreams of becoming a hegde fund trader over?

Not quite. The thing about managing money is that people are looking for performance. If you can show a track record of performance then people will want to invest money with you. You clearly have to have the capacity for enjoying the stock market, so you probably have been buying and selling stocks but you will need to learn more about other market instrument such as futures etc.

You can do this by opening an account at a reputable trading house and downloading their trading system. They will provide you trade ideas and the explanations behind them and they will help you develop your portfolio operating on trades similar to what the hedge funds do. If you immerse yourself in this type of trading, making profits on your own portfolio, then you are creating a track record. If you are successful enough then you may get to the point where you believe you have the capacity to start a fund.

We are not saying it is easy, it most certainly is not, but not being a 20 year old with a first from Oxford does not necessarily limit your potential career as a fund manager. It is a long hard slog to get anyone to believe that you are credible but the rewards are there if you get to that stage.

The billionaire boys have spent years perfecting their art in most cases and now have the ear of huge amounts of money, but don't give up becuase you can't work in an investment bank.. remember 'money follows performance'.

If you would like to see if you have what it takes there are several platforms you can download for free and test out your skills. This online trading system is something you may want to consider if you are trading.

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The author has spent 20 years in the financial services industry trading everything from physical commodities to futures. Currently writes for a variety of sites including online trading sites and general market information sites.

Questions and Answers Ask our experts your Investing related questions here... Ask 200 Characters left How many hours do hedge fund managers work? Do hedge funds beat the market? How is a hedge fund structured? Rate this Article 1 2 3 4 5 vote(s) 16 vote(s) Feedback Print Re-Publish Source:  http://www.articlesbase.com/investing-articles/how-to-become-a-hedge-fund-manager-524909.html Article Tags: hedge fund manager, hedge funds, becoming a fund manager, investment, financial, money Related Articles Latest Investing Articles More from David Brown Emerging Hedge Fund Manager Sentiment Survey Declares Technology As Best Investment

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Is the ban on hedge fund advertising perpetuating the myth and legend of these funds and opening doors to criminals?

By: David Brownl Finance> Investingl Aug 18, 2008 Author Navigation My Home Publish Article View/Edit Articles View/Edit Q&A Edit your Account Manage Authors Statistics Page Personal RSS Builder My Home Edit your Account Update Profile View/Edit Q&A Publish Article Author Box David Brown has 7 articles online Contact Author Subscribe to RSS Print article Send to friend Re-Publish article Articles Categories All Categories Advertising Arts & Entertainment Automotive Beauty Business Careers Computers Education Finance Food and Beverage Health Hobbies Home and Family Home Improvement Internet Law Marketing News and Society Relationships Self Improvement Shopping Spirituality Sports and Fitness Technology Travel Writing Finance Accounting Banking Credit Currency Trading Day Trading Debt Consolidation Insurance Investing Loans Mortgage Personal Finance Real Estate Taxes Wealth Building Need Help? Contact Us FAQ Submit Articles Editorial Guidelines Blog Site Links Recent Articles Top Authors Top Articles Find Articles Site Map Mobile Version Webmasters RSS Builder RSS Link to Us Business Info Advertising Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
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Hedge Fund Ad-ban.. Causing More Problems Than Its Worth?

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Home Page > Finance > Investing > Hedge Fund Ad-ban.. Causing More Problems Than Its Worth? Hedge Fund Ad-ban.. Causing More Problems Than Its Worth? Posted: Aug 18, 2008 |Comments: 0 |

If ever there was an argument for the advertising ban on Hedge Funds to be lifted it is this one. Over three years a brazen group of New York scam artists raised about $30 million from unsuspecting investors by posing as principals of a successful hedge fund and then fled with the loot.

Investments from $5,000 to $500,000 were obtained from college professors and educated professionals. It took the group a little more than three years, from early 2003 September 2006 to raise the $30 million.

A grand jury empaneled by Michael J. Garcia, the U.S. Attorney in Manhattan, is said to have handed up a sealed indictment in the case, according to a lawyer hired by 10 of the victims, who said that the FBI was investigating the matter.

The criminals are clearly to blame here, however, this is a problem that, in our opinion, is caused in part, by the regulators themselves.

There is a scam out there that is based on "Prime Bank Guarantees" or "Medium Term Notes" that has taken billions from investors with promises of astronomical returns. The SEC web site says:

"Lured by the promise of astronomical profits and the chance to be part of an exclusive, international investing program, investors are once again falling prey to bogus "prime bank" scams. These fraudulent schemes involve the purported issuance, trading, or use of so-called "prime" bank, "prime" European bank or "prime" world bank financial instruments, or other "high yield investment programs" ("HYIP"s). The fraud artists who promote these schemes often use the word "prime" – or a synonymous phrase, such as "top fifty world banks" – to cloak their programs with an air of legitimacy."

The thing that allows the bogus 'brokers' and 'investment managers' of this fraud to operate is that they have created a veil of secrecy over the whole operation. The SEC says:

"Promoters claim that transactions must be kept strictly confidential by all parties, making client references unavailable. They may characterize the transactions as the best-kept secret in the banking industry, and assert that, if asked, bank and regulatory officials would deny knowledge of such instruments. Investors may be asked to sign nondisclosure agreements."

This 'secrecy' is what perpetuates the fraud. Simply put, the peddlers of this scheme will tell you that when you do your research that you will find everyone denying the existence of the scheme. They will say that those not in the industry don't know about it because there would be outrage that rich people could make so much money and those in the industry will deny it because they either aren't high enough up or are trying to keep it a total secret. They will also tell you that a minimum investment of $10mn is the norm, but they have split up that $10mn to allow their investors in.

This secrecy is the perfect cover, and I speak from personal experience, 15 years ago as an investment pup, to my eternal shame, I got caught in a the same scam.

So we have an 'investment' that is supposed to be super secret, has a minimum investment and is not advertised anywhere. Do elements of this ring any bells?

Simply put, the regulators are perpetuating the 'secrecy' of hedge funds by not allowing advertisement of the funds. Their rules about only being able to invest a certain amount of money did not protect the people in this case who invested $5000, did it? Something tells me the scammers did not check to see what the net worth of the investors was either.

How would advertising funds have helped? As with everything, the fact that advertising is allowed generates an awareness of a particular industry. How many of you knew how to play poker before the online casinos plastered the web with advertising? My limit was 'Snap', now I am a stone cold poker shark.

By the very nature of advertising and, therefore, informative web sites, brochures etc etc, this kind of fraud would be more difficult to perpetrate because the veil of secrecy would be lifted for all to see.

Of course, there will always be criminal elements who will attempt to subvert whatever rules are out there but the regulators throughout the world don't need to make it easy by perpetuating a secrecy myth that can be exploited by the criminal element.

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Watch your traffic increase just by submitting articles with us, click here to get started. Liked this article? Click here to publish it on your website or blog, it's free and easy! David Brown - About the Author:

The author has spent 20 years in the financial services industry trading everything from physical commodities to futures. Currently writes for a variety of sites including online trading sites and general market information sites.

Questions and Answers Ask our experts your Investing related questions here... Ask 200 Characters left Do hedge funds beat the market? How is a hedge fund structured? How many hedge funds in the us? Rate this Article 1 2 3 4 5 vote(s) 1 vote(s) Feedback Print Re-Publish Source:  http://www.articlesbase.com/investing-articles/hedge-fund-adban-causing-more-problems-than-its-worth-525600.html Article Tags: hedge fund, hedge fund advertising, regulators, investment, financial, money Related Articles Latest Investing Articles More from David Brown Alternative Investments in Finance

Alternative investment involves investment in assets other than the traditional products of stocks, bonds or cash. These assets include the likes of art, antiques, wine, coins or rare stamps – in other words, rare items. Financial assets like commodities, private equity, hedge funds and financial derivatives are also accommodated in alternative investment.

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By: David Brownl Finance> Investingl Aug 22, 2008 lViews: 2,371 Add new Comment Your Name: * Your Email: if($.cookie("screen_name")) { $('#not_logged_in').hide(); } Comment Body: *   document.write(''); Verification code:* * Required fields Author Navigation My Home Publish Article View/Edit Articles View/Edit Q&A Edit your Account Manage Authors Statistics Page Personal RSS Builder My Home Edit your Account Update Profile View/Edit Q&A Publish Article Author Box David Brown has 7 articles online Contact Author Subscribe to RSS Print article Send to friend Re-Publish article Articles Categories All Categories Advertising Arts & Entertainment Automotive Beauty Business Careers Computers Education Finance Food and Beverage Health Hobbies Home and Family Home Improvement Internet Law Marketing News and Society Relationships Self Improvement Shopping Spirituality Sports and Fitness Technology Travel Writing Finance Accounting Banking Credit Currency Trading Day Trading Debt Consolidation Insurance Investing Loans Mortgage Personal Finance Real Estate Taxes Wealth Building Need Help? Contact Us FAQ Submit Articles Editorial Guidelines Blog Site Links Recent Articles Top Authors Top Articles Find Articles Site Map Mobile Version Webmasters RSS Builder RSS Link to Us Business Info Advertising Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
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Generali - Still The Best Way To Hedge For The Upcoming Italian, And European, Contagion

Back in December, when noting the first material blow out in PIIGS spreads following the first Greek bailout 6 months earlier, we touched upon Italy, and specifically looked at a way to best play the coming shift in Eurozone contagion from the periphery to the core, coming up with one unique corporate name. Back then we said: "We all know what has happened to Italian bond prices in the past weeks: as of today, Bund spreads have just hit a fresh all time high. But all this is irrelevant since the bank must have a capital buffer to accommodate the losses. After all, what idiot would run a company with almost €300 billion in Euro-facing bond exposure and not factor for deterioration in risk after the events of May... Well the ASSGEN CEO may be just such an idiot. The company's balance sheet as of 9/30 discloses that the firm had a mere €10 billion in tangible capital (excluding €10.7 billion in intangible assets). So let's recap: €262 billion in Euro bonds on.... €10 billion in tangible equity! A 26x leverage on what is promptly becoming the most impaired asset class in the world." In a nutshell, Assecurazioni Generali, one of Italy's largest insurers, is a highly levered windsock for Italian and other PIIGS stress, and better yet, can be played in either equity or CDS. Now that the European bond vigilantes are once again looking beyond Greece and focusing particularly on Italy (especially based on recent Sigma X trading), none other than JP Morgan (which just cut its estimates on GASI.MI, a very appropriate equity ticker) validates the thesis that Generali (or ASSGEN per its memorable corporate/CDS ticker) is the best proxy for contagion: "Generali is one of the most sensitive stocks to both the sovereign debt crisis and the implications for the financial sector through both its government, corporate and equity investment portfolios...Generali’s sovereign exposure is mainly concentrated in Europe with Italy accounting for the largest share (37%; home market bias)."

The chart that confirms that GASI is nothing but an inverse bet on Italian viability:

A reminder of ASSGEN's sovereign exposure:

The same data in tabular format:

Some points from JPM's Andreas de Groot van Embden:

Generali’s main risk exposure to sovereign debt outside of Italy include Greece, Portugal, Ireland and Spain. The sovereign bonds are valued at market (accounted as Available For Sale). In aggregate, Generali has €12bn of gross exposure to troubled sovereign debt (excl Italy) and €2.1bn of net exposure (post tax and policyholder participation) accounting for c.14% of TNAV. We have assumed in our analysis that Generali would be able to share the impact of any potential impairments on its sovereign and financial (eg bank) exposures with policyholders given the decline in the minimum guarantees we have seen over the past few years (avg guarantee 2.3% in 2010). In practice the actual allocation will depend on the location of the bonds, the local country profit sharing rules and the level of buffer capital available in those entities (such as the free RfB buffer in Germany).

The Greek exposure is €3.0bn on a gross basis (per year end 2010) and €500m after policyholder participation and tax (based on amortized cost). This accounts for 20% and 3% of 2011e tangible book value on a gross and net basis respectively. We estimate Greek bonds will be valued at an estimated c50% of par based on a 6 year duration at end of 2011 Q2 with an estimated €160m unrealized loss included in shareholders’ equity after policyholder participation and tax. Should the debt rollover discussions be judged a credit event by either the rating agencies or auditors, we estimate that a €160m impairment would be realized through the P&L - assuming the haircut is in line with the market value of the bond. The overall impact on shareholders’ equity would be neutral (as it is already included).

Only if there is an additional haircut on the sovereign exposure that shareholders’ equity would be affected by additional impairments. In solvency terms, Generali includes unrealized gains and losses in its Solvency I and Solvency II calculations and the impairment of Greek debt should already be largely incorporated in our Q2  shareholders’ equity assumptions. Aggregating the main sovereign credit risk exposures outside Italy we estimate this factors in an unrealized loss of €3.2bn gross and €343m net unrealized losses in shareholders’ equity per end of 2011Q2 (see table below). The gap between the gross and net is material but is equivalent to 74bp of traditional life technical reserves. Substantially higher gross losses than those described below might belong more to shareholders than policyholders.

The bottom line, with appropriate sugarcoating:

Overall, a write down in line with current marks on the Greek sovereign debt exposure will not have any incremental impact on the solvency ratio of the group as the debt is already included at market value. However, further swings in the value of sovereign debt, Spanish and Italian in particular will continue to affect TNAV and solvency until the situation stabilizes.

There is much more in the full JP Morgan report but this is the gist: anyone who wishes to play the developing contagion and awakening bond vigilantism via either equity or CDS, this is without doubt the best proxy.

And for those curious how ASSGEN correlates with Italy CDS, here it is:

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