Monthly Archives: January 2013

U.K. Leads European Venture-Capital Funding, but Russia Is Fastest Growing

rachid sefrioui venture capitalAccording to The Wall Street Journal’s Ben Rooney, Venture Capital, Russia, Europe, Venture Capital, Finance, Netherlands, Germany, France, Economy, U.K Data on venture-capital funding show the extent of the boom in Russia’s technology sector over the past six years.

In our report Monday, we wrote that the U.K. led the overall European venture-funding pecking order, followed by Germany, France and the Netherlands. That was for all sectors, based on data produced by Dow Jones VentureSource.

Looking at the numbers for just the tech sector, a rather different pecking order emerges.

The revised tech figures push the Netherlands right off the grid (there was a large deal in 2012 in the biopharmaceuticals sector, which is why the Netherlands was ranked fourth overall). As of 2012, the top five nations were, in order: the U.K. (€867.46 million), France (€508.76 million), Germany (€431 million), Russia (€236.55 million) and Sweden (€88.93 million).

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Private Equity Foundation in charity merger

merger-illo-560-300x225According to Financial Times’  Anne-Sylvaine Chassany, The Private Equity Foundation, a London-based charity backed by private equity groups including KKR, Apax and Terra Firma, is merging with Impetus Trust.

The new entity will be called Impetus – The Private Equity Foundation and will be able to spend between £10m to £12m on programmes every year, with an emphasis on children and young individuals in severe poverty, said Daniela Barone Soares, the current chief executive of Impetus, who will become the CEO of the combined group.

The new charity will be chaired by Johanes Huth, who runs KKR in Europe and is currently chairman of PEF.

The merger should be completed by spring 2013. Louis Elson, managing partner of Palamon Capital Partners and current chairman of Impetus, will become deputy chairman.

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Private Equity Firm Jacana Plans Africa Expansion With New Fund

imagesJacana Partners, a private-equity company with $43 million under management, agreed to merge with Kenya-based InReturn Capital and raise a new fund to invest in small and mid-sized businesses in Africa.

Jacana, based in London, is hoping to raise as much as $75 million for the fund from mostly development finance institutions and invest about $1 million to $5 million in each target company, Simon Merchant, chief executive officer of Jacana, said in an interview today in Nairobi, Kenya’s capital. The group plans to eventually attract a wider range of investors including pension funds and wealthy individuals in the U.S. and Europe over the next five to 10 years, he said.

The emergence of small and mid-sized companies is essential for the creation of jobs for Africa’s expanding population and can provide a basis for stronger economic growth, Merchant said. The fund could support domestic suppliers of consumer goods looking to tap into the continent’s burgeoning middle class that has money to spend, he said.

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Hedge Funds Boost Bullish Bets by Most Since July: Commodities

bull-market-and-bear-marketAccording to Bloomberg’s Elizabeth Campbell, Hedge funds increased bullish commodity bets by the most in six months as accelerating growth from China to the U.S. boosted prices for a seventh week.

Speculators raised net-long positions across 18 U.S. futures and options by 11 percent to 758,048 contracts in the week ended Jan. 22, the biggest gain since July 3, U.S. Commodity Futures Trading Commission data show. Bullish crude- oil bets reached a four-month high, while those for soybeans climbed by the most since March. Investors are the most bullish on cotton since February 2011.

More than $2.2 trillion was added to the value of global equities this month as the Standard & Poor’s 500 Index posted the first eight-session rally since 2004. Manufacturing in China is expanding at the fastest rate in two years, and an index of U.S. leading indicators rose the most in three months in December, private reports showed Jan. 24. Germany’s economy, Europe’s largest, has started to show signs of recovery, the Bundesbank said Jan. 21.

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Buffett pulls ahead in wager against hedge funds

imagesAccording to Fortune’s Carol Loomis, It’s halfway time in the 10-year stock market wager sometimes called The Million-Dollar Bet—that’s Warren Buffett backing the performance of an S&P index fund vs. a New York money manager backing five funds of hedge funds—and there’s double-barreled news.

Item One: For the first time since the bet started five years ago, Buffett has moved ahead—by an okay margin to boot. Item Two: For the first time ever as well, both sides have crawled out of the ditch (though the funds of funds barely made it) and are showing positive results.

About that history of bad results, of course, you need to keep in mind that this bet started in the gut-wrenching year of 2008, which left both contenders deep in the red. Buffett, though, was definitely a deeper shade of red:  Vanguard’s Admiral shares—the S&P index fund he’d backed—lost 37% in 2008 vs. a 24% drop, on the average, for Protégé’s five funds of funds.

Reporting on that first year of the bet, Fortune quoted Buffett as just hoping he could be like the fabled tortoise that ultimately passes the hare.

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Pensions Bet Big With Private Equity

P1-BK046_TEXAS__G_20130124204022According to The Wall Street Journal’s Micheal Corkery, Austin, Texas—On the 13th floor of a sleek downtown office building here, the trading desks are manned overnight. The chief investment officer favors cowboy boots made of elephant skin. And when a bet pays off, even the secretaries can be entitled to bonuses.

The office’s occupant isn’t a highflying hedge fund but the Teacher Retirement System of Texas, a public pension fund with 1.3 million members including schoolteachers, bus drivers and cafeteria workers across the state It is a sign of the times. Numerous pension funds are still struggling to make up investment losses from the financial crisis. Rather than reduce risks in the wake of those declines, many are getting aggressive. They are loading up on private equity and other nontraditional investments that promise high, steady returns in the face of low interest rates and a volatile stock market.

The $114 billion Texas fund has hit the trend particularly hard. It now boasts some of the splashiest bets in the industry, having committed about $30 billion to private equity, real estate and other so-called alternatives since early 2008. That makes it the biggest such investor among the 10 largest U.S. public pensions, according to data provider Preqin Ltd. Those funds have an average alternatives allocation of 21%.

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Central clearing will affect hedge funds

hedge_fundsAccording to Financial Times’ Brian Bollen, The implications of central clearing of over-the-counter derivatives for certain hedge fund trading strategies could be significant.

If Olivier Lebleu, London-based head of non-US distribution for Old Mutual Asset Management, is correct in his analysis, the imposition of higher levels of transparency will make life increasingly difficult for hedge fund traders pursuing relative value fixed income strategies.

To illustrate his thesis, he points to two of the most high-profile events of recent years in which one party identified vulnerability in another and constructed customised transactions specifically to position itself to exploit that vulnerability. Centralised clearing of OTC derivatives would diminish de facto and de jure the ability of Paulson & Co to trade against the subprime mortgage market as it controversially did in 2007, and the ability of hedge funds to stage a repeat of the “whale trade” attacks on JPMorgan in the spring of 2012.

“The primary pool of funds this process impacts are sophisticated credit strategies,” adds Peter Laurelli, a New York-based vice-president at eVestment, a provider of institutional investment data intelligence and analytic solutions.

“But it will impact other groups that trade in the OTC derivative markets on an opportunistic basis as well, including macro and multistrategy funds. I don’t think this process will eliminate the ability of hedge funds to exploit unique opportunities as the bilateral structure for OTC derivatives is not disappearing.”

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Moving From Wall Street to the Tech Sector Proves Tricky

elite-daily-venture-capitalistAccording to New York Times William Alden, When Vinicius Vacanti set out to make a pitch for a local deals start-up to investors, he figured he understood the process given his four years on Wall Street.

But minutes into his first meeting with a venture capitalist, Mr. Vacanti realized he would be rejected. The investor quickly pointed out the flaws, including the site’s lack of users. As Mr. Vacanti rode the bus back to New York from Boston, he considered scrapping the project and starting over.

“The skills you build on Wall Street don’t correlate to a start-up,” said Mr. Vacanti, 31, a founder of the daily deal aggregator Yipit, who previously worked at the private equity firms Blackstone Group and the Quadrangle Group. While some of those skills are useful, he said, “a couple of those are actually bad.”

As more financiers jump to the technology sector, some are finding that their background, typically considered an asset in the corporate world, can be a liability. Some do not know how to write computer code. Others are ill-prepared for the penny-pinching and frustration of start-up life. In short, they have trouble persuading the Silicon Valley establishment that they have what it takes to nurture a young company.

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NewGlobe Capital Launches to Rid Private Equity of ‘Zombie Funds’

private_equityAccording to Wall Street Journal’s  Jonathan Shieber The “zombie” funds bedeviling investors in private-equity funds may have met their match with the launch of a new firm called NewGlobe Capital.

Backed by private equity asset manager Hamilton Lane and multistrategy private equity firm Vanterra Capital, NewGlobe expects to spend more than $1 billion over the next two to three years to buy out what it calls ‘end-of-life’ and ‘disrupted cycle’ private-equity funds, according to Andrew Hawkins, the chief executive and founder of NewGlobe.

Hamilton Lane will provide capital, while Vanterra will provide financial, strategic and operational support and co-invest alongside the multi-billion-dollar asset manager.

According to a May 2012 article in The Wall Street Journal, of the 10,000 private-equity funds raised over the past decade, at least 200 now qualify as zombie funds, vehicles that aren’t making new investments but still tie up investors’ money and charge them fees. Such funds hold as much as $100 billion of the $1.5 trillion invested in private equity overall, according to consultants TorreyCove Capital Partners.

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Soros Says Hedge Funds Can’t Beat Market Because of Fees

hedge fundAccording to Bloomberg’s Kahtherine Burton, George Soros, the billionaire philanthropist and former hedge-fund manager, said institutions that invest in the industry should expect poor performance, in part because managers charge high fees.

“Since hedge funds are now a dominant force in the market, they can’t, as a group, outperform the market,” Soros said today in a Bloomberg Television interview with Erik Schatzkerfrom the World Economic Forum in Davos, Switzerland. The funds’ fees, typically 2 percent of assets and 20 percent of returns, eat into profits, Soros said.

Soros’s hedge fund operated until 2011, when he turned New York-based Soros Fund Management LLC into a family office that now oversees $24 billion. He averaged returns of about 20 percent a year since 1969 at the firm and its predecessor.

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