Hedge Fund

It had to happen sometime, and sometime is now. Hedge funds have invited peons off the street, up the paneled staircase and into the tabernacle of leverage, derivatives and arbitrage. And why wouldn't they? Hedge-fund managers rake off 2 percent of the assets and 20 percent of the profits. Mutual funds, by contrast, are often considered expensive when they charge 2 percent of assets, period. In that light a hedge-fund dollar invested by Joe Schlub is as good as a dollar from Bill Gates - maybe better!

Timothy E. Parker, manager of T. Rowe Price's New Era Fund for the past three years, will leave the the Baltimore-based money manager by the end of September, the company said. Parker will be replaced as manager by Shawn T. Driscoll, an energy analyst with the fund. "I had a wonderful 12 years here and learned a lot of things," said Parker, 38. "It's a good organization. Sometimes you need to part ways to pursue different challenges. " Parker said he doesn't have any firm plans at this point.

Imagine hedge funds without brainy managers maneuvering artfully through short-lived market opportunities day in and day out. You might think the flashy hedge-fund arena could never evolve into this. But with about $1.2 trillion in assets, the industry is maturing. And as it does, analysts are looking for ways to capture the advantages of hedge funds without the tremendous fees and egos that go with the territory. Attention is turning to what is known as passive investing. That's the term that applies to index mutual funds, and that means setting up a portfolio and keeping it intact without human tinkering day to day. What's envisioned for hedge funds tends to be somewhat different than mutual funds.

After T. Rowe Price executives recapped last year's highlights at Tuesday's annual meeting, a shareholder raised concerns about the loss of a top money manager, competition from exchange-traded funds and an Obama Administration tax proposal that could dampen Price's retirement business. President and CEO James A. C. Kennedy said that Kris Jenner, the former manager of T. Rowe Price Health Sciences Fund, left "millions" in deferred compensation on the table by leaving the company in February.

Hedge funds aren't just for the big boys anymore. Formally limited by law to participation by wealthy investors, true hedge funds are designed to make money even in down and falling markets. Now the financial industry has developed mutual funds that use hedging techniques. The reason that hedge funds are regulated differently from other investment vehicles is that they're dangerous to the small investor. Their managers wager on short stock sales, play leverage and arbitrage games, and count the incomprehensible cards of derivatives to turn a profit.

Kris H. Jenner, the manager of T. Rowe Price Health Sciences Fund until his resignation in February, has raised more than $100 million to launch a Baltimore-based hedge fund, Bloomberg News reported. The hedge fund, which will be called Rock Springs Capital, will have a similar investing strategy as Price's Health Sciences Fund, said Bloomberg, quoting an unnamed person knowledgeable about Jenner's plans. Jenner had managed the Health Sciences Fund since 2000. It has been one of Price's top funds, achieving a 15.3 percent annualized return over 10 years, according to Morningstar.

Hedge-fund selling is a huge culprit in this fall's stock market decline, and everybody wants to know when it'll be over. Reports are mixed. "The bad news is in for hedge fund managers," reports Pensions & Investments. "Come Dec. 31, many could lose up to one-quarter of their assets if investors indeed take back all that they've requested." Investment strategist Ed Yardeni is optimistic. "I don't know," he says in a letter to clients who ask when the hedge-fund hemorrhage will end. "But I suspect the bulk of their selling is over, and that redemption gates have been closed when possible."

Legg Mason Inc. is in talks to buy a hedge fund to satisfy its clients who want an investment vehicle that can protect them when the stock market sours.Edward A. Taber III, who heads the Baltimore-based brokerage's $40 billion-plus management operation, told investors yesterday at an industry conference in New York that Legg is negotiating to buy a hedge fund that has more than $1 billion in assets under management, according to Bloomberg News."The average client is asking, 'What's out there more than mutual funds?

WASHINGTON -- Federal Reserve Chairman Alan Greenspan said yesterday that Long-Term Capital Management LP's banks and other creditors played a significant role in the hedge fund's near collapse by lending money without fully understanding the risks they faced.The institutions "misjudged the state of potential losses that could occur under extreme circumstances," Greenspan said at a House Banking Committee hearing into the $3.6 billion takeover of Long-Term Capital.Greenspan defended the Fed's role in brokering last week's takeover by arguing that bankers are best situated to understand the risks of lending to hedge funds.

Hedge funds and I go way back. When I was a kid I got paid$1.25 every time I trimmed a neighbor's hedge. I squirreled the money away and tapped the hedge fund whenever I wanted to buy myself a small treat. Squirreling away money is a practice I have continued over the years, even though I often end up paying myself for yard work.So when I saw the "Hedge funds send stocks plummeting" headline about John Meriwether's hedge fund losing billions and threatening the collapse of world credit markets, my first thought was, "Man, that guy must be up to his neck in shrubbery."

Kris H. Jenner, the manager of T. Rowe Price Health Sciences Fund until his resignation in February, has raised more than $100 million to launch a Baltimore-based hedge fund, Bloomberg News reported. The hedge fund, which will be called Rock Springs Capital, will have a similar investing strategy as Price's Health Sciences Fund, said Bloomberg, quoting an unnamed person knowledgeable about Jenner's plans. Jenner had managed the Health Sciences Fund since 2000. It has been one of Price's top funds, achieving a 15.3 percent annualized return over 10 years, according to Morningstar.

Baltimore-based Legg Mason Inc. announced Thursday morning it has agreed to acquire Fauchier Partners, a manager of funds of hedge funds based in Europe. The terms of the deal were not disclosed. Fauchier will be merged into Legg's subsidiary Permal, an alternative asset manager. As a result of the combination, Permal will have about $24 billion assets under management and offices in nine locations worldwide, Legg Mason said. The deal is expected to close in the first quarter of next year.

NEW YORK - Two former Bear Stearns hedge fund managers were found not guilty of fraud, a decision that could make government prosecutors less likely to bring criminal charges against Wall Street executives for their role in the financial crisis. The case - the first major prosecution arising from the meltdown of major U.S. financial institutions - was seen as a test of whether a jury, presented with evidence from e-mails and other communications, would convict individuals for corporate collapses.

Baltimore City Council President Stephanie C. Rawlings-Blake called Thursday for the city's fire and police pension board to sue to recover funds lost in the Bernard L. Madoff financial scandal. The pension fund lost about $3.1 million after a hedge fund in which it was invested, Union Bancaire Privee Asset Management, placed money in another fund that invested with Madoff. During a council meeting she called to discuss the matter, Rawlings-Blake pointed to a recent Wall Street Journal article that alleges UBP researchers warned its money managers not to do business with Madoff.

Sen. Chuck Grassley, an Iowa Republican, and Sen. Carl Levin, a Michigan Democrat, took a step toward future financial sanity by introducing a bill that would increase regulation of hedge funds, which are essentially mutual funds for wealthy people. Despite holding hundreds of billions in investments, often turbocharged with borrowed money, hedge funds typically have not had to register with the Securities and Exchange Commission. The proposed Hedge Fund Transparency Act of 2009 would change that, although it would still allow hedgies to avoid the full legal requirements covering mutual funds.

Hedge-fund selling is a huge culprit in this fall's stock market decline, and everybody wants to know when it'll be over. Reports are mixed. "The bad news is in for hedge fund managers," reports Pensions & Investments. "Come Dec. 31, many could lose up to one-quarter of their assets if investors indeed take back all that they've requested." Investment strategist Ed Yardeni is optimistic. "I don't know," he says in a letter to clients who ask when the hedge-fund hemorrhage will end. "But I suspect the bulk of their selling is over, and that redemption gates have been closed when possible."

Faced with growing numbers of retirees, pension plans are pouring billions into hedge funds, the secretive and lightly regulated investment partnerships that once managed money only for wealthy individuals and elite institutions. The plans and other large institutions are expected to invest as much as $300 billion in hedge funds by 2008, up from just $5 billion a decade ago, according to a study by the Bank of New York and Casey Quirk & Associates, a consulting firm. Pension funds account for about 40 percent of all institutional money.

Talk about minting money. In 2001 and 2002, hedge fund managers had to make $30 million to gain entry to a survey of the best paid in hedge funds that is closely followed by people in the business. In 2004, the threshold had soared to $100 million. Last year, managers had to take home - yes, take home - $130 million to make it into the ranks of the top 25. And there was a tie for 25th place, so there were actually 26 hedge fund managers who made $130 million or more. Just when it seems as if things cannot get any better for the titans of investing, it gets better - a lot better.

Hedge fund regulation gets guarded support WASHINGTON: Billionaires testifying before Congress yesterday gave guarded support for proposals that would bring greater regulation of hedge funds, the investment funds for the ultra-wealthy being blamed in part for the current global financial turmoil. Five powerful figures in investments told the House Committee on Oversight and Government Reform that hedge funds should be subject to greater oversight. But they stopped short of supporting public reporting of hedge fund data.

Cordish Co. halts role in Ky. redevelopment Baltimore-based The Cordish Co. has pulled out of a $250 million redevelopment of downtown Louisville, Ky., that proposed a mix of shops, lodging, homes and offices and would have extended the Cordish-developed Fourth Street Live entertainment district.