Hedge funds

Morgan Stanley, releasing its 2nd quarter earnings Wednesday, reported a 60% drop in profit from $2.57 billon, or $2.45 a share, in the second quarter of 2007, to $1.01 billion, or 95 cents a share. Net revenue also fell a substantial 38% from $10.52 billion to $6.51 billion.

In a similar way that the dot-com boom could serve as a snapshot for the 1990s, the last decade could easily be defined as a period where many Wall Street insiders daringly quit their jobs in exchange for presumptive hedge fund glory, The Wall Street Journal reports.

The family of deceased Circle T Partners hedge fund manager and frequent CNBC guest Seth Tobias is said to be near a settlement regarding his $25 million estate. Since 44-year-old Tobias’s mysterious death last September, his family and his wife, Filomena Tobias, have been disputing the circumstances of his death and the outcome of his estate.

Ralph Cioffi and Matthew Tannin are close to becoming the first two criminal indictment casualties of the subprime crisis, The Wall Street Journal reports this morning.

Hedge funds may be coming off their worst first quarter in history, including, surprisingly enough, a poor showing in the energy sector, but not everyone is doing poorly.

Mutual fund and other financial services firms are making it easier for their investment advisers to address a broader array of clients' trust needs, ranging from estate planning to philanthropic giving.

NEW YORK - As the turbulent economy begins to calm down, investors will likely gravitate toward index-based, middle-of-the-road mutual funds, opening the door for opportunists to sweep up bargains, industry experts say. And the safer, the better.

The Securities and Exchange Commission doesn’t think there is a need for hedge funds to include certain derivatives when calculating how they report ownership stakes in companies, according to a June 4 letter.

While data from the Commodity Futures Trading Commission shows that hedge funds’ bets against the U.S. greenback have risen by 36% so far this year, Deseret Morning News reports, mutual funds and other institutional investors are raising their stakes in the dollar.

While not exactly a national victory for the mutual fund industry, a recent court ruling regarding "excessive fees" could set a strong precedent for further disputes.

Michael Iavarone may have rung the opening bell at the New York Stock Exchange yesterday and be poised, as owner of the magnificent Big Brown, to win the Triple Crown, but he can’t win them all.

A study by the Genocide Intervention Network, conducted with Bloomberg, has found that companies that invest in countries with poor human rights practices make bad investments, both financially as well as ethically.

Morgan Stanley has been shuffling executives and its sales strategy for its Van Kampen mutual fund unit, The Wall Street Journal reports this morning. The funds are part of Morgan Stanley Investment Management, which has $600 billion in assets and accounted for 40% of the firm’s income before taxes in 2007. Approximately one-third of that income is generated by the fund division, a third of which is sold to retail investors. The rest is primarily institutionally and foreign-sold.

Including lift-outs and partial deals, investment firms have shelled out more than $50 billion so far this year to acquire mutual fund companies and other asset management firms, in a record 241 deals this year, according to Jefferies Putnam Lovell, a division of Jefferies.

Four years ago, the board of directors of the Gabelli Funds conducted a thorough investigation into charges by the Securities and Exchange Commission that market timing had occurred in its funds, according to a press release the invesment manager issued on behalf of one of its former principals who is now under investigation.

NEW YORK - Cautious investors will be watching 130/30 funds over the next few years to see how the new products perform.

The harder the hedge fund managers’ fall - the more money they lose, the bigger the fat cats - the easier it is for them to raise additional seed capital for another hedge fund idea. So reports The Wall Street Journal this morning in “Rebounds by Hedge-Fund Stars Prove ‘It’s a Mulligan Industry.’”

WASHINGTON - The credit crisis is 75% to 85% unwound in terms of the financial markets, but the economy may still be on shaky ground, Jamie Dimon, chairman and CEO of JPMorgan Chase told the 1,500 delegates assembled here for the Investment Company Institute’s 50th GMM.“I would say this thing has largely already worked its way through. It probably won’t get worse at this point. Increased capital requirements will take about six months longer” to bring markets and counter-party risk tolerance back to normalcy, Dimon said.However, he was quick to add: “The recession, I don’t know. To paraphrase Yogi Berra, it’s tough to make predictions, especially about the future.”Markets perform in cycles, Dimon reminded executives, listing the 2001 technology bubble, Long Term Capital Management’s overleveraged exposure to Russia in 1997, the real estate and savings and loan crisis of 1990, overvalued earnings in 1987 and the subsequent stock market crash, the recession of 1982 and the oil shortages in 1974.
“The difference in this one is it’s a housing crisis,” said Dimon, who included among those to blame for the subprime crisis those mortgage bankers who failed to properly verify borrowers’ income or appraisers’ real estate assessments.Dimon also praised the government for its swift action in bailing out Bear Stearns and a cadre of more than 1,000 investment bankers at his own firm who, after he got “the Thursday telephone call” about whether or not to purchase the ailing firm, spent the entire weekend performing due diligence on the deal.In answer to a question from an audience member, Dimon exhorted mutual fund executives to continue to bring innovative products to market but to be extremely cautious when doing so.As an example, Dimon said, collateralized debt obligations, CDO warehouses and structured investment vehicles that invested in subprime mortgages are so complex that to try to assess the price in one such instrument, JPMorgan ran a Monte Carlo simulation on one of its mainframe computers for seven hours.Questionable mark-to-market policies also factored into the subprime troubles, he added. But that said, Dimon said he is tired of being “vilified” by the media for bailing out Bear Stearns or operating a bank that itself sold subprime mortgages and products derived from them. And as to banks’ role in making credit and loans too available to the American public, Dimon stressed that the consumers of subprime CDOs and other structured products over the past two years, have largely been institutional and not retail investors.The ICI booked Dimon’s appearance many months ahead of JPMorgan’s recent preeminent role in partnering with the government on the Bear Stearns deal, noted Edward Bernard, chairman of the ICI’s General Membership Meeting Planning Committee, and vice chairman of T. Rowe Price Group.“We thank Mr. Dimon for honoring his commitment” at this exceptionally busy time, Bernard said.

The turmoil in the $330 billion auction rate securities (ARS) market has spurred a series of investigations by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (Finra), and Massachusetts securities regulators. Congressional leaders are calling for relief, allowing mutual funds to provide liquidity to retail investors holding the securities.

A Federal appeals court yesterday upheld a 160-month, or 13-year, three-month, sentence for stockbroker and frequent CNN guest Todd Eberhard.