We are broadcasting on location this week from a major hedge fund conference in Boston.  Regular readers will remember this as the “no media” event whose real name we’re therefore not allowed to mention on the air (see previous posts: 2006, 2007).  This is the place where Andrew Lo, Myron Scholes, Robert Shiller, Larry Summers and a who’s who of academia deliver lectures for the world’s mega-pension plans, endowments and leading hedge fund managers.

You might be excused for wondering who would attend a conference right now as the global equity markets bounce from convulsion to convulsion.  But in the course of my preparations as one of the co-chairs of this event, many panelists are telling me that the gathering could actually not have been better timed.  It seems that the chance to compare notes, search for answers (and commiserate) trump sitting in the office staring at Bloomberg screens while the world goes haywire.

Although the event is closed to the media, we have been authorized to comment generally about the themes arising over the next few days.  So we’ll bring you more on the event tomorrow.

But today, we’ve cooked up another batch of our “Newsreel” – a random walk through the stories that have caught our eye in the past week but never made it onto the front page.  (note: As usual, a few of these stories require a quick one-time registration.)

Alpha-centric Investing

Investment Consultants Focus Search Activity in Alternative Asset Classes-Hedge Funds and Funds of Hedge Funds-While Demand for Traditional Long-only Products is Stagnant: Many long-only products have difficulty in generating consistent alpha, and institutions would rather index core asset classes using ETFs, index funds, or derivatives.

Asset Management M&A

Investec CEO sees chance to snap up fund firms: “Hendrik du Toit told Reuters that as banks and insurers seek to recapitalise, they may want to get rid of their asset management businesses in a ‘faster and bigger’ way.”

Third quarter 2008 asset manager M&A activity climbs amid financial crisis: “Deals involving asset managers rose in the July to September 2008 period, with the global credit crunch as the backdrop for a jump in divestitures to almost 40% of total sales, up from 23% a year earlier, according to Jefferies Putnam Lovell…”

Cash rich asset managers look for bargain M&A buys: “Some of Europe’s most senior asset managers expect consolidation in their industry to gather pace as the market downturn persists into next year, hurting fee revenue and hitting valuations.”

Credit Crunch boosts asset management M&A deals: “Companies under pressure to raise capital accounted for 40% of asset management merger and acquisition deals worldwide in the third quarter as deals in the sector received a boost from the credit crunch, according to a new report.”

Asset Management Job Cuts

Hedge Funds May Cut 10,000 Jobs, Options Group Says: “Hedge funds may cut as many as 10,000 jobs this year as they struggle with their biggest losses in almost two decades, according to estimates by executive search firm Options Group.”

Fund-of-Funds Cuts Staff as Returns Sag: “A spokesman for [hedge fund company Fairfield Greenwich Group] told DealBook on Friday that the firm was ‘paring down its staffing in alignment with the rest of the industry.‘”

US fund industry slashes jobs as assets shrink: “Several big U.S. asset managers are slashing jobs as the financial crisis deepens, a dramatic reversal in an industry that added record numbers of workers in recent years and showered them with lucrative rewards.”

Outlook grim for U.S asset managers’ earnings: “Earnings at U.S. money management companies likely slumped in the third quarter and may deteriorate further in the short term as financial market turmoil slashes asset values and forces heavy outflows from funds.”

Grim Forecasts force fund managers to eye more cuts: “…Asset managers have been taken by surprise by the market’s deterioration since early September.”

Yet more estimates of hedge fund shrinkage

30% failure rate – Roubini’s Dismal Forecast for Hedge Funds: GLG predicts 30% of hedge funds will close: But Roubini is actually less bearish on hedge funds – predicting only “hundreds of hedge funds will go bust”.  Then again, what does he mean by “bust”?  Thomson reports that it means “fail”.  But does “fail”, “bust” and “give up” mean the same thing? (more on Rounbini’s over-reported comments)

50% – The Incredible Shrinking Funds: “Now industry executives predict that assets could fall by 30-40%, as clients stampede for the exit. The number of funds, which climbed to over 7,000 as a generation of financiers headed for the gold-paved streets of Mayfair in London and Greenwich, Connecticut, could fall by half.”

60% – Panic over hedge funds ‘could close markets’: “Jon Moulton, the private equity investor behind Alchemy Partners, forecast a tidal wave of hedge fund collapses in the next three months. ‘We estimate 60 per cent of the capacity of UK hedge funds will go this year, through bankruptcies and redemptions.‘”

66% failure rate – Only hedge fund rescues can now turn the market: “Most hedge funds are still reluctant to admit that two-thirds of them will go out of business and you can’t really blame them for that and won’t yet talk to their rescuers. Until they do, the lethal combination of volatility and downward drift is likely to continue.”

“Hundreds or thousands” – Hedge funds’ steep fall sends investors fleeing: No one knows how much more hedge funds might have to sell to meet a rush of redemptions. But as the industry’s woes deepen, money managers fear hundreds or even thousands of funds could be driven out of business.

Hedge Funds in the Media

Time to Bury the hedge fund label: “Hedge funds get blamed for all manner of ills, including the current crisis in financial markets. They are a convenient scapegoat – partly through their own determination to cloak their activities in secrecy and operate in a kind of nether world that few people outside select financial circles are privy to or understand.”

Uphill battle seen for active managers: “[David Wray, president of the profit Sharing/401(k) Council of America] pointed out that many leaders who advocate passive management have been marketing their strategies and philosophies for some time.  “The same needs to be done by people who advocate active management, Mr. Wray said.  “‘The people who support passive management have an active campaign,’ he said. ‘They’re driving home passive investing every day.’”

Hedge Fund Regulation

Bankers take a billhook to the hedge funds: “According to an e-mail from Dick Fuld, the former chairman of Lehman Brothers, quoted by The Wall Street Journal, Hank Paulson, the US Treasury Secretary, said he wanted to “kill” the bad hedge funds and “heavily regulate the rest”. The Italian Finance Minister has promised to put the extermination of hedge funds…”

Bulldog Barks Over Freedon of Speech: “Two years after Phil Goldstein, founder of US hedge fund Bulldog Investors, forced the Securities and Exchange Commission to abandon a controversial hedge fund registration rule, the engineer-turned-activist investor is championing another case against the SEC: demanding freedom of speech.”

No need for more hedge fund regulation-UK’s FSA: Britain’s Financial Services Authority (FSA) said on Wednesday it did not see the need for more regulation of hedge funds, and that most funds had so far weathered recent financial turmoil fairly well.

Hedge Fund Fees

Funds face their decision time: “…many investors, particularly pension schemes and other institutional investors, have avoided alternative investments because they think they cost too much.”

Fees to fall at US hedge fund: US hedge fund manager Ramius Capital has offered to slash its performance fees by a quarter if investors will stay in its funds, as losses mount in the hedge fund industry and clients redeem their capital