End of the Hedge Fund? Unlikely, according to Washington Post columnist Sebastian Mallaby who writes, “Even if you define Madoff’s investment outfit as a hedge fund, which for various reasons is debatable, there’s nothing in this saga that supports clamping down on the industry.”

Hedge funds return to roots as alpha claim refuted: This prediction of the hedge fund apocalypse tops all others.  Robert McAdie, a credit strategist at Barclays Capital, was quoted by Reuters last week as saying “Eighty percent of the hedge fund sector will not be here in three to four months“.  Check back in April for an update…

Regular readers may recall this post on “hedge fund forum shopping” - the theory that hedge funds search out the least-regulated jurisdictions in which to ply their trade.  AIMA’s Canadian chapter announced last week that the study cited in this post was the recipient of the organization’s annual research award.  If you want to compare jurisdictions side-by-side, this study is the place to start.

Man bites dog!…GLG Partners to buy SocGen UK asset management arm: Here’s an addendum to our recent  post on hedge funds being snapped up by traditional asset managers.  Except this time, the hedge fund is the one doing the buying.

In another twist on the traditional, T. Boone Pickens has reportedly decided to unilaterally relax quarterly redemption and 90-day notice rules on his equity fund - begging the question, why did he have these liquidity rules in the first place?

University endowments may reduce their hedge fund exposure next year, but not for the reason you might think.  Quoting InvestHedge, Bloomberg reports that “Hedge funds might be put ‘on the backburner’ when endowments have to fulfill previous obligations to private-equity managers.”

And here’s another problem faced by otherwise healthy hedge funds…J.W. Henry worries that even strong hedge funds may go under.

Breaking Views reports on “six changes they [hedge funds] need to prepare for” (via IHT).  One is that industry concentration will accelerate.

But Portfolio.com’s Jesse Eisinger has a different view.  Writes Eisinger: “Most hedge fund watchers think the biggest fund managers will only get bigger. But that’s hard to see…”

At least hedge funds aren’t the only ones looking at a huge drop in fees next year.  Thomson reports that “UK unit trusts and open ended investment companies have seen rises in both TERs [total expense ratios] and annual management fees for equity funds for the past ten years.”

You may have noticed that our fancy-schmancy new website displays all of our discarded news clippings and displays them on right behind this panel in our “news clippings” section (check it out right now if you like).  However, if you don’t have the time or inclination to click on every link you see in that section, then you’ll still find some value in our (semi) regular “newsreel” segments that provide you with a brief explanation about why we were drawn to each story.  If you’re interested in more of these snippets from the cutting-room floor, click on the “AAA Newsreels” in our Topics listing in the right column.  So, without further ado, here is this week’s AllAboutAlpha Newsreel…

US Managers Stem the Fall in Assets: Investors checked under the sofa cushions and found a bit of extra change - just enough that “for the first six months of this year, unlike the largest European asset managers, the largest US investment firms have been able to stem their fall in assets under management.”

Low Returns Spur Big Cuts: Re-use your paperclips everyone, “…while massive layoffs are still rare in the asset management industry, headhunters report that bonuses - with some exceptions for the top echelon of talent - and other incentives have softened.”

Large Cap Doldrums Drive Alternative Investment Quest: Apparently turning their backs on plain vanilla mark beta, financial advisers are looking to products with a higher proportion of alpha in their returns - in this case, real estate, commodities and small caps.

JP Morgan Increases Allocations to Alternative Investments: The firm’s private bank says equity allocations in discretionary accounts have dropped 40-80% in the past five years to between a quarter and a half of the typical client portfolio.  Now they’re roughly the same size as alternative allocations.

Touted 130/30 Funds are New and Unproven: MarketWatch’s Chuck Jaffe rains on the 130/30 parade by setting up the following straw man: “…there’s a logical expectation that it will deliver superior performance in all market conditions.”

Appeal of 130/30 funds swell: Hold the phone!  Investment News says “…the market continues to move in the direction of 130/30 strategies, with growing supply meeting growing demand.”

Inflows to Emerging Market Hedge Funds Fall 72%: Sure, emerging market hedge funds with a local presence in the region to better than those with no presence (see related posting).  But apparently, the whole category took it on the chin anyway in Q2.

Who Needs a Hedge Fund Anyway?: CNBC reports that hedge funds rock - as long as you’re a big institution.   Says one expert, “High net worth investors don’t get access to alpha managers.”

Regulatory Paranoia Means Hedge Fund Claustrophobia: SEC xenophobia is resulting in hedge fund claustrophobia.  A crack-down on sharing investment ideas threatens one of the most cherished traditions of the hedge fund industry, the “best ideas dinner”.

Ivory Towers Showing Some Cracks: After “blowing the bell curve” for the rest of the class for years thanks, mainly to alternative investments, US university endowments have finally lost some money.

US Seeks Delay of Civil Case vs. Bear Managers: So much for civility!  Prosecutors appear to think their chances are better with a criminal case, rather than civil one.

Comptroller Seeks Flexibility in Managing Pension Fund: To protect the retirements of New York’s public servants, the head of its pension fund wants only one thing: the ability to invest more in alternatives.

But mega-pensions aren’t the only ones who want more flexibility.  A Bank of America survey found 30% of wealthy individuals were satisfied with traditional long-only investments during the past year while over 50% were satisfied with hedge funds.

Back down to earth for hedge funds of funds: The FT reports that New York actually wants more single strategy funds and less funds of funds.  The paper says it’s a sign of the “growing maturity” of the hedge fund marketplace.

Hedge fund assets hit $3.8 trillion: Unlike estimates by database managers, this one is based on a survey of fund administrators.  But is the definition of “hedge fund” the same?

State pension fund forms partnership with DE Shaw: Relationships between institutional investors are becoming more complex.  South Carolina now “co-invests” with its managers.

Fledgling longevity swap market faces uncertain future: People, stop exercising and start smoking again.  Pensions can’t afford you any more!

Reuters says that “hedge funds are looking less and less like a single asset class”. Problem is, they never were one asset class.  But Reuters sounds surprised to report “fund of hedge fund managers are actively reshuffling their portfolios to take advantage of the next winning strategies.”

AQR drills for beta in new style: So-called “hedge fund beta” is usually delivered in the form of hedge fund sub-indices.  But AQR now say “fund beta can be captured by using a quantitative, bottom-up security selection process that replicates the common elements of a particular hedge fund style strategy.” P&I reports they’ll put their money where their mouths are this September.

Business Week reports on the growing “Freaky Friday” phenomenon where hedge funds and banks switch roles.

Passive LDI gives fake security: Pimco says that simply replicating estimated future cash outflows doesn’t mitigate all risks for a pension plan.

We’re reported extensively on the dwindling ranks of small hedge funds as the industry consolidates.  Should small fry give up?  No way, says one consultant.  Instead, here’s what they need.

Do PE firms make bad owners? Not according to a new survey: According to Investment News, E&Y finds that “Businesses sold by private equity firms last year saw greater growth in value and profit than their publicly held peers.” (related posting: New research on private equity surprises even some of the experts)

Like the movie Freaky Friday, hedge funds and banks have switched bodies.  John Snow says Fannie Mae and Freddie Mac are really hedge funds (Bloomberg) and hedge funds are side-stepping tightwad banks and lending money to each other (Financial News).  Stay tuned for more zany antics!

Online dating sites aren’t helping the elderly hook-up in Austria.  But that’s a good thing for pensions who are saving a bundle by not having to support a pensioner’s spouse (IPE)

Despite often issuing enough information to satisfy a Ph.D. in statistics, hedge funds get failing grades from advisors.  A new survey finds nearly 90% of advisors rate hedge fund sales efforts as “ineffective” according to Investment News.

As a follow-up to our posting on the rising cost of stock borrowing, we note that the FT ran a couple of interesting pieces last week: Rising costs of shorting hampering funds and Shorting ‘makes billions’ for groups.  Those poor hedge funds.  Suffering at the hands of evil pension funds.

New data from Hedge Fund Research finds first half allocations to hedge funds increased by about a quarter of what they added in the same period last year.  While that sounds horrendous, it wasn’t as bad as 2003.

No worries, though.  P&I reports that “Institutions stick to hedge-fund guns“.  Says the newspaper: “…institutional investors weren’t the culprits…Institutional hedge fund hiring and search activity was strongly positive, totaling $19 billion…”

But wait!  Financial News reports that Morningstar found net redemptions from hedge funds up to the end of May.  Did things really turn around that much in June?  Or could measuring the hedge fund industry be an inexact science?

P&I reports that Moody’s gave a raging endorsement to LDI, saying: “We believe the positives and negatives will tend to offset one another over the long-term, making LDI neutral to mildly positive for most issuers, depending on their unique facts and circumstances.” Okay.  Not really “raging”.

Contrary to some earlier academic research, one accounting firm finds performance fees don’t lead to better performance after all.

Giants launched with record $19.5 bln in first half: Industry concentration means that its feast and famine at the same time in the hedge fund industry.

Swedish funds hope rules to change soon: The Swedish public pension scheme lobbies its government to allow more access to alternative investments.  As P&I observes, “Alternatives managers — particularly global players — should be in the best position to benefit from what consultants estimate will be billions of dollars up for grabs.”

Don’t Pay Alpha Fees for Beta Performance: Advisor Perspectives gives us a sneak peak at a new article by previous AllAboutAlpha guest contributor Larry Siegel on various alpha-centric themes.  This is a great discussion - particulary for financial advisors.

Hedge funds hit troubled banks with a hiring binge: More on a topic in last week’s newsreel - the employee pillaging being conducted by hedge funds.

Bigger may be better as smaller hedge funds give up: Says one industry player, “The costs of entry into the hedge fund industry have always been very low, but the costs of remaining in business are very high.”

Fewer U.S. hedge fund starts so far this year: Reuters reports on Absolute Return magazine’s analysis of US hedge fund start-ups.

UK asset management industry moves towards multi-boutique model: Gartmore isn’t the only asset manager wrapping itself in the “multi-boutique” flag.

Aberdeen changes tack on hedge fund strategy: Another UK-based manager says “Hedge funds are going to be a long term game and not a short term win.”  (ed: especially for Aberdeen, which is now a quarter-owned by hedge funds)

Hedge Funds Hire From Wall Street as Jobs Disappear, Pay Falls: Bloomberg reports that hedge fund recruiters may be the biggest beneficiaries of the carnage on Wall Street.

Asia to Create Thousands of Hedge Fund Jobs, Pinnacle Says: And it appears that some of those hedge fund recruiters are likely to be located in Asia.

First Half 2008 Sets Record for Alternatives Manager M&A: Putnam Lovell predicts “In the next 12 months, we expect strong M&A activity involving battered banks and other financial institutions divesting asset management businesses to raise capital, and continued record demand for alternatives.”

Feds Cast Scapegoat Net, Snag Cioffi and Tannin: Bloomberg’s Caroline Baum, author of the book “Just What I Said”, reiterates just what we said last week about the fundamental questions raised by the recent Bear Stearns indictments.

Hedge-fund mystique: the need for transparency: The Australian reports that Morningstar VP of research says it’s time for hedge funds to come clean.

US Presidential Election May Spur Hedge Fund Regulation: Then again, hedge funds may have no choice if this guy is right.

Finding alpha with few bets: Seeking to avoid short-selling, institutions are looking to “concentrated” funds for long-only alpha.  (ed: While not technically short-selling, a concentrated portfolio has a negative weighting vs. its benchmark in a huge number of names and a positive weighting in select others - raising interesting questions about whether a long/short fund is really that different.)

State Street world’s largest again: According to Pensions & Investments, State Street Global Advisors is the world’s largest institutional manager for the 7th year in a row ($1.8 trillion AUM).

“Best Blogs”: Speaking of P&I, we think they are one of the best.  Coincidentally, that’s exactly what they said about us in their recent ranking of “best blogs” (where they ranked us #9).

Increased regs not in the cards for hedge funds: Morningstar says their database is “the closest hedge funds are going to come to oversight” in the near future.

Seed capital providers now vital for funds: The FT reports that as assets get harder to raise, some are saying “seeders” are just about the only way to go for hedge fund start-ups.

Value Partners Says Smaller Hedge Funds Face Takeover: …and if smaller funds don’t have access to a sugar-daddy ”seeder”, guess what…

Several 130/30 funds come to the market: Investment Week reports that Roger Ibbotson is about to launch a 130/30 fund.

The hedge fund industry is big. Make that really big. Or sorta big?: Reuters provides a great summary of the myriad of ways to determine the actual size of the hedge fund industry.

Goldman offers mutual fund based on hedge fund index: After launching its Absolute Return Tracker (ART) index last year, Goldman has now built one of its own funds around the “hedge fund replication” model.

The LDI analogy of pensions and airlines: One expert says that airlines and pensions face the same challenge - fluctuating liabilities.

Battered funds cling to hope of recovery: One noted manager hits the nail on the head with regard to hedge funds’ PR problem, saying they “have an image problem among some institutional investors…the perception that the sector is dominated by cowboy attitudes, high fees and unfavorable risk adjusted returns.”

The Lo Down: The Economist scrapes bottom of pun barrel to draw attention to Andrew Lo’s new book.

Study finds managers prefer lean teams: This is exactly why we’ll never see a lot of lay-offs in the hedge fund industry.  There’s no one to lay off.

Portfolio construction job one, study says: Cerulli report says that two-thirds of asset managers surveyed are planning to develop alternative investments or products that blend traditional and alternative strategies.

New York Life 130/30 Webcast (video): New York Life Investment Management 130/30 video is now online.  Enjoy on your 60″ plasma screen with some popcorn.

Institutional Investment Managers Predicted to Increase Hedge Fund Allocations by 25 to 50 Percent Over the Next Two Years: Wharton prof. says “You’d expect a certain proportion of failures — including some spectacular failures — in a universe that now includes roughly 15,000 funds. But hedge funds are not necessarily riskier as a group just because some fail.”

New LDI tools evoke ‘false sense of security’: A UBS study questions the suitability of new liability-driven investing (LDI) techniques.

AP3 restructures for alpha-beta separation: Our favourite Swedish pension plan confirms organizational changes that will pave the way for the separation of alpha and beta.

No Shortcuts Here: 130/30 Funds Require A Long, Hard Look: Poor performance from the early 130/30 mutual funds has convinced at least one major business newspaper that, “individuals are better off sticking to plain-vanilla funds.”

Back in Black: After a relatively good May, hedge funds are back in the black for 2008 - prompting the CEO of one major hedge fund firm to report in a recent telephone interview with AllAboutAlpha.com:  “We’re back in black, I hit the sack.  I’ve been too long, I’m glad to be back.”

After a brief pause, the executive continued, “Yes, I’m let loose from the noose that’s kept me hangin’ about.  I’ve been livin’ like a star ’cause it’s gettin’ me high.  Forget the hearse, ’cause I never die.  I’ve got nine lives, cat’s eyes, abusing every one of them and running wild.”

It always confused me how airline business lounges could charge extra for WiFi access.  After charging an arm and a leg for lie-flat seats and 290 hours of TV reruns, airlines still make you crack open the AllAboutAlpha.com corporate credit card just to access the web.  Well, the friendly folks at our local Star Alliance lounge have finally come to their senses, providing me with the (free) pleasure of uploading a bunch of news stories we’ve been watching this week but didn’t get a chance to write about…

Incubators on look-out for start-up managers: According to the FT, “The upheaval in global capital markets is creating abundant new investment targets for hedge fund incubators.”

Road to hedge fund riches is rockier now: On the other hand, the Guardian reports that “Starting a hedge fund was long considered the road to riches for money managers, but the path has become much rockier in the last months.”

ICG head slams hedge fund pay: From the hedge fund compensation beat, we bring you one well-paid manager who apparently has a beef with the (market-to-market) remuneration of his industry colleagues.

Hedge fund performance fees spark debate: The FT picks up on this theme, reporting that “A debate is breaking out across Wall Street about whether hedge funds that specialise in illiquid investments should adopt compensation policies more like those of private equity firms.”

Super funds eye hedge funds: Meanwhile down-under, a university study finds institutions are planning to increase their allocations to hedge funds substantially over the next 2 years.

Northern Foods adopts LDI ahead of ‘challenging’ year: Pizza technician tells IPE it has a “significant pension asset and liability in relation to the company size…”

Pioneer lines up more hedge fund launches for retail market: Small investors in Luxembourg, Italy, Spain, France, Germany and Austria how have something new to choose

Alternative investment industry shifts to support more formal regulation: PwC study says the industry is coming around to more regulation - and kinda liking the idea.

Hedging Meets ETNs With Launch Of First 130/30 Portfolio: Index Universe covers the launch of the first 130/30 Exchange Traded Note (ETN).

That’s all for now.  The show is going on the road this week to the inaugural European edition of the event whose name cannot be mentioned (since there is a strict “no-media” policy).  Regular readers will remember the original, equally as secretive, annual edition in Boston.  While we are banned from reporting specifics, we’ll try to tell you about the major themes arising at the event over the coming days.

- AM

Inalytics launches new service to analyse 130/30 funds: Thomson reports that “The firm specialises in quantitative forensic analysis to identify 130/30 managers that can add value from skill by verifying that their short positions actually generate returns.”

Nervous alternatives managers could be leaving alpha on the table: P&I reports from ”AlphaMax” in Madrid that “Fees became a point of contention between pension fund executives and hedge fund managers…with the pension executives arguing that the typical hedge fund management fee of 2% and performance fee of 20% can be a deterrent…”

8 out of 10 managers fail to add value: Meanwhile in Stockholm, Watson Wyatt’s Roger Urwin tells another conference why pensions have an allergy to “2 and 20″.

Credit Suisse kicks off launch of hedge fund replication products with index: Also not oblivious to pensions’ concern over fees, Credit Suisse launched their long-awaited “Alternative Index Replication” product (see previous posting).

Portable Alpha/Overlay Strategies Slides (pdf): Thomas Picciochi of Deutsche Asset Management and Francois Bourdon, of Fiera Capital deliver a presentation to the Society of Actuaries in March.

Prime time at Morgan Stanley’s hedge-fund debutantes ball: Asian Investor reports from a Morgan Stanley cap intro event where organizers say “2008 will be about the separation of alpha and beta”.

Merseyside seeks UK 130/30 managers: Big UK pension plan looks for someone to manage around $1billion using 130/30 or portable alpha - confirming a growing realization that the two are basically the same thing.

Japan public pensions ‘need revamp’: We’re not the only ones who think Ikea and maple syrup have a lot in common (see posting).  The FT reports that “The more aggressively managed state pension funds of countries such as Sweden and Canada, whose investment strategies serve as a model for the proposals”.

At CFA Institute: BGI execs looking to upset the apple cart: Innovation, whether social, technological or financial, often follows the same evolutionary path.  As BGI’s Blake Grossman told the annual CFA shindig last week, hedge funds and ETFs represent “disruptive innovation” in financial services.  (see previous postings on the many parallels between technological innovation and financial innovation.  See FT article about Grossman circa 2006).

Advisers debate alternative investments: A panel at the annual meeting of the Investment Company Institute (ICI) shows why alternative investments are still try to crack the retail market (also: another report about discussion of alternatives at the gathering).

Investors stand by 130/30 funds: Although many early 130/30 funds have succumbed to the credit crisis, it seems investors are able to differentiate between bad investment decisions and the potential value-add of short extension strategies.

Finding Alpha in Environmental Performance: The May issue of HedgeWorld’s “Accredited Investor” newsletter includes an article that goes beyond the social/ethical reasons for using environmental performance as an investment criteria.  (free reg. required)

Global non-traditional manager searches up 20 percent in 2007: Mercer report shows its all about alpha.  While true alternative investments are actually only a part of the “non-traditional” category, Thomson Investment News says: “Last year’s predicted growth in alternative categories has materialised in the UK with a significant increase in activity.”

Mercer’s head of Asia/Pacific Research concurs, telling Thomson: “In 2008, we expect to see growing demand for alternatives, especially given current volatile market conditions…” (free reg. required)

Euromoney/Institutional Investor coverage here. (no reg. required)

Leverage of 130/30 funds can burn: BusinessWeek journalist and 130/30 critic suggests that leverage - no matter the form - is a bad thing.

‘Safe’ funds that have lost money: The Times of London is far less charitable with regard to the rocky start by some UK 130/30 funds.

Managers ready absolute return, alternative funds for tough markets: A survey by S&P confirms our hunch, that alternative investments may just catch on…

In recognition of our legions of loyal readers in Budapest, Hungary, we are broadcasting live from the “Pearl of the Danube” today.  (Actually, no - we don’t quite have “legions” of Hungarian readers.  But yes, today’s newsreel was produced on the banks of the Danube where Alpha Male was sharing his two cents on alpha-centric investing with a meeting of European asset managers.)

(Note: as usual, free registrations may be required for some of these stories.  Rest assured, they’re all free though - we’re far too cheap to actually pay for stuff.)

NACM launches three 130/30 funds: CIO says “We believe 130/30 investing will become an integral part of institutional investors’ portfolios in the years ahead.”

Hedge funds banking on IPO route: Hedgeweek says that the spike in UK hedge fund managers’ interest in IPOs is a result of an easing of LSE listing rules.

Fund managers overmarket, underperform as competition hits: Watson Wyatt says fund managers are trying too hard to wow their prospects.

California Firm Preps ETF Hedge Fund: Now we can have an “ETF hedge fund” to go with your “hedge fund ETFs.”

The $3-billion prophet of doom: Canada’s leading news magazine says “There are many who will reflexively point to Paulson’s success as yet more evidence that the hedge fund sector is somehow predatory. In reality, it is just the opposite, and it’s time we dispensed with the knee-jerk disapproval that continues to dog the industry.”

Investors stand by 130/30 funds: Like Hillary Clinton once did, investors have so far chosen to “stand by their (130/30) man”

Pension worry from new accounting rules: Pending regulatory changes in Europe have some worried that pensions will have to yank assets from alternative investments.

Comas wants funds of hedge funds to drop the ‘diversification’ tag: Commerzbank’s hedge fund of funds business says the industry has lost sight of need for actual returns.

Investors expect hedge funds to raise $200bn this year: Despite the news about the pending death of hedge funds, things have apparently been worse.

The activities of the “new shorts”: Analyst says that “institutionalized, mainstream short-selling trade that is practiced by well capitalized hedge funds and traditional money managers…are much less prone than they have been in years past to flee when positions move against them, so the short-covering rallies fuelled by panicked short liquidation have become somewhat scarcer.”

That’s all for now.  Viszontlátásra!

Boy: You sure gotta climb a lot of steps to get to this Capitol Building here in Washington. But I wonder who that sad little scrap of paper is?

Bill: I’m just a bill. Yes, I’m only a bill. And I’m sitting here on Capitol Hill. Well, it’s a long, long journey to the capital city. It’s a long, long wait while I’m sitting in committee, but I know I’ll be a law someday at least I hope and pray that I will, But today I am still just a bill.

Boy: Gee, Bill, you certainly have a lot of patience and courage.

Like the bill in the 1970’s “Schoolhouse Rock” TV segments, we’re all going to need a lot of “patience and courage” since it looks like the never-ending debate over hedge fund regulation isn’t going away any time soon.  Here’s the news from last week…

Phil Goldstein, the man who has taken on government officials on everything from hedge fund registration, 13F filings, and hedge fund advertising (see related posting), is reportedly championing a new industry advocacy group, tentatively called the “Rational Regulatory Policy Institute”.

It sounds like the recommendations from the President’s Working Group (PWG) may not be enough to satisfy skeptics like Soros…Apparently, we weren’t the only ones to note the excessive use of the word “should” in the recent hedge fund report from the President’s Working Group (see posting).  According to Reuters, Connecticut Attorney General Richard Blumenthal said the PWG plan “is one small step when giant strides are needed…The Treasury Department’s proposals for greater transparency and risk disclosure must be mandatory or they are meaningless.”

George Soros probably won’t have Goldstein on his Holiday greetings list this year.  Soros told a Brussels audience that he thinks “hedge funds need to be regulated like all other market participants” and that “there are some hedge funds that have been operating as unlicenced insurance companies by writing credit default swaps.”

Across the English Channel, the UK’s financial regulator says “not so fast“.  According to the Financial Times, “the FSA has stopped short of directly regulating the hedge fund and private equity industries…At the economic and monetary affairs committee public hearing, Dan Walters, director of retail policy and themes and sector leader for the FSA, said hedge funds themselves were outside of the FSA’s jurisdiction…” However, the FSA is quick to point out that they do intend to regulate the hedge fund managers themselves.

Regulation or not, UK pension plans remain keen on the diversification benefits of hedge funds. Thomson reports that State Street “argues there has been a dramatic shift in the way pension funds consider their investment strategies, and they are now embracing absolute return investments in a broader variety of guises.  [Joe] Moody [of SSgA] said pension managers are becoming more intolerant of middle-of-the-road strategies - focusing now on the separation of alpha and beta to deliver high returns.”

Meanwhile over in Sweden, regulators have moved to relax existing rules governing hedge funds.  A senior official with one of the country’s public pension funds lamented the 5% cap on alternative investments, “This is a problem for us since many alternative beta strategies are in the space of unlisted assets, or at least on the border…

While the issue of hedge fund regulation is never far from the top of the legislative agenda in Europe, the European Parliament recently gave the issue a boost with its “working paper” on hedge fund and private equity regulation.  That paper asked the following, somewhat pointed, question: “What is the rationale in having lightly or unregulated private pools of capital such as private equity funds and hedge funds operating in the market alongside tightly regulated institutions such as pension funds, insurance companies, banks and others?”

(For more alpha-centric news items on hedge fund regulation and more, check out the scrolling news ticker above - or our gigantic news archive.)

“Hedge funds come unstuck on truth-twisting”: Aussie newspaper The Age provides a great example of why AIMA felt compelled to put its foot down on anti-hedge fund hype yesterday.  The article covers a recent academic study and starts with “Has the hedge-fund industry been built on a series of lies?” and continues on to proclaim, “Now it looks as if the industry might be based on a more systematic falsehood”, “The conclusion? The promise on which the industry was built looks to be largely a false one. If investors start to question the hedge funds’ ability to produce consistently superior returns, they will start to exit the industry in droves - and rightly so.” (see November ‘07 posting on this study)

“Tough Times for Hedge Funds”: Reuters provides another prime example.  Says this promotional story for its hedge fund summit this week: “Many investors expect the $1.8 trillion industry’s estimated 10,000 funds to be winnowed down by a few thousand in a few years. Funds that oversaw nearly $4 billion in assets have already closed their doors in the first quarter of 2008.” Only a couple of problems: A) The number of players in any new industry is always “winnowed down” as it matures and says nothing about the overall size of the industry and B) $4billion x 4 quarters = $16 billion = if true, the lowest attrition rate in 3 years…

“First-quarter redemptions hit hedge fund industry”: While we’re on the topic, Dow Jones says “Hedge funds overall recorded losses in the first quarter, particularly in January and March. They lost 2.78% of their value in the quarter after dropping 2.46% last month, according to the investable global hedge fund index published by US data provider Hedge Fund Research.” While ugly compared to the positive returns people have come to expect from hedge funds, this pale in comparison to the S&P 500’s Q1 loss of over 7%.

More…

Below is out (shortened) weekly round-up of stories in which you might be interested, but which didn’t graduate to full stories on AllAboutAlpha.com.  As usual, all these stories are listed in the scrolling news ticker you see at the top of your screen.

Lawrence Cohen, a NY lawyer, dives deeper into the legal issues surrounding the Bulldog Investors case.  Says Cohen, “The tension between freedom of speech and non-public offerings may come down to a determination of the meaning of the term ‘offering.’ Some would argue that the availability on a hedge fund’s Web site of a document that can be read by anyone constitutes a ‘public offering,’…”

Is it any wonder hedge funds aren’t clamoring to voluntarily register with the SEC?  Bloomberg reports that the regulator has only just abandoned its efforts to get hedge funds to fill out a 27 page questionnaire.

The European head of investment consulting at Watson Wyatt tells Pensions & Investments that, We’re only in the early stages, but (alternative beta) is attracting a lot of interest at the moment…Right now, those who are looking at this are the very big clients with a lot of resources. But in time, (alternative beta) should attract the smaller to medium-size funds interested in diversifying away from the equity risk premium.

A new study finds that 80% of investment consultants will focus on alternative investments this year - prompting one of its authors to say “We knew alternatives would be important…We did not know the extent to which this would drive flows.”

Paul Sarbanes and Michael Oxley tell Indian media that “The only way to get a regulatory regime for hedge funds is a huge scandal.”

After being blamed for sparking the whole sub-prime mess in the first place, it now appears that hedge funds might be “riding to the rescue” of at least one wounded mortgage company.  Similarly ironic are recent reports that several hedge funds cleaned up on Bear’s collapse - a downfall precipitated by the collapse of Bear’s own hedge fund last summer.  Which all goes to show that hedge funds defy blanket characterizations.