IVY Plus Blog

SocGen Layoffs Continue Among Chaos

 SocGen former home of rogue trader Jerome Kerviel who lost 4.9  billion euros in trading in 2008 is reviving their generous redundancy offering of 2012 this year.  They are targeting 600-700 employees based in France as much of their US operation has been reduced and there is a perception of protecting French jobs first.  Yahoo news reports – 

"In 2012, SocGen encouraged its bankers to take voluntary redundancy by paying them a minimum of €30k and a maximum of €300k, depending upon their pay and length of service. The scheme was so generous that it ended up massively oversubscribed: 2,200 people wanted to leave SocGen, but only 800 were accepted. " 

You can find more here – http://yhoo.it/19ePC9h

Dealbreaker reports – http://bit.ly/19eSByv

"The French bank Société Générale announced on Tuesday that it was planning a new-cost cutting drive that would result in hundreds of job losses in France, as its first-quarter net income fell sharply. The bank said first-quarter net income fell 50 percent, to 364 million euros ($476 million), from the period a year earlier. That was well below the 674.6 million euro profit expected.

Société Générale, the second-largest French lender, said it planned 900 million euros of cost reductions through 2015, adding to the 550 million euros of cuts last year." 

In 2011, Zerohedge claimed that Socgen was levered up 50 times with only 2% of tier 1 assets – http://bit.ly/pgVmNq

 Likewise, e-financial careers reports that the 4th quarter of 2012 was not good for SocGen either – http://bit.ly/WlUeGS

"Societe Generale reported a larger-than-expected fourth quarter loss of 476 million euros and said it would reorganize around three businesses: retail banking in France, retail banking and financial services internationally and CIB, private banking and asset management.

The bank didn’t say whether its restructuring would involve job losses, however, the head of retail banking in France, Jean-François Sammarcelli, said at a press conference today that the group plans to close “a few dozen” of its 3,250 bank branches in France. Last year, SocGen cut 1,600 jobs worldwide in its CIB division. It employs 160,000 worldwide."

Meanwhile, Glassdoor.com, an inside scoop website with anonymous feedback from workers at SocGen reports that existing New York employees think there is little job security, less pay than rivals and a two-tier career track for those who are French speaking and those who are not.  Even though English is generally recognized internationally as the language of business and moreso banking, some employees report that as many as half of their communications received are in French.

More here – http://bit.ly/14f5iZl 

 

Old Venture Capital Firms Disappearing

Elton Sherwin, founder of private equity firm Ridgewood Capital’s Palo Alto office reports: “There appears to be over 400 venture capital firms that are either inactive (stopped investing) or have quietly gone out of business,”.  This is from a population of less than 1,000 U.S. Venture Capital firms.  Flag Capital, reports that 86 U.S. venture capital firms were active in 2012, down from 441 in 2000.   

The US VC environment continues to downshift facing increasing competition from Angel Groups, Peer to Peer Networks and mega Angel investors.  Likewise the cost of startups in the software space is declining.   Many VCs are participating in later round funding only.  Though these investments are more likely to provide return, none of them are likely to provide the 300-400% returns VCs have historically targeted.  The hastening in lack of new vintages means that more VC consultancies will arise trying to guide capital stacks, Angel and Peer to Peer, through investment on an advisory basis.

 In the past information and branding were an advantage to Venture Capitalists, but in an era with easy disintermediation, VC brand irrelevance, ready information on the internet and an ability to reach customers more directly, what is the VC advantage outside of capital?  Expect more VCs to align with pockets of capital for lower middle market PE firms or family offices.  

More information can be found at Businessweek here – http://buswk.co/ZNrG8H or PE Hub – http://bit.ly/XWhI7q

 

Sylvestri Explains Why Standard PE Funds Less Attractive

Frequent IvyPlus speaker, Ronald Sylvestri, President of Quail Ridge Asset Management, LTD, is in Forbes this week discussing "Why The Standard Private Equity Fund Is Losing Its Luster".  

Among other reasons, Sylvestri says "The biggest issue the industry faces is liquidity where a 10-year lockup with two 1-year extensions is the norm. That is a long time to keep precious capital locked up, especially in a bad economic cycle during which a fund can’t exit its investment. Most investors don’t like the 10-year lockup and would rather opt for a more liquid structure. LP’s seem to be moving away from blind pool investing, and opting for more flexible vehicles and structures. "

You can find out more here – http://onforb.es/XIaDaG

 

Hedge Funds See More Allocations

 Quick Updates on New Hedge Fund Allocations –

CALPERS boosting allocations to Macro Funds – http://bloom.bg/XdM2ZC

Hedge fund investors expect continued growth in 2013, and are predicting alternative investment industry AUM to reach an all time high of USD2.5trn by year end with net inflows of USD123bn, according to the 11th Deutsche Bank Alternative Investor Survey.  –  http://bit.ly/V11jhY

 RACON Capital raises $35 million – http://bit.ly/YhKFrV

 

Mesirow Gets Hit by $75 Million Redemption from Chicago Teachers

 Hedge Fund of Funds, Mesirow Advanced Strategies has had a $75 million redemption from Chicago Teachers.  Pluscios Management, an Ivy Family Office Network past presenter, will now be the only Fund of Funds with capital ($25 million) from Chicago Teachers.  

"The teachers’ fund initially approved a 5% allocation to hedge fund of funds but it was never fully implemented because of the board’s concern with “illiquidity of the asset class, high fees, and the lack of transparency,” according to a board report, citing analysis by investment consultant Callan Associates."

More info here – http://www.pionline.com/article/20121127/DAILYREG/121129942

 

Hedge Fund Assets Grow to $2.19 Trillion

 Bloomberg reports that Hedge Fund Assets grew by 3% in 3rd quarter 2012 to $2.19 trillion even as October YTD hedge fund performance gains sank to 1.1 % for the year and a loss in October of 1.9%.  Popular hedge fund strategies such as long/short, global macro and multi strat all lost money.  

More info from Bloomberg – http://bloom.bg/VAmqaD

Private Equity Firms in Name Only

 The New York Times reports on the dramatic asset management "super-marketization" of mega private equity firms such as Blackstone, Kohlberg Kravis, and Apollo Group. Having difficulty raising new private equity style funds, these public firms are offering a variety of other products in some cases such as KKR, hedge fund products in other cases mutual fund style products.  Less than 25% of Blackstone’s assets are private equity and firms such as Apollo are diversifying into India.  

 

More here – http://nyti.ms/TRXQRa

Barron’s Blasts Family Office Exchange Research

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Barron’s online has blasted a study by the Family Office Exchange listing saying it was "surprised to find serious problems" in a list of top wealth advisors.  Problems included – 

*  The head of one of the firms listed was banned from the securities industry shortly after the list was issued

*  Listed firms who were not FOX members were required to pay extra fees for more exposure.  

* Many of the listed companies were FOX members.

You can find out more here – http://on.barrons.com/U0unzN

 

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54% Of All Institutional New Manager Hirings Going to Alternatives

                             ********  IvyPlus Fund Business Development Event – http://bit.ly/PyQqyz   ****** 

 

 Pensions & Investments reports that 54% of all new manager hirings since 2011 have gone to alternative investments including real estate.  Since 2011, $94.6 billion of alternative investment commitments have been made versus $79.6 billion to equities and fixed income.  Dwindling returns on fixed income products and the volatility of equities have been given as reasons.  These numbers are even more compelling given institutional disenchantment with dysfunctional private equity strategies.  Nevertheless, private equity, including venture capital has been able to raise $8.5 billion in the most recent quarter.

Many allocators are looking at hedge fund strategies such as market neutral or infrastructure or other conservative approaches to replace fixed income.  P&I reports that the old 60-40 split is dead.  

"Even so, the 60% equities/40% fixed-income allocation that was standard decades ago is long gone. Callan executives anticipate the typical public pension plan’s fixed-income allocation, for example, could start heading toward 20%, Mr. Kloepfer said. Many plans already are in the 30% to 20% range for fixed income.

Indeed, according to the Wilshire Trust Universe Comparison Service, the median allocation to alternatives by public plans with assets greater than $1 billion was 15.07% as of June 30, up from 1.81% as of June 30, 2003. During the same nine-year period, the median allocations to equities and fixed income dropped to 50.68% and 25.96%, respectively, from 56.8% and 31.35% respectively."

You can find more information here – http://bit.ly/OjC3g4

 

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Louisiana Pension Fund Stands to Lose Millions from Fletcher Investment

                           ********  IvyPlus Fund Business Development Event – http://bit.ly/LwG8ka   ****** 

A series of Lousiana based Pension Funds including: (1) Municipal Employees’ Retirement System, (2) Firefighters’ Retirement System, (3) The New Orleans Firefighters’ Pension and Relief Fund stand to lose substantial parts of more than the $100 million they invested in Fletcher Asset Management.  Fletcher Asset Management is headed by Alphonse "Buddy" Fletcher, Jr. .  Fletcher has been embroiled in a long standing legal battle with the Dakota building where he resides in NYC, http://nyp.st/faW9tb The New Orleans Times Picayune reports:

"  The arrangement, which officials say is similar to others that the Firefighters’ Retirement System and Municipal Employees’ Retirement System have invested with in the past, promised a guaranteed 12 percent return on their money. If the return dipped lower, the difference would be made up by $50 million put up by a third-party investor that was advised by Citco Fund Services, an independent hedge fund administrator." 

and

 "In March 2011, almost three years after investing $45 million in Fletcher, trustees of the Firefighters’ Retirement System learned that the value of the holdings had grown to $63.7 million. Days later, they filed a request to cash out $17 million of their investment to capture a portion of the profit.

That same month, the Municipal Employees’ Retirement System made a similar request, to redeem $15 million."

 and 

"In May, lawyers for the three pension systems also petitioned the Cayman Islands court to force Fletcher’s "master fund," Fletcher International Ltd., into liquidation. "This is where the real assets are at," Stockstill said."

The Times Picayune does not disclose if the consulting firm involved in the recommendation, Consulting Services Group of Memphis, are still employed.  Louisiana tax payers may be on the hook for the more than 3% of the pension funds that seem to have disappeared in the hedge fund controversy.

More information can be found here – http://bit.ly/NSVvmw or here – http://nyp.st/TILk4i

More information about Fletcher can be found here – http://bit.ly/cMMIo

 

                         ********  IvyPlus Fund Business Development Event – http://bit.ly/LwG8ka   ****** 

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