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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Markets News Wednesday: Top 25 hedge fund managers earned a total of $11.6 billion in pay in 2008 down from $22.5 billion in 2007
By Finfacts Team
Mar 25, 2009 - 10:10:49 AM

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Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner at a House hearing on AIG on Tuesday.
The top 25 hedge fund managers earned a total of $11.6 billion in pay in 2008 down from $22.5 billion in 2007, according to an annual ranking of top hedge fund earners by Institutional Investor’s Alpha magazine's latest issue.

James Simons, a former math professor who has made billions year after year for the hedge fund Renaissance Technologies, earned $2.5 billion running computer-driven trading strategies. John Paulson, who in 2007 headed the list, came in second with reported gains of $2 billion. And George Soros earned $1.1 billion.

The average earning in 2008 was $464 million.

In 2007,the top earning hedge fund manager John Paulson earned a record $3.7 billion in 2007. The Paulson & Co. head overtook George Soros and James Simons, who ranked second and third, at $2.9 billion and $2.8 billion, respectively. The top 25 on the list earned an average $892 million, up from $532 million in 2006. Paulson had made his 2007 fortune by shorting the subprime mortgage market - making his money as the market spun downward.

When the magazine published the inaugural list, in 2002, Soros led the way with $700 million.

John R. Taylor, the third hedge fund manager who tied as ninth on the list, told the New York Times, that even winning hedge funds should acknowledge that they had benefited from the government’s bailout of the banking system. “Thank God for the government, because if they hadn’t intervened, we wouldn’t have had anybody to trade with,” said Taylor, who has run his currency fund, FX Concepts, since the 1980s.

Rank Name Firm Name 2008 Earnings
1 James Simons Renaissance Technologies Corp. $2.5 billion
2 John Paulson Paulson & Co. $2 billion
3 John Arnold Centaurus Energy $1.5 billion
4 George Soros Soros Fund Management $1.1 billion
5 Raymond Dalio Bridgewater Associates $780 million
6 Bruce Kovner Caxton Associates $640 million
7 David Shaw D.E. Shaw & Co. $275 million
8 Stanley Druckenmiller Duquesne Capital Management $260 million
9 (tie) David Harding Winton Capital Management $250 million
9 (tie) Alan Howard Brevan Howard Asset Management $250 million
9 (tie) John Taylor Jr. FX Concepts $250 million

Bloomberg reports today, that compensation for US.hedge-fund employees may drop as much as 25% this year as the firms try to recoup last year’s investment losses.

The decline will cut hedge-fund paychecks to about half the record levels of 2007, according to estimates by Alan Johnson, founder of Johnson Associates Inc., a New York-based compensation-consulting firm whose clients include financial- services companies.

About 70% of the industry’s 6,800 so-called single- manager funds lost money in 2008 with the average fund dropping 19 percent, according to data compiled by Chicago-based Hedge Fund Research Inc. That means most clients don’t have to pay performance fees -- generally 20 percent of profits -- until the losses are made up. Many owners of the private partnerships will cover salaries out of their own pockets, or from pools set aside in previous years, to keep their best employees, Johnson said.

The Wall Street Journal says today, that the US government's top financial regulators are channeling widespread outrage over retention bonuses at American International Group Inc. to quickly win authority they have sought for much of the past year to seize nonbank companies and freeze their contracts.

The House Financial Services Committee plans to vote as early as next week on legislation that would give the government that authority. Federal officials already have such power over banks. The Obama administration is pushing for fast action on the issue, even before Congress tackles a broader overhaul of financial regulation.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, in congressional testimony Tuesday, said the lack of authority to seize AIG -- the way the Federal Deposit Insurance Corp. places failing banks into so-called receivership -- forced the government into the position of owning almost 80% of the insurance giant, and serving as its major lender, while lacking the power to stop multimillion-dollar bonus contracts signed before the government intervention.

The Dow Jones Industrial Average, which rose nearly 500 points Monday, declined 115.65 points, or 1.5%, to 7660.21 on Tuesday. J.P. Morgan Chase fell 8.7%. Bank of America dipped 7.1% and Citi dropped 3.2%.

The S&P 500-stock index declined 2% and the Nasdaq composite fell 2.5% after rises in both measures by 7% on Monday.

The MSCI Asia Pacific Index rose 0.4% Wednesday and the measure is up 12% this month so far.

Japan today reported another stunning plunge in exports and while imports also tumbled. Exports nearly halved in February, falling 49.4% from a year earlier. The fall in exports was the steepest since 1957.

Imports fell 43% as the country struggles with the severest recession since 1945.

The Nikkei 225 dropped 0.1% and China's CSI 300 fell 2.06%.

Asia-Pacific -benchmarks

Finfacts Reports
German business confidence falls to a 26-year low in March
Obama says the US economy is showing "signs of progress"
Central European economies depend on Developed Europe for 70% of their exports as remittances fall; Austria faces headwinds
IMF revamps lending to help countries with very strong fundamentals face global crisis
Asia-Pacific Business & Finance News: Japan reports stunning 49.4% plunge in exports in February - - the steepest fall since 1957
Standard & Poor's says US Big Pharma consolidation and financial policy key to stability

German business confidence fell to a 26-year low in March, adding to evidence that the recession in Europe’s biggest economy is getting worse. The Ifo institute, at the University of Munich, said today, that its business climate index, dropped to 82.1 from 82.6 in February.

European stocks have risen Wednesday, for a fifth straight day and the Dow Jones Stoxx 600 is up 0.2%.

The ISEQ Index is up 0.3%.

AIB is down 6% and BoI has dipped 7%.

Elan is up 2%.

On Tuesday, it was disclosed, that Elan partner Biogen Idec, may have found a treatment for the deadly brain infections that have been tied to use of its multiple sclerosis drug Tysabri, the biotech  companies fastest-growing product.

Analysts said the drugmaker may discuss its Tysabri safety efforts at a meeting today with investors to present its latest drug research.

A malaria pill developed during the Vietnam War is being tested by Biogen on patients with progressive, multifocal leukoencephalopathy, the brain disorder known as PML, said Al Sandrock, Biogen's head of neurology research.

Mobile phone services company Zamano today reported pre-tax losses of €3.622m for 2008.

The company had reported pre-tax profits of €3.08m the previous year.

Revenues rose by 66% to €41.4m from €24.7m mainly as a result of acquisitions completed in 2007.

Rod Matthews, Chairman of Zamano, commented: "The Board worked throughout 2008 to ensure the Group took appropriate steps to address the difficult economic conditions, currency fluctuations and changing regulatory environment. As a result of these actions, the Board remains confident that the Group's strategy and management continue to position zamano to respond positively to the unpredictable changes in the environment. The Board is pleased that profitability year to date is in line with expectations."

John O'Shea, CEO , added:
"The Group has made significant progress on the key actions identified in September 2008 as being critical to positioning zamano for the current challenging environment, and we will continue to focus on executing these actions through 2009."

Results detail

European Benchmarks

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AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3431 and at £0.9108.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record. 

Commodities

Crude oil for May delivery is currently trading on the New York Mercantile Exchange (Nymex) at $53.12 per barrel down 86 cents from Tuesday's close. In London, Brent for May delivery is trading on the International Commodities Exchange at $52.63 down 87 cents.

Gold spot price

Gold is trading at $925.00 down $1.10 from Tuesday's spot price close in New York.

Davy economist Rossa White comments: Successful Irish bond auction - - "The NTMA, on behalf of the Irish government, successfully auctioned €1bn in new debt yesterday. It was a great result on two counts: both issues (€300m in the 2011 bond and €700m maturing in 2020) were heavily oversubscribed and prices soared in the secondary market on a day when the rest of the European gilt market was weak. Irish yields have converged sharply with Germany since the start of March. If the government now takes the hard decisions on public expenditure in the Budget on April 7th, the Irish funding situation will suddenly look a whole lot rosier.

The latest issue adds to the significant fund-raisings in January and February. So far this year, €11bn in long-term debt has been raised (€6bn in January, €4bn in February and €1bn yesterday). The only redemption of a benchmark bond this year is next month when €5bn is due. In total, we reckon that the government would like to raise somewhere in the region of €15bn extra in long-term funding this year to cover the likely deficit. Note, though, that the NTMA built up a significant cash cushion coming into 2009.

The rapid drop in Ireland's government CDS has not received the attention it deserves over the last month or so. The 10-year CDS traded as wide as 365bps on February 17th, following the hysteria about Ireland's potential funding problems in late January/early February. That spread had shrunk to 208bps by yesterday. The fiscal problems are far from resolved, but the announcement of a supplementary Budget for April 7th has definitely helped improve sentiment. A credible plan for fiscal consolidation on that date (with the emphasis on current expenditure rather than tax) would see Irish government bonds rally much further."

Goodbody economist Dermot O'Leary comments on the Irish economy: Back to the table  - -"With the budget in Ireland looming, tough decisions will have to be taken in the coming weeks and plenty of pain will have to be endured. In truth, we have known this for some time. The difficult part though was always going to be a realisation that these decisions would have to be taken so as to ensure the continued viability of the economy into the medium-term. Evidence that acceptance of the necessary fiscal retrenchment would be a bridge too far came in the form of protests following the budget last October and the cuts to public sector pay in February.

In this light, the news that planned strikes for next Monday may now be averted is a positive development. After a number of unions rejected strike action over the past few days, the Irish Government sent out an invitation to the social partners yesterday to re-engage in talks on a shared approach to economic recovery. If the invite is accepted by the unions today – which appears likely – talks could start as soon as next weekend. Let us be clear, the talks will not be plain sailing, as both employers and unions will have to accept some proposals that their members will not like. However, the sight of strikes on the streets of Ireland’s main cities would further reinforce some international opinion that Ireland does not have the will to make the necessary decisions to address its problems.

 These latest events, especially the rejection by a number of unions of strike action, indicate that the message is getting across that it is better to attempt to come up with internal solutions to the problems. In this way, the country can regain some of the confidence in the financial markets that it has lost over the past six months. While it is unrelated to yesterday’s moves, the downward movement in the CDS spread (5-year spread down from 396bps to 220bps) and the successful €1bn bond auction are positive developments. Further proactive action in the budget in less than two week’s time should further alleviate the concerns that international investors currently have."

Goodbody analyst Eamonn Hughes comments: Airlines; Posturing by Ryanair or the real deal on upgrades? - - "On a day in which the IATA raised its loss guidance for the airline sector this year, Ryanair hinted that it could be looking to raise its guidance on passengers carried for FY10, a statement obviously at odds with trends elsewhere in the industry. The IATA announcement was flagged last week, though the move to raise prospective losses for the global industry from $2.5bn to $4.7bn appeared to have negative feed-through implications for the Ryanair share price yesterday. The IATA announcement was at 8.30am yesterday and Ryanair declined over the following 30 minutes and traded at the lower levels for the rest of the day. US airlines overnight and European travel & leisure stocks were relatively flat on the day, so Ryanair’s showing made it the worst performing stock in the DJ European Travel & Leisure index, down 6.3%. Crucially, however, it closed below its 200 day moving average of 282c, an important support level since mid-late November, with the next support level looking like the 250c range, around which the stock gravitated for a while back in October.

The IATA update highlighted that the “state of the industry is grim”. It is now forecasting that revenues fall 12% (6.5% previously in their December guidance and compares to the 7% drop in the two years after 9/11). Global demand is now anticipated to fall by 5.7% compared to a 3% decline previously and Cargo is now pencilled in to fall by 13% compared to 5% previously. Yields don’t escape and are slated in to fall by 4.3% points (3% previously). Lower fuel “is the only good news” with IATA budgeting for $50 for the year. We would have a similar figure on un-hedged amounts for both AERL and RYA, though rising to $60 in 2010 and $70 in 2011. Within Europe, demand is expected to fall by 6.5% though capacity cuts of 5.3% won’t keep pace, implying load factors continue to ease. However, the recent February traffic statistics from a range of European airlines would highlight that the bias to these figures is still lower already.

While the IATA announcement indirectly may have impacted the stock price on the day, we are more interested in the comments attributed to the RYA CEO on possibly raising passenger growth estimates while talking to Bloomberg in Madrid. RYA has guided a Pax number for FY10 of 67m, up 15/16% yoy. While the airline won’t revise its forecasts until it has its full year earnings in June, Michael O’Leary is quoted as saying “if anything, we’ll be revising our numbers up” on the passenger front. “I think our growth will be even stronger this year”. “People are increasingly making their travel decisions on price. We are seeing a dramatic switch in passengers across from high fare, fuel-surcharging airlines”.

If the comment to raise passenger guidance is actually going to materialise, then what locations offer the growth? Interestingly, Mr O’Leary was in Spain yesterday to announce 39 new routes from Spain this year, operating from 8 different airports. In the Q3 conference call, RYA indicated that Spain would account for c10% of traffic so presumably this number goes up in due course. As we noted above, RYA is currently guiding 67m passengers to be carried for fiscal 2010. Assuming, RYA tempered its disposals programme in which to drive higher capacity growth, then we note that every additional 1m passengers would have the potential to impact FY10 EPS by c1.5%.

It is not clear whether this upgrade will materialise or not, but we note additional comments that RYA appears to be attempting to re-open negotiations with Airbus for new craft and it would obviously be no harm highlighting the growth plans of the airline in the meantime with which to whet appetites. We are still not convinced about the seriousness of RYA’s approaches to Airbus given that the current one-size fits all plan for the Ryanair fleet has worked well to date, as it has for Southwest which now has 530 Boeing 737s compared with “just” 181 currently for RYA. Alternatively, there is always the possibility that any overtures to Airbus could be to focus on the wider-body craft if the transatlantic plan is ever to get off the ground."

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