Friday, May 25, 2007

The Biggest Hedge Funds? Investment Banks

If you are having trouble telling the difference between hedge funds and investment banks these days, the latest ranking from Alpha magazine probably won’t help. In a further sign of how deeply Wall Street firms are getting into the hedge-fund business, the hedge fund arms of two bulge-bracket banks, J.P. Morgan Chase and Goldman Sachs, have the No. 1 and No. 2 positions on Alpha’s annual list of the biggest hedge funds. Top-ranked J.P. Morgan has $33 billion in hedge fund assets, putting it just above last year’s winner, Goldman, which oversees $32.5 billion.

Hedge funds are private pools of capital, subject to relatively little regulation, that use a wide variety of investing strategies. They are usually restricted to wealthy and institutional investors, who have been increasingly clamoring to put their money in these kinds of funds. Investment banks have noticed the trend and have been buying stakes in hedge fund managers — or entire hedge-fund firms — to get a piece of the action for their clients.

Though it dropped a rung, Goldman’s hedge fund business is hardly shrinking. Alpha said that Goldman showed $11 billion more in assets than last year, but it slipped in the rankings in part because its Global Alpha fund has underperformed.

J.P. Morgan seems to be benefitting from its 2004 purchase of a majority stake in Highbridge Capital Management, which had $7 billion in assets under management at the time. Highbridge now has $15.7 billion in assets, or nearly half of J.P. Morgan’s total hedge fund assets. Jes Staley, chief executive of J.P. Morgan’s asset management arm, told Alpha that the growth stemmed in large part from maturing ties between the firm’s private banking business and Highbridge.

Renaissance Technologies, which hires scientists to apply mathematical formulas to its trading strategies, shot up from No. 26 to No. 6 in the rankings, with $26 billion under management. Bridgewater Associates fell from No. 2 to No. 3, with $30.2 billion in assets., and D.E. Shaw Group, with $27.3 billion, dropped from No. 3 to No. 4.

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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.