News&Notes: Hedge Funds Ramius & Whitehall, UBS Says, & Paulson Debates

RCM Comment: More examples of the best and most well-known hedge funds suffering large losses. Important to note that all aspects of the hedge fund business are being affected, whether its multi-strategy at Ramius or real estate at Whitehall. The retooling and/or closing down of these funds is directly responsible for both the pressure on the markets and the violent volatility.
Hedge fund Ramius is retooling - WSJ
WSJ reports Ramius Capital is telling investors that the co will close four funds with a combined $550 million in assets concentrated in convertible bonds, distressed credit and securities of merging companies. Meanwhile, Ramius's biggest fund, the $2.1 billion multi-strategy Ramius Fund, could shrink by about $500 million or more if investors stick with plans to pull money, according to people familiar with the fund. "Going forward, these strategies will continue to be important allocations in our multi-strategy funds and will continue to be managed by the same portfolio teams," a spokesman for Ramius said. He said Ramius is streamlining its business in an effort to run the co more efficiently. Some of the money in Ramius's smaller, soon-to-be-closed funds could migrate to the multi-strategy fund. Still, it's unclear how much will stay, since the bigger fund has lost about 23% this year on investment declines. A portion of that loss is attributed to assets that got tied up in Lehman Brothers when that securities firm sought bankruptcy protection in September.

Goldman Sachs: Whitehall funds lose their luster - WSJ (65.00 ) -Update : WSJ reports the co's Whitehall family of real-estate funds is struggling with weak performance and potentially big losses on some investments made at the top of the real-estate market. Whitehall is best known for deals such as buying Rockefeller Center in 1996, but has slashed the value of the equity in one of its funds in half and likely will struggle to make a profit on deals such as its purchase of the Stratosphere, a Las Vegas casino, in 2008 and a string of hotel deals in the past two years. There also has been some turnover at the top of Whitehall. The group's chief, Stuart Rothenberg, 45 years old, announced recently that he is retiring at the end of the year. The real-estate unit will be run by three people -- Brahm Cramer, Edward Siskind and Todd Williams -- and report to Rich Friedman, the head of Goldman's merchant-banking unit.

RCM Comment: You don't see stories like this at a market bottom. There is a serious amount of investor complacency with redemptions from U.S. equity mutual funds totaling "only 3.5% of assets so far in 2008, against 4.3% of assets during the 2001-2003 bear market."
Stocks to rise in ’09, UBS says; S&P 500 may gain 53%- Bloomberg.com
Bloomberg.com reports global stocks will withstand a "full-blown" recession and surge in 2009 as cheap valuations and efforts by governments to restore confidence in the financial system lure investors back to equities, UBS said. The Standard & Poor's 500 Index may rally 53% to 1,300 by the end of 2009, David Bianco wrote in a note dated yesterday. The New York-based strategist, who a year ago predicted a 2008 advance of 16% for the S&P 500, is now forecasting a gain that would exceed the index's best annual performance on record. "The consensus outlook for 2009 is a full year of gloom," Bianco wrote in his 2009 market outlook. "We believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect."

RCM Comment: And these are our leaders? Why does this feel like a scene from a bad Woody Allen movie? Paulson as the lead character, shuffling back and forth with his hands up in the air without a clue what to do.
Paulson debates second infusion - WSJ
WSJ reports U.S. Treasury Secretary Henry Paulson is debating whether to ask Congress for the second installment of the $700 billion bailout package, concerned about competing demands for the funds and a potentially hostile reaction from lawmakers. Mr. Paulson's dilemma was thrown into relief Tuesday by a report from the Government Accountability Office, the investigative arm of Congress, which criticized the Treasury Department's handling of the Troubled Asset Relief Program, or TARP. Besides lawmakers threatening to deny a request for the additional money, Mr. Paulson is also grappling with confusion stemming from the transition to a new administration. If Mr. Paulson decides to request the next $350 billion, he is expected to do so next week. His hand may ultimately be forced if market conditions continue to deteriorate. Political and practical concerns also color the debate. While Mr. Paulson wants to steer more funds to financial institutions, Congress has its own ideas, including aid for the auto industry and troubled homeowners -- two ideas Mr. Paulson has resisted.