All about investment

By Jamie Murray

We have not seen a financial storm like the present one for decades. For many, the sudden intensity of this financial cold snap, and the likely wintry recession ahead, has been a surprise. In days of yore, winter and snow forced a community to come together so that it would pull through and see off the cold, the wolves and other dangers.

The hedge fund industry is a community. It is rightfully proud of the many benefits that it has brought. It is not just making its clients wealthier. It has helped transform the investment industry to the good. It gives employment to many people and gives back through philanthropy and charitable works. It has given liquidity to some markets and kept them running. It is true that it is described as a Darwinian industry, and that it is about "survival of the fittest" as if hedge fund managers were a group of frontiersmen. However, in winter, even frontiersmen helped each other through the hard times and stood up for their community.

Deep winter has come to the industry. Performance is down sharply for many strategies. Clients are redeeming. A few politicians are calling for the abolition of hedge funds. Regulators are scrutinising the sector. Leverage is harder to access. Parts of the mainstream media demonize the sector, crowing in triumph at the difficulties it faces. The natural response is to hunker down and let the storm pass. However, if individual funds do that, when the blizzard is over and they emerge blinking into the sunlight, they will likely see a very changed financial landscape. You only need to see the recent statements out of Brussels to see where things may be heading. As EU Economics and Monetary Affairs Commissioner, Joaquin Almunia, recently told the EU Parliament "On hedge funds, we have used as our basis that they must be regulated."

The industry has a choice. It can stand up and be counted, and be part of the debate on how the financial landscape should change, or leave it to the politicians and regulators to sort things out. Clearly industry bodies work behind the scenes on hedge funds' behalf, but there is plenty to do in the public eye to change perceptions. This is where I must declare self interest. After twelve years of selling and structuring hedge funds, I have moved into media relations. I am doing it partly because it is a challenge, but mainly because I am passionate about the hedge fund industry, and am frustrated that it does not stand up for itself. It is a media punch bag.

There is plenty that a good media strategy can do to contribute to asset raising, client retention and attracting talented employees. However, the media strategy needed now is one engaging directly with the press and the broadcast media, and through them with the public and politicians. If the case is not made, and parts of the media paint hedge funds as causing market upheaval, public opinion may turn even more negative. Public opinion moulds political thought. Politicians drive policy responses and financial regulation worldwide.

There are other consequences if hedge funds do not engage. Institutional investors may shy away from investment. Pension fund trustees reading " hedge funds are high risk " stories may not invest. Local politicians may lean on local authority pension plans and force sale of hedge fund positions or forbid any exposure to hedge funds. Unions may question why their members' assets are invested in such "risky" investments. Some institutions may stop lending stocks. All this is not just possible in the context of one country, but applies across regions such as Europe, the Middle East and Asia.


The picture is not as bleak as it seems. There is plenty to be positive about if the industry starts to engage with the media. Both the hedge fund industry and the PR industry need to rethink things. For example:-

· Individual hedge funds need to work much harder on communications with the media. They also need to work more closely with industry bodies such as AIMA. AIMA works hard behind the scenes lobbying on the industry's behalf. It also works hard on the industry's behalf as shown by Chairman, Christopher Fawcett's recent defence of the industry in print media, and on BBC's Newsnight.

· PR firms representing hedge fund clients need to be more strategic in how they serve their clients. Being non-reactive, even if that is the main brief, is exacerbating media hostility. If PR agencies are to represent hedge fund clients better, they need to be much more proactive and to push back at a client's knee-jerk " no comment " reaction.

· The PR industry should also take the hedge fund opportunity more seriously and learn more about the industry and how it works. This means having accounts staffed by people who really understand how their clients' investment strategies work, and who are able to communicate this. This requires investment at a time when hedge fund assets are likely to halve from their $1.9 trillion peak. However, as 1998 and the early 1970s showed, the hedge fund industry has gone through periodic retrenchment. These were exciting times as they were when fresh stars of the hedge fund firmament were born. After each retrenchment the industry has come back stronger.

Many hedge funds are launched because their owners want to control their own destiny. Surrendering the media landscape, with the likely consequences, runs against that philosophy. There are grave dangers in ignoring the media. Equally, there are huge benefits to be gained from engaging with the media in an open and coordinated manner. If the hedge fund industry truly is a community, in this financial winter, it needs to come out of the cold and stand together in front of the media.

Jamie Murray is head of Broadgate Alternatives, a specialist division of Broadgate Media focused at developing communications and public relations strategies for hedge funds. He has twelve years experience selling and structuring hedge funds for large industry players. His move into public relations comes from a desire to see the hedge fund industry better represented in the media.

Article Source: http://EzineArticles.com/?expert=Jamie_Murray

by: Walter Rhett

The global credit crunch and capital market collapse drained over 2 trillion dollars of value from this year from American markets has also hit home for retired workers. Many retirees fear the loss of pension benefits as many public systems and private companies have seen significant declines in pension funds, in some cases, by billions of dollars.

If these declines continue, benefit checks to retirees could be frozen or cut. For public systems, states may have to fund shortfalls, making higher contribution to public pension funds from tax revenues. States and local systems may as a last resort issue bonds to cover legal shortfalls, but the current state of the credit markets make such bond offerings a difficult sale and an expensive fix.

Are pensions in immediate danger? No. But the decisions and strategies used by states and municipalities should be watched closely. Monitoring the investment changes in pension portfolios is a prudent course for citizens with a vested stake or an eye toward public fiscal responsibility.

Tight credit and falling values have created a new environment for pension fund directors to operate in, and it is important to know how your state and local managers are adapting their allocations and investments to the new market realities. Public pension funds have information or public affairs telephone numbers to answer inquiries.

Here are several examples of loses recently suffered as the markets plunged.

The federal agency that guarantees pensions (similar to the way Fannie Mae guaranteed mortgages), US Pension Benefit Guaranty Corp lost more than 3 billion dollars.

The Pennsylvania State Employees' Retirement System was down a billion dollars last June.

Allegheny County, Pa's 738 million pension fund down was recently down 5 percent.

Iowa's Public Employee Retirement system faces a short fall of 2 billion (the present market value of it fund is 22.4 billion).

In Wisconsin, the state pension dipped 3 billion. (current value, 80 billion).

In Georgia, the state employees pension fund for public employee and teachers lost more than 11 billion dollars in under four months.

A Texas fund dropped one billion dollars.

Mississippi Public Employees Retirement System has lost more than 10 percent of its value-more than 2.1 billion dollars-recently (17.6 billion, current value).

A 300 point drop in the Dow Jones Industrial Average stock index represents a loss of 450 million for the

Alabama Retirement Systems, an average of 1.5 million dollars per point.

Florida's public pension fund has been hit hard. It lost six percent in three months.

Some state see the current troubles as an investment opportunity. South Carolina, from February, can invest up to 45 percent of its 29 billion pension fund in hedge funds, real estate, and set aside 100 million dollars for purchases of sub prime mortgages! The state had no investments of this type a year and a half ago. One percent of the pension fund has also been set aside for invests in commercial real estate, to be resold as the market recovers. The state's treasurer has said these investment represent acceptable risks, and should benefit the state.

Check your state's fiscal health, especially its public pensions. Participation in a democracy requires each of us to be vigilant as citizens!

(also by the author, Walter Rhett, . . "Wading in the Water": Who Will Present the Better Plan for...). Thanks for reading!

Walter Rhett Walter Rhett attended Ohio State and writes from Charleston, SC. He is a Johns Hopkins University Fellow and a scholarship winner to the Johns Hopkins Summer Writing Institute. He has consulted for Japanese Educational Television and founded a civil war re-enactment unit, the 33rd USCT SC V. Walter contributes to 15 national blogs (LA Times, Seattle Times, Denver Post, Dallas Herald, Kansas City Star, Detroit Free Press, Chicago Tribune, ,Atlanta Journal-Constituion, Charlotte Observer, Washington Post, Philadelphia Inquirer, New York Times, Boston Globe, Christian Science Monitor and USA Today).