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The Morning Brief: NJ Hedge Fund Scorn; Structured Credit Gains

A New Jersey state senator has come out swinging against hedge funds: She’s introducing a bill that would prohibit the state’s pension and annuity funds from investing in hedge funds and derivative contracts. Noting that the state’s pension funds are badly underfunded, New Jersey State Senator Shirley Turner said the state’s pension fund has invested some 23 percent of its assets in hedge funds to make up for the shortfall—and she’s not impressed with the results. “It’s high-risk, high-reward, but so far the hedge funds the state has invested in have not returned the 8.2 percent that they had anticipated,” Turner said. She added that this past year hedge funds returned just 2.9 percent. Turner called the hedge fund investments “gambling with retirees money” and said, “I don’t think we should allow it to continue.”

Standard & Poor’s raised its credit rating on Fortress Investment Group to BBB, primarily due to Fortress’ increased focus on increasing fee-paying assets under management. S&P also said the investment firm’s outlook is stable, reflecting the credit rating agency’s expectation for sound cash generation, and that Fortress has steadily grown assets and has significantly improved investment performance since 2008.

Hedge funds seeking high-yielding assets are piling back into structured credit. The strategy gained 13.3 percent for the first nine months of the year, the only strategy to generate double-digit returns, according to industry tracker Hedge Fund Research.

Another new hedge is betting on Asian M&A. Ardon Maroon Fund Management, run by Frank Dominick, who previously worked at Morgan Stanley, and Charles Woo, a former Lehman Brothers banker, launched an Asia-focused event-driven hedge fund with seed capital from a European family office.

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