Hedge Fund

Driven by an improving regulatory and investment climate, the European hedge fund industry is growing rapidly and could shortly overtake the U.S. industry, an investment analyst contended yesterday at a conference organized by Philadelphia's Dechert L.L.P. law firm. Segun Aganga, managing director of equities for the Goldman Sachs Group Inc. in London, said a more favorable regulatory climate, an abundance of capital, and a location central to American and Asian markets were helping to boost establishment of hedge funds in Europe.

Questioning insider stock sales and "wildly illogical acquisitions" at Penn Virginia Corp., a New York hedge fund called on A. James Dearlove yesterday to resign as president and chief executive officer of the Radnor-based energy company. In a letter mailed to Dearlove and filed with the Securities and Exchange Commission, Third Point Management Co. said it wanted chief financial officer Frank Pici to take over. Dearlove did not return phone calls. The oil and gas exploration and production company's stock rose 24 cents in New York Stock Exchange trading to close at $37.24.

It was an expensive throw of the dice: Back in 2006, the Pennsylvania State Employees Retirement System (SERS) and its board, headed by ex-state Rep. Nicholas Maiale (D., Phila.) , gave more than $3 billion to six private investment firms so they could use it to buy high-priced hedge fund investments, in hopes of fat profits. The goal was to beat the sluggish stock and bond markets and ease the system's deficit, which had been growing since Gov. Tom Ridge boosted pensions in 2001 but failed to pay for the increase.

A federal judge in Philadelphia has ordered a former hedge fund operator with offices in King of Prussia and Toronto to pay $279 million in restitution to investors and a $12 million civil penalty. Judge Michael M. Baylson, of the U.S. District Court for Eastern Pennsylvania, last week issued the consent order in the three-year-old case involving $202 million in investor losses. Federal regulators alleged in a June 2005 civil lawsuit that Ontario resident Paul M. Eustace defrauded investors in Philadelphia Alternative Asset Management Co. L.L.C.

WEALTHY HEDGE fund CEO Daniel Shak is going after his ex-wife in one of the most lowdown and dirty ways a man can go after a woman. No, he's not after custody of the kids. He's after the shoes. Specifically, he wants to get his hands on his ex-wife Beth's extensive collection of designer stilettos. We're talking Christian Louboutons (a/k/a red bottoms), which start at about $600 and can cost upward of $4,000. Beth owns about 700 pairs of those alone, not to mention numerous pairs by the likes of Walter Steiger, Yves St. Laurent and Jimmy Choo.

Hedge funds are famously secretive, using offshore tax havens to shelter their investments from public scrutiny. When the funds go bad, that can lead to international complications - as investors in troubled Philadelphia Alternative Asset Management Co. L.L.C. have learned since federal regulators seized the firm in June. A court-appointed receiver in Philadelphia is battling British investors; Cayman Island lawyers; and banks from France, Switzerland and the Netherlands over what's left of the $275 million invested since 2004 in three hedge funds run by the company from its former offices in King of Prussia and Toronto.

A Bucks County-based hedge-fund manager has attracted the eye and capital of Goldman Sachs Group Inc. Mount Lucas Management Corp. , with $1.8 billion under management, said Monday that Goldman Sachs' Petershill Offshore Fund L.P. will acquire a passive minority interest in the 34-year-old firm in Newtown. It did not disclose how big that stake will be. However, Mount Lucas said it will "retain complete autonomy" over management, operations, and investment strategies.

The $700 billion bailout may or may not unclog the nation's financial system. But what it would surely do, experts say, is create opportunities for clever investors to game the system. "I think everyone who is in the financial-services business is busting a gut right now trying to figure out where" the money can be made, said Richard D. Jones, a partner at Dechert L.L.P. who focuses on mortgage finance and capital markets. As the U.S. Treasury Department begins implementing the bailout program - the first contractors might be hired this week - the nation's financial problems only deepened.

A Miami hedge fund plans a $115 million initial public offering for Claymont Steel Holdings Inc. and would use the proceeds to reduce debt used largely for dividend payments to itself. H.I.G. Capital bought Claymont Steel, formerly CitiSteel USA Holdings, in June 2005 for $75 million. Since then, according to an IPO prospectus the company filed with the Securities and Exchange Commission, it has paid itself $183 million in dividends, financed largely through issuing debt. The bulk of the debt, $172 million in junk bonds, is due in 2010.

American Business Financial Services said yesterday that it completed $450 million in borrowings, easing a cash crunch at the lender specializing in high-risk mortgage loans. "We're breathing easier this afternoon," said Albert Mandia, the Center City company's executive vice president and chief financial officer. American Business Financial is paying dearly for the loans, which include $250 million from an investment group led by Lubert-Adler Management, a Philadelphia hedge fund.