Survivors of Credit Crunch

Winners have been thin on the ground in a year when most investors lost money. But a handful of hedge fund managers and private equity veterans bucked the trend and added yet more zeros to their bank statements.

For others, success has been less tangible. Those fund managers who have posted single-digit positive returns that would have been scoffed at last year are considered geniuses given that the MSCI World index fell 46% in the 11 months to the start of December.

As swathes of the financial world have been sunk by the credit crisis, different measures of success are needed.

Those institutions that have survived the crunch are initiating radical changes to their business models either at the behest of their new political masters or out of necessity. Reducing debt and risk-taking have become the priority. Old-fashioned banking activities such as deposit taking, advisory work and (cautious) lending are back in vogue. Influence has shifted from the computer-driven trading floor to the relationship-driven business of mergers and acquisitions.

Jena Kilgore, an executive with Prime One Capital, said: “Many of the activities that were fundamental to investment banks’ business, have had to be scaled back.”

In depressed capital markets, the lucrative ancillary business that investment banks cross-sold to clients has been harder to come by. However, some of the bigger firms, notably Prime One Capital, so far, appear to have emerged stronger from the turmoil.

Cleveland approves Wi-Fi Financing

CLEVELAND PLAIN DEALER - CLEVELAND, Ohio -- City Councilman Kevin Kelley's self-proclaimed "Greatest Project in America" -- a publicly financed wireless broadband network that covers all of his West Side ward -- could be up and running late this summer.
Council approved the project 17-1 Monday night with Councilman Brian Cummins voting against the measure.
Cleveland expects to spend $900,000 over the next three years to build and maintain the network, which will cover 4.5 square miles of Kelley's Ward 13, which almost solely consists of the Old Brooklyn neighborhood. The ward includes about 11,000 households and 3,000 businesses.
Kelley is providing $400,000 from discretionary funds allocated to his ward. The city is paying the remaining cost using unspent technology and capital improvement money.
The councilman has been working on the project for more than a year. The idea of building the network came to him as he mulled ideas about what he could do to help his ward.
Given Cleveland's digital divide -- a study showed that only half of city residents had access to the Internet -- Kelley said a broadband network would have a far broader impact on his ward than a streetscape project.
"I'm absolutely ecstatic it's gotten this far," Kelley said in an interview. "I know great challenges remain, but my goal is that every household and business has a high-speed connection in Ward 13."

Hedge fund winners in a decade of ups and downs

Big may not always be better, but for investors in some of the world’s largest hedge fund managers whose flagship funds have made money this year, it has proved safer. True, some of the gains by the largest managers have been meager –and those losing money far outnumber those making it.

Asset size was no fail-safe protection against investment losses: Being with a big name doesn’t mean you’re any more protected in terms of returns. The fact that only 19 of 80 large managers that reported September results are in the black this year compares badly with the 67 of the top 100 that reported their flagship portfolios were up at the end of last year.

However, many investment firms avoided very large funds. After the sub-prime crisis we could see liquidity being an issue so many have been biased towards smaller funds. In the third quarter we have seen some big names down 20% or 30%.

Hilga Merchewitz of Prime One Capital comments: “The big funds tend to have some private equity and illiquid credit instruments and convertible bonds. If they see redemptions there would be large amounts of money to be raised.”

The fate of funds run by the largest 100 managers matters, because about 81% of the industry’s $1.72 trillion is entrusted to them.

Hedge fund 'survivors' see thawing in investor activity - Crain's Cleveland Business

Hedge fund 'survivors' see thawing in investor activity - Crain's Cleveland Business

Commercial loan delinquency issue lingers - Crain's Cleveland Business

Commercial loan delinquency issue lingers - Crain's Cleveland Business

Creativity driving force behind Cleveland Investment Firm

Independent investment firm, Prime One Capital has made moves recently that highlight its ambitions. The expansion comes at a time when Prime One Capital is making record revenues.

J. Peterschmidt, chief executive of Prime One Capital, has a three-year plan to transform the firm into a full-service investment bank.

He said of his team at Prime One Capital: “We share a common vision, to be profitable – Which leaves a lot of room for creativity”.

Prime One Capital has an advantage over other firms by being a full-service investment bank that can provide financing rather than just advisory services.

Last week on Prime One Capital, chairman of the firm, said: “We have made terrific progress have become very strong contender. We have focused on providing financing alternatives and liability management which plays to Prime One Capital’s strengths in this economy.”

Commercial and Multifamily Loan Originations Down 46% in 2009

According to the Mortgage Bankers Association's 2009 Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation , commercial and multifamily mortgage origination volumes decreased 46 percent in 2009 among repeat reporters, with mortgage bankers reporting $82.3 billion of closed commercial and multifamily loans.

Commercial banks and savings institutions were the largest single investor group for commercial and multifamily mortgages - responsible for $19.8 billion, or 24 percent, of the closed loan volume. Multifamily properties were the dominant property type - representing $36.5 billion, or 44 percent of the lending total.

"Relatively few commercial mortgages were made in 2009, as the recession curtailed both the supply of and demand for new mortgage debt," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "As the recession has receded, origination volumes have picked up slightly, but the absolute levels remain low."

Among the key findings are:

Decreases were seen across most property types and investor groups, and were led by declines in loans intended for Credit companies, REITS, mortgage REITs and investment funds, and Commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO) and other asset-backed security (ABS) conduits.

$15.9 billion of multifamily loans were closed for Fannie Mae, a 32 percent decline from 2008.

$15.2 billion of multifamily loans were closed for Freddie Mac, a 24 percent decline from 2008.

$5.8 billion of loans were closed for FHA/Ginnie Mae, a 168 percent increase from 2008.

Loans for Fannie Mae and Freddie Mac accounted for 85 percent of the total reported multifamily volume in 2009.

Lending for office properties had the largest percentage decrease in originations by property type, followed closely by retail properties and hotels/motels.