Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.net) – Fundspire, a cloud-based technology provider of performance analytics and reporting for the hedge fund industry, announced record revenue as well as significant client, product and employee growth in 2011.
“We are very pleased to have had an excellent year in 2011 despite the European credit crisis which affected the hedge fund industry,” Christophe Frèrebeau, Chief Executive Officer, said. “We were fortunate to have won a record number of new clients for our analytics platform while retaining 100% of our existing clients.”
Fundspire added a record number of new hedge funds, fund of funds, family offices, advisors and other institutional investors as clients in 2011, growing its global user base in excess of 400 users. About 60% of the new business came from competitive systems that were not cloud based.
In January 2012, Fundspire also opened a new regional office in Chicago allowing it to better serve the US markets. “We’re very serious about expanding our presence and are excited to be able to service and support the asset management community,” Frèrebeau concluded.
New York (HedgeCo.net) – Hedge funds ended a two-month losing streak, profiting from the January market surge. The Hedge Fund Intelligence Global Composite Index rose 1.27%.
The equity market rally handily exceeded hedge fund returns, however, with the MSCI World Index (net) rising 5.02% for the month.
Event-driven funds were the best performers globally with a gain of 3.54% in January. This is the strategy’s best performing month in the history of the HedgeFund Intelligence database, which began collecting data in 1998 (the second best month was November 2004, when the Event Driven Index rose 3.25%).
In the U.S., all strategies were positive except commodities funds, which fell 1.28%. Equity funds rose 2.37% in January, their best start to the year since 2006 when they were up 3.11%. Despite a positive return, emerging market debt funds fell into last place globally, with an almost flat return of 0.30% in January.
New York (HedgeCo.net) – The UCITS Hedge Fund Alternative Index Global is up 1.37% in January, after a performance of -3.64% in 2011. The Fund of Funds Index is up 0.18% after finishing the year 2011 down -5.25%.
All strategies are positive this month, with Emerging Markets posting the strongest gains with 4.04%. Long/Short Equity and Macro also start the year on a very positive note, up respectively 1.69% and 1.70%. CTA and Volatility somewhat lag the performance of the Global Index, with respective gains of 0.23% and 0.02%.
The UAI Blue Chip is up 1.27% in January, following a negative performance of -3.96% in 2011. It performed in line with the UAI Global Index in 2011 and continues to do so for this first month of 2012.
After a decrease in the last quarter of 2011, the total assets managed by UCITS hedge funds have increased to more than EUR 116 billion in January. At the end of January 2012, the UCITS Alternative Index is composed of more than 820 constituent hedge funds and funds of hedge funds, totaling EUR 116.5 billion assets under management.
New York (HedgeCo.net) – Hedge funds have been the biggest doners to Mitt Romney’s Super PAC, “Restore Our Future.” Almost 60 corporations and wealthy individuals donated at least $100,000 each to the Romney PAC, which raised more than $20 million in the second half of 2011. He has been called “The Wall Street Candidate.”
The Sydney Morning Herald reports that casino mogul Sheldon Adelson and his wife, Miriam, are the biggest donors to to Newt Gingrich’s PAC ”Winning Our Future”. Gingrich’ promised the Adelsons that he would relocate the US embassy in Israel to Jerusalem, from Tel Aviv, a move long supported by Mr Adelson. They donated over $12 million.
There used to be strict rules capping donations to PACS at $2500. Corporate and union money was banned from PACs. A 2010 Supreme Court ruling removed the regulations.
New York (HedgeCo.net) – The GlobeOp Forward Redemption Indicator for January 2012 measured 1.85%, down from 4.58% in December 2011. GlobeOp’s data represents approximately 8-10% of the hedge fund industry, with $173 billion in AUM.
“January 2012 is the lowest month for hedge fund investor redemption notifications since Index records began in 2008,” said CEO Hans Hufschmid. “While January notifications are typically lower than December, this year is also substantially lower than the January 2011 requests of 2.79%.”
This is the lowest figure recorded since GlobeOp began measuring the index in 2008 and could reflect typical seasonal reallocation of investments, as investors take money out in January and redeploy it in February and March.
The Indicator represents the sum of forward redemption notices received from investors in hedge funds administered by GlobeOp, divided by the AuA at the beginning of the month for GlobeOp fund administration clients. Forward redemptions as a percentage of GlobeOp assets under administration have trended significantly lower since reaching a high of 19.27% in November 2008. The next publication date is February 21, 2012.
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New York (HedgeCo.net) – “When large-scale hostile takeovers appeared in the 1980s, many voiced the opinion that they were driven by investor greed; the robber barons of Wall Street had returned to raid innocent corporations. Today, it is widely accepted that the takeovers of the 1980s had a beneficial effect on the corporate sector and that efficiency gains, rather than redistributions from stakeholders to shareholders, explain why they appeared.” Bengt Holmstrom of MIT and the University of Chicago’s Steven Kaplan 2012
“Investors ranging from pension plans and charities to global insurance companies and university endowments have placed money with private-equity firms. Public and private pension funds represent 43% of all the money invested with leveraged buyout firms in 2010, the most-recent year tracked by the Private Equity Growth Capital Council. Foundations represented 12% of the money invested. What is the appeal? For one, the returns. While stocks have spent the past decade treading water, and bond yields are near record lows, private-equity firms on the whole have scored gains for their customers.” Gregory Zuckerman and Michael Corkery, The Wall Street Journal January 12, 2012
“From the standpoint of our business, being owned by [private equity firm] Blackstone’s the best thing that ever happened to Hilton. Hilton was a good company that had the potential to be a great company and Blackstone has unleashed the ability for us to do that by helping us by investing significantly in the business and being an incredible partner in kind of setting the strategic direction of the business… We have completely transformed Hilton Worldwide and as I said, as a result of it have become the fastest growing of the major global brands, adding new rooms to the system of almost 30% over the last four years. Blackstone has been at the table with us, a great partner with us, has invested $6.5 billion in the business and has really put us in the position where were growing, as I describes, at a much faster pace, and in fact, creating a lot of jobs. If we look at the job growth that has come out of our entire enterprise over the last four years since Blackstone acquired the business, around the world we have added net over 70,000 jobs while we’ve been owned by Blackstone…It’s been very positive.” Christopher Nassetta, Hilton Worldwide President and CEO January 19, 2012
“On average, private-equity firms make companies more productive and, in so doing, have delivered strong returns to their customers. At the same time, PE firms don’t have much of an effect on net employment one way or the other… When appropriate, PE firms invest in and expand their businesses and employment. And the firms make these cuts and investments not for their own sake, but to deliver results for their customers.” Steven N. Kaplan, University of Chicago Booth School of Business December 14, 2011
“What is indisputable is that private equity needs public pensions and the public now needs private equity. All of America needs private equity to thrive.” Brett Joshpe, Investor’s Business Daily January 19, 2012
“Indeed, as “private” as private equity may sound, the beneficiaries are often the public.” Andrew Ross Sorkin, The New York Times January 16, 2012
“And the point of private equity is to spot opportunities to make a profit. But how do they make a profit? They see companies that are underperforming, that could be made more efficient, that perhaps could go into new markets, and what they try to do is make money by making those companies more profitable. And the real home-run ball is not just taking management fees and paying yourself dividends, but also building an asset you can then sell to someone else.” James Freeman, Assistant Editorial Page Editor of The Wall Street Journal January 16, 2012
“It is impossible to determine exactly the overall effect private equity has on American workers and domestic industry (though studies have tried). But Steel Dynamics offers a particularly positive case; its courageous origins and clever management have allowed it to compete with foreign manufacturers in what most considered an industry for which the die had been cast and America had lost. For every tragic story of a company that fails at the expense of its workers and investors, there are stupendous successes such as that of Steel Dynamics, and they would not happen without the capital and expertise of firms such as Bain.” Patrick Brennan, National Review Online January 16, 2012
“Likewise, the attacks on private equity seem over the top. Private equity firms like Bain Capital, where Romney worked, aren’t about destroying companies and picking over the carcasses. Rather, the aim is to acquire poorly managed companies, make them more efficient (sometimes by firing people but often by rejiggering the business model) and then resell them at a profit. That’s the merciless, rugged nature of capitalism.” Nicholas Kristof, The New York Times January 19, 2012
“Private equity investing has been good for the [public pension] funds, and for California taxpayers. [Calpensions.com’s Ed] Mendel notes that the year over year return at Calpers from private equity investments was nearly 29 percent, and the average over 10 years was a robust 8.9 percent, or far above what the funds have been earning in the public stock markets.” Steve Malanga, Public Sector Inc. January 17, 2012
New York (HedgeCo.net) – The proposed European Union financial transaction tax (FTT) could lead to a significant decrease in cross-border trading of financial instruments in the EU, undermining the single market, according to the Alternative Investment Management Association (AIMA), the global hedge fund association.
AIMA, which has carried out a comprehensive analysis of the proposed FTT, said there would be a significant slowdown in trading of financial instruments like shares, bonds and derivatives in the EU.
The AIMA analysis concluded that the FTT would have widespread, unintended damaging consequences. As well as undermining the EU’s single market, the FTT would be likely to reduce EU taxpayers’ savings and pensioners’ incomes, lead to a reduction in the level of investment in the real economy, send asset prices lower, widen spreads, hinder efficient price discovery and increase market volatility.
The Commission’s own studies concluded that the FTT would leave the EU worse off by tens of billions of euros annually. It estimated that the FTT’s annual revenues would be approximately €25bn-€43bn, but there would also be a reduction in EU-wide GDP of between 0.53% (€86bn) and 1.15% (€186bn).
Even that considerable cost may have been underestimated, AIMA said, because it did not fully take account of the “cascade” effect of taxes being applied to every constituent part of a particular trade.
AIMA CEO Andrew Baker said: “Our analysis concludes that the EU’s proposed financial transaction tax will reduce or eliminate a vast amount of cross-border share and bond trading activity within the European Union, thus undermining the Single Market. And we are not talking about complex financial transactions but very simple buying or selling of shares undertaken by ordinary investors. This could have very serious unintended consequences – including a further tightening of financing conditions for business – at a critical moment for the European economy.”
Equity, bond or derivatives trades routinely involve one or more intermediaries such as dealers and brokers, often located in a different EU member state from the buyer or seller.
The Commission’s own studies acknowledge that simple share trades usually require a much longer transaction chain, with one or more intermediaries being interposed between a client and a trading venue in another EU member state. AIMA said the Commission had underestimated the widespread extent of this practice and overestimated the degree to which buyers and sellers would be able to change existing practices to reduce the number of transactions necessary for a cross-border trade. A smaller, less liquid market in the majority of Member States would be the outcome, said AIMA.
Andrew Baker said: “Article 113 of the Lisbon Treaty, which is the legal basis of the Financial Transaction Tax proposal and which states that taxes are to be introduced only ‘to the extent that such [tax] harmonisation is necessary to ensure the establishment and the functioning of the internal market’, is being used to present a proposal that would lead to a significant reduction of much cross border trading in the EU because it would attract double or triple the tax burden compared to purely domestic transactions.”
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New York (HedgeCo.net) – A greater focus from regulators and investors has led to an increased number of hedge fund and private equity managers actively considering strategic moves to more favourable domiciles. Emerging regions are particularly appealing to investors and as such managers are now looking at the business potential of setting up a presence overseas.
Regulation has been a key driver for this trend following the 2008 Madoff scandal and a general shift towards greater transparency across global financial markets. 2011 has been no exception with laws being tightened and new proposals such as the Alternative Investment Fund Mangers Directive (AIFMD) under discussion.
With such operational and regulatory concerns at the front of manager’s minds, the ‘Re-domiciling & Co-Domiciling for Fund Managers’ report by Clear Path Analysis, seeks to uncover why these funds can add value to a businesses and assesses the key decisions that must be considered. This report takes a look at several of the key fund jurisdictions from each geo-political region: Guernsey (non-EU/Europe), Bermuda (non-EU/Caribbean) and Malta (EU).
AIMA: AIFMD could potentially cost hedge funds $6bn
KPMG: Over 50% of UK’s largest companies have considered re-domiciling or co-domiciling
Clear Path Analysis: Countries with competitive tax regimes will make companies consider fund relocation
Fiona Le Poidevin, Deputy Chief Executive at Guernsey Finance, points out the importance of regulatory changes: “Now is time for managers to look at re-domiciling or co-domiciling. The global financial crisis came to a head in 2008, but more than three years later, the wave of repercussions continues. This is particularly true in the Eurozone but also across global markets.”
“The financial crisis has brought a renewed focus on improved standards including a raft of regulatory proposals e.g. AIFMD. Guernsey’s position outside the EU will enable it to offer a less prescriptive regime for funds not touching this marketplace and this is no doubt helped by the fact that Guernsey has a tax exempt regime for collective investment schemes.”
According to one survey published by KPMG, more than half of the UK’s largest companies have looked at or are actively considering the prospect of leaving the UK. As a result fund domiciles are optimistic about further growth.
Cheryl Packwood, Chief Executive Officer at Business Bermuda, highlights the significant increase in business and fund moves throughout 2010: “Since Bermuda’s launch in 1986 as a domicile for fund managers, its investment management industry has grown significantly. Data published last year by the Bermuda Monetary Authority, revealed 1,165 fund and segregated account companies registered in Bermuda and over 300 unit trusts with the combined net asset value of $183.61 billion. This compares with $147.30 billion in 2009.”
She notes that: “Now, more than ever, an international fund manager needs a domicile that combines stability and trustworthiness with ease of doing business and incentives to counterbalance the myriad of uncertainties in today’s global economy.”
A recent paper from the Alternative Investment Management Association (AIMA) estimates that fund managers will be hit with a potential $6bn cost. The paper suggests that the AIFMD will virtually force hedge funds to consider re-domiciling to new jurisdictions to mitigate the cost impact.
The process of moving funds has become a much more straightforward affair remarks Emaliese Lofaro, Manager, Regulatory Development Unit at Malta Financial Services Authority: “There is flexibility in Malta’s regulatory framework allowing a range of fund types and fund structures. Part of Malta’s attractiveness as a fund domicile is also undoubtedly due to the Passporting Regime under the UCITS Directive and in the near future, the AIFMD.”
“She states that inward Redomiciliation of companies trading in securities and real estate in particular is on the rise in Malta: “In 2010, three companies trading in real estate were redomiciled into Malta. In the area of securities, redomiciliations made a considerable increase between 2008 and 2010.”
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Nrw York (HedgeCo.net) – The 2012 Hedge Fund Compensation Report revealed that hedge fund managers anticipated an increase in base salary but a shortfall in year-end bonuses. The average reported cash compensation for 2011 was $311,000, just slightly higher than last year’s compensation. The annual industry report is based on data collected directly from hundreds of hedge fund managers and employees.
Last year 45 percent of hedge fund professionals reported double-digit positive returns for their fund. This year that number dropped to only 16 percent. The number expecting their funds to be down 10 percent or less went from 3 percent to 22 percent. Only 4 percent expect their funds’ performance to sink by double digits.
“Given the drop in fund performance this year, hedge fund professionals fared pretty well,” said David Kochanek, Publisher of HedgeFundCompensationReport.com. “Except for only a few positions in the firm, increases in base pay more than covered the lower bonuses.”
This decrease in fund performance and bonus payout has some professionals worried. Employees surveyed cited market conditions and the pace of redemptions as concerns and the hedge fund job market is supporting those concerns.
According to this year’s report, although one out of four funds is looking for research analysts, there is little other hiring going on in the industry. Even in this difficult environment, 44 percent reported that, overall, they are happy with their compensation.
“We’ve seen this before. When the investment job market tightens, professionals report more satisfaction with their pay. Their focus changes from greener pastures and moves to becoming content with where they are,” said Kochanek. “And, among hedge fund employees, there might be good cause for celebration — that is, celebrating that they don’t work for one of the big banks.”
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New York (HedgeCo.net) – The Dow Jones Credit Suisse Core Hedge Fund Index was down 0.41% in December as the component strategies reported mixed results.
The Dow Jones Credit Suisse Core Hedge Fund Index provides daily published index values which enable investors to track the impact of market events on the hedge fund industry.
New York (Hedgeco.net) – Based on several dominant and emerging trends Agecroft has identified through their conversations with more than 300 hedge fund organizations and 2,000 institutional investors during 2011, Agecroft Partners predicts 2012 will be the best year for net flows into the hedge fund industry since 2007 despite the lackluster investment performance for the industry in 2011.
Some of the trends they have observed include:
1. Improvement of net capital flows across most major hedge fund investor segments
2. Large rotation of assets between managers based on relative performance and changes in demand for strategies
3. Increased net flows to small and mid-sized hedge fund managers
4. Continued concentration of hedge fund flows into a small percentage of managers
5. More retail oriented hedge funds in the marketplace
6. Increase in both hedge fund closures and launches
7. Greater hedge fund investor concentration risk due to more consultant-based asset placement
“In conclusion, Agecroft Partners expects 2012 to be a very good year for raising assets in the hedge fund industry.” Don Steinbrugge, Chairman of Agecroft Partners, said, “This will we driven by a combination of positive net flow into the industry from most investor segments and large rotation of assets between managers. Although the competition from the largest well known funds will decline, the market place will remain highly competitive where a majority of assets will be going to a small percentage of managers. The managers that are successful growing their business will be those that rank well across multiple evaluation factors, have a high quality marketing message and strong distribution capabilities. The hedge fund industry is moving toward a period of sustained growth driven by institutional investors that will increasingly adopt a more institutionalized process for evaluating hedge fund managers.”
New York (HedgeCo.net) – 2011 was the second worst year on record for the hedge fund industry as global markets remained unpredictable amid the European debt crisis, risk-on risk-off investor sentiment, political wrangling and geopolitical events. The Eurekahedge Hedge Fund Index was flat to slightly negative in December, bringing the yearly number to -4.1%. The MSCI World Index returned -0.4% in December and was down 9.9% for year 2011.
Other hedge fund highlights for 2011 include:
Total asset flows for the year were US$67 billion taking the size of the overall industry to US$1.72 trillion.
Launch activity remained strong throughout 2011, with more than 1100 hedge funds launching in the year (the second highest number of launches ever). Capital raising remained as challenging as ever.
Latin American hedge funds provided the best returns for 2011, gaining 2% over the year. The second best performing region was North American hedge funds, even though it was in negative territory for the year, with a drop of 0.8%.
The Mizuho-Eurekahedge Index, which is an asset-weighted index, finished the year with gains of 2%, thus showing that overall larger funds fared better in the market.
Fixed income and arbitrage were the best performing strategies for the year – up 1.5% and 0.6% respectively.
While most hedge funds witnessed gains through the first six months of 2011, the heightened volatility in worldwide markets during the second half of the year pushed many hedge funds into the red. Larger funds fared better than their smaller counterparts during the year, as evidenced by the Mizuho-Eurekahedge Top-100 Index gaining 2% over 2011.
New York (HedgeCo.net) – Fundspire, a cloud-based technology provider of performance analytics and reporting for the hedge fund industry, announced record revenue as well as significant client, product and employee growth in 2011.
