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New York (HedgeCo.net) – Highlights of a second annual national survey released by Morningstar and Barron’s Magazine examining the perception and usage of alternative investments among institutions and financial advisors showed that hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
“One of the most interesting findings from our survey is that both institutions and advisors continue to view alternative investments optimistically, despite their questionable performance, correlation, and liquidity during last year’s global downturn as well as the high-profile scandals that rocked the hedge fund industry,” said Steve Deutsch, director of the pension, endowment, and foundation database at Morningstar. “Again this year, the majority of participants indicate that they plan to increase allocations to alternatives, but with greater scrutiny and due diligence given to those investments.”
Among the survey findings:
Current and Future Usage of Alternatives
• More than 60% of institutions and advisors believe that alternatives will be as important or more important than traditional investments over the next five years.
• The majority of institutions and advisors expect alternatives to account for more 10% of their portfolios over the next five years; a quarter of institutions expect alternatives to account for more than 25% of their portfolios.
• Hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
Motivation and Hesitation
• For both institutions and advisors, the top three reasons for investing in alternatives remain the same as in last year’s survey: portfolio diversification, absolute returns, and exposure to different investment techniques, like arbitrage or shorting.
• Institutions and advisors are much more concerned, however, about lack of liquidity and transparency than they were last year.
Definitions of “alternative”
• Compared to the 2008 survey, fewer institutions and advisors view real estate investment trusts and commodities as alternative asset classes.
• Both institutions and advisors tend to classify investments as “alternative” based on the investment’s strategy, i.e. absolute return, rather than the investment’s designation, i.e. mutual fund versus hedge fund.
“Perhaps most important for investment consultants, advisors, and money management firms to note is the survey once again found that overall both institutions and advisors want the benefits of alternative strategies with the positive characteristics of traditional investments—low correlation with liquidity, absolute returns with transparency, and redemptions without restrictions,” Deutsch added.
Morningstar and Barron’s conducted the Web-based survey in late September through early October 2009; 89 institutions and 300 financial advisors participated. Survey results appear in the Nov. 9 issue of Barron’s and online at Barrons.com.
New York (HedgeCo.net) – Winner of the “Fund of Hedge Funds Leader of the Year” 2009, Liongate Capital Management, has opened a Dubai office after being awarded a license by the Dubai Financial Services Authority (DFSA) to operate from the Dubai International Financial Centre (DIFC).
The $2.3 billion FoHF’s manager will focus on advising institutional clients in the MENA region on allocations to hedge fund investment strategies out of the new Dubai office.
“With investors increasingly seeking to diversify their portfolios to include alternative investments, the long-term potential for the growth of the hedge funds market in the Middle East, North Africa and India is strong.” His Excellency Dr Omar Bin Sulaiman, Governor of the DIFC, commented. “DIFC offers the infrastructure and regulations for providers of hedge fund investments to take advantage of opportunities in the region. The establishment of Liongate Capital Management’s office is testimony to DIFC’s ability to offer a secure and productive platform for the growth of hedge funds. It also demonstrates the continued confidence of the global financial industry in the potential of the regional market.”
Liongate Capital Management has also appointed hedge fund allocator, Fahad Al-Bader, as Senior Executive Officer of the Dubai office. Fahad Al-Bader has over six years experience of investing in hedge funds. Previously, he was Head of Hedge Funds at the Kuwait Fund, Head of Alternative Investments at Ryada Capital and an Investment Analyst at KIA (Kuwait Investment Authority). Fahad al-Bader is a graduate of Purdue University, and joined Liongate Capital Management in May 2008.
Reuters – European Union plans to tighten regulation of hedge funds and private equity managers could choke off investments and deepen the credit crunch, British Business Secretary Peter Mandelson said in the text of a speech to be delivered on Friday.
The executive European Commission has put forward a draft law that requires managers of alternative investment funds to register and disclose more information to regulators if they want to operate in the 27-nation bloc.
NYT – Citigroup is preparing to relaunch its hedge fund business operations, after months of debate on the unit’s future, The Financial Times reported.
The move comes after two years of performance problems and investor unrest at the unit, Citi Alternative Investments. Now, it seems, the only problem facing Citigroup executives is what to name the unit, which has $14 billion of assets under management.
New York (HedgeCo.net) – Hedge funds are recovering rapidly in 2009, Morningstar reported in their preliminary hedge fund performance study for the third quarter of 2009.
“Paced by an exceptionally strong September, hedge funds began to regain their swagger in the third quarter,” said Nadia Papagiannis, Morningstar alternative investments strategist. “The road to recovery for hedge funds was paved by strong performance in riskier asset classes such as emerging markets, distressed, and small-cap securities.”
But hedge funds overall haven’t yet returned to their October 2007 peaks, the Morningstar 1000 Hedge Fund Index declined 25.2% through February 2009, and has only recovered 20% in the last seven months, with 11.4% to go.
Certain hedge fund strategies have set new highs, however. In September, hedge funds following global macro-economic strategies, fully recovered from 2008 losses, despite lagging the performance of other category indexes this year.
Reuters – Hedge fund industry veteran Philip Duff is setting his sights on acquiring an asset management firm at a time he says big corporations are ready to leave the management of their pension funds to someone else.
Duff made his name at legendary hedge fund Tiger Management, as a chief financial officer at Morgan Stanley and the co-founder of FrontPoint Partners, a $5.5 billion hedge fund manager that Duff sold to Morgan Stanley in 2006 as part of the bank’s alternative investments push.
New York (HedgeCo.net) – Gulfmena Investments Limited has launched the first directional absolute return hedge fund focusing specifically on the MENA equity markets to be managed by a GCC based and DFSA regulated asset management business.
The asset manager of the fund, Gulfmena Alternative Investments Limited, was granted a license by the Dubai Financial Services Authority (DFSA) to operate as a DIFC asset management company in August 2009 and is headed by CEO and Fund Manager, Haissam Arabi. Arabi is one of the region’s most respected and prominent fund managers having managed SHUAA Capital’s Arab Gateway Fund from March 2001 to June 2008 and headed its asset management division.
“Today, investor appetite is returning gradually as we can see from recent markets performance, but while everyone would like to take advantage of the recovery story and existing price distortions in the short term, investors remain somewhat sceptical over long term prospects. Therefore risk aversion and liquidity remain high priorities when making investment decisions at least until risk appetite returns and when investors will demand higher risk and relative value type products. This is why a debut flagship fund today should be a conservative hedge fund product, which is absolute return, unconstrained, multi faceted that is designed for both today and tomorrow’s MENA markets. We believe it is the ideal product at the ideal time with the ideal strategy.” commented Haissam Arabi, CEO and fund manager of Gulfmena Alternative Investments Limited.
The fund will adhere to stringent risk management and portfolio construction parameters such as stops and rolling stops in addition to an overlay hedge strategy that is designed to minimise volatility aiming at preserving investment capital during all market conditions. This is particularly important to professional investors during the early days of a market recovery when visibility is still not clear and there remains little appetite for risk. The fund will target annual returns in excess of 15% while it aims not to exceed an annual volatility of 7%. The fund will also observe strict liquidity criteria and capacity over-ride rules which are built into the strategy to ensure high liquidity levels that allow it to be open-ended and to offer weekly liquidity, unique to most hedge funds.
The fund’s operator and sponsor is Gulfmena Investments Limited (Cayman Islands). The Gulfmena Arab Opportunities Fund Limited will be registered as a regulated mutual fund with the Cayman Islands Monetary Authority and is managed by Gulfmena Alternative Investments Limited, a DIFC based MENA specialist asset management company that is regulated by the Dubai Financial Services Authority (DFSA).
Wall Street Journal – One of the U.K.’s biggest pension plans is moving forward with a strategy to invest hundreds of millions of pounds in alternative assets, potentially including hedge funds for the first time.
The £10.6 billion ($16.8 billion) U.K. pension fund for oil company Royal Dutch Shell Group PLC agreed to a new strategic investment plan over the summer, according to a recent report to members of the pension plan. This includes a 5% allocation to alternative assets — a category that includes hedge funds, infrastructure, and commodity funds. The allocation will come on top of the 5% it already has invested in private equity.
The Shell fund is the latest big investor to give a vote of confidence to the hedge-fund industry, which went through the worst period in its history during the financial crisis last year. Last week, alternative-assets consultancy Preqin published a survey of 50 pension funds, insurers, family offices and other investors, and found that 73% of them said their hedge-fund portfolios had either met or exceeded return expectations, up from 62% that said so last year.
Bloomberg – Credit Suisse Group AG, which sold its Japanese asset management unit in June, will offer alternative investments including private-equity funds to attract the nation’s $800 billion in pension money.
Tokyo-based Credit Suisse Securities (Japan) Ltd., the Japanese brokerage unit of Switzerland’s second-largest bank, won approval on Oct. 2 from Japan’s Financial Services Agency to act as an investment management firm, according to Akira Takahashi, the head of the brokerage’s asset management group. The unit in August hired BlackRock Inc.’s Shinichiro Sato to head a six-member investment team, Takahashi said.
New York (HedgeCo.Net) – Global hedge fund group, Nexar Capital Group SCA, announced the launch of an investment from funds managed by Aquiline Capital Partners LLC, a New York-based private equity firm.
The hedge fund firm was founded by industry veterans who built a market-leading hedge fund business at Société Générale Asset Management Alternative Investments, led by Arié Assayag, Chief Executive Officer; Eric Attias, Chief Investment Officer; and Bernard Kalfon, Head of Volatility Strategies.
“As an independent company, Nexar has a long-term approach that aligns our interests with those of our clients and allows us to provide them with superior investment management,” said Mr. Assayag. “Aquiline’s depth of investment management experience immediately gives us the strength and stability of an institutional platform, thus making Aquiline an ideal partner as we build our business.”
“Nexar’s team built its strong reputation in the industry through its success in growing and managing a leading hedge fund business,” said Jeff Greenberg, Chief Executive of Aquiline. “Recent market turmoil has underscored the importance of transparency, liquidity and true alpha generation, which are core elements of Nexar’s approach.”
Nexar has more than 30 investment professionals in New York and Paris and will provide clients the ability to invest in a “variety of hedge fund products,” including funds of hedge funds and volatility arbitrage funds.
Alex Akesson
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Investment News – Seizing on an anticipated increase in demand for alternative investments, a Greenwich, Conn.-based firm has rolled out an investible hedge-fund-tracking index that offers liquidity and transparency.
TrueBeta LLC’s index is designed to replicate the performance of the broader hedge fund universe through portfolios made up of liquid market indexes.
West Palm Beach (HedgeCo.net) - Research and Markets has announced the addition of the "High Net Worth Alternative Investments" report to their offering.
The report identifies demand for hedge funds, capital protected funds, private equity funds and real estate funds from high net worths, The scope of the report covers France, Germany, Italy, Spain, UK, Nordic region, Belgium/Netherlands, Switzerland, Australia, China, India, Hong Kong, Singapore and Taiwan.
Includings hedge funds, capital protected funds, private equity funds and real estate funds (open ended and closed ended) thr peport shows the results of the Wealth Management Market Leaders survey of 280 wealth management companies worldwide, and on high net worths (those with more than $1m in onshore liquid assets)
HNW alternative investment asset allocations are expected to decline slightly in both Australia and France in the next two years, as high net worths reposition their portfolios. Real estate allocations and commodities allocations will decline among Australian HNWs while both hedge fund and derivative allocations will increase.
While British HNWs plan to increase their exposure to capital protected products and private equity funds, and their wealth managers will devote significant resources to the development of these product areas, they are failing to anticipate their clients demand for closed-ended real estate funds.
At the same time German wealth managers are focusing strongly on capital protected products which, while certainly in demand by most HNWs, will not see a significant increase in terms of portfolio allocations.
