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New York (HedgeCo.net) – Richard H. Baker, President and CEO of the Managed Funds Association (MFA) wrote a letter to MFA members this afternoon, highlighting today’s announcement by the Obama Administration requiring all advisers to hedge funds and other private pools of capital, including private equity and venture capital funds, to register with the Securities and Exchange Commission (SEC).
Baker highlights how the Administration’s proposed legislation would:
* eliminate the private adviser exception in the Investment Advisers Act and require hedge fund managers and other investment advisers to private investment pools with at least $30 million in assets under management to register with the SEC;
* eliminate the exemption from registration in the Advisers Act for certain commodity trading advisors registered with the CFTC if the commodity trading advisor acts as an investment adviser to a private fund (defined as a company that would be an investment company under the Investment Company Act of 1940 but for the exceptions contained in Section 3(c)(1) or Section 3(c)(7));
* give the SEC authority to require investment advisers to maintain records and submit reports of information relating to both the adviser and funds it manages, in order to allow for the supervision of systemic risk by the Board of Governors of the Federal Reserve and the Financial Services Oversight Council, and to provide such information to the Board and Council. The reported information must include at least, for each private fund, the amount of assets under management, use of leverage (including off-balance sheet leverage), counterparty credit risk exposures, trading and investment positions, and trading practices. Each adviser must maintain records of such information and make them available to the SEC upon request, and would be subject at any time to periodic, special, or other examinations by the SEC. Information provided by the SEC to the Board or Council would be kept confidential.
* give the SEC authority to require investment advisers to provide reports, records and other documents of private funds to investors, prospective investors, counterparties, and creditors, for the protection of investors or the assessment of systemic risk.
* permit the SEC to keep confidential any information in reports required to be filed with the SEC, except pursuant to requests from Congress or other federal agencies
* provide the SEC with the authority to define the term ‘client’ differently for different purposes of the Advisers Act and clarify other aspects of the SEC’s rulemaking authority with respect to registered investment advisers.
Click here to read the Administration’s press release announcing the proposed legislation.
Reuters – The heat is on hedge funds to outperform markets and prove their worth to skeptical investors, and to do so requires strategies based on riding out spikes in volatility, seeking liquidity and deft trading.
Returns this year will, of course, not be what they were in the over-leveraged days before the financial crisis, but convictions on one’s investment strategies and asset allocation will help the best and brightest funds survive, industry experts told the Reuters Private Equity and Hedge Funds Summit.
The strategies expected to do well include commodity trading advisors’ managed futures accounts because they can perform well in times of heightened volatility. Funds that focus on macroeconomic developments were also seen outperforming other strategies given the tremendous changes in policy affecting markets globally and risks of both deflation and inflation.
West Palm Beach (HedgeCo.net) – In an example of how hedge funds and CTAs are turning to third-party administrators with an eye on offering their investors improved transparency, hedge fund and FoHF provider Spectrum Global Fund Administration has teamed up with with AlphaMetrix LLC, a managed futures investment platform.
AlphaMetrix says it chose Spectrum for their "ability to easily provide estimated daily NAVs and to facilitate semi-monthly liquidity, critical differentiators at a time of heightened investor sensitivity regarding alternative investments." The platform will provide investors with access, research and real-time performance reporting to managed futures funds and commodity trading advisors (CTAs).
“The AlphaMetrix value proposition is built on what we call ‘TLC,’ which stands for transparency, liquidity and custody,” said Aleks Kins, founder and CEO of AlphaMetrix. “In partnering with Spectrum, we have selected the only fund administrator that can produce the estimated daily NAV reporting our clients demand, and handle the increased complexity associated with more frequent liquidity.”
Currently, client assets allocated over the AlphaMetrix Platform total approximately $1.7 billion, which includes both direct investments and managed account tracking.
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Markets Media News – The New Year is likely to see several important shifts in alternative investing, according to Don Steinbrugge, managing partner of Agecroft Partners, a global consulting and third-party marketing firm for hedge funds.
Steinbrugge said during the fourth quarter of 2008, investor demand started to shift toward market neutral strategies, as well as toward strategies that used little leverage and provided investors with transparency and liquidity. That shift will likely continue throughout 2009, he said.
Short-biased funds, which have always been a small percentage of the marketplace, surged ahead in 2008, delivering double-digit returns and capturing a larger market share of alternative investments. Steinbrugge said investors are likely to continue to invest in short-biased funds, but their growth will be at a slower pace than last year.
Commodity Trading Advisors (CTAs) are likely to see a lot of demand as well, as they also delivered double-digit returns last year and proved they are not correlated with other hedge fund strategies. Steinbrugge said, however, that does not mean traditional long-short equity funds are on their way out.
"Long-short equity funds have actually done pretty well in comparison to the S&P 500," Steinbrugge said. "I don’t think you’ll see a huge shift out of long-short equity."
