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.
Reuters – Active credit fund managers are set to enjoy stellar returns in 2010 as individual company performance supplants the financial crisis as the crucial driver of prices.
Passive managers who track indices — as opposed to funds that focus on picking names, or hedge funds with long/short strategies — have performed strongly since March as all credit assets have risen. They were helped by market-wide recovery in credit markets from a year ago.
Bloomberg – Nassim Taleb, author of “The Black Swan,” questioned why Federal Reserve Chairman Ben S. Bernanke, and Treasury Secretary Tim Geithner kept their posts after failing to foresee the collapse in global credit markets.
Bernanke was appointed to a second term last month by President Barack Obama, while Geithner took his job after being the president of the New York Fed from November 2003 through January of this year. Current National Economic Council Director Lawrence Summers was treasury secretary between 1999 and 2001.
“Bernanke, Geithner and Summers didn’t see the crisis coming so why are they still there,” Taleb told a group of business people in Hong Kong. Bernanke is like “a pilot who didn’t see a hurricane,” he added.
New York (HedgeCo.net) – Hedge funds’ good fortunes persisted in August according to a preliminary hedge fund performance report from Morninstar.
“Hedge fund returns in August were driven by strong equity markets throughout the developed world,” said Nadia Papagiannis, Morningstar hedge fund analyst. “Many hedge funds claim to be uncorrelated to the markets, but it appears that the rising tide of the market has lifted all boats, including hedge funds.”
The Morningstar 1000 Hedge Fund Index and the currency-hedged Morningstar MSCI Composite Hedge Fund Index rose 1.6% and 1.5%, respectively in August. For the year to date through August, these indexes increased 13.7% and 9.5%, respectively.
Developed countries’ stock markets rallied for the sixth straight month on positive news in areas such as manufacturing. The Morningstar MSCI Developed Markets Hedge Fund Index appreciated in August by 1.9%, with the Morningstar MSCI Europe Equity Hedge Fund Index outperforming with an increase of 2.9%, as European stock markets hit 11-month highs on better-than-expected economic data in France and Germany. In the United States, continuing the year-long trend, smaller-company equities outperformed larger-cap stocks. The Morningstar US Small Cap Equity Hedge Fund Index rose 1.9% versus the Morningstar US Equity Hedge Fund Index’s 1.4% rise.
Emerging market equities stagnated in August, with gains in Eastern Europe and certain other countries offset by steep losses in China. The Shanghai Composite Index experienced a severe sell-off, dropping nearly 7% on the last day of the month to its lowest level since May. The sell-off was fueled by fears that the Chinese government may curb stimulus measures. The Morningstar Emerging Markets Equity Hedge Fund Index rose 1.6%, as many funds in this index had lighter weightings in China than did the index.
The big winners in August were hedge funds that trade distressed securities. Credit markets, notably the more speculative ones, continued to rebound in August, though the pace of appreciation has slowed. Global corporate bond issuance broke 2007 levels in August, improving liquidity, and leveraged loan prices reached 12-month highs with some new issues. The Morningstar Distressed Securities Hedge Fund Index rallied 4.1%.
August returns and July asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of Sept. 17, 2009. Returns for the Morningstar MSCI Hedge Fund Indexes are based on funds that reported August performance as of Sept. 14, 2009.
Editing by Alex Akesson
For HedgeCo.net alex@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
HedgeCo.net (West Palm Beach) – Assets invested in the hedge fund industry increased by $100 billion in the second quarter of 2009, ending at $1.43 trillion, according to figures released by Hedge Fund Research (HFR). This is the first quarterly increase in assets since 2Q 08, when total industry capital peaked at $1.93 trillion.
The strong performance was led by strategies focusing on Emerging Markets, Convertible Arbitrage and Energy/Basic Materials. These three areas were among the weakest performers in 2008, showing the dramatic shift in market dynamics that has taken place this year.
Investors redeemed $42.8 billion from hedge funds in the second quarter, approximately 60% less than the $103 billion that was redeemed in 1Q 09 and an even more significant drop from the $152 billion that was withdrawn in 4Q 08.
Funds of Hedge Funds continued to experience a higher percentage of capital redemptions than single-manager strategies, as investors withdrew $33 billion from Funds of Hedge Funds in the second quarter. Total capital invested in hedge funds via Funds of Hedge Funds currently stands at $530 billion, 37 percent of the industry’s total capital and well below the $825 billion which were invested through Funds of Funds at their peak level in mid-2008.
HFR also reports that the number of hedge funds, including both single-manager and funds of funds, remained approximately flat during the quarter at just over 8,900. The performance of the HFRI Fund Weighted Composite is now available hedged into four foreign currencies, including Euro, British Pound Sterling, Swiss Franc and Japanese Yen.
"Reflecting the diverse drivers of hedge fund industry performance, recent gains have occurred in an environment in which developed equity markets have been essentially flat", Kenneth J. Heinz, President of Hedge Fund Research Inc, said. "Improved liquidity in credit markets contributed to narrowing some of the pricing dislocations that were created near the end of 2008, and the combination of improved credit markets, gains in emerging markets, and decreased risk aversion have driven broad-based gains in 2009."
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Charity Times – Putting it into perspective, at January 1 2008 there was $9.7trn of hedge funds assets invested, at the end of 2008 it was $3trn, a massive loss in capital.
This year, hedge funds gained 2.41 per cent in March, according to the Barclay Hedge Fund Index compiled by BarclayHedge. The index is now up 0.82 per cent in 2009. ”After an eight per cent sell-off in early March, the S&P 500 Index bounced back to gain 17 per cent from 9 March to 31 March, its largest three-week rally since 1987” says Sol Waksman, founder and president of BarclayHedge. Overall, 15 of Barclay’s 18 hedge fund indices gained ground in March. Hedge funds took modest advantage of March’s upswings in the global equity and credit markets, according to Morningstar’s hedge fund performance summary for the first quarter of 2009.
Highbridge Capital Management, once the world’s biggest hedge fund, was a big winner, with $1bn of net inflows this year, including $225m from majority owner JPMorgan. It ended the quarter with $20bn under management.
HedgeCo.net (West Palm Beach) – Long/Short Equity managers who maintained a cautious stance through the recent market run-up appeared to be positioned to profit as markets shifted from cyclicals to defensives in June. Overall, the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) finished up 0.43% for June, bringing year to date to 7.18%.
Convertible Arbitrage funds continued to post the best performance of all the strategies in the Broad Index, with 4.05% for June and 23.95% cumulative performance YTD, Credit Suisse/Tremont Index’s monthly commentary reported. As equity markets’ recovered in the second quarter, managers began to profit again from the volatility arbitrage aspect of the strategy.
Overall, Emerging Markets finished the month relatively flat despite a rebound in economic activity in Asia, as countries across the region saw rising industrial and manufacturing output, the Index reported.
Credit-oriented hedge funds performed well as credit markets showed healthy activity, with $102 billion of investment grade bonds brought to the market in June. Many believe continued governments’ activism in the markets could provide additional opportunities for these managers.
Global Macro hedge funds posted their first negative monthly performance since October 2008 as the sell-off of short rates in US Treasuries negatively impacted the positions of a number of Global Macro hedge funds early in the month, Credit Suisse/Tremont said.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Assan Din, a former Lehman Brothers Holdings Inc. credit trader, is setting up a hedge fund to trade corporate bonds and derivatives in Asia.
SaKa Capital’s fund, which will have a capacity of more than $500 million, will start in September with $25 million to $50 million sourced mainly from founding members and friends, Din, 38, said. The Singapore-based firm will subsequently raise capital from institutional investors, including U.S. pension funds and endowments, once it builds a track record, he added.
Times Online – Hedge funds are on course to deliver their best first-half performance in a decade, as investors renew their faith in the sector in the wake of last year’s calamitous losses.
Hedge funds worldwide returned 5.63 per cent to their investors in the year to last Thursday, according to Hedge Fund Research (HFR), the Chicago-based research firm that compiles daily statistics on performance.
Strategies that predict big directional market moves made profits of 12.52 per cent over the period as equity markets in Europe, the US and Asia-Pacific posted strong gains and liquidity gradually returned to the credit markets.
Reuters – The fund management arm of Swedish banking group SEB is planning to launch a global credit hedge fund in the autumn to take advantage of mis-pricing opportunities in the credit markets.
Peter Branner, global head of investment management at SEB, said the fund would use leverage and take long and short positions in the investment grade and high yield credit markets where the turbulence of the financial crisis has thrown up undervalued and overvalued assets.
SEB will target institutional and private banking clients for the fund, he told Reuters at the Fund Forum industry conference.
Bloomberg – Billionaire Nelson Peltz and former Countrywide Financial Corp. President Stanford Kurland are among at least six investors turning to the public markets to finance purchases of distressed home loans and corporate debt.
The investors, most of whom previously relied on private partnerships for funding, have proposed since May 1 to raise $2.6 billion through public stock sales. They plan to use the money, along with government financing in some cases, to acquire mortgages and below-investment grade loans to companies that fell in value amid the collapse of the real estate and credit markets starting in mid-2007.
West Palm Beach (HedgeCo.net) – Convertible Arbitrage: Shifting Gears (more found here at HedgeCo/blogs) discusses the strategy’s ability to generate positive returns both during the declines in equity markets in January and February, as well as during the global market rallies in March and April.
Convertible Arbitrage went from being one of the worst-performing strategies in the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) in 2008, to one of the best-performing strategies in the first quarter of this year. Many believe that the fundamental and technical reasons for convertibles’ devaluation in 2008 may correct as credit markets begin to stabilize and if deleveraging continues to abate.
West Palm Beach (HedgeCo.net) – Hedge funds took modest advantage of March’s upswings in the global equity and credit markets, according to Morningstar’s hedge fund performance summary for the first quarter of 2009.
Equity markets around the world significantly rebounded in March as appetite for risk returned, especially in emerging markets, according to the report. Positive lending and manufacturing news in China coupled with higher commodity prices, which helped stocks in other emerging economies such as Russia, drove the Morningstar MSCI Emerging Markets and Morningstar Emerging Markets Hedge Fund Indexes to increase 4.2% and 6.2%, respectively.
"In March we saw a recovery in equity and some credit markets, which helped hedge funds post small gains. But many hedge fund managers, believing that the economy is not yet out of hot water, continued to remain cautious, and were not strongly positioned to participate in the market rally," said Nadia Papagiannis, Morningstar hedge fund analyst. The Morningstar MSCI Developed Markets Hedge Fund Index rose only 1.1% in March compared to the MSCI World Index, which climbed 7.2%.
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
