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West Palm Beach (HedgeCo.net) – In a preliminary hedge fund performance report for April 2009 and asset flows through March, Morningstar reported the largest one month-return since January 2006—bringing hedge fund returns into positive territory for 2009.
"Over the last two months, the bulls have dominated the markets, and stories of green shoots in the economy colored the financial media. The rally was led by higher-risk asset classes, including small-cap, financial sector, and emerging market stocks, as well as high-yield bonds and leveraged loans. Many hedge fund managers weren’t confident in the sustainability of the rally, and invested with a more conservative market exposure," said Nadia Papagiannis, Morningstar hedge fund analyst.
U.S. convertible bonds benefited from the trend toward higher-risk, low-credit-quality investments. According to the Merrill Lynch All U.S. Convertibles Index, these securities enjoyed their best month since 1987, with speculative-grade convertibles returning more than double the gains of investment-grade securities. The Morningstar Convertible Arbitrage Hedge Fund Index, the best-performing Morningstar hedge fund index this year, rose 5.1% in April and 12.5% year to date.
Also in the lower-quality field, the Morningstar Distressed Securities Hedge Fund Index increased 2.1% in April, the largest since the beginning of the credit crunch in mid 2007.
In emerging market equities, Eastern European countries produced the best returns in April, although this region is still recovering from its early 2009 nosedive. The only losers in April were the Morningstar Global Trend and Global Non-Trend Hedge Fund Indexes, which dropped 1.7% and 0.5% respectively.
According to Morningstar’s database, hedge funds overall continued to show a decline in outflows. In January, investors withdrew more than $29 billion from hedge funds, but February outflows totaled less than $6 billion, while March’s preliminary figure showed an even lower amount, at $3.6 billion. Despite the overall March trend of outflows, developed Asia equity hedge funds actually had net inflows of $4.1 billion in March, and investors were rewarded.
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West Palm Beach (HedgeCo.net) – Due to poor market conditions in the distressed securities space, Dow Jones’s hedge fund arm has suspended publication of the Dow Jones Hedge Fund Distressed Securities Strategy Benchmark.
The Dow Jones Hedge Fund Convertible Arbitrage Strategy Benchmark was also halted in January, 2009 and remains suspended until further notice. The remaining strategies—Equity Long/Short, Equity Market Neutral, Event Driven and Merger Arbitrage, will continue to be published on an end-of-day basis.
Launched in November 2003, the Dow Jones Hedge Fund Strategy Benchmarks measure individual hedge fund strategies. The six existing strategies are Equity Market Neutral, Convertible Arbitrage (suspended), Distressed Securities (suspended), Merger Arbitrage, Event Driven and Equity Long/Short . DJHFI provides style-pure, hedge fund strategy indexes that exhibit highly correlated component returns.
Alex Akesson
Editor for HedgeCo.Net Email: alex@hedgeco.net
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Bloomberg – Philip Falcone, who runs the $7 billion Harbinger Capital Partners LLC, is starting a hedge fund that draws on his background in distressed securities, even as investors are locked into his biggest fund.
The Credit Distressed Blue Line Fund will buy troubled loans and bonds, and bet against higher-rated debt, the New York-based firm said in a March 16 letter to investors. The firm’s flagship $5 billion Harbinger Capital Partners Fund I limited withdrawals to 65 percent of its assets last year because of private-equity investments, which are harder to sell than publicly traded stocks.
West Palm Beach (HedgeCo.net) – Morningstar reported a sharp decline in credit and equity markets as the U.S. government announced its stimulus package and financial stability plan. February saw a huge sell-off in U.S. and European bank stocks caused by concerns of financial health and nationalization.
U.S. bank stocks hit a 17-year low and spreads on corporate bonds widened, according to the report.
"Hedge fund managers, like other investors, are nervous about the efficacy and unpredictability of government involvement in the economy. They just don’t know what the U.S. government will do next, and this uncertainty is wreaking havoc in the markets," said Nadia Papagiannis, Morningstar hedge fund analyst.
Widening spreads hurt hedge funds that invest in distressed debt, as lower-quality credits became cheaper. The Morningstar Distressed Securities Hedge Fund Index was one of the worst-performing category indexes, falling 4.1%. The Morningstar MSCI Specialist Credit and Relative Value Hedge Fund Indexes fell only 0.5% and 0.1%, respectively, as some areas of the credit market, such as leveraged loans, performed better than others.
Global non trend funds, those that make macro-economic bets, and global trend funds, those that bet on price trends in commodity and financial futures, showed mixed results in February. These funds took advantage of the rise in gold and the depreciation of the Japanese yen against the U.S. dollar, but volatility in other commodities such as oil caused declines.
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Bloomberg – Treasury Secretary Timothy Geithner’s financial-rescue plan may be doomed if he doesn’t offer low-cost loans to hedge funds and other investors to help them buy toxic assets weighing down bank balance sheets.
Creating a “bad bank” or “aggregator bank” that would use federal funds to acquire and warehouse the assets, as some have proposed, would be costly for taxpayers and require too much government interference, say two experts on distressed securities who have pitched an alternative plan to officials.
John Ryding, chief economist at RDQ Economics LLC in New York, and Matt Chasin, chief operating officer of Sorin Capital Management LLC, a Stamford, Connecticut-based hedge fund that manages about $1 billion, say the Treasury Department should provide loans at commercial rates to investors for up to 50 percent of the purchase price of securities. The financing would be for as long as the maturities of the assets being acquired.
Reuters – Blackstone Group LP said on Tuesday it plans to liquidate two hedge funds as a lack of outside investing amid tight credit markets will prevent them from getting big enough to be meaningful to the company.
The private equity firm plans to consolidate its distressed securities fund with GSO Capital Partners, a hedge fund manager it acquired in March for $10 billion.
Blackstone also plans to spin off Blackstone Kailix advisers, the investment manager of its long/short equities fund, to a management team led by Manish Mittal, who plans to form a new fund as an independent entity.
"We believe these measures will enable us to operate more profitably in the current environment," Chief Operating Officer Tony James said.
West Palm Beach (HedgeCo.net) – The Blackstone Group is making changes to the single manager hedge funds businesses within its Marketable Alternative Asset Management (MAAM) segment.
Blackstone is consolidating its distressed securities fund onto a single operating platform and moving Blackstone Kailix Advisors, the investment manager of Blackstone’s long/short equities fund, which will be spun off to its management team led by Manish Mittal, who intends to form a new fund as an independent entity.
Commenting on the changes, Tony James, President and Chief Operating Officer of Blackstone, said, “We believe these measures will enable us to operate more profitably in the current environment. Although these funds have performed better than the S&P 500 and other global market averages, we expect that adverse fundraising conditions in the hedge fund industry will prevent these two initiatives from scaling up to a size where they are meaningful for our business on a stand alone basis.”
Blackstone will be an investor in the new fund and investors in the existing fund will be offered the option of investing in the new fund on a preferred basis as their interests in the existing fund are liquidated. Although the existing fund has outperformed global equities measures, its size does not make it a core strategic business for Blackstone and it is not anticipated that this will change in the near term. The fund has not imposed any gates or liquidity restrictions on investors.
“We continue to have a significant commitment to the hedge fund business," James continued, "The current market turmoil with its associated dislocation of asset prices presents us with a multitude of compelling opportunities to invest capital. It is during times like these that we need to be especially disciplined to focus both our people and our capital on the largest opportunities.”
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West Palm Beach (HedgeCo.net) – Because of investors’ demand Salus Alpha decided to make the Salus Alpha Directional Market accessible as a fund. This way Salus Alpha continues to launch tracker funds for all hedge fund indices launched by Alternative-Index Ltd.
The Directional Markets Index (DMX) convinced investors this year with outstanding +53% YTD performance and above-average performance in the last years, the DMX contrasts clearly with other Hedge Fund Indices.
Investors are able to achieve profits even in falling markets because of the widening of the product range Salus Alpha. It responds to investors’ needs in the current volatile market environment and offers a lager selection of funds with no correlation to bonds or equities.
The Salus Alpha Directional Markets employs directional trend following strategies in multiple time frames and markets. The funds objective is to achieve low to negative correlation to traditional longonly investments such as bonds or equities. The fund also tracks the Vienna Stock Exchange listed DMX.
Since inception of the calculation the DMX displays a performance of approximately 28.40% p.a. with a volatility of 17.88% p.a.
The subscription period for the Salus Alpha Directional Markets is from 5th November 2008 to 30th November 2008. During subscription period no sales fee will be charged.
West Palm Beach (HedgeCo.net)- The DMX, Directional Markets Index, heads the list of investable Alternative Investment Indices provided by Alternative-Index Ltd, with a month-to-date performance of +0.71% and a stellar year-to-date performance of +16.61%. DMX is listed on the Vienna Stock Exchange.
The best performing sector for the DMX was the Interest Rates sector with a month-to-date attribution of +0.62%.
The DMX outperformed its peer, the FTSE Hedge Directional Index month-to-date by 2.13% (0.71% vs. -1.42%) and year-to-date by 21.42% (16.61% vs. -4.81%). The DMX also outperformed the MSCI Systematic Trading Index year-to-date by 12.17% (16.61% vs. 4.44%). The DMX’s performance surpassed the HFRX Market Directional Index’s performance month-to-date by 1.22% (0.71% vs. -0.51%) and year-to-date by 15.67% (16.61% vs. 0.94%).
Alternative-Index Ltd. is an Index specialist and provides investable Indices that represent the risk and return of investable alternative strategies and asset classes. The company is a 100% subsidiary of Swiss Alternative Investment expert Salus Alpha Group AG.
