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CNBC – Ongoing hedge fund losses and liquidations spooked markets Wednesday, and some of the biggest names in the mix now are Citadel Investments and Highland.
Hedge funds had their worst month ever in September, with average losses of 6.2 percent, according to an estimate by TrimTabs Investment Research.
All major categories of funds chalked up losses over the month, but emerging markets, long equity funds and distressed strategies had the worst results. The declines came as investors withdrew $43 billion from hedge funds—almost seven times the previous monthly record for redemptions, TrimTabs said.
Citadel confirmed to CNBC that its flagship Kensington and Wellington funds, which hold around $15 billion in assets, are down between 26 percent and 30 percent so far this year.
West Palm Beach (HedgeCo.net) – Reflecting a growth in corporate activities, Vodia Group has rebranded as Finadium. The move was made, the re-named Finadium says, to showcase an ability to develop new ideas and create products and marketing strategies in financial markets, expanding beyond the original scope of Vodia Group.
The Finadium name comes from the abbreviation Fin for finance and the latin word Aedium, meaning house. As Finadium, the firm emphasizes its core value proposition – providing ideas, product development and marketing strategies to the securities and investments industry.
Based on proprietary surveys and market knowledge, the company is looking multiple market sectors such as institutional investors, hedge funds and traditional asset managers.
As part of the rebranding, the company are launching a monthly newsletter for portfolio managers, traders and others looking for briefings on prime brokerage, securities finance and custody but who do not need the detail of our full reports.
Also expanding into frontier and emerging markets, Josh Galper, Managing Principal, says “As Finadium, we are pleased to expand our audience in prime brokerage, securities finance and custody to include a broader range of market professionals. We also look forward to tackling the complex subject matter of financial services in frontier and emerging markets.”
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West Palm Beach (HedgeCo.net) – The Morningstar 1000 Hedge Fund Index lost 3.12% in August, significantly underperforming U.S. and global equity and bond markets.
August, like July, was characterized by a large drop in emerging markets and commodities. "Even though commodity prices have started to descend, their lofty valuations slowed growth and demand, especially in emerging markets,” said Morningstar Hedge Fund Analyst Nadia Van Dalen. "It was only a matter of time before hedge funds riding these waves crashed."
The Morningstar Emerging Markets Hedge Fund Index lost 7.13% in August while the Global Trend Hedge Fund Index, which profited from a previous upward trend in commodities, lost 5.35%. Both of these indexes experienced similar losses in July. Through July however, these funds continued to receive the largest inflows of assets this year, approximately $10.9 billion.
Unlike emerging market hedge funds, U.S. equity hedge funds fared relatively well. The Morningstar US Equity Hedge Fund Index earned 0.47% in August. Even though these hedge funds performed better than those in other equity categories, they still underperformed the markets—the S&P 500 Index gained 1.45% in August. Similarly, the Morningstar US Small Cap Equity Hedge Fund Index lost 2.81% while the Russell 2000 Index gained 3.61%
The U.S. equity markets were propped up for most of the month by the rising dollar and weakening Euro. Morningstar calculates its hedge fund indexes by converting hedge fund returns into U.S. dollars using the spot rate at the end of the month. This methodology does not hedge U.S. dollar exposure, and reflects the negative impact of Euro-denominated funds.
Along with the Euro, European equity markets dropped in August, reacting to weak economic data. The Morningstar Europe Equity Hedge Fund Index dropped 3.33%. Year to date through July 31, funds in this index have seen the largest outflows, approximately $9.6 billion. Despite the appreciation of the Yen, developed Asian equity markets followed that of emerging markets in general. The Morningstar Developed Asia Equity Hedge Fund Index lost 3.10%. Currency traders on the right side of the dollar, Yen, and Euro trades helped to cushion the blow for the Global Non-trend Hedge Fund Index, which lost 1.63%.
Global bonds, as measured by the Lehman Global Aggregate index ended the month in the red, and the Morningstar Global Debt Hedge Fund Index and the Morningstar Debt Arbitrage Hedge Fund Index both experienced losses of 3.64% and 1.33%, respectively. During the month, credit spreads widened amid financial distress at Fannie Mae and Freddie Mac, hurting funds in these indexes. Volatility in the credit markets also affected funds in the Morningstar Convertible Arbitrage Hedge Fund Index, which lost 1.08%.
Distressed securities funds and corporate event funds continued to wait for a market turn around. The Morningstar Distressed Securities Hedge Fund Index and Corporate Actions Hedge Fund Index dropped 1.28% and 2.34%, respectively. Multi-strategy funds outperformed hedge funds of funds. These indexes fell 2.40% and 3.99%, respectively. Read Complete Article
Business Day – Private equity firm Actis says equity funds have embraced investing in Africa because many governments have instituted market reforms which are creating opportunities for brave investors willing to take a long-term view on Africa.
“There is increased private equity interest in the continent, illustrated by numerous new (private equity) funds being raised for Africa," Peter Schmid, head of Actis Africa, said yesterday.
His firm recently led a consortium to acquire Alstom South Africa, a big electrical engineering, manufacturing, distribution and contracting business, for R5,16 bn.
Analysts say the lure of emerging markets in countries such as Russia, China and India, and now Africa, has grown stronger after the bruising credit crunch in the US and Europe.
InvestmentNews – Emerging-market strategies gained some momentum during the quarter ended June 30, but are still struggling, according to Hedge Fund Research Group LLC of Chicago.
HFR reported today that emerging-market hedge funds took in $995 million during the second quarter, reflecting a 66% increase over the $597 million worth of inflows into the strategy during the first quarter of the year.
But the inflows into the category paled in comparison to the year-ago quarter, when emerging market hedge funds took in $3.7 billion.
If the current pace of asset flows continues through the end of the year, the emerging-markets strategy could experience its worst year for investment flows since 2000, when the category had net outflows.
Reuters UK- Investors are responding to the sharp falls on equity markets around the world by shifting from what are now being seen as vulnerable emerging markets to relatively safer developed ones.
The moves — which can be seen in a variety of investment flow data — are evidence that an earlier belief that emerging economies and markets could decouple from troubles in the dominant U.S. economy is on rocky ground.
In its monthly poll of fund managers, released last week, Merrill Lynch noted that there are now more investors overweight U.S. equities than there are those who are overweight emerging markets.
Times Online- They may be partly responsible for the mess the banks are in but bankers are not sticking around for the clean-up. Many top bankers have lost confidence in their institutions and are quietly heading for the exit. The smart ones, it seems, are going to hedge funds.
GLG, Europe’s largest hedge fund, recently poached Goldman Sachs partner and top trader Driss Ben-Brahim. The bank was “not amused” by Ben-Brahim’s defection, according to one source.
Karim Abdel-Motaal and Bart Turtelboom, the global co-heads of emerging markets at Morgan Stanley, were also snapped up by GLG.
Last week, Fauchier Partners, a fund of hedge funds, announced the appointment of Jamie Kermisch. Also from Morgan Stanley, he has been in investment banking for 19 years. This follows high-level recruitment by Citadel, Tudor Investment and CQS, which has already drafted in some 45 people this year.
Reuters- Fund managers are gloomier about equities than at any time in at least the last 10 years and aversion to risk is close to what it was during the Bear Stearns crisis in March, a Merrill Lynch poll showed on Wednesday.
In its July poll of 191 global fund managers, the investment bank also found investors’ love affair with emerging markets to be souring and their demand for safe-haven cash at highs.
But the poll also showed that concern about inflation has waned, suggesting that investors are expecting a slowing global economy to squelch the threat of price rises.
"This very much is the age of extremes," said David Bowers, Merrill’s poll consultant.
Reuters- Melissa Ko, a former star trader at Bear Stearns, has formed a new hedge fund called Covepoint Capital with nearly $1 billion in assets, according to a letter the firm sent to investors on Monday.
Ko ran Bear’s Emerging Markets Macro Fund, which generated returns of more than 25 percent from 2005 to 2007 through currency, sovereign debt, equity and other investing strategies. New York-based Covepoint has assets of about $925 million, mainly from previous investors in the Bear fund.
Covepoint is the latest hedge fund to become independent from the former Bear Stearns Asset Management (BSAM) division, a collection of funds which held about $27 billion in assets when JPMorgan Chase & Co bought the crippled investment bank on May 30.
Taipei Times- Two years there was a music festival at Knebworth, in central Britain, that was very different. At “Hedgestock” 4,000 hedge fund managers and investors paid US$1,000 a ticket for a weekend of rock’n’roll, champagne, laser clay pigeon shooting and seminars on arcane aspects of how to make even more millions.
Some wore beads as part send-up, part veneration of Woodstock, 1960s hippies and “hedgies” bound by the bond of anti-establishment love of liberty, as if the aims of getting stoned and making a fortune gambling in unregulated financial markets were curiously united. The Who played out the event, with proceeds going to the Teenager Cancer Trust. “Hedgies” were the cool face of capitalism.
This year, a rerun of Hedgestock would be pilloried and rightly so. Oil prices are spiraling higher and the plight of stricken banks, property companies and housebuilders is made more acute because of hedge funds’ aggressive speculation. Late last month there were fresh fears that the Western financial order simply could not cope and global stock markets reeled. Hedge funds are emerging as one of the triggers of a first order crisis.
FINalternatives- Bedrock Alternative Asset Management in May launched its Global Diversified Fund, a fund of funds covering private equity, hedge funds, real estate and commodities, combined with traditional stock and bond investments.
The fund will invest in a 15 to 25 underlying hedge fund managers, with exposure to event-driven, long/short equity, managed futures, global macro distressed, volatility and emerging markets strategies. Some 70% of its portfolio was weighted toward hedge funds, followed by equities (19%) and cash (8.4%). The firm is limiting its p.e. and real estate exposure to no more than 15% and commodities at 10%.
The US$65 million fund finished its first month of trading up an estimated 0.68%. Its hedge funds sub-portfolio was the strongest contributor to its performance in May, providing almost two-thirds of its gains, according to the firm.
CityWire.co.uk- Skandia has launched an offshore protected fund of funds which aims to offer capital protection alongside investment returns from the global equity markets.
The Royal Skandia Protected Portfolio Investment Global Vista Life fun (PPI Global Vista) will offer exposure to global markets in a protected environment through equally weighted positions in AXA Framlington Emerging Markets Acc fund, Henderson European Opportunities A Acc fund, Invesco Perpetual Global Bond Inc fund, M&G Global Basics A Euro Acc fund and Schroder US Smaller Companies Inc fund.
It will be available to UK investors via Skandia’s offshore portfolio bonds and offers 100% capital protection plus 100% of the quarterly averaged growth at maturity. There is also an enhanced allocation of 104%.
The fund has a fixed five year term and will return the final redemption value to the bond at the end of the term offering the opportunity to reinvest the proceeds into an alternative investment vehicle.
