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.
HedgeCo.net (West Palm Beach) – Swiss based hedge fund and FoHFs provider, Infonic AG, has expanded to the US by establishing a New York office. Infonic named IT specialist Nolan Phillips as Chief Operating Officer, and financial expert, Bridget Piraino, Head of Global Marketing & Sales.
“I’m delighted to welcome Nolan Phillips and Bridget Piraino to the executive team. Adding to the depth of our management team demonstrates Infonic’s commitment to becoming the trusted operational backbone of the institutional hedge fund investor industry,” said Tom Furrer, Infonic’s CEO. “With the establishment of a New York office we will expand our presence delivering innovative products and dedicated client services to asset managers and administrators of funds of hedge funds.”
Nolan has held executive and consulting positions at Coopers and Lybrand, Union Bank of Switzerland, Société Générale, Bankers Trust, IQ Financial Systems and Bank of Bermuda, Alternative Investments Program.
Piraino’s career has included Aregon International, the UK financial data delivery system provider, and Goldman Sachs and Co’s Fixed Income Research group. She held senior technical management and financial services marketing positions with Sybase, TIBCO Financial Systems and SeeBeyond.
Headquartered in Switzerland with offices in Zurich and New York, Infonic AG is the provider of HedgeSphere, a product suite for operations of funds of hedge funds.
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Bloomberg – Geneva banks, which began investing client money in funds of hedge funds during the 1960s, are struggling to rebuild the business after market losses and Bernard Madoff’s Ponzi scheme cut assets by 72 percent.
The assets of funds of funds managed from Geneva slumped to $15 billion in May from $54.2 billion at the end of 2007, according to data compiled by Singapore-based Eurekahedge Pte. Almost 25 percent of the 227 funds operating in the city at the end of last year shut in the first five months of 2009 and only six opened, less than a fifth of the 2008 number.
Bloomberg – Geneva banks, which began investing client money in funds of hedge funds during the 1960s, are struggling to rebuild the business after market losses and Bernard Madoff’s Ponzi scheme cut assets by 72 percent.
The assets of funds of funds managed from Geneva slumped to $15 billion in May from $54.2 billion at the end of 2007, according to data compiled by Singapore-based Eurekahedge Pte. Almost 25 percent of the 227 funds operating in the city at the end of last year shut in the first five months of 2009 and only six opened, less than a fifth of the 2008 number.
HedgeCo.net (West Palm Beach) – Hedge funds attracted $19 billion of fresh capital (gross) in June, marking their second consecutive month of net inflows of $6 billion. Nearly 75% of all reporting hedge funds are in the black for H12009, with event driven funds up an impressive 19% (YTD), on average, according to Eurekahedge.
Gross inflows into hedge funds totalled a healthy $19.2 billion (or 1.5% of end-May assets), about two-thirds of which were negated by redemptions of $13 billion. A good portion of these redemptions (nearly $5 billion) represented the assets withdrawn by funds of hedge funds, which continued to witness redemption pressures as investors are increasingly opting to invest directly into hedge funds for better returns and capital protection, as well as relatively lower fees.
The Eurekahedge Hedge Fund Index gained 9.5% while the Standard and Poor 500 rose 1.8% over 1H2009. Since Jan-2007, hedge funds are up 10.4%, while the Standard and Poor 500 is down over 35%.
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HedgeCo.net (West Palm Beach) – International hedge fund manager and Swiss banking group, SYZ & CO, has acquired 50% of the asset management company owned by Spanish alternative investment group N+1.
The joint venture, named “N+1 SYZ Gestión”, will provide asset management services to high level clients in Spain, providing discretionary or advisory mandates for large family groups or institutional clients, as well as for investment funds and funds of hedge funds.
“As has been the case in Italy, we have preferred entering into a partnership with a solid and well-established local partner. This enables us to provide offerings that are adapted to the specific nature of the local market”, said Alfredo Piacentini, Managing Partner at Banque SYZ & CO. “We are particularly satisfied with our partnership with N+1, a group we have known for many years, and with which we share the same vision and values.”
“The Spanish asset management market is in the midst of dramatic change and today there is real demand for high level international asset management expertise; our alliance with SYZ & CO will enable us to successfully meet this demand”, said Santiago Eguidazu, N+1′s President. “SYZ & CO enjoys a strong reputation in the Spanish market and there are strong synergies between our two asset management groups.”
N+1 Group company currently has approximately CHF 400million ($353 million) in assets under management. The transaction is subject to approval by the CNMV, the Spanish financial markets regulatory authority.
SYZ & CO’s total assets under management now exceed CHF 20bn ($18.6 billion).
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HedgeCo.net (West Palm Beach) – Hatteras Funds has acquired a controlling interest in Alternative Investment Partners, LLC, a Harrison, NY-based provider of open end mutual funds of hedge fund strategies known as AIP Mutual Funds, increasing Hatteras Funds and its affiliated companies’ AUM to approximately $1.6 billion.
The two mutual funds of hedge fund strategies, the Alpha Hedged Strategies Fund (ALPHX) and the Beta Hedged Strategies Fund (BETAX) provide financial professionals with access to alternatives that have all the client-friendly features of a mutual fund, including daily liquidity, no lock-ups, no accreditation requirement, no performance fees, and 1099-tax reporting.
David B. Perkins, CEO and founder of Hatteras Funds, will become Chief Executive Officer of the company, which will be rebranded under the Hatteras umbrella and operate as the mutual fund division within Hatteras Funds upon investor approval of the transaction. Lee Schultheis, Chief Executive Officer and Chief Investment Strategist of AIP Mutual Funds, will remain with the company as President of this division. Mr. Schultheis, along with Asset Alliance Corporation, an original investor in the company, will continue as significant shareholders.
“AIP Mutual Funds is an ideal fit.” said David B. Perkins, Chief Executive Officer of Hatteras Funds. “AIP Mutual Funds had a stroke of genius when it created the structure of these funds, which allow a wider range of individuals to access alternatives. In a post-Madoff world, these mutual funds of hedge fund strategies are a tool for financial advisors to allocate to alternatives while meeting increasing client demands for liquidity and transparency.”
The strategies provide financial professionals with access to alternatives that have all the client-friendly features of a mutual fund, including daily liquidity, no lock-ups, no accreditation requirement, no performance fees, and 1099-tax reporting. The funds actually have a unique structure that allocates assets to a variety of hedge fund managers who run the capital in a separate account from their hedge fund – so the funds do not hold actual shares in a hedge fund. This is how they get around the lock-up and liquidity issues associated with hedge funds.
ALPHX and BETAX may also invest in smaller capitalized companies, foreign securities, securities limited to resale to qualified institutional investors and shares of other investment companies that invest in securities and styles similar to the funds, resulting in a generally higher investment cost than from investing directly in the underlying shares of these funds. Additional information will be filed with the SEC, the company said.
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West palm Beach (HedgeCo.Net) – Leading risk analytics provider Measurisk, LLC, an affiliate of J.P. Morgan Worldwide Securities Services (WSS), today announced that it has crossed an important industry milestone in modeling the full positions of over 1,000 hedge funds – making it the largest position-based hedge fund analytical platform in the industry.
Measurisk acts as an independent intermediary facilitating the flow of risk information between hedge funds and investors. Measurisk receives the full positions from the hedge funds, but only provides summary risk and exposure statistics to investors. In this way, investors receive the risk transparency they need, while hedge fund managers maintain the confidentiality of their individual positions.
Measurisk also announced that the platform now includes managers that collectively make up more than 50% of the total $1.3 trillion* hedge fund industry assets.
“We are excited that the industry has chosen Measurisk as the preferred outlet to bridge the needs of both the investor and the manager" said Andrew Lapkin, President of Measurisk. "In today’s markets, transparency and risk management are paramount. Position-based risk information provides investors with a higher level of information necessary to make the best investment decisions – especially when having to navigate these difficult market environments.”
Measurisk’s independent, third party risk solutions are designed to address the needs of pension plans, endowments and foundations, family offices, insurance companies, hedge funds and funds of hedge funds. Measurisk compliments the full breadth of J.P. Morgan WSS services including: fund administration; custody; performance analytics and securities lending.
JPMorgan Chase & Co., is a leading global financial services firm with assets of $2.1 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan, Chase, and Washington Mutual brands.
J.P. Morgan Worldwide Securities Services (WSS) is a premier securities servicing provider that helps institutional investors, alternative asset managers, broker dealers and equity issuersoptimize efficiency, mitigate risk and enhance revenue. A division of JPMorgan Chase Bank, N.A. (NYSE: JPM), WSS leverages the firm’s unparalleled scale, leading technology and deep industry expertise to service investments around the world. It has $13.5 trillion in assets under custody and $3.7 trillion in assets under administration.
The Australian – Global hedge funds made an estimated 9.73 per cent in returns for the year to June 24, according to figures published by data provider Hedge Fund Research.
Individual managers, including Britain’s Henderson Global Investors, have seen funds rise by more than 60 per cent this year. In the wake of these results, the £1.8 billion ($3.68bn) Avon Pension Fund has been advised to stick with its 10 per cent allocation to hedge funds after putting them under review, while the Clwyd Pension Fund said it would keep 5 per cent in funds of hedge funds and is looking for a single-manager hedge fund.
West Palm Beach (HedgeCo.net) – Global hedge fund association AIMA (The Alternative Investment Management Association), has published the world’s first global Guide to Sound Practices for Funds of Hedge Funds Managers.
The guide was developed by some of the world’s leading funds of hedge funds practitioners. It focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues. The group consisted of Unigestion, Financial Risk Management; Man Investments; Fauchier Partners; Pacific Alternative Asset Management; Ivy Asset Management; HDF Finance; Penjing Asset Management and Simmons & Simmons.
“AIMA has produced a huge body of work on sound practices and this was the ‘missing book in the library’." Andrew Baker, CEO of AIMA, and a member of the steering group, commented, "It is particularly important given recent events that there should be dedicated guidelines for funds of hedge funds managers. Funds of funds are a critical sector in the industry, are of particular interest to institutional investors, and it is right that AIMA has taken the lead in documenting sound practices. We hope that these guidelines that have been drawn up by such a distinguished and experienced group will be widely observed within the industry.”
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West Palm Beach – (HedgeCo.net) – Hedge fund assets will bottom out at roughly $1 trillion in 2009, after which capital appreciation and $800 billion in net inflows over the next four years will push global levels to $2.6 trillion by 2013, according to a new study of institutional investors, investment consultants and hedge funds released today by The Bank of New York Mellon BK and Casey, Quirk & Associates.
The study, entitled "The Hedge Fund of Tomorrow: Building an Enduring Firm," found that institutions remain firmly committed to hedge fund investing. Institutional investors comprised less than 20% of hedge fund redemptions in 2008-2009, and North American pension plans will represent the single largest source of new capital between 2010 and 2013, followed by British and Northern European institutions. Global high net worth investors could account for as much as 60% of new net flows between 2010 and 2013, although their return to hedge fund strategies will rely on capital market conditions and hedge fund performance.
Funds of hedge funds will solidify their role as the primary hedge fund distribution channel, capturing almost 60% of net inflows between 2010 and 2013 by continuing to offer services most investors will find difficult to replicate on their own, such as manager-sourcing and ongoing due diligence.
According to the report, the hedge fund industry is facing a "transformational crisis" and must address key shortcomings in its business and operating models. As a result, hedge funds will rely more on third parties for a growing range of administrative support. Fund administrators will play a greater role in hedge funds’ operations, which will require stronger integration of hedge fund servicing activity with traditional custody and cash platforms.
"The events of 2008 have changed the old dynamic. Investor and regulatory demands for new levels of transparency mean the legacy operating model no longer works," said Brian Ruane, executive vice president of Alternative Investment Services at The Bank of New York Mellon. "Hedge funds increasingly will turn to independent third parties for middle- and back-office functions such as portfolio accounting and reconciliation, custody of non-collateral assets, pricing and valuation, cash management, and counter-party risk-mitigation. Allowing third parties to play a bigger role in their business will be a sign the hedge fund industry is maturing."
"Enduring hedge fund management firms will more closely align their business models with investor needs for transparency and liquidity. This means new fee models and longer-term incentive structures," said Kevin Quirk, a partner with Casey Quirk. "By striking better-designed balances, they will come to define the central value proposition of active asset management."
While the single-strategy boutique remains a viable model, better-designed and more durable investment management businesses will capture a majority of new hedge fund assets. Four models likely to thrive in the coming years include:
Single-Strategy Boutique: ‘Classic’ hedge fund, dominated by a typical direct investment capability using hedge fund techniques
Multi-Capability Platform: Common brand, distribution and business infrastructure support multiple distinct alternative investment capabilities
Merchant Bank Alternative Manager: Diversified financial intermediation business with core capabilities in investment management
Converged Traditional-Alternative Manager: Investment firm that has successfully integrated alternative and traditional long-only capabilities
Results from this year’s study, the third in an ongoing series jointly created by the Bank of New York Mellon and Casey Quirk, relied on interviews with more than 150 institutional investors, investment consultants, hedge funds, funds of hedge funds, and industry experts around the world.
The funds of hedge funds industry shrank by nearly 30% in 2008. Volatile markets, zero liquidity, and year-end average returns of -16.63% led to the asset outflows for the global funds of funds industry, according to the latest survey of the InvestHedge Billion Dollar Club.
The largest funds of funds – those with more than $1 billion in assets under management – now control a combined amount of $744 billion in assets, according to the 2008 asset flow survey carried out by InvestHedge, the leading publication about investors in hedge funds.
“The industry has taken a serious beating but it is not an industry that is on the brink of extinction. The multi-manager approach and professional selection of hedge funds is still very much essential for the creation of a healthy hedge fund portfolio,” says Niki Natarajan, editor of InvestHedge. “What has happened is that the barriers to entry have finally gone up and only those that are serious representatives of the funds of funds industry will win the institutional money.”
“This clear-out was necessary as there were too many sloppy practices in the industry. Everyone, large or small, good or bad, will be going back to the drawing board to make sure that their business can stand the highest level of scrutiny.”
There are now 137 funds of hedge fund management companies in the InvestHedge Billion Dollar Club and if the assets of the smaller 420 or so funds of funds management companies are also included, this universe still manages roughly half the assets of the hedge fund industry (which currently measures about $1.8 trillion in all according to the latest HedgeFund Intelligence data). Some 27 groups fell out of the rankings after shutting their businesses or the assets falling below the $1 billion level.
UBS Global Asset Management A&Q with total assets of $34 billion regained the top slot in the rankings having lost in the mid-year survey to Union Bancaire Privée, which now has $33 billion in total assets. If the assets of UBS Wealth Management USA are added in, UBS has a total of $36.8 billion, making the largest hedge fund of fund management group in the world.
Man Group, which includes RMF Investment Management, Glenwood Capital Investments and Man Global Strategies, now has a total of $26.6 billion, taking its global position as a group to 4th in the rankings after HSBC, which has $31.9 billion.
Top 10 largest Funds of Funds
31 December 2008
Assets $bn
UBS Global Asset Management A&Q 34.00
Union Bancaire Privée 33.00
HSBC Alternative Investments 31.88
Permal Investment Management 24.40
Blackstone Alternative Asset Management 23.65
Goldman Sachs Asset Management 23.50
Credit Suisse 21.90
Grosvenor Capital Management 20.50
RMF 19.30
GAM Multi-Manager 18.40
Total
250.53
Source: InvestHedge
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HedgeFund Intelligence is the biggest provider of hedge fund news and data in the world, with the largest and most knowledgeable editorial and research teams of any hedge fund information provider. We supply data on more than 11,000 funds and comprehensive news and insight from across the globe. Through four regional brands – Absolute Return, EuroHedge, AsiaHedge, AfricaHedge – and InvestHedge, which focuses on investors in hedge funds – we provide news and data to the global hedge fund industry.
Hedge Funds Review – A majority of all assets under management (AUM) by hedge funds and funds of hedge funds globally are from institutional investors, according to the Alternative Investment Management Association (AIMA).
One third of the AUM comes from institutional investors now come from pension funds.
The AIMA research defines institutional investors as pension funds, university endowments, foundations and governmental authorities. The figures were produced by AIMA’s research department and are based on extensive consultation with the association’s members.
