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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 A good portion of these redemptions (nearly $5 billion) represented the assets withdrawn by funds of hedge funds, which continued to witness redemption pressures as investors are increasingly opting to invest directly into hedge funds for better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) – Six months after their worst drawdown on record, hedge funds appear to be demonstrating stronger performance than in some previous recovery periods, such as during the Asian Currency Crisis and the Tech Bubble Burst events.
On average, it has taken hedge funds 13 months to recover from these market disruptions accordind to research peice by Credit Suisse Tremont Index LLC, the research reviews of how hedge funds have repositioned themselves in the first half of 2009 to generate positive returns for five out of the first six months of the year.
The report discusses how hedge funds, as measured by the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”), have generated year-to-date returns of 7.2% through June 30, outperforming, with lower volatility, both key equity and bond indices. Some key takeaways from the report include:
The Convertible Arbitrage, Emerging Markets, and Global Macro sectors have received increased attention as investors began to regain their appetite for risk and global markets rallied.
Performance has improved across most sectors, with the bulk of returns for many strategies moving into positive territory for the year, with 80% of all funds reporting positive returns for the second quarter.
Overall industry assets under management have dropped approximately $18 billion since the end of the first quarter of 2009; we estimate industry assets totaled $1.3 trillion as of June 30 – down from $1.5 trillion at the end of 2008.
As of June 30, 2009, an estimated 9.6% of funds were classified as impaired, meaning they have either suspended redemptions, imposed gate provisions or sidepocketed assets.
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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.
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Bloomberg – Hedge funds had net inflows of $4 billion in June as the index measuring their performance remained little changed after posting its longest stretch of monthly gains since July 2007, according to Eurekahedge Pte.
The industry had net inflows for the second consecutive month, bringing total assets under management to $1.33 trillion, according to a preliminary report by the Singapore-based research firm, based on the 35 percent of funds that reported June performances. The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, lost 0.02 percent, taking its year-to- date advance to 9.4 percent, the report showed.
West Palm Beach (HedgeCo.net) – Quantum Global Financial Corp. has launched the multi strategy New Renaissance Fund with over 37% return for its first 11 months ended May 29, 2009.
The fund uses a systematic approach that employs a new technology. These are dynamically self adapting forecasting models. The algorithms have been in development for 18 years, tested for 7 years in simulation, and finally put into practice 11 months ago resulting in a substantial positive performance gap.
QGF achieved their 37% return with average leverage ratio of 1.25. For the same period, the CSFB Managed Futures Index was down 2.37%, Barclay Multi Strategy Hedge Fund index was down 13.89% and the S&P 500 was down 37.67%.
The fund focuses on delivering absolute performance throughout the economic cycle, transparency, liquidity and partnerships with firms that demonstrate extraordinary ethical compliance and global sustainability.
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West Palm Beach (HedgeCo.net) – “Hedge funds finished up 4.06% in May, capturing the largest monthly gains since February 2000." Oliver Schupp, President of Credit Suisse Index, said, Emerging Markets funds were the strongest performers, finishing up 6.96%. The Emerging Markets sector has experienced a significant turnaround over the last three months as risk appetite seems to be returning to markets, and investors are encouraged by positive signs of global growth and rising commodities prices.” Schupp added, “Convertible Arbitrage managers also performed well during May as funds capitalized on the overall appreciation in convertible bonds globally. The Convertible Arbitrage sector has been up every month this year, and redemption pressure seems to have eased substantially as a result.”
The Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) is the industry’s premier asset-weighted hedge fund index. Unlike equal-weighted indices, the Broad Index does not underweight top performers and overweight decliners to provide the most accurate representation of the hedge fund universe.
Alex Akesson
Edtior for HedgeCo.Net Email: 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!
Bloomberg – Hedge funds returned an average 5.2 percent in May, the best performance in more than nine years, as they attracted more money and global markets rallied, Eurekahedge Pte said.
The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, has advanced 9.2 percent this year, according to a preliminary report by the research firm based on the 27 percent of funds that reported May performance. The industry recorded net inflows for the first time in 10 months in May, gaining $1.5 billion, while total assets rose by $5 billion, the report said.
“Numbers of this magnitude clearly won’t last, but I do think the industry will have a very good year,” said Peter Douglas, principal of GFIA Pte, a Singapore-based hedge-fund consulting firm. “What we like at the moment is equity long- shorts, and Asia is an equity story.” Long-short equity funds bet on rising and falling stock prices.
West Palm Beach (HedgeCo.net) – “Hennessee Group research and discussions with hedge fund managers has lead us to believe that the 20 year secular bull market in bonds is over.” Charles Gradante, Co-Founder of hedge fund investor consultant, Hennessee Group LLC, said of the 9 year high point seen this month in hedge funds.
“We see a problem growing in the bond market. The Government is issuing more debt than it is buying back. This has to lead to rates increasing and equity PE ratios adjusting downward. Our contacts among hedge fund managers continue to buy gold and short Treasuries. However, Hennessee Group expects the Treasury and Fed to put a short squeeze on at an opportune time.”
The Hennessee Hedge Fund Index advanced +5.68% in May (+11.40% YTD), while the S&P 500 increased +5.31% (+1.76% YTD), the Dow Jones Industrial Average advanced +4.07% (-3.14% YTD), and the NASDAQ Composite Index advanced +3.32% (+12.52% YTD). Bonds also rose, as the Barclays Aggregate Bond Index advanced +0.73% (+1.33% YTD).
Managers have been maintaining a conservative investment strategy, which has caused them to lag in the recent market rally. In May, funds also benefited from long positions in energy and commodity-related positions, which performed strongly.
“With hedge funds up +5.68%, May was the best month for hedge funds since February 2000, when the index was up +6.83,” said Lee Hennessee , Managing Principal of Hennessee Group . “Gains were largely driven by arbitrage strategies. However, long/short equity managers, with reduced levels of exposure, also performed well, participating significantly in the market rally while maintaining hedges. With a market correction in the short term being a possibility, we feel that most hedge funds are positioned conservatively and will be able to quickly alter exposures to protect capital if the market experiences a correction.”
“May had the biggest one month run up in commodities in 35 years,” commented Charles Gradante. “It appears to us, from Hennessee Group research and manager conversations, to be speculative and led by commodity ETF demand, which exceeds "real" demand. Furthermore, margin requirements favor the speculators. Hedge funds are betting commodities will continue to rise with many long agriculture commodities, such as sugar and corn.”
Editing by Alex Akesson
For HedgeCo.Net Email: alex@hedgeco.net
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Opalesque – Last week, we heard of fund launches from Galena (energy); Verulam (commodity); Twin Tree; Paulson & Co (distressed property); Abax (Asia macro); Odey (Ucits III); Pictet (agriculture); and Liontrust (European).
The Canadian Hedge Watch Hedge Fund Composite Index was up 2.26% in April (+4.66% YTD); RBC Hedge 250 Index 2.37%, 2.6% YTD; Morningstar 1000 Hedge Fund Index 3.4% (est.), 3.11% YTD; Lyxor’s investable Global Hedge Fund index -0.45%, 0.93% YTD; Greenwich Global Hedge Fund Index 3.49%, 3.91% YTD; Scotia Capital Canadian Hedge Fund Index -0.61%, 4.98% YTD; And the Eurekahedge April report showed hedge funds were up 3.9% YTD, and that the industry assets were now at $1.30tn.
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) – 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 fund adviser, Hennessee Group LLC, announced that the Hennessee Hedge Fund Index advanced +3.84% in April (+5.02% YTD).
“April continued to be a challenging environment for hedge funds, as the market rally was driven by short covering and momentum, rather than changes in fundamentals,” commented Charles Gradante, Co-Founder of Hennessee Group. “While we have seen some improvement in data (most typically that the rate of deterioration is slowing), most funds remain conservatively positioned. Funds are cautious and will wait for fundamentals to improve before significantly expanding their net exposures.”
“Hedge funds underperformed again in April, but have still outperformed year to date. Volatility remains elevated with the S&P 500 experiencing a gain or loss greater than 8% each month this year,” said Lee Hennessee , Managing Principal of Hennessee Group . “Last year hedge funds did a good job of protecting capital, so they don’t need a huge rally to reach a new high water mark. Equity markets would need to double from current levels to reach their previous high.”
Alex Akesson
Editor for HedgeCo.Net Email: 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!
