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 – Wheat has been the poor cousin of commodities this year, losing value as star performers such as copper, lead and sugar have flown, but the humble grain is now beginning to catch the eye of all-important investment funds.
Prices have been weighed down by growing stocks following a record global harvest in 2008 and the second-largest harvest in history this year, but there are signs that the tide may finally be beginning to turn.
CityWire – During the first three quarters of 2009 the total net inflow into investment funds amounted to SEK 70 billion (€6.8 billion) (over $10 billion). September became the tenth month in a row for net fund inflows.
Equity funds have received the bulk of the inflows in September, with net inflows of SEK 9.4 billion (€911 million) and bond funds had a net inflow of SEK 2.8 billion (€271.4 million). Also balanced funds and hedge funds had net inflows of SEK 1.9 (€184 million) and SEK 900 million (€87 million) respectively. Money market funds on the other hand recorded an outflow of SEK 3.9 billion (€377.4 million) last month.
EurActiv – French financial market regulator AMF has aligned itself with British opinion on the EU draft directive to reign in alternative investment funds, in contrast with the strictly pro-regulation stance of French President Nicolas Sarkozy.
At a conference in London, UK Financial Services Minister Paul Myners and the chairman of French market regulator AMF, Jean-Pierre Jouyet, outlined their major points of contention with the EU draft directive to regulate alternative investment funds.
New York (Hedgeco.net) – The Alternative Investment Management Association (AIMA) – the global hedge fund industry association – in conjunction with the Irish Funds Industry Association (IFIA) has published the revised edition of the AIMA Guide to Sound Practices for Hedge Fund Administrators.
The revised Sound Practices Guide deals with the main functions typically carried out by hedge fund administrators, and outlines how administrators contribute to the overall management and administration of a hedge fund. It provides guidance to hedge funds, investors and other service providers as to how sound practice has emerged in the field of hedge fund administration.
“>The AIMA Guide to Sound Practices for Hedge Fund Administrators, which was originally published in 2004, has been updated to reflect various industry developments in areas such as valuations, tax and anti-money laundering.
It covers a hedge fund’s start-up phase; how administrators interact with a fund’s investors; how the net asset value is calculated; the additional services that administrators offer; and the support functions they provide. It is not jurisdiction-specific but is relevant to practitioners around the world.
The section on valuation – one of the most heavily discussed subjects in the investment funds industry – includes key extracts from the recent AIMA Guide to Sound Practices for Hedge Fund Valuation. The recommendations outlined represent a significant step forward in providing a roadmap to industry professionals – and comfort to investors – in recommending governance, control and risk mitigation processes in this area.
The Guide to Sound Practices for Hedge Fund Administrators expands AIMA’s substantial, international body of work developed over the last 10 years including guidelines on Managers; Valuation; Administration; Governance; Business Continuity; Due Diligence for Managers and Service Providers; Anti-Money Laundering; and Funds of Hedge Funds.
Andrew Baker, Chief Executive Officer of AIMA, said: “AIMA is very pleased to offer the latest guidance in hedge fund administration sound practices to the global hedge fund industry and all interested parties. The guide also represents the latest contribution by AIMA to the continuous development of industry standards that will benefit the entire investment community.”
Gary Palmer, Chief Executive of the IFIA, added: “As the leading jurisdiction for the servicing of alternative investment funds, the Irish industry, once again, is very pleased to include the industry’s acknowledged expertise and experience in this valuable project whose objective is to contribute to the advancement of hedge fund industry practices.”
Reuters – Bank of China will launch the first yuan-denominated investment funds in Switzerland as Chinese investors expand their horizons and look to manage exchange rate risk.
The yuan funds, to be invested in a range of global assets, will be among a batch of 24 funds denominated in different currencies issued by Bank of China in Switzerland, the bank said in a statement on its website on Tuesday.
Gulf News – Kuwait Global Capital Management Ltd, the alternative investment funds arm of Global Investment House, has announced positive results for Global Umbrella Europe Hedge Fund.
The fund has returned about 6.6 per cent year to date 2009, outperforming its respective benchmarks.
It outperformed Eureka Hedge Europe, Multi strategy fund of funds index (2.78 per cent) which represents the funds in Europe by over 100 per cent and the MSCI Europe index (4.3 per cent), a Europe focused equity index by over 50 per cent.
Business24-7 – Investment funds that extended redemption periods because of adverse conditions in the market have started to cut their notice periods.
The move comes in response to positive factors such as the recent market rally and improved liquidity levels following the government’s measures to boost the economy.
Funds that have cut redemption periods – the time investors must wait to receive their cash when they sell a holding – include Permal, Markaz and Jabre Capital.
HedgeCo.net (West Palm Beach) – During the first quarter, most alternative investors spent their time rebalancing their portfolios, redeeming with current managers, and waiting for the market to correct itself. This process freed up capital and uncovered gaps in portfolios, ultimately leading to a significant increase in alternative investment interest in the second quarter, according to a report by Brighton House Associates (BHA), a hedge fund and FoHF reserach firm.
Fixed-income strategies and volatility arbitrage were sought after, and experienced a significant boom in interest, as investors looked to take advantage of pricing inefficiencies created by rebounding markets, the report said. Investors’ concerns were evident by a push for greater liquidity, transparency, and access from managers of alternative funds. This shift manifested itself in conversations BHA analysts had with the global investor community.
Nearly a quarter of all real estate fund interest in Q2 came from wealth advisors. Consultants and government pension plans also showed significant interest. 48% of the real estate investors that BHA spoke were specifically targeting the commercial sector. In terms of strategy; most investors were looking opportunistically at any type of real estate exposure, and the majority of investors were focused on core and value-added strategies.
The second quarter of 2009 was very strong for alternative investment funds. Funds of hedge funds in particular saw an increase in investor interest after a disastrous Q1. In the first quarter, BHA received 108 mandates for funds of funds from investors; in the second quarter that number jumped over 40%. Several factors contributed to this change, including increased investor tolerance for lock-ups and longer redemption periods, increased investor interest in single-strategy funds of funds, and various investor types looking to increase their funds of funds exposure.
Many investors that spent the first quarter on the sidelines outlined active mandates while others committed capital to funds. Investors reported interest not only in funds with which they had long standing relationships, but also in new funds to which they were introduced in the past few months.
While many strategies realized increased interest during the quarter, volatility arbitrage and fixed income were two of the most intriguing, the report said. The rise in interest in volatility arbitrage is of little surprise. As the push for liquidity, focused investors on highly liquid, short-term trading-oriented funds. Investors also increasingly favored the relative stability and predictable returns that fixed-income funds provide. In the private equity space, venture capital showed signs of rebounding after a rough start to the year.
During the second quarter, 57% of investors profiled by BHA analysts maintained minimum asset requirements of $1 million to $200 million for potential funds, and 19% looking for funds with a minimum of $21 million to $75 million.
Investors and managers are hoping to build on the momentum created during the second quarter and carry it forward into the second half of the year, the report concluded.
Brighton House Associates is an alternative investment research firm that speaks to investors across the globe about their current interest and activity in alternative investment funds. Brighton House works with a network of over 100 fund managers and assists in indentifying qualified investors for their internal marketing campaigns.
Each quarter, BHA analysts collect detailed profiles from more than 1,000 investors globaly that are actively making investments in hedge funds, private equity and real estate funds, and related funds of funds. These investors’(AUM) range from less than $100 million to more than $10 billion dedicated towards alternative investments.
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HedgeCo.net (West Palm Beach) – Richard Bookbinder is launching TerraVerde Capital Partners LLC, one of the first ”green” hedge fund of funds in the United States. Bookbinder is Managing Member of Bookbinder Capital Management, a New York-based hedge fund of funds, and a founding Principal of Sandler, O’Neill & Partners, L.P.
TerraVerde allocates capital to hedge funds devoted solely to reducing carbon emissions through clean-tech, renewable energy and other environmental sectors such as carbon trading, energy, solar, wind, water, reforestation and more.
”We’re in the early stages of a long-term, multi-generational growth cycle for carbon reduction strategies,” Bookbinder said. ”TerraVerde is focused on those green strategies that are capitalizing on the business potential driven by the need for energy security and clean energy use.”
While managing one of Bookbinder Capital’s other hedge fund of funds, Bookbinder studied the emergence of investment opportunities in the ”green” space. After an in-depth analysis of the industry, including meeting with hedge fund managers, green private equity funds, scientists, historians, and others, he came to the realization: investment funds with an environmental focus offer sufficient, attractive long-term investment opportunities to dedicate an entire strategy focused solely on the “green” space.
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The Australian – The move wades the US into a fierce battle between the UK and other parts of Europe over how tough regulation should be. Some nations, led by Germany and France, are calling for wholesale regulation of financial services in the wake of last fall’s crisis, but the UK says that overly stringent rules would damage its large financial sector and close off US and other funds to European investors.
The US and UK are lining up to change the European Union’s proposed Alternative Investment Funds Directive, a sweeping bid to overhaul regulation of hedge funds, private equity and other alternative investment funds.
The Guardian – Value of assets held by the world’s sovereign wealth funds fell to $3 trillion this year from $3.6 trillion at end-2007 as the credit crisis nearly halved their equity portfolio, according to Deutsche Bank.
The German bank’s report on state-owned investment funds also highlighted their positive long-term prospects, with their total assets under management likely to more than double to $7 trillion in the next 10 years.
Sovereign wealth funds (SWFs), which have replaced hedge funds and private equity as major movers of corporate mergers and acquisitions, have taken a dent in their wealth after pouring $80 billion into major banks just before the credit crisis escalated into major market turmoil.
HedgeCo.net (West Palm Beach) – Paul Myners, the UK Financial Services Secretary to the Treasury, speaking at an Alternative Investment Management Association (AIMA) event this morning in London, said, “the UK is not in the business of blocking more stringent regulation, contrary to what some in Europe may say.”
Lord Myners said the UK government’s aim was “a framework which allows efficient, well run and well regulated fund managers to compete for business without restriction across the EU and to make the EU a base from which to compete in global markets.” But he said that the draft directive, “needs major surgery before this can be delivered”.
He also expressed concern about the protectionist impact of the directive and argued that, “to deny institutional investors a global choice of fund manager would come at a direct cost to pension savers and others who rely on the returns from institutional investment funds”. He said of the custody elements of the directive that “imposing strict liability for delegated custodians would impose large capital costs, make investing in some emerging markets impractical and increase costs to investors”. And on the leverage caps within the directive, he argued that “systemic risks posed by the leverage of any one fund can only be assessed in the context of wider market conditions so capping leverage on a fund-by-fund basis cannot be an effective protection”, adding that it could even be counter-productive.
Lord Myners said that the UK government was, “reaching out bilaterally to leverage natural alliances and win over others” in Europe. But he pointed out that managers threatening to quit the UK “will make my job harder” and would not be well received in Europe. And he called on institutional investors to make their voices heard on the directive. He said, “if institutional investors can make clear which regulatory safeguards they want to see applied to their fund managers and which they find to be costly and unnecessary, this will send a powerful message to policymakers”.
The UK Financial Services Secretary to the Treasury concluded by arguing that, “an open single market in fund management must be a major opportunity for Europe and we must all do our bit to ensure we deliver the best possible result for EU investors and for the future of the EU funds industry”.
