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HedgeCo.net (West Palm Beach) – Assets invested in the hedge fund industry increased by $100 billion in the second quarter of 2009, ending at $1.43 trillion, according to figures released by Hedge Fund Research (HFR). This is the first quarterly increase in assets since 2Q 08, when total industry capital peaked at $1.93 trillion.
The strong performance was led by strategies focusing on Emerging Markets, Convertible Arbitrage and Energy/Basic Materials. These three areas were among the weakest performers in 2008, showing the dramatic shift in market dynamics that has taken place this year.
Investors redeemed $42.8 billion from hedge funds in the second quarter, approximately 60% less than the $103 billion that was redeemed in 1Q 09 and an even more significant drop from the $152 billion that was withdrawn in 4Q 08.
Funds of Hedge Funds continued to experience a higher percentage of capital redemptions than single-manager strategies, as investors withdrew $33 billion from Funds of Hedge Funds in the second quarter. Total capital invested in hedge funds via Funds of Hedge Funds currently stands at $530 billion, 37 percent of the industry’s total capital and well below the $825 billion which were invested through Funds of Funds at their peak level in mid-2008.
HFR also reports that the number of hedge funds, including both single-manager and funds of funds, remained approximately flat during the quarter at just over 8,900. The performance of the HFRI Fund Weighted Composite is now available hedged into four foreign currencies, including Euro, British Pound Sterling, Swiss Franc and Japanese Yen.
"Reflecting the diverse drivers of hedge fund industry performance, recent gains have occurred in an environment in which developed equity markets have been essentially flat", Kenneth J. Heinz, President of Hedge Fund Research Inc, said. "Improved liquidity in credit markets contributed to narrowing some of the pricing dislocations that were created near the end of 2008, and the combination of improved credit markets, gains in emerging markets, and decreased risk aversion have driven broad-based gains in 2009."
Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
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Alibaba News Channel – Investors generally put aside recent worries about the world economy and banking industry woes on Thursday, sending global stocks higher and reversing safety flows into the Japanese yen.
Mixed earnings plagued European markets, however, with Credit Suisse posting better-than-expected profits and engineering group ABB missing forecasts and giving a cautious outlook.
Euro zone purchasing managers provided the latest "green shoots" data to suggest some economic recovery. They signalled stabilisation in their sectors but also record job losses.
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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The Australian – US stocks fell as another drop in oil prices and a warning from Toyota Motor underscored the unsparing nature of the slowdown.
Toyota forecast an operating loss for the current year, the first in the car maker’s history. The Japanese giant was thought to have developed a watertight strategy that would yield profits through thick and thin, making it the subject of managerial guides like the 2004 book The Toyota Way.
But the spreading recession caught up on Toyota, too, and it blamed a slump in the global automobile market and a sharp appreciation in the Japanese yen against major currencies for a likely loss. American depositary shares of Toyota fell $US3.50, or 5.45 per cent, to $US60.88.
General Motors was by far the weakest stock on the Dow Jones Industrial Average, falling US97 cents, or 22 per cent, to 3.52. Analysts warned that the Government rescue measure may not be enough to keep the car and truck maker out of bankruptcy court.
