HedgeCo.Net (New York) – Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index will finish almost flat with a +0.17% return in October.

Hedge funds had a slightly positive month overall with a widening dispersion of returns among strategies, based on whether managers could take advantage of October’s market volatility.

The Chicago Board Options Exchange Volatility Index (VIX), that measures the implied volatility of S&P 500 Index options, began a surge of approximately 30% on October 23 that took the VIX from just over 20 to just over 30, as equity markets took a turn downward in the second half of the month.

October’s US equity gains for many Long/Short managers were concentrated in the industrial, utilities and health sectors, and from shorting financials. Some managers which have had positive returns in recent months have begun to take profits and wind down for the year, while others which have struggled due to their defensive positions earlier in the year continued to actively seek opportunities arising from the market volatility.

Macro data was mixed, with positive earnings momentum in the US and globally, as well as positive GDP growth figures for the third quarter in the US and China , and encouraging PMI numbers for the Eurozone (except the UK which saw its economy shrink by 0.4% in 3Q). On the other hand, PMI numbers in Singapore slipped to 50.2 from a peak of 54.4 in August, personal spending in the US dropped by 0.5%, and US consumer confidence dropped from 73.5% in September to 70.6%, according to the Reuters/University of Michigan Consumer Sentiment Index.

Certain managers in Equity Market Neutral and Relative Value strategies believe that the increase in market volatility may continue and will likely favor securities pickers who perform fundamental analysis. We believe sideways markets are also generally a better environment for arbitraging rather than long-biased, directional approaches.

For example, Merrill Lynch reports that the convertible bond market was down for the first time since January, but Convertible Arbitrage managers had their 11th consecutive month of positive performance as they shifted their focus to arbitraging strategies rather than the long-only-type credit plays that were profitable earlier in the year.

Equity Market Neutral managers also experienced a positive month and their performance relative to other hedge fund strategies improved, since its market neutral profile can give the strategy an advantage over those with higher market correlations when volatility rises. Dedicated Short Bias had its first positive month since February, and was the performance leader with 5.86% for the month, while many Managed Futures managers gave back some of the profits of the previous two months.

Tags: hedge fund, hedge-fund-index, market volatility

New York (HedgeCo.net) – Salus Alpha issued a statement regarding the reinvention of the hedge fund sector since last year’s crisis. “UCITS Hedge Funds” are known as a new and innovative concept, but the strategy actually goes back to 2002 when the first hedge fund was implemented under UCITS I.

The UCITS directive was established in 1986 but it took 16 years for asset managers to take notice of the opportunities the directive provided, Salus Alpha states. Only few tried to structure innovative hedge fund products within the UCITS directive and only one was able to successfully launch the first UCITS I Hedge Fund and expand the product range significantly under UCITS III.

“From the beginning it was clear to us that transparency, liquidity and risk management were the most important factors to secure our success in inventing UCITS Hedge Funds. We recognized the potential of UCITS Hedge Funds in 2002 and despite the complicated regulations we were able to offer the first regulated Hedge Funds already under UCITS I in 2003.” Salus Alpha explained.

Now after the financial crisis has wreaked havoc on the market everyone wants to be part of the UCITS Hedge Fund world.

“We strongly believe in investing in alpha therefore it’s a mystery to us why the majority of the market invests in beta. It is becoming clearer that the interval between crises will get shorter since the global markets are more volatile than the markets of just one country. Therefore investing in products independent from this market volatility will become more important as markets get closer connected.”

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership in HedgeCo.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

Tags: asset-managers, global-markets, hedge fund, hedge funds, market volatility, transparency

West Palm Beach (HedgeCo.net) -  London hedge fund manager ACP Partners, which is soon to merge with TriAlpha Investment Advisors, said that their long/short eguity strategy fund, ACP Financial Opportunities, has beaten its benchmark by over 65% in its first six months.

Since the fund launch on 1 September 2008 through 28 February 2009, the new fund, which invests across a group of portfolio managers focused on the financial sector, returned 4.9%. Its benchmark, the S&P 1200 Global Financials, returned -60.7% over the same period, and the HFRI Equity Hedge Index -22.2%.

"Financials account for around 20% of global equity market capitalisation and, despite benefiting from significant diversification, the financial sector as a whole exhibits a high degree of complexity and is under-covered by specialist investors." Stephen Greene, partner and CIO of the ACP’s Multi Manager business, said, "Having undergone an unprecedented shock, resulting in severe price dislocations, such conditions are ideal for sector specialist hedge fund managers to add value."

"The key to achieving positive returns has been portfolio construction. The portfolio was specifically structured to benefit from the expected market volatility as we placed significant emphasis on sourcing managers with trading orientated approaches, ‘macro-aware’ processes and short term catalysts for value realisation. Unusually, our fund was one of only a very few fund of funds to be market neutral over this period of turmoil." Greene concluded.

As examples, the portfolio currently shorts banks that lack balance sheet integrity and takes a long position on banks that have been through the exercise of write-downs and capital raises. The underlying managers also hold long positions in property and casualty insurers and reinsurers, who have strong balances sheets and will benefit from a firming of insurance premiums and decreased competition. Conversely, they have taken short positions in life insurance companies whose shorter term liabilities now far outweigh their available liquid assets. Several of the managers have been shorting consumer sensitive sectors, such as credit cards and consumer finance.

The fund has a minimim investment of $1,000,000 (or equivalent) with quarterly redemptions, and a managment fee of 1% and performance fee of 10%.

Alex Akesson

Tags: casualty insurers, dislocations, equity hedge, financial-sector, global equity, hedge-fund-manager, hedge-fund-managers, insurance premiums, lack balance, manager business, market capitalisation, market volatility, portfolio construction, portfolio-managers, property and casualty, quot quot, reinsurers, sector specialist, strategy-fund