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.
Forbes – 2008 was a bad year for hedge funds that invested in Eastern Europe and Russia, forcing many to abandon the region. A month into the new year, they are still steering clear of the market and waiting for more attractive cheap buys to emerge.
"Most funds are waiting to see what happens, looking for distressed asset opportunities toward the end of the year," said the director of a London-based hedge fund, which has been investing in the region. "Potentially there are quite a few funds that could reorientate toward the region but mostly people are managing redemptions and waiting to see what happens," he told Forbes. According to the fund manager, Ukraine, Russia and Kazakhstan’s industrial and resource sectors were likely to be among the first areas re-entered.
Seattle Times – The big stories in the mutual-fund world are always taking shape, but the new year gives us a chance to gaze into the crystal ball to try to read future headlines.
Performance stories always rule the day — and I don’t make market forecasts, leaving that task to people willing to volunteer for the job of village idiot — so maybe it will be a good year if the economic crisis winds up serving as the backdrop for the developing stories, rather than continuing to dominate the news itself.
Here are the fund-world stories that could capture the headlines in the year ahead:
Financial Times – The London market’s new year bounce continued into a fifth session, but Tate & Lyle missed the trend.
Tate lost 8.5 per cent to 386¼p amid speculation that Harbinger, its second-biggest shareholder, might have to sell to meet redemptions.
The US hedge fund run by Philip Falcone cut its holding from 19 per cent to 13.9 per cent through December.
Tate shares were also hit by concerns that the sweetener industry had failed to push through price rises. Supply contracts for 2009 have been fixed at 1-2 cents above last year’s levels, but below the 3½-cent increase requested, according to a trade press report.
Tate shares rallied 5.5 per cent last week, helped by talk of a Russian investor looking to buy a 10 per cent stake but had struggled to find a broker willing to take the trade.
The FTSE 100 closed up 0.4 per cent, rising 17.85 points to a two-month high of 4579.64. Activity remained at holiday levels, however, with just over 840m blue-chip shares changing hands.
Markets Media News – The New Year is likely to see several important shifts in alternative investing, according to Don Steinbrugge, managing partner of Agecroft Partners, a global consulting and third-party marketing firm for hedge funds.
Steinbrugge said during the fourth quarter of 2008, investor demand started to shift toward market neutral strategies, as well as toward strategies that used little leverage and provided investors with transparency and liquidity. That shift will likely continue throughout 2009, he said.
Short-biased funds, which have always been a small percentage of the marketplace, surged ahead in 2008, delivering double-digit returns and capturing a larger market share of alternative investments. Steinbrugge said investors are likely to continue to invest in short-biased funds, but their growth will be at a slower pace than last year.
Commodity Trading Advisors (CTAs) are likely to see a lot of demand as well, as they also delivered double-digit returns last year and proved they are not correlated with other hedge fund strategies. Steinbrugge said, however, that does not mean traditional long-short equity funds are on their way out.
"Long-short equity funds have actually done pretty well in comparison to the S&P 500," Steinbrugge said. "I don’t think you’ll see a huge shift out of long-short equity."
International Herald Tribune – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again.
Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
New York (HedgeCo.Net) – GLG Partners started off the new year by suspending its dividend payments, after capping off a year that saw a steady decline in share value.
This is the first time that GLG, who used to manage $24 billion, has done away with the dividend since it was listed in late 2007. However, with hedge funds seeing a record number of redemption requests, GLG, along with other hedge funds may be trying to salvage as much capital as they can. GLG currently manages an estimated $17 billion.
“We have decided at this time that it is prudent to retain capital rather than continue paying a regular quarterly dividend,” said Noam Gottesman, Chairman and Co-CEO of GLG.
2008 was a tough year for hedge funds across the board. The $3 trillion that the industry was thought to manage at one point, should dwindle down to about $1 trillion, experts say. On average, hedge funds dropped about 19 percent in 2008, according to the Credit Suisse/Tremont Hedge Fund Index.
Shares of GLG closed at $2.27 yesterday, dropping over 80 percent since March 2008.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
