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Bloomberg – Brazilian hedge funds saw a record 14.3 billion reais ($6.7 billion) in withdrawals last month after returns trailed a fixed-income benchmark even while defying a 25 percent plunge in the Bovespa stock index.
The redemptions brought total outflows this year to 48.9 billion reais, shrinking the industry by 16 percent, according to data released by the National Association of Investment Banks yesterday. The rate of withdrawals is similar to hedge funds globally, even though the worst-performing Brazil funds lost a third as much on average as their overseas rivals.
Brazilian managers avoided declines even as the Bovespa plunged 43 percent this year. Investors withdrew money because they compare performance against fixed-income indexes, said Luiz Felipe Andrade, a director at the association known as Anbid. Bond yields in Brazil are among the highest in the world.
Bloomberg – Brazilian hedge funds saw a record 14.3 billion reais ($6.7 billion) in withdrawals last month after returns trailed a fixed-income benchmark even while defying a 25 percent plunge in the Bovespa stock index.
The redemptions brought total outflows this year to 48.9 billion reais, shrinking the industry by 16 percent, according to data released by the National Association of Investment Banks yesterday. The rate of withdrawals is similar to hedge funds globally, even though the worst-performing Brazil funds lost a third as much on average as their overseas rivals.
Brazilian managers avoided declines even as the Bovespa plunged 41 percent this year. Investors withdrew money because they compare performance against fixed-income indexes, said Luiz Felipe Andrade, a director at the association known as Anbid. Bond yields in Brazil are among the highest in the world.
DealBreaker.Com – Morgan Stanley and Goldman Sachs are linking their lending to hedge funds to the market’s assessment of the credit worthiness of the investment banks. Morgan Stanley will reportedly evaluate the amount of leverage it will supply to hedge funds based on the price of its own credit insurance pricing. Goldman is said to be linking its willingness to provide loans to hedge funds based on its bond prices.
The report of both changes ran in the Financial Times. The changes would limit the ability of hedge funds to borrow from either firm if borrowing by Morgan and Goldman became too expensive, indicating a lack of market confidence in the financial health of the firms.
In one sense, this seems a practical response to volatility in the credit markets, reducing exposure to hedge fund leverage as credit markets for financial companies become unsettled. It does, however, create a self-serving dynamic for the investment banks. If hedge funds taking the view that the companies have become unstable push up CDS or bond yields on the firms, they may find themselves unable to borrow from the firms. In other words, it gives the hedge funds an incentive not to bet against Goldman and Morgan.
HONG KONG (Reuters)- As risk appetite for equities and property wanes, investors are willing to endure negative real returns for bonds from China, Singapore and Hong Kong because their economies are seen better equipped to tackle inflation.
Conventionally, bond yields have to be sufficient to compensate investors for their holdings as inflation erodes value over time, but those seeking safe haven destinations are choosing to brave lower returns in some markets.
Bond investors are proving less patient with India, Thailand and the Philippines, markets where yields will continue to rise on worries about fiscal imbalances and authorities’ limited effectiveness in overcoming inflation.
