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.
West Palm beach (HedgeCo.net) – Swiss funds of hedge funds (FoHF) tech. provider Infonic AG, released the latest version of its software suite for FoHFs, HedgeSphere 4.3. “For many funds of hedge funds, including those with complex portfolio structures, management and incentive fees are still calculated manually – a time consuming and error-prone process.” said Thomas Furrer, Infonic AG’s CEO.
“This is an area of supreme client sensitivity,” he continued, “being the primary source of revenue for the management function and a major factor in liability and credibility in administration. HedgeSphere PAD 4.3 provides advanced automation to simplify and streamline the fee calculation process, providing near-real time availability, improving accuracy and transparency over fees and their attribution to investors,” “On the front and middle office side, HedgeSphere MO 4.3 provides tools to improve trading workflow and the exchange of information among portfolio managers, as well as enhanced equity exposure analysis.”
In this latest release, HedgeSphere provides enhanced capabilities for the calculation and processing of investor fees, including: in-advance fee calculations, automated fee crystallization and investor equalization tracking. In addition, HedgeSphere PAD now supports natural hedging and provides real-time views of cash available across accounting entities. Version 4.3 of HedgeSphere MO provides improved trading workflow and exchange of information among portfolio managers, as well as enhanced equity exposure analysis.
Headquartered in Switzerland, and with offices in Zug, Zurich and New York, Infonic AG is the provider of HedgeSphere, the leading product suite for operations of funds of hedge funds. Its HedgeSphere product range debuted in 1999 and has been adopted by the largest and most innovative funds of hedge funds asset managers and administrators in the industry.
NASDAQ – The pace of new European hedge fund launches has stalled this year after the industry’s dismal 2008 performance made investors unwilling to back new ventures.
Data provider EuroHedge Monday said just 47 funds started trading in the first six months of the year, the least in a decade and less than half the number in the same period of 2008. The new funds collectively raised $2.09 billion – a figure that in "normal" times might have been raised by one fund alone.
However, EuroHedge said there are signs the second half could be more fruitful, with several high-profile funds already started or in the pipeline. Those include Theleme, a global equities strategy being set up by Patrick Degorce, a co-founder of The Children’s Investment Fund who left to strike out on his own, and Gyldmark Liquid Macro Fund, a fund started by former BlueCrest Capital portfolio managers.
West Palm Beach (HedgeCo.net) - FSA regulated asset manager, Silk Invest Ltd, successfully launched the African Lions Fund and the Arab Falcons Fund, which helped the hedge fund manager achieve its goals in becoming a specialist in Arab and African equities.
The Luxembourg domiciled African Lions fund and Arab Falcons fund went live on 27th March with an NAV of Euro 100 ($135.2). The portfolio managers, based in London, Cairo, Casablanca and Johannesburg, plan to build up the portfolio up cautiously, taking advantage of liquidity opportunities.
"Raising assets in these markets proved extremely challenging," Zin Bekkali, CEO of Silk Invest said, "Ultimately, the strength of our investment proposition, and the valuation of the markets we specialise, convinced investors to support the launch."
African and Arab markets account for 4% of worldwide market capitalization and this is projected to increase as the region is set to further grow its share of the world’s GDP.
Baldwin Berges, director of business development, observed that “the funds should grow in size fairly rapidly. Investors understand well our proposition and we have built a pitch book in excess of Euro 500 million ($676.2 million). Many of these investors have committed to invest in our funds, once the fund is up and running.”
Daniel Broby, the Chief Investment Officer of Silk Invest says that the launch “is perfectly timed from an investor perspective. There is now immense opportunity in frontier markets of the dramatic declines caused by the credit crisis.”
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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%.
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Philadelphia Inquirer – Pension funds for Pennsylvania state workers and schoolteachers lost more than $12 billion in the three months ended Sept. 30.
And that’s not counting losses from hedge funds, real estate, private equity, and other hard-to-trace private investments – roughly half of the State Employees’ Retirement System – that pension managers don’t plan to disclose until next year.
Using commodities to hedge potential losses in stock markets has not worked lately, and the tighter link among assets these days means diversification benefits may not be as great as before.
Hedge funds, pension funds, mutual funds and wealthy individuals who invested in commodities on the theory that they move independently of other asset classes watched helplessly as the global economic nosedive turned commodities, once the top asset class, into the year’s worst performer after equities.
Those who have studied commodities and longtime investors in energy, metals and grains say that in ordinary times, these markets make good alternatives to stocks.
Bloomberg – Hedge-fund assets may fall to about $1 trillion by the middle of next year, a decline of almost 50 percent from their peak in June, because of market losses and client withdrawals, Citigroup Inc. said in a report.
Managers are likely to see investors, led by funds of funds, pull 20 percent of their money, Tobias Levkovich, an analyst at the New York-based bank, wrote yesterday. Funds of funds are middlemen who select hedge funds for their clients.
“The so-called `Swiss hot money’ wants out and funds are responding,” Levkovich wrote, referring to Swiss investors who have a shorter investing period than pension funds. “Citi’s credit analysts estimate that hedge funds have raised cash to roughly 40% of assets already in anticipation of known redemptions and possibly unanticipated demands from investors.”
Hedge funds lost an average of 16 percent this year through October, according to data compiled by Hedge Fund Research Inc., as stock and commodity markets tumbled and lending tightened. The industry has lost money in only one year — a 1.45 percent decline in 2002 — since the Chicago-based firm began tracking returns in 1990.
Reuters – The days of hedge funds as a red-hot asset class may be cooling, according to a new survey released by fund research firm Morningstar on Monday.
Nearly half of all financial advisers who help wealthy people invest their money said they expect hedge funds to become somewhat less or much less important in clients’ portfolios in the next five years. Among institutional clients like pension funds, 37 percent of those polled said they expect hedge funds to become somewhat less or much less important.
Wealthy investors and pension funds helped hedge fund industry assets double to $1.7 trillion in the last three years, but recently the loosely regulated portfolios have disappointed investors with their worst-ever returns.
Interactive Investor - Man Group aims to win more business from big Asian investors such as pension funds and insurers even as global financial turmoil spurs some existing clients to redeem holdings and seek safety in cash.
The world’s largest listed hedge fund group recently hired an institutional salesperson in South Korea because of the potential it saw there and was studying the long-term opportunity in China, said Tim Rainsford, managing director, Asia Pacific for Man Investments.
"It’s certainly a challenging time. At the same time, the brakes are not on in the business. We will launch products when they’re appropriate," he told the Reuters Finance Summit on Monday.
Newark Star-Ledger – Prompted by criticism from a prominent state lawmaker, the head of the state’s Division of Investment yesterday defended his decision to invest $144 million in pension funds in a BlackRock Inc.-managed hedge fund in the past two weeks, saying the state needed to act quickly to protect its stake and possibly reap big returns.
Senate President Richard Codey (D-Essex) questioned the transparency of the process, taking issue with the state putting $49.5 million in the hedge fund on Oct. 17 — an amount just shy of the $50 million threshold that requires a review by the state Investment Council. On Friday, the state invested another $94 million in pension funds in the BlackRock venture, following a special meeting of the Investment Council.
Reuters – Wealthy investors are cutting back exposure to hedge funds after disappointing returns but are not exiting the sector wholesale, and are likely to come back again once markets have calmed down.
High net worth individuals have been key drivers of the rapid growth of the $2.6 trillion industry. Many invested in free-wheeling portfolios well before institutions such as pension funds decided to go in.
But a dire year of performance is presenting hedge funds with their greatest-ever test — Hedge Fund Research’s HFRI index fell 4.68 percent in September, its second worst month ever, taking the year-to-date loss to 9.41 percent.
Still, given the battering equity markets have taken — the FTSE 100 .FTSE fell 24 percent in the nine months to end-September and has since fallen further — wealth managers say they are not deserting the asset class completely.
Reuters – Britain’s new Personal Accounts scheme, a plan for savers without a company pension, is "highly unlikely" to invest in hedge funds and private equity, said the head of the authority in charge of setting up the scheme.
The investment portfolio of the Personal Accounts scheme, which is set to grow to 150 billion pounds ($279 billion) in 50 years’ time, has not been decided, although the scheme has said its default fund is likely to consist mainly of index-tracking funds.
Tim Jones, chief executive of the Personal Accounts Delivery Authority (PADA), told Reuters on the sidelines of an industry conference: "My personal view is that it highly unlikely because that’s not where our low to middle income earners are."
Hedge funds, which have been blamed for adding to current market volatility due to their role in short-selling stocks, are viewed by pension funds as a diversifier, although returns have been disappointing for many investors this year.
Jones also said the scheme is likely to offer around a dozen funds for savers to select from.
