Search This Blog

12 Nov 2008

New European Hedge Fund Association Launch Underway

Preparations are underway for the creation of a new European hedge fund association,, which has the objective to communicate the public utility of this industry for wealth creation and risk management. A first meeting for founding participants will take place this Friday, November 14, in Paris.

Rene Friedrich, 45, who has analyzed and selected hedge funds since 1996, is launching the initiative, as he sees the industry's advantages undervalued, "There a many opinions about the risks of hedge funds and about the wealth created for their managers, but one sees rarely a balanced view of the general public utility of better asset management in general and of hedge fund work in particular. The realness of the benefits only seems to become apparent when the opposite occurs and wealth is lost in financial markets. The fact is that effective asset management contributes wealth to the economy."

"The initiative aims to give the hedge fund industry a more just image: While individual hedge funds can have more risks than other investment products and investors may lose all or part of their invested capital, the industry overall has, so far this year, avoided the degree of wealth loss of equity investments in general. And a notable number of funds even has avoided losses altogether, no small achievement. It can be argued that future regulations, which could facilitate a greater diversification into hedge funds and funds of hedge funds, may ultimately help to reduce the sum of wealth destructions in cyclical downturns."

"Asset management is not a zero sum game, financial investments are the source of capital in projects, and any wealth created, or not lost, is added, or maintained, in the economy. These are basic principles, and for all the criticisms of financial markets, some just and some not, the objective must be to use what is helping," Friedrich concluded.

Strong Performance For Pure Capital In October

Pure Capital Limited, a quantitatively-driven hedge fund specializing in “targeted non-correlation” saw strong performance from their “Pure Bespoke” customized portfolio solutions in October – with client account performance ranging from +4% to +10% for the month.

Pure Capital describe their “targeted non-correlation” approach as “the provision of positive investment return streams that are very low or negatively-correlated with specific geographic or asset class benchmarks”.

Pure Capital’s year-to-date average performance across all products was +26% at month-end October 2008. Medium term correlation coefficients ranged from -0.15 to -0.80.

"We have a range of quantitative techniques through which we both deconstruct and analyze portfolio performance." Anthony Limbrick, Pure Capital’s Chief Investment Officer said, "Once portfolio performance drivers have been specified, customized portfolio solutions are built using a series of proprietary building blocks, each of which is designed to address specific types of pay-offs".

In September the Paris-based EDHEC Risk and Asset Management Research Centre published a report on overlay hedging in fund of funds. The report, authored by David E. Kuenzi, Remy Chaudhuri and Zhihui Dong of Glenwood Capital investments concluded that “a hedging capability removes a significant constraint from FoFs” and “should have the net result of improving alpha, allowing for more unique and idiosyncratic portfolios, and for more creative structured products”.

Limbrick highlighted the benefits to a European fund of fund of implementing a Pure Bespoke solution - “if one were to use the Eurekahedge European fund of funds index as a fund of fund proxy, our Pure European BetaMatch program could have reduced fund of fund losses from almost 19% year-to-date to less than 1%. Not only would performance have been improved, but there would have also been more cash available for redemption needs. We also give our clients the choice of upside beta exposure if they require it”.

In response to a question regarding the type of client exposures hedged by the Pure Capital, Limbrick said the Pure Bespoke portfolio solutions typically address “pervasive equity beta exposures or potential gap risk issues but we do look forward to widening the approach to address a range of more exotic or dynamic exposures”.