30 Oct 2009
The portfolio, featuring over 30 underlying funds representing 10 different strategies, is particularly well diversified and boasts a positive performance of +11.16 %1 to date in 2009.
Only approximately 16% of funds held by ALTIN have restricted redemptions of one form or another, down 4% from 20% in the last quarter. This relatively low proportion does not affect ALTIN as, being a fixed-capital investment company, it is not faced with redemption requests.
The portfolio’s great liquidity allows the investment manager to conduct a dynamic management strategy and benefit from the current investment opportunities. During the third quarter of this year, the manager has therefore continued the investment programme initiated earlier this year. Since June, weightings in “Long/Short Equity”, “Multi-Strategy” and “Credit” strategies have been increased, through a reduction of cash, “Event Driven” and “Other Equity and Derivatives” strategies.
ALTIN AG was launched in December 1996 and has been listed on the Swiss Stock Exchange since its inception, as well as on the London Stock Exchange since 2001. ALTIN is a multi-strategy fund of hedge funds investing in more than 30 hedge funds representing various investment styles. The Company holds one of the world’s longest track records as an exchange-listed fund of hedge funds. Its objective is to generate an absolute annual return in US dollars terms with lower volatility than equity markets.
"We appreciate that Lipper and Hedgeworld have recognized our fund for this award. Lipper's methodology makes this award especially credible because they consider risk and return over a statistically significant period of time, in this case 3 years."
Eric Hage, Chief Investment Officer of Mohican Financial Management, said.
The Lipper Award honors a hedge fund and management firm that has delivered the best performance among peers. Each candidate for the award is a fund that has provided superior consistency and risk-adjusted returns when compared to similar funds.
The hedge fund manager is reportedly in talks to raise $500 million for the QuantZ Quark Market Neutral Fund. One of his analysts from RBC is joining him in the launch in addition to a marquee name Quant who is being brought on board as Head of Research.
Sharma has extensive experience in asset management, serving at a number of high-profile Wall Street Firms. He was previously on the Portfolio Management Team of the Merrill Lynch Large Cap Series Funds with Bob Doll, who is now Global CIO for BlackRock's equity arm. At BlackRock (MLIM), his investment role spanned a dozen quantitatively managed funds & separate accounts with approx $30B in AUM pegged to the models. Subsequently, he managed Quant EMN portfolios of significant size at Deutsche Bank as Senior Proprietary Trader. Most recently he ran a Proprietary Trading desk at RBC Capital Markets which included Quant EMN, Short Term & Event Driven portfolios (upto $700mm exposure).
Sharma also has significant Risk Management expertise having created the AIRAP (Alternative Investments Risk Adjusted Performance) measure for hedge funds in addition to being co-founder of the Quant Strategies unit (previously Risk & Performance) at MLIM. Prior to that he was Manager of the Risk Analytics and Research Group at Ernst & Young LLP where he was co-architect of Raven TM (one the earliest derivatives pricing/ validation engines).
His publications have appeared in the Journal of Investment Management, Risk, Wiley, HedgeQuest, World Scientific, Elsevier etc. He is a frequent speaker at conferences (Risk, GARP, Institutional Investor etc).
29 Oct 2009
In another major milestone: Securities Investor Protection Corporation President Stephen Harbeck announced that the SIPC advances committed in the Madoff proceeding now exceeds the total of all advances made in the 321 prior liquidations handled under SIPA since the act creating the Securities Investor Protection Corporation (SIPC) was passed by Congress in 1970.
"The fact that one liquidation proceeding has now involved more in advances from SIPC's reserve than all 321 of the liquidations that preceded it is a testament to both the wisdom of those who created this safety net for investors and the resiliency of the safety net itself." SIPC President Harbeck said.
"I am pleased to report that we have made significant headway in recent months in the processing of BLMIS customer claims under what have been very challenging circumstances." BLMIS Trustee Irving H. Picard said, "With more than $4.43 billion in customer claims already allowed and advances of over half a billion dollars committed by SIPC, the Trustee's office is working tirelessly to ensure that every BLMIS customer with a valid claim is given full consideration and handled as expeditiously as possible. That will continue to be our focus in the coming weeks and months."
At a briefing, Picard and Harbeck said that as of noon EDT on October 27, 2009, SIPC committed advances to Madoff customers now totals $534,250,113.22. In SIPC's previous liquidations of brokerage firms from 1970 up to the time of the Madoff case, a total of $520 million has been advanced to pay customers and for the expenses of those cases.
SIPC maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms.
For more information about SIPC liquidation proceedings, see "The Investor's Guide to Brokerage Firm Liquidations".
"BNY Mellon stood out in this category; a truly global administrator which has increased its market share and boasts substantial single manager assets," said HFMWeek's panel of judges.
"Recognition like this is noteworthy because it validates and reinforces our commitment to clients and the investments we're making to better serve them," said Brian Ruane, executive vice president and head of global client management North America at BNY Mellon. "It also speaks to the talent and collaboration of our global team to receive this honor from HFMWeek."
BNY Mellon Alternative Investment Services has more than $200 billion in assets under administration and an extensive global presence, including locations in Bermuda, Cayman Islands, Hong Kong, Ireland, Luxembourg, Singapore and the United Kingdom, as well as US offices in California, Florida, Massachusetts, New Jersey, New York, Pennsylvania and Texas. In addition to administration the company offers a wide range of accounting, cash management, collateral management, custody, corporate trust, asset management and wealth management services to the hedge fund industry.
HFMWeek's U.S. Service Provider Awards are designed to recognize companies that have outperformed their peer group over the course of 2008 and 2009. BNY Mellon AIS captured the best single manager administrator award as a result of its robust technology platform, range of value-added fund services, and overall client service excellence.
28 Oct 2009
The OakRun Income Plus Fund charges a 1% management fee and a 10% incentive fee with a $1MM minimum investment requirement, it returned 0.73% (9.26% Annual Yield) for September 2009 and paid out its fourth quarterly dividend of 2.25%.
“The flagship OakRun Income Plus Fund has received incredible initial feedback from institutions. The fund is invested in highly liquid instruments with substantially higher yields than comparable investments with duration of less than 45 days,” Portfolio Manager, Arturo Neto, CFA, said.
The fund is an actively managed receivables re-factoring fund born out of demand for a low risk, income generating investment. The fund strategy is to purchase commercial receivables (obligations) of highly rated companies. The fund insures a high proportion of portfolio holdings and strives to maintain a short term investment grade weighted average credit quality of A1/P1. OakRun Capital performs a rigorous due diligence process which includes the firms detailed proprietary research and selection method, leading independent third party investment ratings (Moody’s, S&P, Fitch) and credit and payment history (Dun & Bradstreet).
HedgeCo Blogs - This outline addresses the European Commission’s (the “EU”) proposal for a Directive meant to establish an EU framework for the authorization and operation of alternative investment fund managers (“AIFM”). Of particular focus are non EU domiciled managers and funds and EU managers seeking investors for non EU domiciled funds.
On April 30, 2009, the Commission of the European Communities (“EU Commission”) published a “Proposal for a Directive of the European Parliament and the Council on Alternative Investment Fund Managers.” The Directive relates to activity within the EU Member States. Jurisdictions outside of the EU are referred to as Third Countries.
Who is affected? What is an AIF? AIFM?
Virtually all investment managers and “collective investment undertakings” are covered by the Directive. As drafted, the Directive applies to any natural or legal person established in the EU who manages one or more AIFs and which provides management services to one or more AIFs regardless of its domicile. The Directive in current form affects:
1. Hedge funds, private equity funds, venture capital funds, and real estate funds (collectively referred to as “Alternative Investment Funds” or “AIFs” in the Directive)
2. Persons or entities rendering “management services” to AIFs. These are referred to as “Alternative Investment Fund Managers” or “AIFMs” in the Directive and include:
a. Investment advisers and managers of any of the above
4. Valuation agents and appraisers
5. Delegates of the above (sub-advisers, sub-custodians etc.)
The Directive by its terms exempts UCITS from coverage.
In general terms, what is prohibited?
The Directive generally prohibits any AIFM which is not authorized by a Member State of the EU from providing management services to any AIF domiciled in the EU and prohibits a non EU domiciled AIFM from “soliciting” investors in the EU. Note that the focus of the Directive is on the AIFM and not the AIF itself. This is similar in approach to the United States requirement to register the AIFM (if certain conditions are satisfied) and not the AIF itself.
What is definition of “management services”?
The term “management services” is defined as “managing and administering” but the Directive does not go into any detail as to what “managing” means or what “administering” means. It would appear to include investment management, risk management and other services.
Are there operating conditions imposed for AIFMs?
The Directive imposes a number of business requirements on AIFMs including, without limitation, a duty to:
1. act honestly, with due care, skill and diligence and fairly in conducting its activities;
2. act in the best interests of the AIF it manages, its investors and the integrity of the market;
3. act in a manner that treats investors fairly;
4. identify the conflicts, and manage those conflicts;
5. operate its organization effectively; and
6. structure its internal organization such that risk and portfolio management
UCITS are essentially mutual funds designed for retail investor consumption. They are established under the Undertakings for Collective Investments in Transferable Securities Directive (the “UCITS Directive.”)
Many of the conditions seem obvious, but some raise issues. For example, is it always possible for an AIFM to act in the best interest of the AIF, the best interest of the investors and preserve market integrity all at the same time?
How are “side letters” affected?
No investor can receive beneficial treatment unless disclosed to all investors in the AIF. Accordingly, the Directive would essentially require all side letter arrangements disclosed to all investors.
1. Whether or not material.
2. Investors’ identity would be disclosed.
What standards would be imposed by the Directive?
1. Risk Management. The Directive mandates that there be a separation between risk management and portfolio management.
2. Short sales. There is a specific concern with and focus on short selling. The EU Commission is to set forth rules with regard to short sales.
3. Liquidity management. The AIFM must adopt procedures and implement appropriate liquidity management policies to ensure that its liquidity profile is consistent with its investment strategies.
a. Regular stress testing is required.
b. AIF redemption policies need to be consistent with liquidity management policies, and vice versa.
4. Leverage. Disclosure to investors and regulators on a quarterly basis. The EU
Commission is authorized to establish standards.
5. Independent valuator is required.
6. Independent Administrator is required.
7. Independent Depositary is required and must be a credit institution authorized in the EU.
What AIFMs are exempted under the Directive?
Under the Directive, the following AIFMs are exempt from seeking authorization:
1. AIFs that use leverage: Any AIFM with assets under management (in the aggregate) of €100 million or more.
2. For AIFs that do not use leverage, the threshold is raised to €500 million provided. The AIF has no redemption right that is exercisable during a 5 year period following the start up of the AIF.
3. Certain banks, insurance companies, pension funds, etc.
4. AIFMs that render services only to UCITS.
Are there minimum capital requirements being proposed?
Yes. Each AIFM must maintain at least €125,000 in regulatory capital. Where the aggregate value of the AIFs exceeds €250,000 then the AIFM must maintain additional capital of .02% of the excess over €250,000.
Can an EU domiciled manager hire a non EU sub-manager? Can a non EU AIFM hire an EU AIFM? How is delegation handled?
This kind of delegation is virtually impossible because under the Directive a sub-manager or delegate with regard to portfolio management services or risk management functions for an EU AIFM would need to be able to provide that service in its own right in the EU, i.e. would need to meet the requirements of the Directive itself. This would seem to prohibit delegations, sub-advisory agreements and even parent subsidiary relationships to AIFMs who do not meet the requirements of the Directive.
How are administrators and other service providers affected?
An EU AIFM would need to seek authorization from its home Member State before a third party service provider can be appointed for the AIF.
Presumably there will be some procedure established by which an AIFM can become authorized in its Member State to render services to an EU AIF. But as to non EU domiciled AIFMs, the Directive does not permit such AIFMs from even seeking
authorization under the Directive to manage an EU AIF. One possible alternative is for the non EU AIFM to establish a subsidiary in the EU and seek approval from there but in light of the strict delegation rules (described below) it is doubtful whether this type of strategy will be practical.
How is marketing, even to sophisticated and high net worth investors, affected?
1. Non EU AIFM marketing to EU investors is generally not permitted.
a. After a three year waiting period following the effective date of the
Directive, a non EU AIFM would be permitted to apply for authorization to market to “professional clients” if:
i. The EU Commission has determined that the Third Country has adopted “prudential regulation and ongoing supervision” equivalent to the regulations set forth in the Directive as to management, administration, custodian, valuators, leverage, liquidity management etc. This is a subjective standard and may be difficult, if not impossible, to attain.
ii. The AIFM’s Third Country has agreed to reciprocal arrangements as to marketing and grants comparable market access to EU AIFMs.
iii. Cooperation agreement in place as to information sharing with regard to market stability.
iv. Tax protocol adopted by Third Country that is consistent with the Model Tax Convention of the EU (e.g. as to tax data information sharing.)
2. EU AIFMs marketing EU AIFs to EU investors. This is permitted once the Member State regulator is notified (similar to the “Blue Sky” filing requirements imposed within the United States.)
3. EU AIFMs marketing non EU AIFs to EU investors. After the three year waiting period, such marketing is permitted to professional clients but only if:
a. The AIF is domiciled in a country that that has signed a tax protocol agreement that complies with the EU Model Tax Convention, which provides, inter alia, for an effective exchange of information.
4. Unclear what happens during the 3 year period. No authorization is allowable under the Directive but presumably each Member state will decide on its own.
Can AIFs taking control positions in issuers?
Yes, however control positions in excess of 30% of the voting shares of an issuer require disclosure under the Directive.
What confidential information is required to be disclosed under the Directive?
While reporting is required by various provisions of the Directive, it is silent on the protection of legitimate confidential data.
What is a “professional client”?
A client (in this context, an investor) that meets at least 2 of the following 3 conditions:
1. It has carried out transactions in significant size on the relevant market at an average frequency of 10 such transactions per quarter over the previous 4 quarters.
2. It has a portfolio of financial instruments (including cash) exceeding €500,000.
3. It works for or has worked in the financial sector for at least one year in a professional capacity which requires knowledge of the transaction or services to be rendered.
There are also per se professional clients which include banks, regulated financial institutions, pension funds, among others.
What about existing deals?
No information has been made available; on this issue the Directive is silent.
Michael G. Tannenbaum is a founding partner of Tannenbaum Helpern Syracuse and Hirschtritt LLP, where he heads the Firm's Financial Services, Hedge Funds and Capital Markets Group. For close to 30 years, he has concentrated on U.S. and non-U.S. based hedge funds, funds-of-funds, investment partnerships, investment adviser and SEC, NFA, NASD and CFTC regulations, venture capital and private equity matters, futures, swaps, derivatives, structured finance deals and corporate and securities law and regulation. He regularly advises clients as to registrations of advisers, operating agreements and business combinations in the hedge fund and investment adviser space, and represents funds, advisers and sponsors as part of his global practice.
The bill received broad bipartisan support in a 67-1 vote. Rep. Susan Kosmas, D-Fla., the drafter of the measure, said a one-year transition period for registration is necessary because both the SEC and fund managers will need time to organize themselves, news source MarketWatch said.
"The SEC will need time to prepare for the additional responsibilities that will come from the registration of potentially thousands of new managers," said Kosmas. She added that managers will need time to set up formal compliance programs, hire chief compliance officers, all of which is required by the legislation.
27 Oct 2009
The fifth annual fundraising gala will include a live auction conducted by Lord Jeffrey Archer. Items on auction will include a hand-signed Salvador Dali etching donated by the Broad Gallery and a dinner for 10 cooked by Chef Tom Aiken in your home. The evening will also feature a spectacular silent auction of limited edition works of art by some of the 20th century's most celebrated artists, including Picasso, Dali, Matisse and Chagall.
"We are very proud to be in the position to hold a second fundraising event in 2009, despite the less favourable conditions for philanthropy over the past year." Robert Mirsky, Chairman, Hedge Funds Care UK, said, "Our support from the hedge fund industry continues to grow and allows us to help prevent and treat child abuse in the UK."
Since it was established in 2006, the UK chapter of Hedge Funds Care has raised over US$1.4 million through its three annual fundraising events and a summer event held earlier this year. To date, Hedge Funds Care UK has pledged funds to numerous charities, all focusing on improving the lives of children and families that have suffered the trauma of abuse. Recent beneficiaries include: Barnado's (Young Women's Service), CSV(Volunteers in Child Protection) and Family Action (Building Bridges Newham).
Hedge Funds Care was founded in 1998 with the mission of raising funds to support activities focused on the prevention and treatment of child abuse and neglect. Funds are raised through Open Your Heart to the Children benefits in the United States, Canada, Cayman Islands and the UK. Hedge Funds Care UK is registered with the Charities Commission in the United Kingdom.
26 Oct 2009
Peltz is Chief Executive Officer and a founding partner of hedge fund Trian Fund Management, L.P., which owns 6,946,756 shares, or approximately 4.3% of Legg Mason’s outstanding common stock.
"Over the past several months, my colleagues and I have been engaged in constructive dialogue with Mark Fetting and other members of the Legg Mason management team." Peltz commented, "We share their view that Legg Mason’s recent strategic initiatives are improving the Company’s operating performance and I look forward to contributing as a Board member and working with the management team and the Board to help this great company achieve its full potential.”
The addition of Mr. Peltz to the Board reflects an agreement between Legg Mason and Trian Fund Management, L.P., certain funds managed by it and certain of its affiliates. In addition, pursuant to the agreement, Trian Partners has agreed to vote its shares in favor of Legg Mason’s director nominees as provided in the agreement and made certain other commitments.
Launched by UK hedge fund managers, Aramid Asset Management and Thomas Funds, the long and short multi-asset hedge fund, which will invest across equities, bonds and commodities, will be jointly managed by Aramid co-founder Sean Flanagan and Thomas Funds’ Glen Cremer.
"Our first step is to set up a target for maximum loss that we can tolerate in the next 30 to 60 days on which we base our allocation to each asset class and the level of hedges." Cremer says.
"We also hedge at all times because we believe market timing is almost impossible to achieve. There is no free lunch – you can only make money by taking residual market, credit or liquidity risk. The key is to identify that residual risk and minimise it using risk management overlay."
The Cayman Islands-domiciled fund can be accessed through both a closed-ended Jersey feeder fund, the Aramid All Asset Capital Preservation Fund Limited or a Cayman- domiciled open-ended feeder fund, the Aramid/Thomas All Asset Preservation fund.
22 Oct 2009
Brighton House Associates (BHA) is an alternative investment research firm that speaks to investors across the globe about their current interest and activity in alternative investment funds. Brighton House works with a network of over 100 fund managers and assists in indentifying qualified investors for their internal marketing campaigns.
The rebound in global equity markets during the first three quarters, along with successful capital-raising campaigns by large financial institutions, created a favorable environment for catalyst events. The announcements of acquisitions by well-known companies such as Xerox, Walt Disney, and Kraft Foods are only a few examples of the flurry of corporate activity that took place in a variety of sectors during the third quarter.
Dealogic reported that banks and financial institutions sold more than $11 billion in non-government guaranteed bonds in September alone, an increase of more than $6 billion over August.
A senior investment analyst at a southern U.S. university with approximately 30 percent of its endowment dedicated to alternative investments expressed substantial interest in distressed corporate credit and senior bank loans.
As the year winds down and markets continue to stabilize, BHA expects event-driven strategies to present considerable options for attractive returns. York Capital Management, for example, a New York-based firm with over $9 billion under management, recently partnered with Bank of America Merrill Lynch and launched a UCITS III-compliant event-driven fund. Capitalizing on market conditions, the fund has reportedly raised $100 million in assets.3 Furthermore, M&A activity is poised for a flurry of activity particularly in the biotechnology and pharmaceutical sectors.
Long/short equity hedge funds steadily gained momentum in the third quarter, continuing a trend that began in the second quarter.
Many investors turned to funds of funds during this quarter for the same reasons they invested before the economic downturn: superior manager selection, enhanced risk management, diversification, and consistent returns. Funds that offered these benefits attracted investor attention.
Although some investors mentioned interest in single-strategy funds of funds—the most popular being CTA/managed futures, credit, distressed debt, global macro, and long/short equity—81 percent of investors were focused on multi-strategy funds of funds.
During the last six to eight weeks of the quarter, many funds of funds reported that investors were becoming more serious and detailed in their research. This is a key indicator that commitments are beginning to flow back into the industry. BHA sees this as another sign that funds of funds will continue their rebound.
BHA saw a steady increase in demand for technology-focused funds among private equity investors. During the third quarter, the percentage of investors looking for technology-focused funds in the private equity space increased 11.2 percent. Year to date, the technology sector has been popular with approximately 18 percent of investors researching private equity funds.
Hedge fund investors also expressed increased interest in the technology sector. In the first quarter of 2009, of the top five sectors, the technology sector garnered 20.1 percent of overall market share in the hedge fund space.
During the second quarter, this percentage increased slightly. These numbers indicate that hedge funds increased the amount of capital allocated to technology-related opportunities. Separately, of the hedge fund investors BHA analysts interviewed in the third quarter, the percentage that were looking for technology-focused funds rose to 11 percent.
Both in the hedge fund and in the private equity fund space, increased interest in the technology sector is largely due to industry consolidation and company restructurings, both of which help to eliminate inefficiencies and increase profit margins, leading to solid returns for managers and investors.
Private Equity Funds
During the third quarter, investor interest in private equity funds remained strong and originated from a wide array of different investors. Although funds of private equity funds are statistically the forerunner in the search for private equity funds, BHA’s data suggest that this quarter’s interest came from an even broader source of investors.
Wealth advisors, government pension plans, family offices, and insurance companies all showed considerable interest in speaking with private equity fund managers.
Funds of private equity funds showed the most interest in single-manager private equity funds.
One reason for this diversified interest is that investors from across the globe were, once again, beginning to express interest in capitalizing on opportunities that have emerged in the wake of the financial crisis.
The continued thaw of credit markets and the resurgence of equity markets led to a sense of optimism in the alternative investment community during the third quarter. Investors reassessed their portfolios and found opportunities abounding in hedge funds and private equity and real estate space. Investors looked to capitalize on distressed situations through event-driven and merger/risk arbitrage hedge funds, they recognized the significant growth potential of the early stage private equity space, and they targeted emerging market real estate investments that could be poised to rebound over the next several years.
Investors took the time to reevaluate their positions, and focused on making strategic allocations to address specific shortcomings or potential opportunities, such as the ones that they found in the technology sector. Institutional investors sought to make savvy investments that do more than satisfy a percentage of a diversified portfolio. They looked for specific fund managers that have an expertise and a track record of success.
If these statistics are an indication of future trends in the alternative industry than BHA expects the optimism that has driven the equity markets back up to continue to ripple into the alternative investment space. BHA data suggests that the strategies and sectors that are poised for explosive growth in the event of an economic recovery will continue to be the focus of alternative investors throughout the remainder of 2009.
Editing By Alex Akesson
The Capital Introduction team, which is led by Peter Tarrant, Managing Director and Head of Business Development at BTIG, works with a wide range of managers and has a particular expertise in new and emerging hedge fund managers. Through the firm’s network and existing client base of over 1,200 institutional clients, the Capital Introduction team looks to provide clients with effective and targeted introductions.
“Our ability to offer our Prime Brokerage and Outsource Trading clients an enhanced capital introduction team is an important move in BTIG’s strategic growth plan,” said Justin Press, Managing Director and Co-Head of Prime Brokerage at BTIG. “We are a client-led business and strive to provide added value at every stage of the client’s relationship with us.”
Ms. Bloom joins BTIG from Credit Suisse’s Private Fund Group where she was an Analyst. Prior to Credit Suisse, she was with Merrill Lynch’s Real Estate Investment Banking team. Ms. Bloom is responsible for capital introduction on the East Coast and across Europe. She is a graduate of Yale University.
Ms. Wagner joins BTIG from UBS where she was an Associate Director in the Prime Brokerage Sales team. Prior to UBS, she was an Investment Analyst for FirstWorthing. At BTIG, Ms. Wagner is responsible for delivering capital introduction coverage for the Western United States region. She is a graduate of The University of Texas at Austin.
“Our strong network of senior level executives across the hedge fund industry and with institutional investors means that we can provide our clients with the most appropriate, high quality introductions to help further their growth,” added Tarrant.
His bail was set at $100 million. He also said in regard to the charges, that, "they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
"The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital." Rajartnam concluded.
21 Oct 2009
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA's largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
"It very likely that we are at the advent of what could be dubbed “The mother of all carry trades” and this time it is not only coming from Asia but also from Europe and the USA." Berges said, "Developed world government debt yields are too low and commodities are looking mighty expensive."
"We have already seen this trade unfolding in the corporate bond arena, investors will likely continue to venture out further into the wilderness of frontier markets in search of high yields. There is very little consumer and/or corporate debt. The local banking system is reluctant to lend money or lack the experience required to evaluate the risk and therefore capital adequacy ratios in the financial sector tend to be very solid."
Hedge Fund Highlights:
Current average Yield to Maturity above 16%
Average duration of 3.4 years
High diversification: currently 65 holdings, 27 countries, 17 currencies
Luxembourg UCITSIII Fund offering weekly liquidity
"Paced by an exceptionally strong September, hedge funds began to regain their swagger in the third quarter," said Nadia Papagiannis, Morningstar alternative investments strategist. "The road to recovery for hedge funds was paved by strong performance in riskier asset classes such as emerging markets, distressed, and small-cap securities."
But hedge funds overall haven't yet returned to their October 2007 peaks, the Morningstar 1000 Hedge Fund Index declined 25.2% through February 2009, and has only recovered 20% in the last seven months, with 11.4% to go.
Certain hedge fund strategies have set new highs, however. In September, hedge funds following global macro-economic strategies, fully recovered from 2008 losses, despite lagging the performance of other category indexes this year.
20 Oct 2009
“We selected BNY Mellon as a global custodian as in the current economic environment it is important - to both the firm and to its clients - to have a provider with the financial stability to ensure the safekeeping of our assets. Neil McCallum, chief operating officer at the $4 billion Capula Investment Management LLP, said.
“BNY Mellon is committed to helping our hedge fund clients reduce their counterparty risks. Our appointment gives Capula an additional custody option with a custodian of recognized quality.”David Aldrich, managing director and head of alternative investment services EMEA, at BNY Mellon said.
19 Oct 2009
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."
According to Bloomberg, an unidentified informant began setting up interviews and taping the conversations, leading to the uncovering of the alleged massive insider trading scheme that generated more than $25 million in illicit gains.
The SEC also charged six other hedge fund managers with insider trading, including senior executives at major companies IBM, Intel and McKinsey & Company.
“This complaint describes a web of fraud that has been unraveled,” said SEC Chairman Mary L. Schapiro.
“What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be." said Robert Khuzami, Director of the SEC’s Division of Enforcement. “He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity.”
15 Oct 2009
The Guardian reports that at least £70 million ($114 million) is owed. Others say the hedge fund manager is not on the run, but in a hospital receiving care. His lawyers would neither confirm nor deny, the Guardian said.
The questions started when Levene failed to appear at crucial court hearings to defend himself, prompting the court to freeze assets and demand he surrender his passport. A spread betting firm also alleges that Levene has racked up gambling debts.
"Levene is known to be a generous family man with an extravagant lifestyle. One leading city broker described him as a man who 'lived the dream' and had a private jet on call," the Guardian reported.
"Last week certain information was passed to the fraud squad." the police said in a statement, "Detectives are now assessing the matter to determine what action if any is necessary. At this time no decision has yet been reached whether an inquiry should be conducted."
"As a presenter I was very happy to see many start up funds in the audience as well as investors and service providers." Joe Goldstein from G&S Fund Services said, "I think it was a good environment for someone looking for the right information to plan and succeed in establishing a a start up hedge fund. It is typical that in post-Madoff period fund managers embrace the importance of a good infrastructure in gaining investor confidence and building a good fund."
After the speeches were drinks and networking, the general feeling among investors at the event was the the importance of knowing top of the line service providers, ones that stand out and have a prominent reputation.
"After the collapse of Bernie Madoff's ponzi scheme, hedge fund infrastructure has come to the forefront in the industry." Andrew Schneider, founder and co-principal of HedgeCo Networks said, "Investors are performing in-depth due diligence and looking for robust infrastructure before committing their capital. This is especially true for new hedge funds. Potential investors are relying heavily on the reputations of a hedge fund service providers including third-party administrators, auditing firms, prime brokerage houses, and legal counsel to prevent fraud and massive failures like never before."
14 Oct 2009
Paulson & Co. Inc., on behalf of several hedge funds and accounts he manages will also have certain registration rights in connection with its acquisition of the common stock and warrants.
“This is a bold move,” said Andrew Schneider, founder and co-principal of HedgeCo Networks. “With the current healthcare debate in full swing, the timing is everything. But then, this is the kinds of risk we've come to expect from Paulson." Paulson made $2.5 billion last year, hedging against the U.S. housing market.
Paulson’s warrants will also convert to common stock at $6.50 a share. Conseco rose 78 cents, or 16%, to $5.77 at 7:47 p.m. in late New York trading. The shares have dropped about 68% in the past two years.
Conseco, run by Chief Executive Officer James Prieur, will also file for a public offering of $200 million in new common stock and will sell $293 million in convertible notes. The bond proceeds will be used to repurchase existing notes, the company said. The new debt, due in 2016, will pay investors 7%.
Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 %, compared with a loss of 19% for hedge funds on average.
Just last June, Regan settled charges with the SEC on another of his hedge funds, Regan and Regan & Co., which the SEC alleged, he fraudulently obtained at least $15.9 million and ultimately caused investors to lose at least $6.69 million through Regan's misappropriation and trading losses. The settlement was closed without Regan admitting or denying the allegations.
When his hedge fund, River Stream Fund collapsed in April 2008 Regan turned himself in in May 2008 and pleaded guilty to one count of fraud the following month. He began the fund in 1998 with money from friends and acquaintances, according to the prosecution.
While Regan agreed to pay restitution, he filed for bankruptcy protection after turning himself in. The government said it is unlikely his victims will ever be compensated.
The SEC is also filing a civil suite. Regan could face additional criminal charges for failing to file tax returns for 10 years.
13 Oct 2009
Although the prosecution alleges that the hedge fund managers misled investors, they are not being charged with having contributed to the collapse of Bear Stearns. They could face up to 20 years in prison if convicted. Cioffi is charged with an additional count of insider trading for withdrawing $2m from one of the hedge funds.
Tannin's personal Email, which he used as a diary, is being used to prove that he was worried about a possible "blow up" and was under some stress. The evidence also alleges that he had trouble sleeping and was taking some anti-anxiety medication.
The trial is expected to last six weeks. Tannin and Cioffi have denied the charges.
The shares were priced at $15 per share. Fortress funds acquired the company in February 2007 and will continue to own approximately 55.8% of RailAmerica after the closing of the offering.
In connection with the offering, RailAmerica, Inc. granted the underwriters a 30-day option to purchase up to 1,575,000 additional shares of common stock, and RR Acquisition Holding LLC granted the underwriters the option to purchase up to 1,725,000 additional shares of common stock, to cover over-allotments, if any.
The shares will begin trading on October 13, 2009 on the New York Stock Exchange under the symbol "RA." The offering is expected to close on October 16, 2009.
12 Oct 2009
The asset manager of the fund, Gulfmena Alternative Investments Limited, was granted a license by the Dubai Financial Services Authority (DFSA) to operate as a DIFC asset management company in August 2009 and is headed by CEO and Fund Manager, Haissam Arabi. Arabi is one of the region’s most respected and prominent fund managers having managed SHUAA Capital’s Arab Gateway Fund from March 2001 to June 2008 and headed its asset management division.
“Today, investor appetite is returning gradually as we can see from recent markets performance, but while everyone would like to take advantage of the recovery story and existing price distortions in the short term, investors remain somewhat sceptical over long term prospects. Therefore risk aversion and liquidity remain high priorities when making investment decisions at least until risk appetite returns and when investors will demand higher risk and relative value type products. This is why a debut flagship fund today should be a conservative hedge fund product, which is absolute return, unconstrained, multi faceted that is designed for both today and tomorrow’s MENA markets. We believe it is the ideal product at the ideal time with the ideal strategy.” commented Haissam Arabi, CEO and fund manager of Gulfmena Alternative Investments Limited.
The fund will adhere to stringent risk management and portfolio construction parameters such as stops and rolling stops in addition to an overlay hedge strategy that is designed to minimise volatility aiming at preserving investment capital during all market conditions. This is particularly important to professional investors during the early days of a market recovery when visibility is still not clear and there remains little appetite for risk. The fund will target annual returns in excess of 15% while it aims not to exceed an annual volatility of 7%. The fund will also observe strict liquidity criteria and capacity over-ride rules which are built into the strategy to ensure high liquidity levels that allow it to be open-ended and to offer weekly liquidity, unique to most hedge funds.
The fund’s operator and sponsor is Gulfmena Investments Limited (Cayman Islands). The Gulfmena Arab Opportunities Fund Limited will be registered as a regulated mutual fund with the Cayman Islands Monetary Authority and is managed by Gulfmena Alternative Investments Limited, a DIFC based MENA specialist asset management company that is regulated by the Dubai Financial Services Authority (DFSA).
9 Oct 2009
The Hennessee Long/Short Equity Index gained +3.13% in September (+18.75% YTD), while the S&P 500 index finished September up +3.6%, faring much better than the average loss of -1.2% the S&P has historically posted during the month of September dating back to 1929.
Hedge funds have also taken on additional directional risk in order to participate in the ongoing equity market rally and Hennessee believes they remain cautious and aware that the market could turn sharply to the downside.
“Little of the bail out money given to banks seems to have been passed on to businesses or consumers. It must have gone somewhere, and it is possible that is has gone to the proprietary desks of the banks, which are putting it to work in the markets,” Charles Gradante Co-Founder of Hennessee Group, said. “That could lead to a potential problem if the public and institutions do not join the rally, and the banks eventually have to sell equities into a vacuum.”
“The current debate among hedge fund managers is ‘Deflation versus Inflation’,” Gradante said, “The weak dollar and deficits are inflationary, but the 30 year treasury below 4% (80 bps over the 10 year) points to deflation expectations. Hennessee research is noticing a growing propensity of hedge funds to short 20 and 30 year treasuries as yields break 4%. The U.S. Treasury is currently funding its long term debt with 3 to 10 year Treasuries. The need to finance America ’s debt on the long end of the curve with attractive yields is increasingly obvious.”
This follows a spectacular event on 29th September attended by 250 guests from the hedge fund industry in Geneva and beyond in an 18th century mansion overlooking the lake of Geneva, where the 100 Women in Hedge Funds 2009 Geneva Charity Gala raised SFr135,000 ($130,000) for local education charity Association Païdos.
The combined sum of £332,000 ($533,000) raised for these two charities will make a material difference to their work. In the case of SHINE it should be sufficient to fund for an entire year two new SHINE on Saturday programmes, for which there is a queue of eligible, eager participants. For Païdos, it will be able to more than double the number of children accepted onto its "Getting Back into Learning" classroom project.
Sarah Brown, wife of the UK Prime Minister, and a SHINE Patron, said, "Hundreds of young people will benefit from your generosity. For example, children with special educational needs will receive specialised individual tuition to help develop their reading, writing and math skills. For children who are disengaged or simply underachieving, SHINE’s Saturday programmes enrich the school curriculum, making learning fresh, new and exciting. Other SHINE-funded programmes stretch bright teenagers from low income families, to encourage them to raise their horizons and redouble their efforts."
Each year the Association honours an individual in Europe whose achievements are an extraordinary example of success in the hedge fund industry. In 2009, 100 Women in Hedge Funds awarded its European Industry Leadership Award to Mina Gerowin, Managing Director of Paulson Europe and a Partner of Paulson & Co.
"Mina is an exemplary leader at Paulson and in our industry at large," said Effie Datson, Chair of the Board of 100 Women in Hedge Funds. "We are honouring her in recognition of her professional talent, business ethics and demonstration of the kind of passion and dedication that define the hedge fund industry’s standard of excellence."
Ms. Gerowin specializes in European merger and event-driven investment, including directing European activist positions, distressed and restructuring investment and risk arbitrage of both debt and equity. At Paulson, she has led investments such as Stork and Ahold and runs some of the largest positions in their book. As evidence of how highly esteemed she is by her Paulson colleagues, many joined in honouring her at the Gala.
As this year’s theme for 100 Women in Hedge Funds philanthropic efforts globally is education, next month 100 Women in Hedge Funds will be hosting a New York City Gala on November 18th in aid of Computers for Youth.
Long/Short Equity and Emerging Markets managers experienced another positive month driven by equity market gains in September. At the end of the best quarter since 1998 for the Dow Jones Index, which had a gain of nearly 15%, market sentiment was bolstered by several positive macro indicators, such as an increase in the Global Purchasing Managers’ Index (PMI) that signaled expanding manufacturing output and pointed to a continuing stabilization of global economic activity. Inflation continued its moderate downward trend in the U.S. and in the Organization for Economic Co-operation and Development (OECD) countries, while central banks overall maintained low interest rates in the face of a weak recovery. Many equity indices finished in positive territory, although there were some late market corrections following reports of worse-than-expected U.S. home sales.
A number of Global Macro quantitative managers had a positive month, driven by long currency trades in the Yen and Euro and decreased FX volatility. Yield curves did not move significantly and therefore front end positions had relatively little impact on performance.
Credit-oriented managers in the Fixed Income Arbitrage and Event Driven sectors had a positive month, with performance coming from mortgage-related bonds, corporate bonds (especially financials), swap spread trades (which have been normalization trades focusing on the narrowing in the spread between LIBOR rates vs. Treasuries) and opportunities in government bond auctions.
Managed Futures also had another positive month, giving the strategy its third positive month for the year, as many trend followers’ models gained traction. Equity Market Neutral managers were also up in September. The value factor contributed positively to performance while factors such as momentum detracted from performance.
8 Oct 2009
During the third quarter, BHA noted a 20% increase in investors actively evaluating with the intention to invest in fund of hedge funds relative to Q2.
During the third quarter, BHA found that of those investors actively investing in private equity 18% were wealth advisors, 13% were government pension funds, and 15% were family offices and insurance companies. Nearly 50% of the private equity investors that were interviewed indicated that they were looking to speak with new venture capital managers.
The full report is due to be released on October 20th, 2009.
Capstone Global Markets First Annual Charity Day, with participation of the New Jersey Nets, was a success, raising over $150,000 for The Jasper Against Batten Fund.
Pictured from left: New Jersey Nets President Rod Thorn, CEO and Chief Risk Officer of Capstone Holdings Group L.L.C. Paul Britton, and New Jersey Nets General Manager Kiki Vandeweghe.
On October 1st, The First Annual Capstone Global Markets Charity Day supported research focused on finding a cure to Batten Disease, a rare but fatal neurodegenerative disorder affecting children. The boutique derivatives broker dealer donated 100% of its net commissions, for a total of $155,000, to The Jasper Against Batten Fund. This is the largest donation that the charitable organization has ever received. Jasper Duinstra is a 4-year old boy who was diagnosed with Batten Disease in March 2009, and has subsequently been experiencing seizures, deteriorating vision, limited vocabulary and paralysis in his legs.
Representatives of the New Jersey Nets who participated in the event included President Rod Thorn, General Manager (and former New York Knicks player) Kiki Vandeweghe, the New Jersey Nets dance team and the New Jersey Nets mascot.
Each was involved in thanking clients for their business and discussing the importance of the cause. The newly created annual event is part of the commitment from Capstone Global Markets to give back to the global community regardless of the macro financial environment. Every year, Capstone Global Markets will select specific charities to donate to, each with the common goal of helping children.
7 Oct 2009
Charles Schwab and Hedge Fund Founder Ken Fisher Recipients of Tiburon's Inaugural CEO Summit Awards
Fisher will be honored along with Charles Schwab as recipients of Tiburon's Inaugural CEO Summit Awards, recognizing their contributions to "Focusing on Customer Needs" and "Challenging Conventional Wisdom."
"So-called 'best practices' aren't," Mr. Fisher said in his prepared remarks. "They are a fine way for a D-quality firm to become a B-quality firm. But in asset management, to become an A-quality firm you have to ban 'best practices' from your lexicon, think more in terms of innovation and challenging conventional wisdom by establishing practices that have never been done before."
Fisher is also the author of three New York Times best-sellers, including his current best-seller "How to Smell a Rat: The Five Signs of Financial Fraud" (Wiley, August 2009). For the past 25 years, he has also written Forbes' "Portfolio Strategy" column, making him the fourth longest-running columnist in the magazine's history.
6 Oct 2009
Ms. Urie has held various positions at Cambridge Associates since 1985 and, before assuming the role as CEO, she served as the Chief Operating Officer and was responsible for directing the firm’s consulting practice. She is a member and vice-chair of the Investors’ Committee of the President’s Working Group on Financial Markets, which has worked to develop detailed guidelines that would define "best practices" for investors in private pools of capital in order to enhance investor protection and systemic risk safeguards. She currently serves on the Board of Advisors for the Yale School of Management, the Board of Overseers of the DeCordova Museum, and the Board of Visitors of the New England Baptist Hospital. In addition, she sits on the boards of The Plymouth Rock Company and Homesite Group Incorporated. She formerly served on the boards of Phillips Academy, Belmont Day School and Buckingham, Browne & Nichols School.
Before joining Cambridge Associates, Ms. Urie worked as a member of the faculty at Phillips Academy (Andover), where she taught Russian and served on the Admissions Office staff. She also served in the Phillips Academy development office where she was responsible for capital fund raising, and eventually she assumed the position of Associate Secretary of the Academy with responsibility for the school’s annual giving and alumni programs.
Anne Popkin, Chair of the Board of 100 Women in Hedge Funds and Principal, BlueCrest Capital, said, "We are pleased to welcome such a well-respected industry leader to our Board. We believe Sandra’s investment advisory experience coupled with her involvement in initiatives such as the President’s Working Group help us continue to represent, strengthen, and expand our investor member base."
Ms. Urie said, "I look forward to working with the Board to strengthen 100 Women in Hedge Funds’ initiatives on member education, professional development, and philanthropy."
Ms. Urie graduated from Stanford University and received a Master of Public and Private Management graduate degree from the Yale School of Organization and Management. Additionally, she holds the Chartered Financial Analyst designation.
The FoHF group will make a significant investment in the first fund to be launched by Isometric Capital Management, owned and managed by Sanjiv Bhatia, the former head of Deephaven Capital Management's Asia office. The fund is
The fund will use a fundamental research strategy to identify investment opportunities in Asian companies where it can identify a catalyst which will drive investment returns. The fund will invest predominantly in equities although positions will range across the capital structure.
"This deal reinforces the global nature of FCA's business and is the first investment we have made outside of the US and Europe." Neil Mason, CIO, FCA says, "Asia is an important focus in our manager research. Asian economies have shown their strength and there are numerous market inefficiencies that hedge funds can profit from. The industry has grown significantly in recent years and there are a number of high quality managers with interesting investment strategies.
Isometric is the third seeding deal announced by FCA in the past four months having previously agreed strategic relationships with JD Capital and WestSpring Advisors.
5 Oct 2009
Key findings from the whitepaper include:
* Choosing the Proper Outsourcing Model
* Smaller Hedge Funds Challenged by Resource Restrictions
* The Role of the Prime Broker
* Consider Disaster and Recovery Planning in Vendor Selection
"It is important for hedge funds to develop a thoughtful, long-term outsourcing strategy to ensure that its needs for support during various stages of the fund's lifecycle are closely aligned with its goals and objectives to serve investors well." Craig Messinger, managing director of Pershing Prime Services, said, "Employing this type of approach will enable hedge fund managers to focus on generating profitable returns for their clients and help them grow their businesses in a more productive manner."
To help hedge fund managers better understand business continuity and disaster recovery planning processes and principles, Pershing Prime Services, in collaboration with Eze Castle Integration and its colleagues across BNY Mellon, has developed a guidebook entitled, Establishing Business Continuity and Disaster Recovery Plans: A Hedge Fund Manager's Guide.
From a peak figure of almost $2.7 trillion reached during the first half of 2008, global hedge fund assets have now fallen by some 38%.
In the first half of this year, however, performance was generally robust, with a median return from hedge funds globally of over 5%. This implies that net redemptions from hedge funds were continuing at a fairly rapid rate between January and June – with as much as 15% of investor money being pulled from the industry during the first half, and the further overall decline only partially offset by positive performance.
Neil Wilson, editorial director at HedgeFund Intelligence, said “Following a period of strong performance during the third quarter and plenty of anecdotal evidence that the majority of funds have begun to see net inflows again, we would not be surprised to see industry assets rise from the midyear levels by at least 10% before the end of
During the first half, the number of firms that run hedge fund assets of $1 billion or more went down from 395 in the first half of 2008 to 311 at the beginning of 2009 and now to 291 at the mid-year point. The combined assets of these ‘billion dollar club’ firms also shrank further – from $1.46 trillion in January to $1.37 trillion by July.
New York remains by some distance the top global centre for hedge funds. Though New York’s total number of billion dollar firms slipped a little, from 123 to 118, during the first half, its share of assets remained almost unchanged at nearly 47%.
London is still comfortably the second biggest centre, but its number of billion dollar firms dropped more steeply in the first half – from 65 to 55, as several UK-based firms slipped below the $1 billion mark. London’s share of the global billion dollar club’s total assets thus slipped from over 17% to under 15%.
Connecticut is still in third place, with a share of assets slightly up at nearly 10.5%. The figures for other global hedge fund centres were largely unchanged, with centres on the increase this year including Hong Kong and Singapore.
2 Oct 2009
The new electronic reporting system supports submissions by segregated portfolio companies as well umbrella structures with improved formatting and the ability to save entries for later submission. The information obtained from the filing is consolidated and used for statistical purposes.
The deadline for filing is October 15, 2009 for the reporting period ending December 31, 2008, but any fund which has already submitted a hard copy of the return is not required to re-file. Rather, such funds may use the online application for the next reporting period ending December 31, 2009 whose filing deadline will be June 30, 2010.
Anyone requiring further information about the electronic filing system or annual returns which must be filed by BVI funds may contact Robert Briant, Managing Partner of Conyers Dill & Pearman’s BVI office.
“The Rutherford Innovation Fund provides offshore investors with an experienced local co-investment partner to bridge the geographic gap to New Zealand as these companies are not on the radar of international investors,” Milestone Capital principal Kenji Steven says.
The Rutherford Innovation Fund sees the best opportunities for investment as being those that benefit from the massive changes being driven by the growth of Clean Tech – products, services and technologies that provide solutions to urgent global problems around energy, water, carbon and pollution.
The fund is named after Ernest Rutherford, the Kiwi who was the first person to split the atom and the father of modern nuclear physics. It’s a portfolio of private equity companies which include algae fuel manufacturer Aquaflow Bionomic Corporation, carbon sequestration firm Carbonscape and ‘top five’ international climate change website Celsias.
“The key limiting factor in New Zealand is capital. For private companies investment capital is scarce so there is attractive pricing and little competition for deals. The capital markets are also under-developed so approximately 80% of the top 200 New Zealand companies are private,” Steven says. The fund is targeting a capital raising of NZ$50 million over the next two years.
1 Oct 2009
The new ranking method, called the Infiniti Single Fund Analysis (SFA) score, is included as a risk adjusted performance measure (RAPM) in Infiniti’s recently launched Infiniti Analytics Suite (IAS).
“We believe this method to be superior to most others in use." Infiniti chief investment officer and IAS project originator Peter Urbani says, "Infiniti Capital has been using this method for the past two years.”
The effectiveness of any such method, based purely on historical data, is in how well today’s ranking predicts what happens tomorrow or at some future out-of-sample period. In statistical speak this is known as the predictive power of the method.
The one major advantage of any quantitative method is that users can test its performance against all other known methods quickly and easily. In a recent study, the IAS development team did exactly that, comparing the performance of a portfolio built using the SFA total score as the objective to maximize versus three other widely used RAPMs.
This study showed that by using the SFA total score as an objective function, annual returns of up to 500 basis points (5%) per year higher than those using other traditional methods were achievable.
The database used was a common set of 36 hedge funds. Significantly, the returns achieved in 2008 were much higher than those for both the equally weighted portfolio and actual hedge fund of funds which generated average returns of -19% last year.
The ratio of the absolute realised risk adjusted returns, denoted as the Compound Annual Growth Rate (CAGR) over the absolute value of the peak to trough drawdown (downside risk), was also the best for the SFA portfolio.
“The predictive power of the SFA score comes from its innovative construction, proprietary weighting and ability to identify some of the non-linear effects common to hedge funds,” Urbani says.
Unlike traditional performance measures, the SFA score is both conditional on the time period being used and relative to a large reference data set of other hedge funds. Where other methods typically standardize everything back to a normal or Gaussian distribution, the IAS uses the best fitting distributions throughout. This has the effect of calibrating the range of scores more closely to real-world data.
Urbani stresses that the method is not perfect. “The SFA scores will not provide the best returns over each and every single time period, however, over any meaningful length of time they will tend to out-perform.”
He says, “We do not force people to use the SFA scores. This is a key point of differentiation between the IAS and other software packages. Just because we have a good idea doesn’t mean everyone should use it. That’s why this is an option in the IAS along with the ability to use just about any other known RAPM for optimisation purposes or to build your own.”
"LeapFrog's team is widely recognized as having opened up a new frontier in microfinance and alternative investment." The former President noted, "The fund has raised $44 million from both private and public investors, towards an ultimate target of $100 million."
Before an audience of 1000 global leaders, President Clinton drew a direct link between the work of Nobel Laureate Muhammad Yunus to bring microcredit to millions of people, the 'Banker to the Poor,' and the work of LeapFrog as the global leader in microinsurance: "LeapFrog is quickly becoming the 'Insurer to the Poor'. Just like Yunus, [LeapFrog] is the first out of the gate, the first microinsurance fund in the world."
"For those 25 million clients, LeapFrog means the ability to leap out of poverty permanently." Dr. Andrew Kuper, President and Founder of LeapFrog said. "For our portfolio companies, LeapFrog means leaping to the next stage of growth and impact. For our investors, LeapFrog does mean the next frontier of microfinance and alternative investment."
Pierre Omidyar, Founder of EBay, immediately concurred with a post on Twitter, saying that it was "Great to see LeapFrog . . . recognized by President Clinton for work in microinsurance." The Omidyar Network is a lead investor in the fund, together with the European Investment Bank, FMO, Triodos, and Accion International.
LeapFrog's fund is now developing investment opportunities in key emerging markets such as India, Indonesia, the Philippines, South Africa, Ghana, and Kenya.
Focused on frontier markets, the new fund will be named The Silk Road Income Fund. Silk Invest also has previously launched equities hedge funds African Lions and Arab Falcons.
"The Silk Road markets are under-represented in investor’s portfolios. The timing of our launch is perfect for investors as it enables them to take advantage of the re-pricing of risk in these markets.”Daniel Broby, Chief Investment Officer of Silk Invest, said, "Recent history shows that the collective Silk Route countries have consistently grown GDP faster than developed economies."
As part of the fund development, Silk Invest conducted a survey of fixed income securities across the target regions, covering over 4,100 bonds and $480bn in total debt volumes. From this list the firm was able to filter out the most lucrative and liquid target asset universe, using a combination of credit and market-oriented stress tests.
"We aim to manage 60-80 holdings across 25 countries in the fund and are currently showing portfolio yields of over 16.5% with duration of 3.4 years." John Bates, Head of Fixed Income at Silk Invest, said.
Baldwin Berges, Director of Business Development at Silk Invest, noted “Despite tough market conditions, we are seeing strong investor appetite for fixed income in these frontier regions as investors seek reliable returns from a diversified pool of assets. With Daniel Broby’s longstanding investment management track record, John Bates’ experience as a credit analyst and Patrick Landi’s experience in origination, we have put together a formidable team of people, all with hands-on experience in frontier markets”