HedgeCo Blog Archives - The October edition of Hedgebay Trading Corporation’s monthly index has shown that the purchase of hedge fund assets is being driven by two prevailing sentiments among investors, creating a two-tier hedge fund market.
The Hedgebay Global Hedge Fund Secondary Market Index reveals a wide discrepancy between the highest and lowest prices at which secondary market users were willing to trade at.
The highest trade took place at NAV, the second time in the last three months that this watermark has been reached. This is symptomatic of confidence returning to some sections of the industry. However, the number of trades occurring at the lower end of the scale, the lowest of which took place at only 40% of NAV, shows that the search for liquidity and the cleaning-up of unwanted positions is still taking place.
“The trade at 100% of NAV shows that investors are increasingly willing to pay top dollar for high quality and hard to come by funds." Elias Tueta, co-founder of Hedgebay, commented, "More and more we will see trades reaching, and maybe even exceeding, NAV as investors increasingly put their faith in these high end assets. However, in the other extreme, the trade at 40% of NAV, and the volume of trades at a similar level, still shows that riskier, less liquid assets –notably side-pockets -are increasingly overvalued. Sellers currently still have to offload these kinds of assets at whatever price they can get”
Though the disparity in the valuation of assets suggests a continuing lack of conviction among hedge fund investors, the index also provides signs of encouragement for the industry. The average price (in terms of percent of NAV) rose to 87% - the first time in five months that the average price of assets being traded has risen. While the rise in the average price is a reason for optimism, Hedgebay has indicated that hedge funds’ portfolios have not yet been fully cleaned-up:
“During a month of heavy trading volume, the average price is up almost 400 basis points from September. This, perhaps even more than the trade at 100% of NAV, is a sign of increasing optimism, but it is not yet conclusive. When we start to see a substantial amount of trades being done at around the 95% level, then we might begin to say that the hedge fund market is almost back to normal.”
The Hedgebay Global Hedge Fund Secondary Market Index, launched in September, provides hedge fund investors with statistics on the key aspects of the secondary market. Most notably it offers the average discount or premium to Net Asset Value (NAV) of hedge fund shares traded during the month.
19 Nov 2009
Hedge Fund Billionaire John Paulson To Launch Gold Fund
HedgeCo News Archives - According to investors, hedge fund manager John Paulson, who through Paulson& Co., has raised over $1 billion for clients, has plans to launch a fund dedicated to buying up shares of bullion-related investments.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
The Wall Street Journal reports that the gold fund will aim to outperform gold prices, by investing in gold-related shares and derivatives. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.
“Gold has gone up 10% since the start of the month,” Andrew Schneider, co-founder of HedgeCo Networks, said, “Investors may also see gold as a hedge against US dollar fluctuations.”
John Paulson is best known for his bet against financial companies before the credit crisis which some have speculated earned his firm as much as $15 billion in 2007.
18 Nov 2009
Hedge Fund Lawyer Dies In Russian Prison
HedgeCo News Archives - Hedge fund Hermitage Capital's legal adviser, Sergey Magnitskiy, died on Monday night in a detention centre in Moscow, the Guardian reports.
The 37 year old father of two was held in Moscow’s Matrosskaya Tishina detention center for almost a year. "Sergey Magnitskiy was refused bail and kept in detention for a year without trial," Hermitage said in a statement. "He was denied the ability to see his mother and his wife and speak to his children for the entire time of his detention."
The US-born, British naturalised lawyer was arrested in 2008 after accusing senior officers in the Interior Ministry of taking part in a $230m state-sponsored scam, leading to the theft of companies owned by Hermitage and HSBC. Hermitage has filed law suits and sent letters to Russian anti-corruption authorities, naming top-ranked officials and their role in the alleged tax scam.
The Guardian quoted David Clark, former special advisor at the Foreign Office and chairman of the Russia Foundation, a UK-based organisation that promotes a deeper understanding of Russian affairs. Hermitage's case is "real daily life" in Russia Clark said.
The 37 year old father of two was held in Moscow’s Matrosskaya Tishina detention center for almost a year. "Sergey Magnitskiy was refused bail and kept in detention for a year without trial," Hermitage said in a statement. "He was denied the ability to see his mother and his wife and speak to his children for the entire time of his detention."
The US-born, British naturalised lawyer was arrested in 2008 after accusing senior officers in the Interior Ministry of taking part in a $230m state-sponsored scam, leading to the theft of companies owned by Hermitage and HSBC. Hermitage has filed law suits and sent letters to Russian anti-corruption authorities, naming top-ranked officials and their role in the alleged tax scam.
The Guardian quoted David Clark, former special advisor at the Foreign Office and chairman of the Russia Foundation, a UK-based organisation that promotes a deeper understanding of Russian affairs. Hermitage's case is "real daily life" in Russia Clark said.
$200 Billion Cap On Collapse Fund - Barney Frank
HedgeCo News Archive - The fund which the U.S. House Financial Services Committee is setting up to dismantle large insolvent financial institutions will be limited to $200 billion, MarketWatch reported earlier today.
"The cap we have is $200 billion," House Financial Services Committee Chairman Barney Frank said, referring to legislation which would collect funds from large financial institutions and hedge funds with $10 billion in capital or more.
The Chairman's regulatory-overhaul package, in opposition to the Obama administration, which wants to collect fees after a company fails, is up for vote by the House this month.
The fund would be used to make payments to creditors and counterparties of a large failing financial institution so that its collapse does not unsettle the financial markets.
"The cap we have is $200 billion," House Financial Services Committee Chairman Barney Frank said, referring to legislation which would collect funds from large financial institutions and hedge funds with $10 billion in capital or more.
The Chairman's regulatory-overhaul package, in opposition to the Obama administration, which wants to collect fees after a company fails, is up for vote by the House this month.
The fund would be used to make payments to creditors and counterparties of a large failing financial institution so that its collapse does not unsettle the financial markets.
17 Nov 2009
Can precious metals keep on flying?
The precious metal outperformed every major equity index in the world in 2008. The question is, can gold—and other precious metals—keep on flying? Or would buying today be buying high and selling low?
Precious metals have always been intriguing to investors because they tend to hold their value. In times of geopolitical crisis or currency devaluation, for example, the value of paper money might fluctuate, but a hard asset will always be worth something. As a result, historically, precious metals have been considered a “safe haven” in times of economic and financial instability.
That brings us to why gold is on a tear today. It declined in 2008 and early 2009 as panicked investors rushed into cash in an attempt to weather the financial crisis. But sometime in the middle on 2009, when investors began to move their money from the sidelines, gold started to rally. It returned 32.59% through the third quarter of 2009, vs. 19.26% for stocks.
The question is, where can we expect gold to go from here? In order to predict whether gold prices will skyrocket or come crashing down, it’s important to understand the principal factors that affect the price of any commodity: supply and demand.
The supply side of the equation is not particularly relevant in regard to gold because gold supplies remain fairly constant. That’s because production has not significantly increased due to a lack of new mining sites. Should supplies increase, however, investors may want to be cautious.
The demand side of the equation, then, is the one gold investors must look at. And as we noted above, demand for gold tends to increase when investors have a lack of confidence in the U.S. economy and financial markets.
That’s certainly the case today. In fact, we see two factors, that could lead gold to outperform in the near future: inflation and currency devaluation. In response to the financial crisis of 2008 and 2009, the Federal Reserve injected massive amounts of liquidity into the money markets. Ultimately, that increase in the money supply could devalue the U.S. dollar and lead to inflation. In fact, the U.S. dollar is already shockingly low. On October 14, 2009, it fell to a 14-month low against the euro, hitting $1.4947, the weakest since August 2008, according to Bloomberg. And while inflation is not yet a problem, economists are on the lookout for it.
These conditions led Standard & Poor’s (S&P) to raise its gold price assumption for 2010 from $750 per ounce to $800 per ounce. “Investors seeking a hedge against inflation risks and uncertainty in the financial markets continue to support gold prices,” the S&P analysts write. “The metal's properties as a safe haven, and to a lesser extent the demand for jewelry, also support its longer-term price prospects.”
S&P’s estimate, however, may be on the low side. As of November 2009, gold was trading at more than $1,000 per ounce. And since gold exceeded $1,000 per ounce level, the price has been extremely resilient, with no meaningful pullback seen. There have been periods of profit-taking, but increased demand quickly appears on any weakness in price.
In sum, then, good old-fashioned gold fever is back—and investors who are looking for a promising trend may want to consider investing in it and other precious metals.
But don’t consider gold an investment only for troubled times. One of the greatest advantages of precious metals exists regardless of economic and market conditions. Precious metals tend to perform differently from other assets. As a result, investing in precious metals may be a good diversification strategy for a portfolio comprised mainly of stocks, bonds and real estate—in all environments.
This article was written by OilPrice.com - who offer free information and analysis on Energy and Commodities. The site has sections devoted to Fossil Fuels, Alternative Energy, Metals, Oil prices and Geopolitics.
Precious metals have always been intriguing to investors because they tend to hold their value. In times of geopolitical crisis or currency devaluation, for example, the value of paper money might fluctuate, but a hard asset will always be worth something. As a result, historically, precious metals have been considered a “safe haven” in times of economic and financial instability.
That brings us to why gold is on a tear today. It declined in 2008 and early 2009 as panicked investors rushed into cash in an attempt to weather the financial crisis. But sometime in the middle on 2009, when investors began to move their money from the sidelines, gold started to rally. It returned 32.59% through the third quarter of 2009, vs. 19.26% for stocks.
The question is, where can we expect gold to go from here? In order to predict whether gold prices will skyrocket or come crashing down, it’s important to understand the principal factors that affect the price of any commodity: supply and demand.
The supply side of the equation is not particularly relevant in regard to gold because gold supplies remain fairly constant. That’s because production has not significantly increased due to a lack of new mining sites. Should supplies increase, however, investors may want to be cautious.
The demand side of the equation, then, is the one gold investors must look at. And as we noted above, demand for gold tends to increase when investors have a lack of confidence in the U.S. economy and financial markets.
That’s certainly the case today. In fact, we see two factors, that could lead gold to outperform in the near future: inflation and currency devaluation. In response to the financial crisis of 2008 and 2009, the Federal Reserve injected massive amounts of liquidity into the money markets. Ultimately, that increase in the money supply could devalue the U.S. dollar and lead to inflation. In fact, the U.S. dollar is already shockingly low. On October 14, 2009, it fell to a 14-month low against the euro, hitting $1.4947, the weakest since August 2008, according to Bloomberg. And while inflation is not yet a problem, economists are on the lookout for it.
These conditions led Standard & Poor’s (S&P) to raise its gold price assumption for 2010 from $750 per ounce to $800 per ounce. “Investors seeking a hedge against inflation risks and uncertainty in the financial markets continue to support gold prices,” the S&P analysts write. “The metal's properties as a safe haven, and to a lesser extent the demand for jewelry, also support its longer-term price prospects.”
S&P’s estimate, however, may be on the low side. As of November 2009, gold was trading at more than $1,000 per ounce. And since gold exceeded $1,000 per ounce level, the price has been extremely resilient, with no meaningful pullback seen. There have been periods of profit-taking, but increased demand quickly appears on any weakness in price.
In sum, then, good old-fashioned gold fever is back—and investors who are looking for a promising trend may want to consider investing in it and other precious metals.
But don’t consider gold an investment only for troubled times. One of the greatest advantages of precious metals exists regardless of economic and market conditions. Precious metals tend to perform differently from other assets. As a result, investing in precious metals may be a good diversification strategy for a portfolio comprised mainly of stocks, bonds and real estate—in all environments.
This article was written by OilPrice.com - who offer free information and analysis on Energy and Commodities. The site has sections devoted to Fossil Fuels, Alternative Energy, Metals, Oil prices and Geopolitics.
The Untapped Energy Riches of Uzbekistan - OilPrice.com
While many Western investors remain fixated on somehow acquiring a slice of Turkmenistan’s natural gas riches, despite a recent scandal over the country’s actual reserves, there is another country further east whose energy and mineralogical reserves have been overlooked – Uzbekistan.
While a number of factors are responsible for this oversight, including relative geographical isolation (Uzbekistan, along with Liechtenstein, is one of the world’s doubly landlocked nations, requiring crossing two other nations to gain access to the oceans), which currently limits energy exports available for the global market, there are a number of pluses that the country has for investors willing to “think outside the box.”
With a population of 27 million, Uzbekistan is Central Asia's most populous and dominant power. A conservative fiscal policy since 1991, including inconvertibility of the national currency, the som, has shielded its citizens from the hyperinflation that ravaged other former Soviet republics, but the policy previously diminished potential foreign investment.
Since the global recession that began a year ago, however, Uzbekistan’s fiscal conservatism, previously dismissed by the foreign investment community, has looked more and more like a pragmatic policy that isolated the country from the worst aspects of the recession in stark contrast to other post-Soviet states that fervently embraced free market capitalism like Lithuania, whose economy contracted 18.1% this year and is expected to shrink further by 3.9% in 2010. In a move certain to be welcomed by foreign investor Uzbekistan is slowly moving towards making its currency convertible but whenever it happens, for the present the country offers a fiscal stability unmatched by many of its more free-market neighbors.
And now, the good news about the country’s resources. In 2006 Uzbekistan's natural gas reserves were estimated at 1.798 trillion cubic meters (tcm). During the Soviet era Uzbekistan was the USSR’s third-largest producer of natural gas, accounting for more than 10% of the Soviet Union’s production, trailing only Russia and Turkmenistan. In 1992, the country’s first year of independence, Uzbekistan produced 42.8 billion cubic meters (bcm) of natural gas. Uzbekistan currently produces 60 bcm of natural gas annually, an amount nearly equal to Turkmenistan's production. Uzbekistan’s reserves are primarily concentrated in Qashqadaryo province and near Bukhara in the country’s south-central region. During the 1970s Uzbekistan’s largest natural gas deposit at Boyangora-Gadzhak was discovered in Surkhandaryia province north of the Afghan border.
Unlike its energy-rich neighbors to the West, Kazakhstan and Turkmenistan, nearly 80 percent of Uzbekistan's production, about 48.4 bcm, is currently reserved for domestic use at heavily subsidized rates. Of the remaining 12 bcm of natural gas that Uzbekistan exports, more than half currently goes to Russia, with the remainder to neighboring Central Asian states.
Under Uzbekistan’s fiercely patriotic President Islam Karimov relations with Europe’s favorite bête noire, Russia ’s state-owned gas firm Gazprom, have been subject to fierce negotiations to win an equitable price for the country’s exports. Like other former Soviet republics, the Uzbek government chafed under Gazprom's "buy cheap, sell dear" policies and in early December 2008 scored a significant negotiating success by getting an agreement that in 2009 Gazprom would pay $305 per thousand cubic meters (tcm). To put the accomplishment in perspective, Uzbekistan’s state gas company Uzbekneftegaz sold gas to Gazprom for $130 per tcm in the first half of 2008, which then rose to $160 in the second half of 2008.
Those betting on the eventual pacification of Afghanistan and the subsequent pipelines that would crisscross the country to deliver Central Asian gas to the massive Pakistani and Indian markets would also do well to take note of Uzbekistan’s persistent, low key policies over more than a decade attempting to bring peace to its hapless southern neighbor. The initiatives put forward by Uzbek President Islom Karimov during the NATO summit in Bucharest in April 2008 take on heightened importance as one of the few foreign policy ideas offering some hope to quelling Afghanistan ’s three decades of turmoil.
Nearly completely overshadowed by the Bush administration’s relentless efforts to have Georgia and Ukraine join the alliance, Karimov proposed that the UN’s Afghanistan "6 plus 2" assembly, established in 1999, be revived by expanding it into a "6 plus 3" ensemble by including NATO because of its anti-terrorist operations in Afghanistan among the "six" members Uzbekistan, Tajikistan, Turkmenistan, Pakistan, China and Iran and the "two," the United States and Russia.
Noting that that it is impossible to solve Afghanistan's problems without the direct involvement of neighboring countries, which have felt the destructive impact of the Afghan crisis for more than 30 years, as Afghanistan's problems are now of global nature, Karimov told his audience in Bucharest that their resolution must also be global, with the participation of members of the international coalition that comprise NATO's International Security Assistance Force (ISAF). Karimov concluded by noting that the current situation in Afghanistan precludes a purely military solution and that while it is possible to continue increasing the foreign military presence there, without a clear model of national reconciliation it will be impossible to end the conflict.
Needless to say, one of the benefits of peace and the aforementioned pipelines for Uzbekistan would be that it could export its surplus gas through Afghanistan to southern Asian markets for a higher price than it receives at home or Gazprom’s miserly accountants. Acting on Tashkent’s belief that economic assistance is of greater utility than military operations, Uzbekistan has become involved in a host of reconstruction projects in Afghanistan, including railways, power generation, mining, agriculture, irrigation, education and the exchange of specialists as well as providing its neighbor with construction materials, metals, fertilizer, food and other goods. Uzbek companies and engineers have built 11 bridges in the Mazar-e-Sharif-Kabul area and are finishing the construction of a 275-mile high-voltage line capable of transmitting 150 megawatts from Termez to Kabul across some of the world’s most mountainous terrain, which when it becomes fully operational next month, will provide power and light not only to the capital but the country’s five northern provinces.
For now, Uzbekistan remains largely a transit country rather than a net energy exporter in its own right. But the fiercely independent nationalist policy that Tashkent has followed since 1991 indicates that any company whose policies most benefit the country will have an inside track, and as the old saying goes, “fortune favors the bold.” Chinese, Malaysian, Russian and South Korean companies have already begun investing in Uzbekistan’s energy infrastructure – what do they seemingly know that American and European companies do not?
This article was written by John C.K. Daly for OilPrice.com - Who offer free information and analysis on Energy and Commodities. The site has sections devoted to Fossil Fuels, Alternative Energy, Metals, Oil prices and Geopolitics.
While a number of factors are responsible for this oversight, including relative geographical isolation (Uzbekistan, along with Liechtenstein, is one of the world’s doubly landlocked nations, requiring crossing two other nations to gain access to the oceans), which currently limits energy exports available for the global market, there are a number of pluses that the country has for investors willing to “think outside the box.”
With a population of 27 million, Uzbekistan is Central Asia's most populous and dominant power. A conservative fiscal policy since 1991, including inconvertibility of the national currency, the som, has shielded its citizens from the hyperinflation that ravaged other former Soviet republics, but the policy previously diminished potential foreign investment.
Since the global recession that began a year ago, however, Uzbekistan’s fiscal conservatism, previously dismissed by the foreign investment community, has looked more and more like a pragmatic policy that isolated the country from the worst aspects of the recession in stark contrast to other post-Soviet states that fervently embraced free market capitalism like Lithuania, whose economy contracted 18.1% this year and is expected to shrink further by 3.9% in 2010. In a move certain to be welcomed by foreign investor Uzbekistan is slowly moving towards making its currency convertible but whenever it happens, for the present the country offers a fiscal stability unmatched by many of its more free-market neighbors.
And now, the good news about the country’s resources. In 2006 Uzbekistan's natural gas reserves were estimated at 1.798 trillion cubic meters (tcm). During the Soviet era Uzbekistan was the USSR’s third-largest producer of natural gas, accounting for more than 10% of the Soviet Union’s production, trailing only Russia and Turkmenistan. In 1992, the country’s first year of independence, Uzbekistan produced 42.8 billion cubic meters (bcm) of natural gas. Uzbekistan currently produces 60 bcm of natural gas annually, an amount nearly equal to Turkmenistan's production. Uzbekistan’s reserves are primarily concentrated in Qashqadaryo province and near Bukhara in the country’s south-central region. During the 1970s Uzbekistan’s largest natural gas deposit at Boyangora-Gadzhak was discovered in Surkhandaryia province north of the Afghan border.
Unlike its energy-rich neighbors to the West, Kazakhstan and Turkmenistan, nearly 80 percent of Uzbekistan's production, about 48.4 bcm, is currently reserved for domestic use at heavily subsidized rates. Of the remaining 12 bcm of natural gas that Uzbekistan exports, more than half currently goes to Russia, with the remainder to neighboring Central Asian states.
Under Uzbekistan’s fiercely patriotic President Islam Karimov relations with Europe’s favorite bête noire, Russia ’s state-owned gas firm Gazprom, have been subject to fierce negotiations to win an equitable price for the country’s exports. Like other former Soviet republics, the Uzbek government chafed under Gazprom's "buy cheap, sell dear" policies and in early December 2008 scored a significant negotiating success by getting an agreement that in 2009 Gazprom would pay $305 per thousand cubic meters (tcm). To put the accomplishment in perspective, Uzbekistan’s state gas company Uzbekneftegaz sold gas to Gazprom for $130 per tcm in the first half of 2008, which then rose to $160 in the second half of 2008.
Those betting on the eventual pacification of Afghanistan and the subsequent pipelines that would crisscross the country to deliver Central Asian gas to the massive Pakistani and Indian markets would also do well to take note of Uzbekistan’s persistent, low key policies over more than a decade attempting to bring peace to its hapless southern neighbor. The initiatives put forward by Uzbek President Islom Karimov during the NATO summit in Bucharest in April 2008 take on heightened importance as one of the few foreign policy ideas offering some hope to quelling Afghanistan ’s three decades of turmoil.
Nearly completely overshadowed by the Bush administration’s relentless efforts to have Georgia and Ukraine join the alliance, Karimov proposed that the UN’s Afghanistan "6 plus 2" assembly, established in 1999, be revived by expanding it into a "6 plus 3" ensemble by including NATO because of its anti-terrorist operations in Afghanistan among the "six" members Uzbekistan, Tajikistan, Turkmenistan, Pakistan, China and Iran and the "two," the United States and Russia.
Noting that that it is impossible to solve Afghanistan's problems without the direct involvement of neighboring countries, which have felt the destructive impact of the Afghan crisis for more than 30 years, as Afghanistan's problems are now of global nature, Karimov told his audience in Bucharest that their resolution must also be global, with the participation of members of the international coalition that comprise NATO's International Security Assistance Force (ISAF). Karimov concluded by noting that the current situation in Afghanistan precludes a purely military solution and that while it is possible to continue increasing the foreign military presence there, without a clear model of national reconciliation it will be impossible to end the conflict.
Needless to say, one of the benefits of peace and the aforementioned pipelines for Uzbekistan would be that it could export its surplus gas through Afghanistan to southern Asian markets for a higher price than it receives at home or Gazprom’s miserly accountants. Acting on Tashkent’s belief that economic assistance is of greater utility than military operations, Uzbekistan has become involved in a host of reconstruction projects in Afghanistan, including railways, power generation, mining, agriculture, irrigation, education and the exchange of specialists as well as providing its neighbor with construction materials, metals, fertilizer, food and other goods. Uzbek companies and engineers have built 11 bridges in the Mazar-e-Sharif-Kabul area and are finishing the construction of a 275-mile high-voltage line capable of transmitting 150 megawatts from Termez to Kabul across some of the world’s most mountainous terrain, which when it becomes fully operational next month, will provide power and light not only to the capital but the country’s five northern provinces.
For now, Uzbekistan remains largely a transit country rather than a net energy exporter in its own right. But the fiercely independent nationalist policy that Tashkent has followed since 1991 indicates that any company whose policies most benefit the country will have an inside track, and as the old saying goes, “fortune favors the bold.” Chinese, Malaysian, Russian and South Korean companies have already begun investing in Uzbekistan’s energy infrastructure – what do they seemingly know that American and European companies do not?
This article was written by John C.K. Daly for OilPrice.com - Who offer free information and analysis on Energy and Commodities. The site has sections devoted to Fossil Fuels, Alternative Energy, Metals, Oil prices and Geopolitics.
Brevan Howard Hedge Fund Co-Founder To Leave Firm
New York (HedgeCo.net) - Jean-Philippe Blochet has left Europe's biggest hedge fund firm, Brevan Howard, Bloomberg reports, "Following his return from sabbatical last year, Jean-Philippe Blochet has decided to cease to be an active member of Brevan Howard Asset Management LLP," the firm said in a statement.
Blochet was co-founder of Brevan Howard and was part of the hedge fund firm's macro team, focusing on currencies and interest rates.
Brevan Howard had $25.7 billion in assets under management as of September 2009, it returned more than 20% last year while the average hedge fund lost around 19%.
Also leaving Brevan Howard is UCITS fund manager Stephane Diederich, who was hired from Credit Suisse in 2007 to set up an alternative CDO (collateralized debt obligation) business, an area of the financial world that was hit hard by the credit crisis, Bloomberg reported.
Survey Finds Continued Optimism Towards Hedge Funds Despite 2008 Performance
HedgeCo News Archives - Highlights of a second annual national survey released by Morningstar and Barron’s Magazine examining the perception and usage of alternative investments among institutions and financial advisors showed that hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
“One of the most interesting findings from our survey is that both institutions and advisors continue to view alternative investments optimistically, despite their questionable performance, correlation, and liquidity during last year’s global downturn as well as the high-profile scandals that rocked the hedge fund industry,” said Steve Deutsch, director of the pension, endowment, and foundation database at Morningstar. “Again this year, the majority of participants indicate that they plan to increase allocations to alternatives, but with greater scrutiny and due diligence given to those investments.”
Among the survey findings:
Current and Future Usage of Alternatives
• More than 60% of institutions and advisors believe that alternatives will be as important or more important than traditional investments over the next five years.
• The majority of institutions and advisors expect alternatives to account for more 10% of their portfolios over the next five years; a quarter of institutions expect alternatives to account for more than 25% of their portfolios.
• Hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
Motivation and Hesitation
• For both institutions and advisors, the top three reasons for investing in alternatives remain the same as in last year’s survey: portfolio diversification, absolute returns, and exposure to different investment techniques, like arbitrage or shorting.
• Institutions and advisors are much more concerned, however, about lack of liquidity and transparency than they were last year.
Definitions of “alternative”
• Compared to the 2008 survey, fewer institutions and advisors view real estate investment trusts and commodities as alternative asset classes.
• Both institutions and advisors tend to classify investments as “alternative” based on the investment’s strategy, i.e. absolute return, rather than the investment’s designation, i.e. mutual fund versus hedge fund.
“Perhaps most important for investment consultants, advisors, and money management firms to note is the survey once again found that overall both institutions and advisors want the benefits of alternative strategies with the positive characteristics of traditional investments—low correlation with liquidity, absolute returns with transparency, and redemptions without restrictions,” Deutsch added.
Morningstar and Barron’s conducted the Web-based survey in late September through early October 2009; 89 institutions and 300 financial advisors participated. Survey results appear in the Nov. 9 issue of Barron’s and online at Barrons.com.
“One of the most interesting findings from our survey is that both institutions and advisors continue to view alternative investments optimistically, despite their questionable performance, correlation, and liquidity during last year’s global downturn as well as the high-profile scandals that rocked the hedge fund industry,” said Steve Deutsch, director of the pension, endowment, and foundation database at Morningstar. “Again this year, the majority of participants indicate that they plan to increase allocations to alternatives, but with greater scrutiny and due diligence given to those investments.”
Among the survey findings:
Current and Future Usage of Alternatives
• More than 60% of institutions and advisors believe that alternatives will be as important or more important than traditional investments over the next five years.
• The majority of institutions and advisors expect alternatives to account for more 10% of their portfolios over the next five years; a quarter of institutions expect alternatives to account for more than 25% of their portfolios.
• Hedge funds were the most popular alternative vehicles over the last five years, and institutions and advisors expect to continue to increase allocations to hedge funds over the next five years.
Motivation and Hesitation
• For both institutions and advisors, the top three reasons for investing in alternatives remain the same as in last year’s survey: portfolio diversification, absolute returns, and exposure to different investment techniques, like arbitrage or shorting.
• Institutions and advisors are much more concerned, however, about lack of liquidity and transparency than they were last year.
Definitions of “alternative”
• Compared to the 2008 survey, fewer institutions and advisors view real estate investment trusts and commodities as alternative asset classes.
• Both institutions and advisors tend to classify investments as “alternative” based on the investment’s strategy, i.e. absolute return, rather than the investment’s designation, i.e. mutual fund versus hedge fund.
“Perhaps most important for investment consultants, advisors, and money management firms to note is the survey once again found that overall both institutions and advisors want the benefits of alternative strategies with the positive characteristics of traditional investments—low correlation with liquidity, absolute returns with transparency, and redemptions without restrictions,” Deutsch added.
Morningstar and Barron’s conducted the Web-based survey in late September through early October 2009; 89 institutions and 300 financial advisors participated. Survey results appear in the Nov. 9 issue of Barron’s and online at Barrons.com.
13 Nov 2009
South Florida Benefit for Hedge Funds Care
The South Florida Benefit for Hedge Funds Care is being held Thursday, December 3, 2009, from 7 p.m. until 10 p.m. at the The Betsy Hotel South Beach during the most important art show in the U.S. Art Basel Miami Beach.
The South Florida Benefit for Hedge Funds Care hopes to unite hedge funds, investors, local luminaries, and the financial and art world, for an evening dedicated to preventing and treating child abuse. The evening reception includes cocktails, hors d'oeuvres and live entertainment.
* Multiple open bars and hand-rolled cigars inside the private B-Bar and under the moonlight on the rooftop of The Betsy Hotel, with unobstructed views of the ocean along Miami Beach.
* Visit the Miami Investor Lounge where hedge funds can connect in style with family offices, funds of funds, institutional investors and wealthy individuals.
* Live music by the John Branzer Band who have performed with Frank Sinatra, Sammy Davis, Jr., Tony Bennett, Louis Prima, and Keely Smith.
* Silent auction featuring artwork from the Peter Lik Gallery and Friedland Art, a private island getaway at the Turks & Caicos Sporting Club at Ambergris Cay, a spa day at the Mandarin Oriental, a tour of Miami with the Official Bud Light Poker Run Team, among others.
Thanks to our sponsors, 100% of event proceeds will go to Hedge Funds Care - Preventing and Treating Child Abuse.
Click this link to register
The South Florida Benefit for Hedge Funds Care hopes to unite hedge funds, investors, local luminaries, and the financial and art world, for an evening dedicated to preventing and treating child abuse. The evening reception includes cocktails, hors d'oeuvres and live entertainment.
* Multiple open bars and hand-rolled cigars inside the private B-Bar and under the moonlight on the rooftop of The Betsy Hotel, with unobstructed views of the ocean along Miami Beach.
* Visit the Miami Investor Lounge where hedge funds can connect in style with family offices, funds of funds, institutional investors and wealthy individuals.
* Live music by the John Branzer Band who have performed with Frank Sinatra, Sammy Davis, Jr., Tony Bennett, Louis Prima, and Keely Smith.
* Silent auction featuring artwork from the Peter Lik Gallery and Friedland Art, a private island getaway at the Turks & Caicos Sporting Club at Ambergris Cay, a spa day at the Mandarin Oriental, a tour of Miami with the Official Bud Light Poker Run Team, among others.
Thanks to our sponsors, 100% of event proceeds will go to Hedge Funds Care - Preventing and Treating Child Abuse.
Click this link to register
Horseman to Step Down From Hedge Fund Management After Losses
Bloomberg reported this morning that hedge fund manager John Horseman is stepping down from his position as manager of the $2.8 billion fund, Horseman Global Fund Ltd.
“There will be those who might think that a poor year is unduly influencing my decision, and it is probably true that if the fund had had a better year, I might have been tempted to continue,” Horseman wrote in a letter to investors, obtained by Bloomberg. “But with a time frame of three to four years at most, I feel now is the time to make way for others.”
The hedge fund fell in value by almost a quarter this year. Russell Clark and John-Paul Burke are teaming up to take his place. The pair had run Horseman Emerging Markets Funds, which will close, the letter said.
“There will be those who might think that a poor year is unduly influencing my decision, and it is probably true that if the fund had had a better year, I might have been tempted to continue,” Horseman wrote in a letter to investors, obtained by Bloomberg. “But with a time frame of three to four years at most, I feel now is the time to make way for others.”
The hedge fund fell in value by almost a quarter this year. Russell Clark and John-Paul Burke are teaming up to take his place. The pair had run Horseman Emerging Markets Funds, which will close, the letter said.
Pharos Russia Hedge Fund ranked #1 in Barclay Hedge
Russian hedge fund manager, The Pharos Russia Fund was ranked #1 in the Equity Long/Short category for September 2009 of Barclay Hedge database.
Pharos Russia Fund is an absolute return hedge fund focused on securities in Russia and the former Soviet Union. The Fund is the top performing Russia Fund over the past 11 years. The Fund has the possibility of using derivatives or going short, and is positioned with a long bias due to the manager's positive outlook for the Russian market.
Barclay Hedge, founded in 1985, is a computerized database that tracks and analyzes performance of 5804 hedge fund and managed futures investment programs worldwide. Barclay indices are utilized worldwide by financial media and investment consultants as performance benchmarks for the alternative investment industry.
Pharos Russia Fund is an absolute return hedge fund focused on securities in Russia and the former Soviet Union. The Fund is the top performing Russia Fund over the past 11 years. The Fund has the possibility of using derivatives or going short, and is positioned with a long bias due to the manager's positive outlook for the Russian market.
Barclay Hedge, founded in 1985, is a computerized database that tracks and analyzes performance of 5804 hedge fund and managed futures investment programs worldwide. Barclay indices are utilized worldwide by financial media and investment consultants as performance benchmarks for the alternative investment industry.
Fund Administrators' Role at Hedge Funds Second Only to Prime Brokers, Says TABB Group
With a post-Madoff world fixed firmly in the rear-view mirror and new regulations on the horizon, a new report from TABB Group describes how the role of fund administrators is now among one of the most important of hedge fund counterparties, perhaps second in importance only to prime brokers.
What investors want today, says TABB in a new research report, is more transparency and greater asset safety, which requires improvements in infrastructure for middle- and back-office operations, enhanced reporting to stakeholders and independent verification of portfolio values. This shift in investors’ priorities is significantly altering the role and responsibilities of fund administrators and, by extension, the processes by which administrators are selected.
According to Paul Rowady, senior analyst, and Adam Sussman, director of research, who co-authored the report, “(Hedge) Fund Administration: The Selection Criteria for a New Market Reality,” administration is no longer centered simply on back-office functions dealing with accounting, valuation and share registration. “Fund administration can now be defined as everything after the trade.”
Facing high switching costs, fund managers tell TABB they are keenly aware of how important it is to make the correct administration selection. With managers in Europe as well as the US becoming more sensitive to investor’s increasing demands, TABB Group estimates that from 2009 to 2010 the frequency of daily NAV (net asset value) calculations will increase to 56% of hedge funds, up from 46% in 2009. Operational integrity, says Sussman, is crucial to a fund’s survival, especially when faced with this increase demand in fund performance. “Hedge funds are seeking the best possible resources, including people, processes and technology, so they can meet and exceed the demands of the industry’s changing landscape.”
Prior to 2008, the fund-administrator selection process was straightforward and largely handled by managers, a check-the-box type of exercise that revolved around fund administrators’ brands and fees. The problem with relying too heavily on brand awareness, says Rowady, is that a brand’s quality was often correlated with size. “But size and brand do not ensure that an administrator deploys the most reliable technology, SAS Level II certified processes, domain expertise and scalability, not only in terms of size but the funds ability to adapt its operation to changing technology, regulations and market conditions.”
TABB details three administrator models in the report: custodian-owned, broker-owned and independent/hybrid independent. Although the independent model strives to minimize conflicts of interest that could influence the administrator’s asset valuation and verification practices, “The hybrid independent model enjoys arm’s-length operating independence combined with the financial backing of a larger entity and this may represent the best model,” says Rowady.
As firms move to validate their processing and servicing partners, TABB Group believes that the traditional method of choosing administrators by brand or reputation will be replaced by a selection process that prioritizes due diligence. “This shift should benefit boutique administrators more than many of the traditional providers,” maintains Rowady.
The authors believe the industry is seeing an end to the era in which funds manage their processing internally with a “trust me” nod to their investors. “We see more investors pushing hedge funds to migrate their processing and valuation responsibilities to qualified third parties, firms that will need to expand their processing capabilities to be more on demand, more responsive and more global.” Selecting an administrator is a complex and resource-intensive process, says Sussman. “The good news is, there are clues that investors and managers can use to make well-informed selections based on their needs and the ability of an administrator, regardless of size, to meet those needs.”
The 21-page report with 6 exhibits covers the changing market landscape for both alternative and traditional fund managers, how this new market reality serves as a driver for the broadening spectrum of administrator service offerings, enhances the importance of fund administrators – and the outlook for the fund administration business – and details how fund administrators are now instrumental to the long-term success of funds. The report describes the strengths and weaknesses of the three primary business models of fund administrators, including a discussion of the optimal model. The report also covers the fund administration landscape, pinpointing as many as many as 70 administrators globally, and details a comprehensive list of selection criteria with focus on the two factors that have replaced brand and size as the most important selection drivers.
by TABB Group Equity Research Alliance clients and all pre-qualified media at https://www.tabbgroup.com/Login.aspx. For an executive summary or to purchase the report, visit http://www.tabbgroup.com or write to info@tabbgroup.com.
Other recent TABB Group hedge fund research includes “Prime Brokerage 2009: The Hedge Fund Perspective,” which provides the capital markets industry with an in-depth analysis of hedge fund/prime brokerage relationships, and “US Hedge fund 2009: Fees, Redemptions and Managed Accounts,” covering hedge funds’ challenges dealing with fees, redemption policies, including lockups, advanced notification and frequency of redemptions, plus managed accounts, gate provisions and fund launches.
TABB Group is the financial markets industry’s only research and strategic advisory firm focused exclusively on capital markets, with offices in New York and London . Founded in 2003 and based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb, TABB Group analyzes and quantifies the investing value chain from the fiduciary, investment manager and broker, to exchange and custodian, helping senior business leaders gain a truer understanding of financial markets issues.
What investors want today, says TABB in a new research report, is more transparency and greater asset safety, which requires improvements in infrastructure for middle- and back-office operations, enhanced reporting to stakeholders and independent verification of portfolio values. This shift in investors’ priorities is significantly altering the role and responsibilities of fund administrators and, by extension, the processes by which administrators are selected.
According to Paul Rowady, senior analyst, and Adam Sussman, director of research, who co-authored the report, “(Hedge) Fund Administration: The Selection Criteria for a New Market Reality,” administration is no longer centered simply on back-office functions dealing with accounting, valuation and share registration. “Fund administration can now be defined as everything after the trade.”
Facing high switching costs, fund managers tell TABB they are keenly aware of how important it is to make the correct administration selection. With managers in Europe as well as the US becoming more sensitive to investor’s increasing demands, TABB Group estimates that from 2009 to 2010 the frequency of daily NAV (net asset value) calculations will increase to 56% of hedge funds, up from 46% in 2009. Operational integrity, says Sussman, is crucial to a fund’s survival, especially when faced with this increase demand in fund performance. “Hedge funds are seeking the best possible resources, including people, processes and technology, so they can meet and exceed the demands of the industry’s changing landscape.”
Prior to 2008, the fund-administrator selection process was straightforward and largely handled by managers, a check-the-box type of exercise that revolved around fund administrators’ brands and fees. The problem with relying too heavily on brand awareness, says Rowady, is that a brand’s quality was often correlated with size. “But size and brand do not ensure that an administrator deploys the most reliable technology, SAS Level II certified processes, domain expertise and scalability, not only in terms of size but the funds ability to adapt its operation to changing technology, regulations and market conditions.”
TABB details three administrator models in the report: custodian-owned, broker-owned and independent/hybrid independent. Although the independent model strives to minimize conflicts of interest that could influence the administrator’s asset valuation and verification practices, “The hybrid independent model enjoys arm’s-length operating independence combined with the financial backing of a larger entity and this may represent the best model,” says Rowady.
As firms move to validate their processing and servicing partners, TABB Group believes that the traditional method of choosing administrators by brand or reputation will be replaced by a selection process that prioritizes due diligence. “This shift should benefit boutique administrators more than many of the traditional providers,” maintains Rowady.
The authors believe the industry is seeing an end to the era in which funds manage their processing internally with a “trust me” nod to their investors. “We see more investors pushing hedge funds to migrate their processing and valuation responsibilities to qualified third parties, firms that will need to expand their processing capabilities to be more on demand, more responsive and more global.” Selecting an administrator is a complex and resource-intensive process, says Sussman. “The good news is, there are clues that investors and managers can use to make well-informed selections based on their needs and the ability of an administrator, regardless of size, to meet those needs.”
The 21-page report with 6 exhibits covers the changing market landscape for both alternative and traditional fund managers, how this new market reality serves as a driver for the broadening spectrum of administrator service offerings, enhances the importance of fund administrators – and the outlook for the fund administration business – and details how fund administrators are now instrumental to the long-term success of funds. The report describes the strengths and weaknesses of the three primary business models of fund administrators, including a discussion of the optimal model. The report also covers the fund administration landscape, pinpointing as many as many as 70 administrators globally, and details a comprehensive list of selection criteria with focus on the two factors that have replaced brand and size as the most important selection drivers.
by TABB Group Equity Research Alliance clients and all pre-qualified media at https://www.tabbgroup.com/Login.aspx. For an executive summary or to purchase the report, visit http://www.tabbgroup.com or write to info@tabbgroup.com.
Other recent TABB Group hedge fund research includes “Prime Brokerage 2009: The Hedge Fund Perspective,” which provides the capital markets industry with an in-depth analysis of hedge fund/prime brokerage relationships, and “US Hedge fund 2009: Fees, Redemptions and Managed Accounts,” covering hedge funds’ challenges dealing with fees, redemption policies, including lockups, advanced notification and frequency of redemptions, plus managed accounts, gate provisions and fund launches.
TABB Group is the financial markets industry’s only research and strategic advisory firm focused exclusively on capital markets, with offices in New York and London . Founded in 2003 and based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb, TABB Group analyzes and quantifies the investing value chain from the fiduciary, investment manager and broker, to exchange and custodian, helping senior business leaders gain a truer understanding of financial markets issues.
12 Nov 2009
UK Fraud Office Investigates London Hedge Fund - Oil Sales Contracts
London-based hedge fund, Dynamic Decisions Capital Management, which operated the Cayman Islands-based Growth Premium Master fund is being investigated by the Serious Fraud Office (SFO).
The hedge fund collapsed in April this year when investors applied for it to be put into liquidation, making accusations of "gross mismanagement and misfeasance".
The Guardian reports that it is alleged that the hedge fund moved a large proportion of its assets out of equities and into asset-backed bonds that could be converted into oil. According to reports, the company then "received legal advice that raised questions relating to the counterparties to the oil sales contracts that lie behind the bonds".
Dynamic Decisions’ chairman, Dr Alberto Micalizzi, said in an interview with the Times, “The investigations are not founded, first of all. There have been complaints from investors about the delays in payment of redemptions.” He said that it was his “expectation” that investors would receive their money back in full.
The hedge fund collapsed in April this year when investors applied for it to be put into liquidation, making accusations of "gross mismanagement and misfeasance".
The Guardian reports that it is alleged that the hedge fund moved a large proportion of its assets out of equities and into asset-backed bonds that could be converted into oil. According to reports, the company then "received legal advice that raised questions relating to the counterparties to the oil sales contracts that lie behind the bonds".
Dynamic Decisions’ chairman, Dr Alberto Micalizzi, said in an interview with the Times, “The investigations are not founded, first of all. There have been complaints from investors about the delays in payment of redemptions.” He said that it was his “expectation” that investors would receive their money back in full.
Hedge Fund Compensation on the Rise For 2010
HedgeCo News Archives - The 2010 Hedge Fund Compensation Report, released by Glocap Search LLC and HedgeWorld, shows signs that a recovery is underway. In addition to raising compensation over 2008 levels, funds have begun hiring again, the report explains.
The 2010 report shows that on average, 2009 base salaries for all investment professionals and traders were essentially flat (regardless of fund size or performance)with increases in the low single-digits.
Estimates call for 2009 cash bonuses for investment professionals (those paid in early 2010) to increase about 15% on average above suppressed 2008 levels. The highest percentage increases will go to professionals at those funds that decreased compensation the most in 2008. These bonus levels are still, on average, below 2007 levels.
The report consists of analysis of 2009 compensation paid by U.S. hedge funds including estimates for year-end cash bonuses expected to be paid for 2009.
Adam Zoia, CEO at Glocap, pointed out that in 2008, owners of hedge funds heavily subsidized employee compensation in order to keep their teams together and to help boost morale given that funds needed everyone motivated this year to dig out of the high water mark hole created from last year’s abysmal returns. This year there was some initial thought of taking back some of that subsidy from last year and paying lower bonuses than would otherwise be the norm given performance levels.
11 Nov 2009
Conyers Hosts 8th Annual Offshore Law Forum in New York
As the global economy continues to evolve in the aftermath of the credit crunch, lawyers from Conyers Dill & Pearman provided a timely update on regulatory developments offshore to over 100 lawyers and financial executives at the firm’s 8th Annual Offshore Law Seminar, held last month at the Grand Hyatt in New York.
Overall, the message was that the leading international financial centres in which Conyers operates have emerged as those able to enact innovative legislation with sound financial regulation meeting the standards of international bodies including the OECD and G20.
A panel of Conyers lawyers provided an in-depth look at the state of the market and the impact of the credit crunch on legal systems in the major jurisdictions of the Cayman Islands, British Virgin Islands (“BVI”) Bermuda and Mauritius.
Robert Briant, Managing Partner of the firm’s BVI office, opened the seminar by drawing an important distinction between offshore financial centres and tax secrecy jurisdictions: “The jurisdictions we advise on are tax neutral locations that facilitate international cross-border transactions. Bank secrecy jurisdictions facilitate the confidentiality of one’s affairs. The difference could not be more stark. Each of our jurisdictions plays a legitimate role in global transactions, and all are on the OECD White List.” Briant also gave updates on the BVI commercial court and upcoming Securities and Business Act, which will require every BVI company worldwide which carries on investment business to be licensed.
Richard Finlay, Managing Partner of the firm’s Cayman Islands office, discussed developments in the Cayman Islands: “Cayman has modernized its partnership legislation in response to the increased use of exempted limited partnerships by private equity and hedge funds. Also, we are pleased to report this quarter that for the first time since 2008, there has been an increase in the number of funds being licensed in Cayman. Another important development is the admission of CIMA as a member of IOSCO, which will allow Cayman funds access to emerging markets like India. The timing could not be better: we are already seeing Cayman funds investing in India through Mauritius subsidiaries.”
Devalingum Gopalla, a Mauritius associate based in the firm’s London office, talked about Mauritius as the jurisdiction of choice for structuring investments into Africa, India and China: “Mauritius has an extensive network of double taxation treaties and offers something different to the traditional offshore jurisdictions. It is attracting some of the biggest enterprises in the US and Europe who are looking to invest in emerging markets, and has fast become a hub for private equity investment into Africa. Mauritius already accounts for about 44% of foreign direct investment into India. We are seeing increased interest from China in investing in Africa through Mauritius.”
Meanwhile in Bermuda, new Partnership Legislation introduced this summer is expected to improve the efficiency of formation and administration of Bermuda partnerships and streamline procedures for overseas partnerships and will be particularly welcomed by investment fund clients. The Companies Act was also revised this year to improve the efficiency for Bermuda companies listed on US exchanges.
Anthony Whaley, partner in the firm’s Bermuda office, commented: “We are pleased to be able to deliver insight on the leading jurisdictions to onshore lawyers, particularly during this time of global economic uncertainty. The audience’s response was very positive, and we look forward to next year’s forum.”
Overall, the message was that the leading international financial centres in which Conyers operates have emerged as those able to enact innovative legislation with sound financial regulation meeting the standards of international bodies including the OECD and G20.
A panel of Conyers lawyers provided an in-depth look at the state of the market and the impact of the credit crunch on legal systems in the major jurisdictions of the Cayman Islands, British Virgin Islands (“BVI”) Bermuda and Mauritius.
Robert Briant, Managing Partner of the firm’s BVI office, opened the seminar by drawing an important distinction between offshore financial centres and tax secrecy jurisdictions: “The jurisdictions we advise on are tax neutral locations that facilitate international cross-border transactions. Bank secrecy jurisdictions facilitate the confidentiality of one’s affairs. The difference could not be more stark. Each of our jurisdictions plays a legitimate role in global transactions, and all are on the OECD White List.” Briant also gave updates on the BVI commercial court and upcoming Securities and Business Act, which will require every BVI company worldwide which carries on investment business to be licensed.
Richard Finlay, Managing Partner of the firm’s Cayman Islands office, discussed developments in the Cayman Islands: “Cayman has modernized its partnership legislation in response to the increased use of exempted limited partnerships by private equity and hedge funds. Also, we are pleased to report this quarter that for the first time since 2008, there has been an increase in the number of funds being licensed in Cayman. Another important development is the admission of CIMA as a member of IOSCO, which will allow Cayman funds access to emerging markets like India. The timing could not be better: we are already seeing Cayman funds investing in India through Mauritius subsidiaries.”
Devalingum Gopalla, a Mauritius associate based in the firm’s London office, talked about Mauritius as the jurisdiction of choice for structuring investments into Africa, India and China: “Mauritius has an extensive network of double taxation treaties and offers something different to the traditional offshore jurisdictions. It is attracting some of the biggest enterprises in the US and Europe who are looking to invest in emerging markets, and has fast become a hub for private equity investment into Africa. Mauritius already accounts for about 44% of foreign direct investment into India. We are seeing increased interest from China in investing in Africa through Mauritius.”
Meanwhile in Bermuda, new Partnership Legislation introduced this summer is expected to improve the efficiency of formation and administration of Bermuda partnerships and streamline procedures for overseas partnerships and will be particularly welcomed by investment fund clients. The Companies Act was also revised this year to improve the efficiency for Bermuda companies listed on US exchanges.
Anthony Whaley, partner in the firm’s Bermuda office, commented: “We are pleased to be able to deliver insight on the leading jurisdictions to onshore lawyers, particularly during this time of global economic uncertainty. The audience’s response was very positive, and we look forward to next year’s forum.”
Liongate Fund Of Hedge Funds Dubai Expansion
HedgeCo Archives - Winner of the “Fund of Hedge Funds Leader of the Year” 2009, Liongate Capital Management, has opened a Dubai office after being awarded a license by the Dubai Financial Services Authority (DFSA) to operate from the Dubai International Financial Centre (DIFC).
The $2.3 billion FoHF's manager will focus on advising institutional clients in the MENA region on allocations to hedge fund investment strategies out of the new Dubai office.
“With investors increasingly seeking to diversify their portfolios to include alternative investments, the long-term potential for the growth of the hedge-funds market in the Middle East, North Africa and India is strong." His Excellency Dr Omar Bin Sulaiman, Governor of the DIFC, commented. "DIFC offers the infrastructure and regulations for providers of hedge fund investments to take advantage of opportunities in the region. The establishment of Liongate Capital Management’s office is testimony to DIFC’s ability to offer a secure and productive platform for the growth of hedge funds. It also demonstrates the continued confidence of the global financial industry in the potential of the regional market.”
Liongate Capital Management has also appointed hedge fund allocator, Fahad Al-Bader, as Senior Executive Officer of the Dubai office. Fahad Al-Bader has over six years experience of investing in hedge funds. Previously, he was Head of Hedge Funds at the Kuwait Fund, Head of Alternative Investments at Ryada Capital and an Investment Analyst at KIA (Kuwait Investment Authority). Fahad al-Bader is a graduate of Purdue University, and joined Liongate Capital Management in May 2008.
The $2.3 billion FoHF's manager will focus on advising institutional clients in the MENA region on allocations to hedge fund investment strategies out of the new Dubai office.
“With investors increasingly seeking to diversify their portfolios to include alternative investments, the long-term potential for the growth of the hedge-funds market in the Middle East, North Africa and India is strong." His Excellency Dr Omar Bin Sulaiman, Governor of the DIFC, commented. "DIFC offers the infrastructure and regulations for providers of hedge fund investments to take advantage of opportunities in the region. The establishment of Liongate Capital Management’s office is testimony to DIFC’s ability to offer a secure and productive platform for the growth of hedge funds. It also demonstrates the continued confidence of the global financial industry in the potential of the regional market.”
Liongate Capital Management has also appointed hedge fund allocator, Fahad Al-Bader, as Senior Executive Officer of the Dubai office. Fahad Al-Bader has over six years experience of investing in hedge funds. Previously, he was Head of Hedge Funds at the Kuwait Fund, Head of Alternative Investments at Ryada Capital and an Investment Analyst at KIA (Kuwait Investment Authority). Fahad al-Bader is a graduate of Purdue University, and joined Liongate Capital Management in May 2008.
Smarter Government Is Needed In Hedge Fund Oversight, Says CCMC
The U.S. Chamber of Commerce's Center for Capital Markets Competitiveness (CCMC) today reaffirmed its position on reforming America's capital markets and outlined actions the administration, Congress, and the business community must take to help restore and strengthen our nation's capital markets. The Chamber again called for modernizing the regulations governing our capital markets in a way that puts the economy, jobs, and all investors first.
"We welcome Senate action to reform our broken financial regulatory system," said David Hirschmann, president and CEO of the U.S. Chamber's Center for Capital Markets Competitiveness (CCMC). "This effort needs to have a strong focus on protecting consumers and investors, while ensuring that our markets also supply businesses and entrepreneurs with the capital they need to grow, innovate, and create jobs."
The Chamber supports:
-- An overhaul of existing regulators and greater transparency in
financial markets.
-- Greater coordination among regulators, including mechanisms to ensure
regulators have the information needed to identify systemic risks.
-- Closing the gaps to end regulatory "dead zones" and eliminating
duplicative layers in current regulatory structure.
-- Greater global regulatory cooperation primarily focusing on cross
border regulatory issues and financial reporting.
-- An exit strategy for programs established by Congress, Treasury, and
the Federal Reserve to address the financial crisis.
-- Predictable mechanisms to dissolve failing financial institutions in
an orderly fashion.
-- Registration of hedge fund advisers, including appropriate reporting
to regulators.
-- Ensuring transparency in the derivatives markets through a greater use
of central clearing, while preserving the accessibility and
affordability of the over-the-counter markets for corporate end-users
of derivatives.
The Chamber opposes regulatory proposals that would impair financial markets and our members' access to capital:
-- A new stand-alone Consumer Financial Protection Agency, which would
add a duplicative regulatory layer to the current structure.
-- Proposals such as so-called proxy access that advance the agendas of
activist special interests at the expense of good governance.
-- One-size-fits all corporate governance rules such as those
contemplated in proposed "Shareholder Bill of Rights" legislation.
-- A systemic risk regulator that duplicates existing regulation or
permanently designates specific financial institutions as systemically
significant, thereby designating them "too big to fail."
-- Mechanisms for sustained, open-ended government intervention in the
private economy. We can only support resolution authority if it is
narrowly tailored to achieve the orderly bankruptcy and dissolution of
firms.
"The regulatory systems governing our markets need to be modernized, and the current debate should not be about more regulation, but smarter regulation," said Hirschmann. "We must ensure the viability of global accounting, protect companies from excessive litigation and abusive enforcement, and stop special interests from stretching the rules governing markets in order to pursue activist agendas. We look forward to working with Chairman Dodd in shaping a regulatory system needed to meet the demands of a dynamic 21st century economy."
Since its inception three years ago, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems. Fundamental to this effort, the Chamber believes we must eliminate duplicative and overlapping layers of regulation and enforcement that undermine efficiency.
"We welcome Senate action to reform our broken financial regulatory system," said David Hirschmann, president and CEO of the U.S. Chamber's Center for Capital Markets Competitiveness (CCMC). "This effort needs to have a strong focus on protecting consumers and investors, while ensuring that our markets also supply businesses and entrepreneurs with the capital they need to grow, innovate, and create jobs."
The Chamber supports:
-- An overhaul of existing regulators and greater transparency in
financial markets.
-- Greater coordination among regulators, including mechanisms to ensure
regulators have the information needed to identify systemic risks.
-- Closing the gaps to end regulatory "dead zones" and eliminating
duplicative layers in current regulatory structure.
-- Greater global regulatory cooperation primarily focusing on cross
border regulatory issues and financial reporting.
-- An exit strategy for programs established by Congress, Treasury, and
the Federal Reserve to address the financial crisis.
-- Predictable mechanisms to dissolve failing financial institutions in
an orderly fashion.
-- Registration of hedge fund advisers, including appropriate reporting
to regulators.
-- Ensuring transparency in the derivatives markets through a greater use
of central clearing, while preserving the accessibility and
affordability of the over-the-counter markets for corporate end-users
of derivatives.
The Chamber opposes regulatory proposals that would impair financial markets and our members' access to capital:
-- A new stand-alone Consumer Financial Protection Agency, which would
add a duplicative regulatory layer to the current structure.
-- Proposals such as so-called proxy access that advance the agendas of
activist special interests at the expense of good governance.
-- One-size-fits all corporate governance rules such as those
contemplated in proposed "Shareholder Bill of Rights" legislation.
-- A systemic risk regulator that duplicates existing regulation or
permanently designates specific financial institutions as systemically
significant, thereby designating them "too big to fail."
-- Mechanisms for sustained, open-ended government intervention in the
private economy. We can only support resolution authority if it is
narrowly tailored to achieve the orderly bankruptcy and dissolution of
firms.
"The regulatory systems governing our markets need to be modernized, and the current debate should not be about more regulation, but smarter regulation," said Hirschmann. "We must ensure the viability of global accounting, protect companies from excessive litigation and abusive enforcement, and stop special interests from stretching the rules governing markets in order to pursue activist agendas. We look forward to working with Chairman Dodd in shaping a regulatory system needed to meet the demands of a dynamic 21st century economy."
Since its inception three years ago, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems. Fundamental to this effort, the Chamber believes we must eliminate duplicative and overlapping layers of regulation and enforcement that undermine efficiency.
10 Nov 2009
Hedge Fund Returns up 0.17% in October - Early Estimates
HedgeCo Archives - Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index will finish almost flat with a +0.17% return in October.
Hedge funds had a slightly positive month overall with a widening dispersion of returns among strategies, based on whether managers could take advantage of October’s market volatility.
The Chicago Board Options Exchange Volatility Index (VIX), that measures the implied volatility of S&P 500 Index options, began a surge of approximately 30% on October 23 that took the VIX from just over 20 to just over 30, as equity markets took a turn downward in the second half of the month.
October’s US equity gains for many Long/Short managers were concentrated in the industrial, utilities and health sectors, and from shorting financials. Some managers which have had positive returns in recent months have begun to take profits and wind down for the year, while others which have struggled due to their defensive positions earlier in the year continued to actively seek opportunities arising from the market volatility.
Macro data was mixed, with positive earnings momentum in the US and globally, as well as positive GDP growth figures for the third quarter in the US and China , and encouraging PMI numbers for the Eurozone (except the UK which saw its economy shrink by 0.4% in 3Q). On the other hand, PMI numbers in Singapore slipped to 50.2 from a peak of 54.4 in August, personal spending in the US dropped by 0.5%, and US consumer confidence dropped from 73.5% in September to 70.6%, according to the Reuters/University of Michigan Consumer Sentiment Index.
Certain managers in Equity Market Neutral and Relative Value strategies believe that the increase in market volatility may continue and will likely favor securities pickers who perform fundamental analysis. We believe sideways markets are also generally a better environment for arbitraging rather than long-biased, directional approaches.
For example, Merrill Lynch reports that the convertible bond market was down for the first time since January, but Convertible Arbitrage managers had their 11th consecutive month of positive performance as they shifted their focus to arbitraging strategies rather than the long-only-type credit plays that were profitable earlier in the year.
Equity Market Neutral managers also experienced a positive month and their performance relative to other hedge fund strategies improved, since its market neutral profile can give the strategy an advantage over those with higher market correlations when volatility rises. Dedicated Short Bias had its first positive month since February, and was the performance leader with 5.86% for the month, while many Managed Futures managers gave back some of the profits of the previous two months.
Hedge funds had a slightly positive month overall with a widening dispersion of returns among strategies, based on whether managers could take advantage of October’s market volatility.
The Chicago Board Options Exchange Volatility Index (VIX), that measures the implied volatility of S&P 500 Index options, began a surge of approximately 30% on October 23 that took the VIX from just over 20 to just over 30, as equity markets took a turn downward in the second half of the month.
October’s US equity gains for many Long/Short managers were concentrated in the industrial, utilities and health sectors, and from shorting financials. Some managers which have had positive returns in recent months have begun to take profits and wind down for the year, while others which have struggled due to their defensive positions earlier in the year continued to actively seek opportunities arising from the market volatility.
Macro data was mixed, with positive earnings momentum in the US and globally, as well as positive GDP growth figures for the third quarter in the US and China , and encouraging PMI numbers for the Eurozone (except the UK which saw its economy shrink by 0.4% in 3Q). On the other hand, PMI numbers in Singapore slipped to 50.2 from a peak of 54.4 in August, personal spending in the US dropped by 0.5%, and US consumer confidence dropped from 73.5% in September to 70.6%, according to the Reuters/University of Michigan Consumer Sentiment Index.
Certain managers in Equity Market Neutral and Relative Value strategies believe that the increase in market volatility may continue and will likely favor securities pickers who perform fundamental analysis. We believe sideways markets are also generally a better environment for arbitraging rather than long-biased, directional approaches.
For example, Merrill Lynch reports that the convertible bond market was down for the first time since January, but Convertible Arbitrage managers had their 11th consecutive month of positive performance as they shifted their focus to arbitraging strategies rather than the long-only-type credit plays that were profitable earlier in the year.
Equity Market Neutral managers also experienced a positive month and their performance relative to other hedge fund strategies improved, since its market neutral profile can give the strategy an advantage over those with higher market correlations when volatility rises. Dedicated Short Bias had its first positive month since February, and was the performance leader with 5.86% for the month, while many Managed Futures managers gave back some of the profits of the previous two months.
The Evolving Competitive Landscape for Hedge Funds- Study
HedgeCo Archives, Study - A new independent study that examines the continued emergence of investment managers in the equity long and short marketplace and their convergence with hedge funds has been published by Pershing LLC, a BNY Mellon company, and Finadium LLC.
The report entitled, Competition and Convergence: The Evolving Landscape for Hedge Funds, indicates that while investment managers have relatively few assets in equity long and short investment portfolios, this segment of the market continues to grow rapidly as firms seek to diversify their business lines and compete with hedge funds. This new competition for assets has pushed some hedge funds into long-only investment strategies and others towards retail distribution. The report suggests that investment managers will become more important to hedge funds as potential partners in product offerings and mergers and acquisitions. Key findings from the study include:
– Growth of Equity Long and Short Investment Strategies Among Investment Managers Expected to Increase – Investment managers’ control of equity long and short investment portfolios is expected to rise from $204 billion to $345 billion by 2012 representing an increase from 19% to 28% of today’s $694 billion marketplace. According to a recent Finadium survey, 65% of investment managers now operate some sort of long and short fund, up from 33% one year ago. Independent hedge funds are also expected to continue to grow and increase their equity long and short portfolios to $810 billion by 2012 as equity markets recover;
– Potential Regulatory Reform Remains a Wild Card – Investment managers view potential regulatory reform as a wild card in driving convergence between themselves and hedge funds. The report indicates that some investment managers advocate working more closely with hedge funds as sub-advisors and potential acquisition targets with the expectation that increased regulation will occur. Without specific regulation, hedge funds will continue to have few legal obligations to disclose fees and practices;
– Hedge Funds Continue to Benefit from Strong Prime Brokerage Relationships – Investment managers have notably different servicing needs than their hedge fund competitors. These organizational requirements have created challenges for investment managers looking to do business with noncustodian prime brokers, to the benefit of hedge funds with strong prime brokerage relationships. While investment managers are becoming more agile in their technology and operations, no party has surmounted the funding obstacles that regulatory and market pressures have put in place; and
– Tri-Party Custodial Relationships May Offer Hedge Funds an Edge – Hedge funds have a wide range of opportunities and challenges to take into consideration when evaluating the strategies of investment managers in the long and short arena. For example, hedge funds should consider tri-party custodial relationships which bring many traits of the asset management industry into their domain. These arrangements allow hedge funds to mitigate their counterparty risk by custodying cash and fully paid for securities with a less leveraged bank custodian, while prime brokerages still hold the fund’s short positions and provide margin financing.
“As investment managers increasingly expand into the equity long and short marketplace, hedge fund managers need to provide their investors with a distinct value proposition that uniquely positions them in the marketplace.” Craig Messinger, managing director of Pershing Prime Services, said, “Exploring new investment strategies, embracing potential merger and acquisition opportunities and offering clients innovative separately managed account solutions are several tactics hedge funds should consider to help continue growing their businesses.”
9 Nov 2009
Regulatory Hedge Fund Reform Measures Gain Momentum
HedgeCo New Archives - Regulatory hedge fund compliance consulting firm, FrontLine Compliance LLC, sent out an alert announcing that the House Financial Services Committee has taken the first official steps toward actual financial regulatory reform. The Committee approved three bills that will be moved to the full House for vote in early December. The bills are:
- Private Fund Investment Advisers Registration Act of 2009
- Investor Protection Act of 2009
- The Accountability and Transparency in Rating Agencies Act
The legislative weight of the above bills includes registration and recordkeeping requirements for hedge funds, fiduciary standards for brokers, new restrictions on rating agencies, and enhanced enforcement powers for the SEC, including the ability to pay informants.
FrontLine Compliance is staffed by former SEC and FINRA regulators.
Subscribe to:
Posts (Atom)