Hennessee Group LLC, an adviser to hedge fund investors, voiced concern in early 2009 that the global financial crisis could enter a new and more dangerous phase, one that could push several international countries to the brink of failure and further hinder the global economic recovery.
Of particular concern to the Hennessee Group was the dramatic growth in external debt exposures of G7 and emerging countries and the increasing risk of another outright failure similar to that of Iceland when they had a debt to GDP ratio exceeding 900%. However, Hennessee Group research now indicates that this risk has begun to subside as the majority of countries have experienced a decline in their overall external debt exposure in recent months after reaching all time highs in 2008. That said, the Hennessee Group now believes this development could come at the cost of economic growth as the majority of the decline in external debt has been due to a dramatic drop off in bank lending to foreign institutions.
Charles Gradante, Co-Founder of the Hennessee Group, noted “While the decline in external debt, particularly for countries like the U.K., is a positive development and is likely to reduce the risk of another Iceland, we fear the primary driver behind the external debt reduction, specifically the drop off in external bank lending, could ultimately slow the pace of the global economic recovery.” The Hennessee Group believes it is essential to global growth that banks resume prudent external lending to businesses and individuals to further alleviate the financial crisis and promote economic growth.
In its February 2009 research paper, the Hennessee Group highlighted numerous countries, particularly in the euro zone, that appeared to be building uncomfortably high external debt levels in recent years relative to their economic output. The bright spot, at that time, was the low level of U.S. external debt to GDP output (84%).
The Netherlands reached an external debt to GDP ratio of approximately 328%, while Ireland had a similar exposure ratio to that of Iceland, a staggering 900%. The UK’s debt to GDP ratio reached 456% while Switzerland’s rose to 433%.
Gradante stated, “We believe the build up in external debt was both alarming and unsustainable, particularly for many European countries, and that if the trend continued we could be at risk of a major systemic event.” Gradante continued, “Since our initial analysis, the majority of countries have started to reduce external lending.
The U.K. has decreased its external debt by nearly $3.5 trillion from its high of $12.1 trillion in the first quarter of 2008. While we believe this is a positive development from the perspective that it alleviates our initial concern regarding another Iceland; a closer look at the underlying numbers has revealed a new concern. The vast majority of the reduction is due to a decline in external bank lending, which we believe will present additional challenges going forward. Of the $3.5 trillion decline in the U.K. external debt, $2 trillion can be attributed to a drop off in external bank lending. This could present additional challenges to an economic recovery.”
The Hennessee Group believes this new trend is not just a problem isolated to the U.K. but rather a worldwide issue. In a recent press release by the Bank for International Settlements, they stated, “After a relatively small change in total outstanding stocks in the third quarter, banks’ external claims shrank by 5.4% in the fourth quarter of 2008 ($1.8 trillion at constant exchange rates), to $31 trillion.” They added, “This was the largest reduction ever recorded.” The global economy may very well struggle to recover if the banks remain unwilling to increase external debt lending and may result in a resurrection of protectionism.
7 Aug 2009
Miller Heads Up New NorthPoint Dallas Office
Atlanta based hedge fund prime brokerage firm, NorthPoint Trading Partners, LLC, has opened an office in Dallas, Texas, led by industry veteran Chip Miller.
Miller joins NorthPoint from Stadium Capital where he was head trader for 4 years. He will head up both the prime brokerage and the sales trading operations in the region. Miller will report directly to Michael DeJarnette, President of NorthPoint.
“As we continue to expand our presence nationwide, we are very fortunate to have someone join our team who is as talented and experienced as Chip,” says Douglas Nelson, Chief Executive Officer of NorthPoint.
An industry veteran since 1993, Chip has held positions at Jefferies and Co., Clover Partners and Stadium Capital Management. He is experienced in the trading, operational and regulatory aspects of the buy and sell side.
Miller joins NorthPoint from Stadium Capital where he was head trader for 4 years. He will head up both the prime brokerage and the sales trading operations in the region. Miller will report directly to Michael DeJarnette, President of NorthPoint.
“As we continue to expand our presence nationwide, we are very fortunate to have someone join our team who is as talented and experienced as Chip,” says Douglas Nelson, Chief Executive Officer of NorthPoint.
An industry veteran since 1993, Chip has held positions at Jefferies and Co., Clover Partners and Stadium Capital Management. He is experienced in the trading, operational and regulatory aspects of the buy and sell side.
6 Aug 2009
People Moves: Global Fund Exchange Hires Hedge Fund Specialist
Alternative investment manager Global Fund Exchange has hired A. Michael D’Arpino as Director of Business Development, a new position at the firm. D'Arpino joins Global Fund Exchange from hedge fund manager Clinton Group, Inc.
"We are very excited to have Michael join our team," said Lauralouise Duffy, CEO, Global Fund Exchange Group. "He brings a wealth of hedge fund and Wall Street broker-dealer experience, outstanding leadership capabilities and the expert analytical, planning and communications skills that are so critically important to our investors."
Prior to joining Global Fund Exchange, D'Arpino was Managing Director, Clinton Group, Inc., where he held responsibility for all marketing functions including identifying and mitigating business and operational risks, compliance, business development and investor relations.
"I am pleased to join Global Fund Exchange, which is comprised of a unique group of industry veterans dedicated to providing a distinct approach to alternative and traditional energy opportunities globally through the Earth Wind & Fire Funds," said D’Arpino. "The firm’s strategy, using a multi-manager global macro approach to investing across the entire spectrum of energy and resources, represents a compelling opportunity for investors who seek access to the alternative energy and renewable resources sectors while offering the benefits of diversified and uncorrelated portfolios."
"We are very excited to have Michael join our team," said Lauralouise Duffy, CEO, Global Fund Exchange Group. "He brings a wealth of hedge fund and Wall Street broker-dealer experience, outstanding leadership capabilities and the expert analytical, planning and communications skills that are so critically important to our investors."
Prior to joining Global Fund Exchange, D'Arpino was Managing Director, Clinton Group, Inc., where he held responsibility for all marketing functions including identifying and mitigating business and operational risks, compliance, business development and investor relations.
"I am pleased to join Global Fund Exchange, which is comprised of a unique group of industry veterans dedicated to providing a distinct approach to alternative and traditional energy opportunities globally through the Earth Wind & Fire Funds," said D’Arpino. "The firm’s strategy, using a multi-manager global macro approach to investing across the entire spectrum of energy and resources, represents a compelling opportunity for investors who seek access to the alternative energy and renewable resources sectors while offering the benefits of diversified and uncorrelated portfolios."
5 Aug 2009
Credit Suisse Alternative Index Replication Suggests a Positive Month for Hedge Funds
Long/Short Equity hedge funds continued to increase overall net exposures in July, enabling managers to capitalize on market upswings early in the month, according to Jordan Drachman, Head of Research for Alternative Beta Strategies at Credit Suisse.
Dr. Drachman noted, ''As risk appetite returns to the market, many Long/Short Equity hedge fund managers have increased their overall net exposures, which enabled them to generate positive returns as equity markets bounced back early in July. Despite mid-month volatility, managers were able to preserve gains to finish up for the month. The Credit Suisse Long/Short Equity Replication Index was up 1.96% (net) for the month, while the Credit Suisse Global Macro Replication Index finished up 0.03% over the same period.”
AIR Indices seek to replicate the performance of major hedge fund strategies and enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index. The AIR platform also offers inverse indices that seek to approximate short exposure to the aggregate returns of the universe of Long/Short Equity and Global Macro hedge fund managers.
Performances for the AIR Global Macro and Long/Short Equity Indices are calculated daily and shown net of a 1.15% per annum calculation fee.
Dr. Drachman noted, ''As risk appetite returns to the market, many Long/Short Equity hedge fund managers have increased their overall net exposures, which enabled them to generate positive returns as equity markets bounced back early in July. Despite mid-month volatility, managers were able to preserve gains to finish up for the month. The Credit Suisse Long/Short Equity Replication Index was up 1.96% (net) for the month, while the Credit Suisse Global Macro Replication Index finished up 0.03% over the same period.”
AIR Indices seek to replicate the performance of major hedge fund strategies and enable investors to gain liquid, transparent insight into the Global Macro and Long/Short Equity sectors of the Credit Suisse/Tremont Hedge Fund Index. The AIR platform also offers inverse indices that seek to approximate short exposure to the aggregate returns of the universe of Long/Short Equity and Global Macro hedge fund managers.
Performances for the AIR Global Macro and Long/Short Equity Indices are calculated daily and shown net of a 1.15% per annum calculation fee.
4 Aug 2009
Hedge Fund Industry Assets Surge - HFR
Assets invested in the hedge fund industry increased by $100 billion in the second quarter of 2009, ending at $1.43 trillion, according to figures released by Hedge Fund Research (HFR). This is the first quarterly increase in assets since 2Q 08, when total industry capital peaked at $1.93 trillion.
The strong performance was led by strategies focusing on Emerging Markets, Convertible Arbitrage and Energy/Basic Materials. These three areas were among the weakest performers in 2008, showing the dramatic shift in market dynamics that has taken place this year.
Investors redeemed $42.8 billion from hedge funds in the second quarter, approximately 60% less than the $103 billion that was redeemed in 1Q 09 and an even more significant drop from the $152 billion that was withdrawn in 4Q 08.
Funds of Hedge Funds continued to experience a higher percentage of capital redemptions than single-manager strategies, as investors withdrew $33 billion from Funds of Hedge Funds in the second quarter. Total capital invested in hedge funds via Funds of Hedge Funds currently stands at $530 billion, 37 percent of the industry’s total capital and well below the $825 billion which were invested through Funds of Funds at their peak level in mid-2008.
HFR also reports that the number of hedge funds, including both single-manager and funds of funds, remained approximately flat during the quarter at just over 8,900. The performance of the HFRI Fund Weighted Composite is now available hedged into four foreign currencies, including Euro, British Pound Sterling, Swiss Franc and Japanese Yen.
"Reflecting the diverse drivers of hedge fund industry performance, recent gains have occurred in an environment in which developed equity markets have been essentially flat", Kenneth J. Heinz, President of Hedge Fund Research Inc, said. "Improved liquidity in credit markets contributed to narrowing some of the pricing dislocations that were created near the end of 2008, and the combination of improved credit markets, gains in emerging markets, and decreased risk aversion have driven broad-based gains in 2009."
The strong performance was led by strategies focusing on Emerging Markets, Convertible Arbitrage and Energy/Basic Materials. These three areas were among the weakest performers in 2008, showing the dramatic shift in market dynamics that has taken place this year.
Investors redeemed $42.8 billion from hedge funds in the second quarter, approximately 60% less than the $103 billion that was redeemed in 1Q 09 and an even more significant drop from the $152 billion that was withdrawn in 4Q 08.
Funds of Hedge Funds continued to experience a higher percentage of capital redemptions than single-manager strategies, as investors withdrew $33 billion from Funds of Hedge Funds in the second quarter. Total capital invested in hedge funds via Funds of Hedge Funds currently stands at $530 billion, 37 percent of the industry’s total capital and well below the $825 billion which were invested through Funds of Funds at their peak level in mid-2008.
HFR also reports that the number of hedge funds, including both single-manager and funds of funds, remained approximately flat during the quarter at just over 8,900. The performance of the HFRI Fund Weighted Composite is now available hedged into four foreign currencies, including Euro, British Pound Sterling, Swiss Franc and Japanese Yen.
"Reflecting the diverse drivers of hedge fund industry performance, recent gains have occurred in an environment in which developed equity markets have been essentially flat", Kenneth J. Heinz, President of Hedge Fund Research Inc, said. "Improved liquidity in credit markets contributed to narrowing some of the pricing dislocations that were created near the end of 2008, and the combination of improved credit markets, gains in emerging markets, and decreased risk aversion have driven broad-based gains in 2009."
Merlin Merger Provides Hedge Fund Managers Access to Network of Industry Experts
Hedge fund prime broker Merlin Securities and financial tech group Gerson Lehrman, announced an exclusive research partnership which will allow Merlin to provide emerging managers with access to Gerson Lehrman Group’snetwork of more than 200,000 experts. As a result of the partnership, Gerson Lehrman Group’s platform will be much more accessible to fund managers with assets of up to $150 million.
”We are very pleased to announce this exclusive partnership with Gerson Lehrman
Group,” Stephan Vermut, founder and managing partner of Merlin Securities, said,
”Gerson Lehrman Group is a trusted name and resource for generating alpha, and as
leaders in our respective markets, the combination of Gerson Lehrman Group’s worldrenowned expert network with Merlin’s prime, multi-prime and analytical solutions represents an extremely powerful offering for emerging managers.”
”The decision to offer services to emerging managers was a natural one,” Alexander Saint-Amand, president and chief executive officer of Gerson Lehrman Group, said, ”Like our current clients, emerging managers greatly value the sophisticated expertise offered through our global network. We are excited to be working with Merlin as our partner in providing Gerson Lehrman Group services to emerging managers.”
Merlin was recognized as the #1 prime broker for funds less than $1 billion by Alpha
magazine’s 2008 hedge fund service provider survey for the second year running. Merlin was also the top-ranked non-algorithmic-driven firm and second overall among brokerages trading NYSE stocks as measured by arrival price, according to the 2008 Elkins/McSherry annual transaction cost survey.
”We are very pleased to announce this exclusive partnership with Gerson Lehrman
Group,” Stephan Vermut, founder and managing partner of Merlin Securities, said,
”Gerson Lehrman Group is a trusted name and resource for generating alpha, and as
leaders in our respective markets, the combination of Gerson Lehrman Group’s worldrenowned expert network with Merlin’s prime, multi-prime and analytical solutions represents an extremely powerful offering for emerging managers.”
”The decision to offer services to emerging managers was a natural one,” Alexander Saint-Amand, president and chief executive officer of Gerson Lehrman Group, said, ”Like our current clients, emerging managers greatly value the sophisticated expertise offered through our global network. We are excited to be working with Merlin as our partner in providing Gerson Lehrman Group services to emerging managers.”
Merlin was recognized as the #1 prime broker for funds less than $1 billion by Alpha
magazine’s 2008 hedge fund service provider survey for the second year running. Merlin was also the top-ranked non-algorithmic-driven firm and second overall among brokerages trading NYSE stocks as measured by arrival price, according to the 2008 Elkins/McSherry annual transaction cost survey.
3 Aug 2009
Hedge Funds Strategy Demand Q2 2009: Brighton House Associates Q2 Report
During the first quarter, most alternative investors spent their time rebalancing their portfolios, redeeming with current managers, and waiting for the market to correct itself. This process freed up capital and uncovered gaps in portfolios, ultimately leading to a significant increase in alternative investment interest in the second quarter, according to a report by Brighton House Associates (BHA), a hedge fund and FoHF reserach firm.
Fixed-income strategies and volatility arbitrage were sought after, and experienced a significant boom in interest, as investors looked to take advantage of pricing inefficiencies created by rebounding markets, the report said. Investors’ concerns were evident by a push for greater liquidity, transparency, and access from managers of alternative funds. This shift manifested itself in conversations BHA analysts had with the global investor community.
Nearly a quarter of all real estate fund interest in Q2 came from wealth advisors. Consultants and government pension plans also showed significant interest. 48% of the real estate investors that BHA spoke were specifically targeting the commercial sector. In terms of strategy; most investors were looking opportunistically at any type of real estate exposure, and the majority of investors were focused on core and value-added strategies.
The second quarter of 2009 was very strong for alternative investment funds. Funds of hedge funds in particular saw an increase in investor interest after a disastrous Q1. In the first quarter, BHA received 108 mandates for funds of funds from investors; in the second quarter that number jumped over 40%. Several factors contributed to this change, including increased investor tolerance for lock-ups and longer redemption periods, increased investor interest in single-strategy funds of funds, and various investor types looking to increase their funds of funds exposure.
Many investors that spent the first quarter on the sidelines outlined active mandates while others committed capital to funds. Investors reported interest not only in funds with which they had long standing relationships, but also in new funds to which they were introduced in the past few months.
While many strategies realized increased interest during the quarter, volatility arbitrage and fixed income were two of the most intriguing, the report said. The rise in interest in volatility arbitrage is of little surprise. As the push for liquidity, focused investors on highly liquid, short-term trading-oriented funds. Investors also increasingly favored the relative stability and predictable returns that fixed-income funds provide. In the private equity space, venture capital showed signs of rebounding after a rough start to the year.
During the second quarter, 57% of investors profiled by BHA analysts maintained minimum asset requirements of $1 million to $200 million for potential funds, and 19% looking for funds with a minimum of $21 million to $75 million. During the second quarter, 57% of investors profiled by BHA analysts maintained minimum asset requirements of $1 million to $200 million for potential funds, and 19 percent looking for funds with a minimum of $21 million to $75 million.
Investors and managers are hoping to build on the momentum created during the second quarter and carry it forward into the second half of the year, the report concluded.
Brighton House Associates 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.
Each quarter, BHA analysts collect detailed profiles from more than 1,000 investors globaly that are actively making investments in hedge funds, private equity and real estate funds, and related funds of funds. These investors'(AUM) range from less than $100 million to more than $10 billion dedicated towards alternative investments.
Fixed-income strategies and volatility arbitrage were sought after, and experienced a significant boom in interest, as investors looked to take advantage of pricing inefficiencies created by rebounding markets, the report said. Investors’ concerns were evident by a push for greater liquidity, transparency, and access from managers of alternative funds. This shift manifested itself in conversations BHA analysts had with the global investor community.
Nearly a quarter of all real estate fund interest in Q2 came from wealth advisors. Consultants and government pension plans also showed significant interest. 48% of the real estate investors that BHA spoke were specifically targeting the commercial sector. In terms of strategy; most investors were looking opportunistically at any type of real estate exposure, and the majority of investors were focused on core and value-added strategies.
The second quarter of 2009 was very strong for alternative investment funds. Funds of hedge funds in particular saw an increase in investor interest after a disastrous Q1. In the first quarter, BHA received 108 mandates for funds of funds from investors; in the second quarter that number jumped over 40%. Several factors contributed to this change, including increased investor tolerance for lock-ups and longer redemption periods, increased investor interest in single-strategy funds of funds, and various investor types looking to increase their funds of funds exposure.
Many investors that spent the first quarter on the sidelines outlined active mandates while others committed capital to funds. Investors reported interest not only in funds with which they had long standing relationships, but also in new funds to which they were introduced in the past few months.
While many strategies realized increased interest during the quarter, volatility arbitrage and fixed income were two of the most intriguing, the report said. The rise in interest in volatility arbitrage is of little surprise. As the push for liquidity, focused investors on highly liquid, short-term trading-oriented funds. Investors also increasingly favored the relative stability and predictable returns that fixed-income funds provide. In the private equity space, venture capital showed signs of rebounding after a rough start to the year.
During the second quarter, 57% of investors profiled by BHA analysts maintained minimum asset requirements of $1 million to $200 million for potential funds, and 19% looking for funds with a minimum of $21 million to $75 million. During the second quarter, 57% of investors profiled by BHA analysts maintained minimum asset requirements of $1 million to $200 million for potential funds, and 19 percent looking for funds with a minimum of $21 million to $75 million.
Investors and managers are hoping to build on the momentum created during the second quarter and carry it forward into the second half of the year, the report concluded.
Brighton House Associates 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.
Each quarter, BHA analysts collect detailed profiles from more than 1,000 investors globaly that are actively making investments in hedge funds, private equity and real estate funds, and related funds of funds. These investors'(AUM) range from less than $100 million to more than $10 billion dedicated towards alternative investments.
Bandon Provides Smaller Investors Access To Flagship Hedge Fund Strategy
Hedge fund manager Bandon Capital Management, LLC, has made it’s flagship investment strategy, DIRS - Directional Interest Rate Strategy - available to investment advisors through Adhesion’s WealthADV UMA platform.
The flagship strategy, celebrating it’s 5th year anniversary at the end of this month, seeks to provide investors with absolute returns, uncorrelated with the equity and fixed income markets by investing in the US Treasury Market using ETF’s or mutual funds and is available to non-accredited investors.
Bandon is focused on delivering the attractive investment characteristics of alternative investing – absolute returns with low correlations – to the mass affluent and small institutional investors while minimizing or eliminating many of the structural negatives including high minimums, high fees, long lock ups and lack of liquidity and transparency.
Bill Woodruff, Founder and Managing Principal said “every day we hear from advisors sharing the frustration of their clients, whose account balances have been decimated and are not yet reflecting the economic recovery they keep hearing about. Increasingly, advisors are recognizing the benefit of allocating a portion of their portfolio to absolute return strategies - just like large institutional and ultra HNW investors – and are knocking on our door. We could not be more pleased with the opportunity to be included on the Adhesion platform which has many benefits including an open custody approach that enables advisors and their clients to access Bandon’s strategies through Schwab Institutional, Fidelity, TD Ameritrade and Pershing”.
Michael Stier, President and CEO of Adhesion said “We continue to see increasing demand for absolute return oriented, non market correlated strategies from our advisors and their clients, and could not be more pleased to have one of the leaders in this emerging area, join our platform”.
The flagship strategy, celebrating it’s 5th year anniversary at the end of this month, seeks to provide investors with absolute returns, uncorrelated with the equity and fixed income markets by investing in the US Treasury Market using ETF’s or mutual funds and is available to non-accredited investors.
Bandon is focused on delivering the attractive investment characteristics of alternative investing – absolute returns with low correlations – to the mass affluent and small institutional investors while minimizing or eliminating many of the structural negatives including high minimums, high fees, long lock ups and lack of liquidity and transparency.
Bill Woodruff, Founder and Managing Principal said “every day we hear from advisors sharing the frustration of their clients, whose account balances have been decimated and are not yet reflecting the economic recovery they keep hearing about. Increasingly, advisors are recognizing the benefit of allocating a portion of their portfolio to absolute return strategies - just like large institutional and ultra HNW investors – and are knocking on our door. We could not be more pleased with the opportunity to be included on the Adhesion platform which has many benefits including an open custody approach that enables advisors and their clients to access Bandon’s strategies through Schwab Institutional, Fidelity, TD Ameritrade and Pershing”.
Michael Stier, President and CEO of Adhesion said “We continue to see increasing demand for absolute return oriented, non market correlated strategies from our advisors and their clients, and could not be more pleased to have one of the leaders in this emerging area, join our platform”.
31 Jul 2009
Hedge Fund Shareholder Joins Board of Directors
Hedge fund founder J. Winder Hughes, III, has joined wastewater treatment and power generation technology company, ThermoEnergy Corporation, on the Company's Board of Directors.
Hughes is the Managing Director of the private equity firm of Hughes Capital Investors, LLC. In 2000, Hughes formed the Focus Fund, LP, a Florida-based, highly concentrated equity partnership that focuses on publicly-traded emerging growth companies. Over the past two years, the Focus Fund has become one of the largest investors in ThermoEnergy Corporation.
"We are extremely pleased that Mr. Hughes accepted our invitation to join the board of ThermoEnergy Corporation," said Dennis C. Cossey, ThermoEnergy's Chairman and CEO. "With his extensive background in corporate finance and investment banking, Mr. Hughes represents a tremendous resource on which the ThermoEnergy management team can rely on."
"Given that the Company is on the cusp of commercial prosperity with its wastewater treatment business and at the forefront of achieving value-creating milestones with its Babcock-Thermo Carbon Capture joint venture," said Mr. Hughes, "I look forward to working with the management team to strengthen the company's financial stability and improve business performance for the benefit of all its stakeholders."
Hughes is the Managing Director of the private equity firm of Hughes Capital Investors, LLC. In 2000, Hughes formed the Focus Fund, LP, a Florida-based, highly concentrated equity partnership that focuses on publicly-traded emerging growth companies. Over the past two years, the Focus Fund has become one of the largest investors in ThermoEnergy Corporation.
"We are extremely pleased that Mr. Hughes accepted our invitation to join the board of ThermoEnergy Corporation," said Dennis C. Cossey, ThermoEnergy's Chairman and CEO. "With his extensive background in corporate finance and investment banking, Mr. Hughes represents a tremendous resource on which the ThermoEnergy management team can rely on."
"Given that the Company is on the cusp of commercial prosperity with its wastewater treatment business and at the forefront of achieving value-creating milestones with its Babcock-Thermo Carbon Capture joint venture," said Mr. Hughes, "I look forward to working with the management team to strengthen the company's financial stability and improve business performance for the benefit of all its stakeholders."
30 Jul 2009
Changing Attitudes Towards Risk
HedgeCo.net (New York) - "Attitudes towards hedge fund risk are poised to change," Sara Grillo, Founder of the Coalition for Safer Hedge Funds said in a paper examining proposed improvements in risk measurement, "The evolution will have positive results for the industry."
The paper also analyses the consequences of risk on portfolio performance, the report predicts that regulatory scrutiny will be the catalyst that forces risk levels down and ultimately drives the industry toward a period of maturity. Within this more stable environment, inflows from retail and institutional investors will surge, leading to the emergence of hedge funds as a more popular investment choice amongst the investing public.
Many academics believe that hedge fund returns are not predictable, and that the only persistent factor in performance history is risk itself. Research conducted by Martin Herzberg and Maim Mozes articulates the notion that less risky funds persistently are more likely to outperform riskier ones in the long term. Riskier managers are likely to take large directional “bets” which may crash when the market trends reverse. Less risky funds base decisions on fundamental skill and are less correlated with markets.
The role of high risk funds, Herzberg and Mozes believe, should be to diversify a portfolio rather than act as the main source of return. Aside from investment style, Herzberg and Mozes cite the other factors that affect returns such as the fund size, growth in assets under management, and length of investment history. They note that funds with shorter track records tend to exhibit higher returns than ones with longer track records. They identify the reasons to be their more experimental style, lack of controls, lack of auditing, and self-selection. Herzberg and Mozes hypothesise that funds with lower levels of assets under management tend to outperform, but this tendency fades as assets increase. Additional assets are placed in cash or must be placed with secondary managers, dragging down alpha.
The show is not over yet, she says. In fact, it is just beginning. As attitudes towards risk evolve, there is still plenty more room for the industry to grow. Although industry scandals have left investors reeling, scepticism will fade as industry regulation will increase transparency.
Increased scrutiny by industry watchdogs will lead to the normalisation of risk and return, which will ultimately decrease the level of hedge fund volatility. As volatility levels normalise, hedge funds will become more popular with retail investors and pension funds.
This surge in demand will propel the industry through its lifecycle until it reaches its ultimate maturation level. Regulatory developments and their effect on risk will be the catalyst that leads to the emergence of hedge funds as a prominent investment option amongst the investing public at large.
Sara Grillo earned her B.A. from Harvard University with honors. She is currently enrolled in a M.B.A program at the New York University Stern School of Business. She passed the CFA Level One examination in June 2003, and is a affiliate member of the New York Society of Securities Analysts and the CFA Institute.
The paper also analyses the consequences of risk on portfolio performance, the report predicts that regulatory scrutiny will be the catalyst that forces risk levels down and ultimately drives the industry toward a period of maturity. Within this more stable environment, inflows from retail and institutional investors will surge, leading to the emergence of hedge funds as a more popular investment choice amongst the investing public.
Many academics believe that hedge fund returns are not predictable, and that the only persistent factor in performance history is risk itself. Research conducted by Martin Herzberg and Maim Mozes articulates the notion that less risky funds persistently are more likely to outperform riskier ones in the long term. Riskier managers are likely to take large directional “bets” which may crash when the market trends reverse. Less risky funds base decisions on fundamental skill and are less correlated with markets.
The role of high risk funds, Herzberg and Mozes believe, should be to diversify a portfolio rather than act as the main source of return. Aside from investment style, Herzberg and Mozes cite the other factors that affect returns such as the fund size, growth in assets under management, and length of investment history. They note that funds with shorter track records tend to exhibit higher returns than ones with longer track records. They identify the reasons to be their more experimental style, lack of controls, lack of auditing, and self-selection. Herzberg and Mozes hypothesise that funds with lower levels of assets under management tend to outperform, but this tendency fades as assets increase. Additional assets are placed in cash or must be placed with secondary managers, dragging down alpha.
The show is not over yet, she says. In fact, it is just beginning. As attitudes towards risk evolve, there is still plenty more room for the industry to grow. Although industry scandals have left investors reeling, scepticism will fade as industry regulation will increase transparency.
Increased scrutiny by industry watchdogs will lead to the normalisation of risk and return, which will ultimately decrease the level of hedge fund volatility. As volatility levels normalise, hedge funds will become more popular with retail investors and pension funds.
This surge in demand will propel the industry through its lifecycle until it reaches its ultimate maturation level. Regulatory developments and their effect on risk will be the catalyst that leads to the emergence of hedge funds as a prominent investment option amongst the investing public at large.
Sara Grillo earned her B.A. from Harvard University with honors. She is currently enrolled in a M.B.A program at the New York University Stern School of Business. She passed the CFA Level One examination in June 2003, and is a affiliate member of the New York Society of Securities Analysts and the CFA Institute.
BTIG Launches Fixed Income Prime Brokerage
BTIG LLC. announced that it has expanded its Prime Brokerage group to offer fixed income services, including trading and portfolio financing. The expansion into fixed income is in conjunction with the launch of BTIG’s Global Fixed Income Group in February of this year, which focuses on sales and trading of credit products across the full credit spectrum from investment grade to distressed debt.
BTIG Prime Brokerage previously covered equity and equity options and made the move to fixed income to better meet the needs of its hedge fund clients in today’s market.
“As our clients became more interested in fixed income products, we saw a huge need and opportunity to expand our services,” Justin Press, Managing Director and Co-Head of Prime Brokerage, said. “We have created a one-of-a-kind fixed income offering that will bridge the gap for hedge fund managers who have traditionally been operating in equities only.”
BTIG’s Prime Brokerage clients also benefit from the firm’s full range of expertise and services, including Outsource Trading, Market Intelligence, International Trading, and access to the Equity Derivatives team, Capital Introduction team and Commission Management services. The Prime Brokerage group was launched in January 2004 and caters to start-up and existing long/short equity hedge funds. Prime Brokerage and middle office operations have a combined 40+ professionals.
The Global Fixed Income Group has added 50+ professionals since its launch earlier this year.
BTIG Prime Brokerage previously covered equity and equity options and made the move to fixed income to better meet the needs of its hedge fund clients in today’s market.
“As our clients became more interested in fixed income products, we saw a huge need and opportunity to expand our services,” Justin Press, Managing Director and Co-Head of Prime Brokerage, said. “We have created a one-of-a-kind fixed income offering that will bridge the gap for hedge fund managers who have traditionally been operating in equities only.”
BTIG’s Prime Brokerage clients also benefit from the firm’s full range of expertise and services, including Outsource Trading, Market Intelligence, International Trading, and access to the Equity Derivatives team, Capital Introduction team and Commission Management services. The Prime Brokerage group was launched in January 2004 and caters to start-up and existing long/short equity hedge funds. Prime Brokerage and middle office operations have a combined 40+ professionals.
The Global Fixed Income Group has added 50+ professionals since its launch earlier this year.
29 Jul 2009
Halfway There: New Hedge Fund Research From Credit Suisse/Tremont
Credit Suisse Tremont Index LLC released a new research piece, 1H 2009 Hedge Fund Update: Halfway There, a review of how hedge funds have repositioned themselves in the first half of 2009 to generate positive returns for five out of the first six months of the year.
The report discusses how hedge funds have generated year-to-date returns of 7.2% through June 30, outperforming, with lower volatility, both key equity and bond indices. Some key takeaways from the report include:
* The Convertible Arbitrage, Emerging Markets, and Global Macro sectors have received increased attention as investors began to regain their appetite for risk and global markets rallied.
* Performance has improved across most sectors, with the bulk of returns for many strategies moving into positive territory for the year, with 80% of all funds reporting positive returns for the second quarter.
* Overall industry assets under management have dropped approximately $18 billion since the end of the first quarter of 2009; we estimate industry assets totaled $1.3 trillion as of June 30 - down from $1.5 trillion at the end of 2008.
* As of June 30, 2009, an estimated 9.6% of funds were classified as impaired, meaning they have either suspended redemptions, imposed gate provisions or sidepocketed assets.
Credit Suisse is comprised of a number of legal entities around the world and is headquartered in Zurich. The registered shares of Credit Suisse's parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares, in New York.
The report discusses how hedge funds have generated year-to-date returns of 7.2% through June 30, outperforming, with lower volatility, both key equity and bond indices. Some key takeaways from the report include:
* The Convertible Arbitrage, Emerging Markets, and Global Macro sectors have received increased attention as investors began to regain their appetite for risk and global markets rallied.
* Performance has improved across most sectors, with the bulk of returns for many strategies moving into positive territory for the year, with 80% of all funds reporting positive returns for the second quarter.
* Overall industry assets under management have dropped approximately $18 billion since the end of the first quarter of 2009; we estimate industry assets totaled $1.3 trillion as of June 30 - down from $1.5 trillion at the end of 2008.
* As of June 30, 2009, an estimated 9.6% of funds were classified as impaired, meaning they have either suspended redemptions, imposed gate provisions or sidepocketed assets.
Credit Suisse is comprised of a number of legal entities around the world and is headquartered in Zurich. The registered shares of Credit Suisse's parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares, in New York.
28 Jul 2009
BHA Q1 2009 Alternative Investor Report
Working with a group of 150 alternative investment managers, alternative investor research company, Brighton House Associates,(BHA) published its Quarterly Research Report highlighting insights and trends from this research that are most pertinent to industry professionals.
In summary of the report, the markets continued their downward trend in Q1, but the ability of hedge fund managers and alternative investors to adapt and position properly is what allows investment managers to produce returns in even the most difficult markets. Throughout the alternative industry there are still managers making money and using alpha to produce uncorrelated return streams, and investors are conscious of this and judiciously seeking investment with them, the report said.
Currently, many alternative investors are turning towards short-term CTA and global macro managers because they can nimbly navigate these uncertain markets while providing excellent liquidity terms, according to BHA. Investors are also increasingly interested in the relative stability and unique opportunities that private equity funds provide. Investors are looking for generalist funds that can provide them with diversified exposure and buyout funds that can take advantage of drastically undervalued opportunities.
In the real estate space, according to the report, investors are looking for managers that are aggressively taking advantage of the depressed real estate market to acquire undervalued assets.
Investors and managers are eagerly anticipating a market turnaround in the second half of 2009 that should lead to a significant influx of capital into alternative markets, BHA said. Investors that are currently sitting on high levels of cash said that they are actively researching the proper opportunities to put some of that capital to effective use in 2009.
BHA works directly with a wide range of investment managers on a daily basis. These managers range from hedge funds and funds of hedge funds to private equity, real estate, and venture capital funds. They also range in size and experience from emerging managers to some of the most established firms in the industry.
Each quarter, BHA analysts collect detailed profiles from more than 1,000 investors that are actively making investments in hedge funds, private equity and real estate funds, and related funds of funds. These investors are located all across the globe; their assets under management range from less than $100 million to more than $10 billion. The Q2 research is scheduled for release early next week.
In summary of the report, the markets continued their downward trend in Q1, but the ability of hedge fund managers and alternative investors to adapt and position properly is what allows investment managers to produce returns in even the most difficult markets. Throughout the alternative industry there are still managers making money and using alpha to produce uncorrelated return streams, and investors are conscious of this and judiciously seeking investment with them, the report said.
Currently, many alternative investors are turning towards short-term CTA and global macro managers because they can nimbly navigate these uncertain markets while providing excellent liquidity terms, according to BHA. Investors are also increasingly interested in the relative stability and unique opportunities that private equity funds provide. Investors are looking for generalist funds that can provide them with diversified exposure and buyout funds that can take advantage of drastically undervalued opportunities.
In the real estate space, according to the report, investors are looking for managers that are aggressively taking advantage of the depressed real estate market to acquire undervalued assets.
Investors and managers are eagerly anticipating a market turnaround in the second half of 2009 that should lead to a significant influx of capital into alternative markets, BHA said. Investors that are currently sitting on high levels of cash said that they are actively researching the proper opportunities to put some of that capital to effective use in 2009.
BHA works directly with a wide range of investment managers on a daily basis. These managers range from hedge funds and funds of hedge funds to private equity, real estate, and venture capital funds. They also range in size and experience from emerging managers to some of the most established firms in the industry.
Each quarter, BHA analysts collect detailed profiles from more than 1,000 investors that are actively making investments in hedge funds, private equity and real estate funds, and related funds of funds. These investors are located all across the globe; their assets under management range from less than $100 million to more than $10 billion. The Q2 research is scheduled for release early next week.
'Green' Hedge Fund of Funds Launched by Hedge Fund Veteran
Richard Bookbinder is launching TerraVerde Capital Partners LLC, one of the first “green” hedge fund of funds in the United States. Bookbinder is Managing Member of Bookbinder Capital Management, a New York-based hedge fund of funds, and a founding Principal of Sandler, O’Neill & Partners, L.P.
TerraVerde allocates capital to hedge funds devoted solely to reducing carbon emissions through clean-tech, renewable energy and other environmental sectors such as carbon trading, energy, solar, wind, water, reforestation and more.
“We’re in the early stages of a long-term, multi-generational growth cycle for carbon reduction strategies,” Bookbinder said. “TerraVerde is focused on those green strategies that are capitalizing on the business potential driven by the need for energy security and clean energy use.”
While managing one of Bookbinder Capital’s other hedge fund of funds, Bookbinder studied the emergence of investment opportunities in the “green” space. After an in-depth analysis of the industry, including meeting with hedge fund managers, green private equity funds, scientists, historians, and others, he came to the realization: investment funds with an environmental focus offer sufficient, attractive long-term investment opportunities to dedicate an entire strategy focused solely on the “green” space.
TerraVerde allocates capital to hedge funds devoted solely to reducing carbon emissions through clean-tech, renewable energy and other environmental sectors such as carbon trading, energy, solar, wind, water, reforestation and more.
“We’re in the early stages of a long-term, multi-generational growth cycle for carbon reduction strategies,” Bookbinder said. “TerraVerde is focused on those green strategies that are capitalizing on the business potential driven by the need for energy security and clean energy use.”
While managing one of Bookbinder Capital’s other hedge fund of funds, Bookbinder studied the emergence of investment opportunities in the “green” space. After an in-depth analysis of the industry, including meeting with hedge fund managers, green private equity funds, scientists, historians, and others, he came to the realization: investment funds with an environmental focus offer sufficient, attractive long-term investment opportunities to dedicate an entire strategy focused solely on the “green” space.
AIMA Warns Of Global Impact Of EU Hedge Fund Directive
The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has warned that the European Commission’s draft directive on Alternative Investment Fund Managers would hit fund managers and investors around the world if enacted into European law.
The hedge fund assiciation argues that the directive creates potentially major difficulties for non-EU funds and/or non-EU managers in accessing the EU market. Marketing of funds by managers will only be allowed with a special marketing passport that the directive creates. However the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it.
AIMA suggests that the directive makes it so difficult and costly for non-EU funds and managers to access the EU market that it is clearly protectionist in effect, if not in intent. This will have major consequences for non-EU funds and managers (particularly in North America and Asia-Pacific) who will face a major loss of business in the EU. Investors will face loss of choice, increased costs and diminished returns.
Andrew Baker, CEO of AIMA, said, “Funds and managers outside the EU face being locked out of the EU market with extremely worrying consequences. Global industry centres such as the United States , Canada , Switzerland , Hong Kong , Singapore , Japan , Australia and South Africa , will all be affected by this. This is not just an internal EU matter.
This will also have a very significant impact on investors. EU investors, in particular, face a situation where they can use only EU asset managers of EU domiciled funds investing assets under an EU custodian. And international investors with EU funds or managers will find that their costs will go up and their returns will go down because of the restrictions and compliance costs the directive imposes.
We believe that the provisions of the draft directive with protectionist consequences will not only hit the industry worldwide but weaken the competitiveness of the EU in investment management and make the EU a less attractive destination for international investment. Naturally, we hope that it can be revised to avoid this.”
The hedge fund assiciation argues that the directive creates potentially major difficulties for non-EU funds and/or non-EU managers in accessing the EU market. Marketing of funds by managers will only be allowed with a special marketing passport that the directive creates. However the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it.
AIMA suggests that the directive makes it so difficult and costly for non-EU funds and managers to access the EU market that it is clearly protectionist in effect, if not in intent. This will have major consequences for non-EU funds and managers (particularly in North America and Asia-Pacific) who will face a major loss of business in the EU. Investors will face loss of choice, increased costs and diminished returns.
Andrew Baker, CEO of AIMA, said, “Funds and managers outside the EU face being locked out of the EU market with extremely worrying consequences. Global industry centres such as the United States , Canada , Switzerland , Hong Kong , Singapore , Japan , Australia and South Africa , will all be affected by this. This is not just an internal EU matter.
This will also have a very significant impact on investors. EU investors, in particular, face a situation where they can use only EU asset managers of EU domiciled funds investing assets under an EU custodian. And international investors with EU funds or managers will find that their costs will go up and their returns will go down because of the restrictions and compliance costs the directive imposes.
We believe that the provisions of the draft directive with protectionist consequences will not only hit the industry worldwide but weaken the competitiveness of the EU in investment management and make the EU a less attractive destination for international investment. Naturally, we hope that it can be revised to avoid this.”
SEC To Curtail Abusive Short Sales
The SEC announced several actions protecting against short sales and make more short sale information available to the public.
"Today's actions demonstrate the Commission's determination to address short selling abuses while at the same time increasing public disclosure of short selling activities that affect our markets," said SEC Chairman Mary Schapiro.
First, the Commission made permanent a rule, that seeks to reduce the potential for abusive "naked" short selling in the securities market. The new rule, Rule 204, requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The temporary rule, approved by the SEC in the fall of 2008, was set to expire on July 31.
Second, the Commission and its staff are working together with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO Web sites. This effort will result in an increase over the amount of information presently required by another temporary rule, known as Temporary 10a-3T. That rule, which will expire on August 1, applies only to certain institutional money managers and does not require public disclosure.
Apart from these measures, the Commission is continuing to actively consider proposals on a short sale price test and circuit breaker restrictions.
Third, the Commission intends to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing, and possible additional short sale disclosures. The roundtable will consider, among other topics, the potential impact of a program requiring short sellers to pre-borrow their securities, possibly on a pilot basis, and adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities.
Short selling often can play an important role, the SEC said, in the market for a variety of reasons, including contributing to efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities, and importantly, limiting upward market manipulations. There are, however, circumstances in which short selling can be used as a tool to manipulate the market.
"Today's actions demonstrate the Commission's determination to address short selling abuses while at the same time increasing public disclosure of short selling activities that affect our markets," said SEC Chairman Mary Schapiro.
First, the Commission made permanent a rule, that seeks to reduce the potential for abusive "naked" short selling in the securities market. The new rule, Rule 204, requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The temporary rule, approved by the SEC in the fall of 2008, was set to expire on July 31.
Second, the Commission and its staff are working together with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO Web sites. This effort will result in an increase over the amount of information presently required by another temporary rule, known as Temporary 10a-3T. That rule, which will expire on August 1, applies only to certain institutional money managers and does not require public disclosure.
Apart from these measures, the Commission is continuing to actively consider proposals on a short sale price test and circuit breaker restrictions.
Third, the Commission intends to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing, and possible additional short sale disclosures. The roundtable will consider, among other topics, the potential impact of a program requiring short sellers to pre-borrow their securities, possibly on a pilot basis, and adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities.
Short selling often can play an important role, the SEC said, in the market for a variety of reasons, including contributing to efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities, and importantly, limiting upward market manipulations. There are, however, circumstances in which short selling can be used as a tool to manipulate the market.
27 Jul 2009
Uzbeki/Khazakh Hedge Fund Market's Decline Slowing
Uzbekistan hedge fund manager, Ansher Fund Management, has reported that their flagship hedge fund, Ansher Regional Property Fund, (ARPF) has maintained its performance moderately stable at –0.37% during April-June 2009 despite the still lagging property markets around the globe.
"Property markets in the region, especially Kazakhstan residential segment, continued slowing in the quarter owing to still limited or expensive mortgage facilities for buyers," Khurshid Kholov, hedge fund manager and CIO said. "However, the decline rate in the region has been slower during the 2nd quarter as compared with previous quarters, showing signs of market recovery. Thanks to active portfolio management ARPF is still up by 0.80% since inception, thus comfortably outperforming all three benchmarks."
Despite the fact that the economy of Kazakhstan has been under pressure amid the global financial turmoil, a slight signs of economic recovery has been observed in the country, the fund manager said. It’s expected that the GDP of this oil rich country will not post negative growth for the year 2009, owing to currently recovering oil and commodity prices in the world markets.
This is the result of the antirecessionary measures the Government undertook in which $25 billion of funds were injected into the economy. About $4 billion out
of this amount was directed particularly into the real estate sector of the country.
ARPF has seen new investment opportunities in the hotel sector after the residential real estate market dropped out. "The hotel sector is immature and currently existing 4 five star hotels in Almaty operate with 90% occupancy rate," ARPF said.
A sharp deficit is expected to emerge with the Asian Winter Games which will take place in Almaty in 2011. Real estate sector of this energy house country still offers promising investment opportunities for property investors in the long term.
"Property markets in the region, especially Kazakhstan residential segment, continued slowing in the quarter owing to still limited or expensive mortgage facilities for buyers," Khurshid Kholov, hedge fund manager and CIO said. "However, the decline rate in the region has been slower during the 2nd quarter as compared with previous quarters, showing signs of market recovery. Thanks to active portfolio management ARPF is still up by 0.80% since inception, thus comfortably outperforming all three benchmarks."
Despite the fact that the economy of Kazakhstan has been under pressure amid the global financial turmoil, a slight signs of economic recovery has been observed in the country, the fund manager said. It’s expected that the GDP of this oil rich country will not post negative growth for the year 2009, owing to currently recovering oil and commodity prices in the world markets.
This is the result of the antirecessionary measures the Government undertook in which $25 billion of funds were injected into the economy. About $4 billion out
of this amount was directed particularly into the real estate sector of the country.
ARPF has seen new investment opportunities in the hotel sector after the residential real estate market dropped out. "The hotel sector is immature and currently existing 4 five star hotels in Almaty operate with 90% occupancy rate," ARPF said.
A sharp deficit is expected to emerge with the Asian Winter Games which will take place in Almaty in 2011. Real estate sector of this energy house country still offers promising investment opportunities for property investors in the long term.
Swiss Hedge Fund & FoHFs Provider Expands To US
Swiss based hedge fund and FoHFs provider, Infonic AG, has expanded to the US by establishing a New York office. Infonic named IT specialist Nolan Phillips as Chief Operating Officer, and financial expert, Bridget Piraino, Head of Global Marketing & Sales.
“I’m delighted to welcome Nolan Phillips and Bridget Piraino to the executive team. Adding to the depth of our management team demonstrates Infonic’s commitment to becoming the trusted operational backbone of the institutional hedge fund investor industry,” said Tom Furrer, Infonic’s CEO. “With the establishment of a New York office we will expand our presence delivering innovative products and dedicated client services to asset managers and administrators of funds of hedge funds.”
Nolan has held executive and consulting positions at Coopers and Lybrand, Union Bank of Switzerland, Société Générale, Bankers Trust, IQ Financial Systems and Bank of Bermuda, Alternative Investments Program.
Piraino's career has included Aregon International, the UK financial data delivery system provider, and Goldman Sachs and Co’s Fixed Income Research group. She held senior technical management and financial services marketing positions with Sybase, TIBCO Financial Systems and SeeBeyond.
Headquartered in Switzerland with offices in Zurich and New York, Infonic AG is the provider of HedgeSphere, a product suite for operations of funds of hedge funds.
“I’m delighted to welcome Nolan Phillips and Bridget Piraino to the executive team. Adding to the depth of our management team demonstrates Infonic’s commitment to becoming the trusted operational backbone of the institutional hedge fund investor industry,” said Tom Furrer, Infonic’s CEO. “With the establishment of a New York office we will expand our presence delivering innovative products and dedicated client services to asset managers and administrators of funds of hedge funds.”
Nolan has held executive and consulting positions at Coopers and Lybrand, Union Bank of Switzerland, Société Générale, Bankers Trust, IQ Financial Systems and Bank of Bermuda, Alternative Investments Program.
Piraino's career has included Aregon International, the UK financial data delivery system provider, and Goldman Sachs and Co’s Fixed Income Research group. She held senior technical management and financial services marketing positions with Sybase, TIBCO Financial Systems and SeeBeyond.
Headquartered in Switzerland with offices in Zurich and New York, Infonic AG is the provider of HedgeSphere, a product suite for operations of funds of hedge funds.
24 Jul 2009
Multi-strategy Malta Hedge Fund Launch
Malta-based Golden Hedge Umbrella Sicav has launched a multi-strategy hedge fund and is currently looking for prospective seed investors.
The Golden Hedge Multi-Strategy Fund is the first subfund of the umbrella structure, run by Andreas Koettner and Dr. Bernhard Goetsch, the new hedge find specializes in relative value commodity trading and stock index arbitrage strategies.
Targeting an annualized return of 15% with volatility at 8%.The quantitative strategies are designed to generate returns with low correlation to traditional CTA and hedge fund styles. Inception of trading was in May 2009.
Minimum investment starts at EUR100,000 ($142,000) with monthly liquidity. The auditor is Ernst & Young, prime broker MF Global and fund administrator Valletta Fund Services.
The Golden Hedge Multi-Strategy Fund is the first subfund of the umbrella structure, run by Andreas Koettner and Dr. Bernhard Goetsch, the new hedge find specializes in relative value commodity trading and stock index arbitrage strategies.
Targeting an annualized return of 15% with volatility at 8%.The quantitative strategies are designed to generate returns with low correlation to traditional CTA and hedge fund styles. Inception of trading was in May 2009.
Minimum investment starts at EUR100,000 ($142,000) with monthly liquidity. The auditor is Ernst & Young, prime broker MF Global and fund administrator Valletta Fund Services.
23 Jul 2009
Cayman Islands Hedge Funds and Capital Markets in India
A study by Dennis S. Ryan and Sonia Xavier of offshore law specialist, Conyers Dill & Pearman has come out 'Cayman Islands Funds - Entering the Gateway to Capital Markets in India.' The team describes the history and challenges of what Cayman Islands domiciled investment funds have faced when seeking to invest into Indian capital markets.
One of the major hurdles in this regard has been addressed by the 10 June 2009 admission of the Cayman Islands Monetary Authority (“CIMA”) as an ordinary (i.e., full) member of the International Organization of Securities Commissions (“IOSCO”), according to the report.
By way of background, the IOSCO Objectives and Principles of Securities Regulation were endorsed by its member regulators of various securities and futures markets in 1998, and generally are viewed by securities regulators as the key international benchmark on sound principles and practices for securities regulation. Currently, IOSCO members regulate the vast majority of the world's securities markets.
To access the Indian markets, an investment fund must register as a Foreign Institutional Investor (“FII”) with The Securities and Exchange Board of India (“SEBI”). In the past, since CIMA was not a member of IOSCO, SEBI often engaged in extensive due diligence and inquiries before allowing registration of a Cayman fund as a FII. As a result, few Cayman Islands funds have registered with SEBI. CIMA’s admission to IOSCO looks set to change this trend in favour of Cayman Islands funds.
The timing could not be better, the report says, with emerging markets competing to attract liquidity, the Cayman Islands, with over 9,000 CIMA registered investment funds, a proven track record with investors and an excellent and sophisticated service infrastructure, has a great deal to offer India and investors that wish to access its markets.
One remaining challenge is that the Cayman Islands do not currently have a tax treaty with India, the law fim asid. Mauritius, on the other hand, has long been the preferred jurisdiction for investment into India as a consequence of the favourable double taxation agreement between those countries (the “Mauritius-India DTAA”), contributing to around 44% of foreign direct investment (“FDI”) into India.
Investment funds from non-tax treaty jurisdictions have developed a structure involving a wholly owned Mauritius subsidiary for purposes of Indian investment. Typically, this structure requires a Cayman Islands (or other non-treaty jurisdiction) investment fund to register with SEBI as a FII. The Mauritius subsidiary fund will then be registered with SEBI as a sub-account of the FII, permitting it to invest directly in Indian securities via SEBI.
The Mauritius fund will be set up as a Global Business Company Category 1 (“GBC1”) that is resident in Mauritius for tax purposes. As a Mauritius tax resident, this fund is subject to tax on income at the flat rate of 15%. However it is entitled to claim a credit for foreign tax on income not derived from Mauritius against the Mauritius tax payable, resulting in an effective tax rate generally ranging between 3% and nil. As a tax resident GBC1, the fund is also entitled to take advantage of Mauritius’ network of tax treaties, including the Mauritius-India DTAA.
One of the major hurdles in this regard has been addressed by the 10 June 2009 admission of the Cayman Islands Monetary Authority (“CIMA”) as an ordinary (i.e., full) member of the International Organization of Securities Commissions (“IOSCO”), according to the report.
By way of background, the IOSCO Objectives and Principles of Securities Regulation were endorsed by its member regulators of various securities and futures markets in 1998, and generally are viewed by securities regulators as the key international benchmark on sound principles and practices for securities regulation. Currently, IOSCO members regulate the vast majority of the world's securities markets.
To access the Indian markets, an investment fund must register as a Foreign Institutional Investor (“FII”) with The Securities and Exchange Board of India (“SEBI”). In the past, since CIMA was not a member of IOSCO, SEBI often engaged in extensive due diligence and inquiries before allowing registration of a Cayman fund as a FII. As a result, few Cayman Islands funds have registered with SEBI. CIMA’s admission to IOSCO looks set to change this trend in favour of Cayman Islands funds.
The timing could not be better, the report says, with emerging markets competing to attract liquidity, the Cayman Islands, with over 9,000 CIMA registered investment funds, a proven track record with investors and an excellent and sophisticated service infrastructure, has a great deal to offer India and investors that wish to access its markets.
One remaining challenge is that the Cayman Islands do not currently have a tax treaty with India, the law fim asid. Mauritius, on the other hand, has long been the preferred jurisdiction for investment into India as a consequence of the favourable double taxation agreement between those countries (the “Mauritius-India DTAA”), contributing to around 44% of foreign direct investment (“FDI”) into India.
Investment funds from non-tax treaty jurisdictions have developed a structure involving a wholly owned Mauritius subsidiary for purposes of Indian investment. Typically, this structure requires a Cayman Islands (or other non-treaty jurisdiction) investment fund to register with SEBI as a FII. The Mauritius subsidiary fund will then be registered with SEBI as a sub-account of the FII, permitting it to invest directly in Indian securities via SEBI.
The Mauritius fund will be set up as a Global Business Company Category 1 (“GBC1”) that is resident in Mauritius for tax purposes. As a Mauritius tax resident, this fund is subject to tax on income at the flat rate of 15%. However it is entitled to claim a credit for foreign tax on income not derived from Mauritius against the Mauritius tax payable, resulting in an effective tax rate generally ranging between 3% and nil. As a tax resident GBC1, the fund is also entitled to take advantage of Mauritius’ network of tax treaties, including the Mauritius-India DTAA.
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