October 2005
« August 2005 | Main | November 2005 »
October 26, 2005
Who said Japanese were conservative?
The Japanese have a reputation for being conservative investors, but a new report from Greenwich Associates reveals that the Land of the Rising Sun boasts twice the percentage of institutional investors that plunk down money in hedge funds than their U.S. counterparts, and more than five times the number of their British peers.
The report - which says 55% of Japanese institutions use hedge funds, compared with 28% in the U.S. and 10% in the U.K. - also found that, among those institutions that invest in hedge funds, allocations have skyrocketed from 4% in 2003 to 13% in 2005, and that percentage is poised to jump even higher.
“With funding pressures continuing to mount among Japanese pensions,” the report states, “two-thirds of plan sponsors are planning to make 'significant' changes to their asset allocations.”
Posted by su at 11:03 AM | Comments (0)
October 18, 2005
Funds could win recompense as FSA probes trade
A large stock trade in June by an unnamed London bank is believed to have become the subject of an investigation by the UK Financial Services Authority, and could see hedge funds adversely affected win compensation if market manipulation is found.
The primary trade, conducted on the London Stock Exchange (LSE), is believed to have involved stock in a large oil company. Given the oil and gas sector's 21.14% weighting in the benchmark FTSE 100 stock index - and the connection between the LSE trading price and expiry price set for Euronext.Liffe derivatives - the trade also hit Euronext.Liffe-traded futures and options on the index, just as their expiry approached on Friday, 17 June.
"People could not believe what had happened." one trader said, "we expired 2% further away from where the market has ever traded at any stage."
Partly because the activites occurred on both Euronext.Liffe and the LSE, and partly as the firm is understood to have held positions in each market, the FSA has become involved.
Hector Sants, FSA director for wholesale business, said the exchanges had received a "number of complaints following volatility in the June 2005 expiry."
"Regulated firms are reminded of their obligation to behave reasonably throughout the expiry auction and consider carefully the effect their actions could have on the market.", he said.
The trade hit existing hedge funds, and has forced at least one to move investors' allocations to cash - effectively putting the business into hibernation - until the matter is cleared up.
It is unclear which LSE-listed oil stock was involved, but with Brent Crude's recent fortunes, BP and Shell have come to represent 10.3% and 9.3% of the FTSE respectively. Sharp moves in either could affect expiry prices of index options.
There was no claim of any fault on the part of either Liffe or the LSE. Nick Carew Hunt, market secretary at Euronext.Liffe said some changes had been made to the expiry process since June. He added that the link between LSE and futures' and options' expiry prices was a "crucial link for bona fide arbitrage purposes."
One trader said there were " huge block trades (of Shares) going through, trades of around £25m of BP shares," during the five minutes auction. While Carew Hunt said there was a "massive amount of cash business" done in the June expiry auction, he added that the £1.27bn that went through was still far exceeded by the September auction's £2.93bn. It is believed that stock trader may also have been active in the derivatives markets. The FSA declined to confirm an official enquiry was underway.
-News from Issue60, October, Hedge Funds Review-
Posted by su at 12:06 PM | Comments (0)
October 14, 2005
Lehman Brothers launches global hedge fund Index
Lehman Brothers has launched the Lehman Brothers/HFN Global Hedge Fund Index, to add to its exisiting stable of indices.
It is based on the HedfeFund.net(HFN) database, which includes funds with at least $25m in assets, at least a one-year track record, uninterrupted monthly return time series and annual audit of returns.
It excludes funds of funds so as to avoid double counting.
Posted by su at 11:09 AM | Comments (0)
'The Best' and 'The Worst'
Convertible arbitrage has been the worst performing hedge fund strategy over the first three quarters of 2005.
According to the Edhec investable hedge fund indices, convertible arbitrage turned in a loss of -3.32% over the past nine months. It was the only strategy to report a cumulative loss year to date.
The best performer was equity market neutral which rose 5.76% in the year to 30 September.
An Edhec report said that September was characterised by strong performance of global stock markets. Value stocks and small-cap stocks showed some outperformance over the broad stock market.
Over the month, stock market volatility declined, even though its level was already close to historical lows.
Conditions for bond markets were less favourable than for stocks, as reflected by negative returns for bonds during the month of September.
Against this backdrop, all hedge fund strategies yielded positive returns in September.
Posted by su at 10:48 AM | Comments (0)
October 12, 2005
Hedge funds - an obvious alternative due to the low correlation with traditional assets
The inclusion of alternative investments-such as hedge funds-into a client's portfolio can substantially reduce volatility and has become increasingly important in recent years, according to Toby Joll, executive director at Schroders Private Bank.
Given lower expected nominal returns from equity markets in coming years, there is now a stronger case than ever for the inclusion of hedge funds into a portfolio.
The key benefit is the low correlation with traditional asset classes. Hedge funds can also provide a degree of protection during periods of hostile equity markets. Certainly, this was the case during the bear market in equities between April 2000 and March 2003.
Over the long term, hedge funds have, on average, produced higher returns with lower levels of volatility than other asset classes.
For instance, the CSFB Tremont All Hedge Funds index has returned an average of 12.3% pa over the period from January 1994 to March 2004, with 8% volatility. Over the same period, the FTSE World Index returned 5.7% pa, with 15.7% volatility. UK Bonds returned 6.8% with 4.7% volatility and Global bonds, ex UK returned 4.3%pa with 6.7% annual volatility.
Posted by su at 11:35 AM | Comments (0)