September 2006
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September 29, 2006
66% of Japan's Pension Funds put Money in Alt Investment Products
A survey by Daiwa Institute of Research reveals that 65.9 per cent of pension funds invest in hedge funds and other alternative investment products, up 9.9 percentage points from a year earlier.
The survey, which was conducted between May and June, puts the figure at more than 80 per cent when including those funds that are considering adding such products.
Hedge funds are by far the most popular choice among those that invest in alternative products, with 62.3 per cent including them in their portfolios, up 12.5 points from a year earlier. Around 70 per cent of their hedge fund holdings consist of fund-of-funds type products.
The survey targeted 1,298 corporate pension funds, mutual aid pensions and financial institutions nationwide. Of those, 405 returned valid responses .
-Nikkei-
Posted by su at 4:20 PM | Comments (0)
September 27, 2006
U.S. funds of funds attracting more Japanese money
U.S. funds of funds, which invest in select hedge funds, are increasingly attracting money from Japanese institutional investors in search of high-yielding financial vehicles.
The Japanese investors are increasingly showing their preference for such funds over direct investments in hedge funds, because of the difficulty of assessing the investing abilities of specific hedge funds, industry officials here say.
In an interview with Jiji Press, Geoffrey Stern, president of Muirfield Capital Management LLC, a New York-based fund of funds, expressed hopes of attracting money from a wide range of Japanese institutions.
"We focus on pension funds, (and) insurance companies are important market for us," Stern said, adding that he expects to see entrustment from regional banks in Japan.
A recent U.S. research report found that Japanese institutional investors invested 994 billion yen in hedge funds in 2005, a 13-fold jump from 77 billion yen in 2001. This year, the amount is expected to exceed one trillion yen.
The proportion of the Japanese institutions that invested directly in hedge funds stood at 63 percent in 2005, down from 85 percent in 2003. Meanwhile, the proportion of those that used funds of funds increased to 84 percent from 70 percent.
Explaining the increased popularity of funds of funds, Stern said Japanese institutions acknowledge the need "to hire experts like us to identify which fund to invest and to manage the investments."
He also said his firm's "big advantage" is its relationships with other hedge fund managers and Wall Street players, which allow the firm to determine how talented they are.
In the United States, a midsize hedge fund recently incurred a heavy loss due to a fall in the natural gas market.
On this, Stern said a classic hedge fund adopts "a conservative investment style" and "it is unlikely" a very large hedge fund would suffer losses like those incurred by Long-Term Capital Management, which collapsed in 1998 and caused disruption to international financial markets.
-Mainichi-
Posted by su at 10:18 AM | Comments (0)
Yale endowment returns 22.9 pct, betters Harvard
Yale University, the world's second-richest university, said on Monday its endowment fund returned 22.9 percent in 2005-06, beating returns by wealthier rival Harvard University for a second straight year.
The returns swelled Connecticut-based Yale's endowment to $18 billion for the year to June 30 from $15.2 billion in the previous year, and marked a slight improvement on its 22.3 percent return in 2004-05.
Harvard, the world's richest university, said last week its endowment grew to $29.2 billion, generating a 16.7 percent return for 2005-06. Cambridge, Massachusetts-based Harvard had returned 19.2 percent the year before.
Endowments at Ivy League universities such as Harvard and Yale, and their annual returns, are closely watched by fund managers because of their reputation for savvy investing.
Yale, the alma mater of U.S. President George W. Bush, declined to specify how it managed its strong 2005-06 performance, which compares with a return of 6.6 percent for the Standard & Poor's 500 index <.SPX> over the same period.
In an update on the endowment late in 2005, it said the Investment Committee approved an increase in the "real assets" target to 25 percent from 20 percent. Energy, timber and real estate were included in the classification of "real assets."
Yale, which under Chief Investment Officer David Swensen has over the years built a large exposure to alternative investment strategies, also had said it was reducing its fixed income exposure.
Harvard said last week that investments in emerging markets posted the year's highest total return, adding that commodities achieved the best performance relative to its benchmark.
Yale's endowment, which is the university's biggest source of budgetary support, has returned an annualized 17.2 percent over the past 10 years, during which its size has grown to $18 billion from $4.9 billion.
It will spend $676 million, or about 34 percent of the university's net revenues, from the endowment in the year ending June 30, 2007, Yale said.
-Reuters-
Posted by su at 10:14 AM | Comments (0)
September 22, 2006
Funds of hedge funds protect capital and outperform
Funds of hedge funds appear to have done what most investors buy them for, which is to preserve capital and even produce positive returns during a market downturn.
The sector has had a bumper fund-raising year but ABN Amro analysis suggests that many of the funds are performing well.
Research by the house shows that when the FTSE 100 had its worst month in May, recording a fall of 5 percent amid concerns over interest rates and commodity prices, no sterling-hedged fund of hedge funds listed in London underperformed it.
Close Man Hedge came closest, with its net asset value falling 3.9 percent over the month but the average performance for the group was 1.9 percent. Acencia Debt Strategies even rose over the month.
However, funds of hedge funds still show signs of being able to outperform on the upside.
During the best month for the FTSE 100 in March, when it gained 3 percent, four LSE-listed fund of hedge funds beat this.
Mark James, ABN Amro secondary team director of research, said: "Five of the LSE-listed fund of funds - Acencia Debt Strategies, HSBC European Absolute, Man Alternative, Tapestry Investment and Thames River Hedge+ - outperformed the FTSE 100 index over the first six months of the year.
"Overall, the sample did reasonably well in preserving assets in falling markets and some outperformed on the upside."
In fact the Acencia Debt Strategies fund can boast a 100 percent record in producing a positive return in each of the first six months of the year. Schroder Alternative Strategies and Tapestry Investment Company managed an 80 percent record in line with the FTSE 100.
Funds of hedge funds are becoming an increasingly important part of the London market with 1 billion pounds raised so far this year to bring the UK market size to 2.5 billion pounds, even larger than Zurich. The listings included the three largest ever IPOs for Close All Blue, CMA Global Hedge and Goldman Sachs Dynamic Opportunities .
Closed-end fund of hedge funds are often more popular than the open-ended variety because of their tax status.
The majority are of closed-end funds of hedge funds incorporated in Guernsey and are exempt from the territory's income tax and capital gains within the portfolio.
For UK investors any gains on the disposal of shares should be subject to capital gains tax rather than the income tax payable when selling many offshore open-ended funds.
Many shares are also eligible for PEP, ISA and SIPP investment.
James said: "For fund of hedge fund providers, the fixed capital structure provides them with the flexibility of managing a fixed pool of assets and avoids the distractions of inflows and outflows.
"It may make it easier to take longer-term commitments, for example, to emerging managers or less liquid hedge-fund strategies."
-Reuters-
Posted by su at 12:01 PM | Comments (0)
Funds of hedge funds protect capital and outperform
Funds of hedge funds appear to have done what most investors buy them for, which is to preserve capital and even produce positive returns during a market downturn.
The sector has had a bumper fund-raising year but ABN Amro analysis suggests that many of the funds are performing well.
Research by the house shows that when the FTSE 100 had its worst month in May, recording a fall of 5 percent amid concerns over interest rates and commodity prices, no sterling-hedged fund of hedge funds listed in London underperformed it.
Close Man Hedge came closest, with its net asset value falling 3.9 percent over the month but the average performance for the group was 1.9 percent. Acencia Debt Strategies even rose over the month.
However, funds of hedge funds still show signs of being able to outperform on the upside.
During the best month for the FTSE 100 in March, when it gained 3 percent, four LSE-listed fund of hedge funds beat this.
Mark James, ABN Amro secondary team director of research, said: "Five of the LSE-listed fund of funds - Acencia Debt Strategies, HSBC European Absolute, Man Alternative, Tapestry Investment and Thames River Hedge+ - outperformed the FTSE 100 index over the first six months of the year.
"Overall, the sample did reasonably well in preserving assets in falling markets and some outperformed on the upside."
In fact the Acencia Debt Strategies fund can boast a 100 percent record in producing a positive return in each of the first six months of the year. Schroder Alternative Strategies and Tapestry Investment Company managed an 80 percent record in line with the FTSE 100.
Funds of hedge funds are becoming an increasingly important part of the London market with 1 billion pounds raised so far this year to bring the UK market size to 2.5 billion pounds, even larger than Zurich. The listings included the three largest ever IPOs for Close All Blue, CMA Global Hedge and Goldman Sachs Dynamic Opportunities .
Closed-end fund of hedge funds are often more popular than the open-ended variety because of their tax status.
The majority are of closed-end funds of hedge funds incorporated in Guernsey and are exempt from the territory's income tax and capital gains within the portfolio.
For UK investors any gains on the disposal of shares should be subject to capital gains tax rather than the income tax payable when selling many offshore open-ended funds.
Many shares are also eligible for PEP, ISA and SIPP investment.
James said: "For fund of hedge fund providers, the fixed capital structure provides them with the flexibility of managing a fixed pool of assets and avoids the distractions of inflows and outflows.
"It may make it easier to take longer-term commitments, for example, to emerging managers or less liquid hedge-fund strategies."
-Reuters-
Posted by su at 12:01 PM | Comments (0)
September 20, 2006
August puts hedge funds back on track for double digit 2006
The Greenwich-Van Global Hedge Fund Index returned +0.97% in August (+6.65% YTD), according to Greenwich-Van Advisors, LLC. In comparison, the S&P 500, MSCI EAFE, Nikkei 225 and the Lehman Brothers Aggregate Bond Index returned +2.38% (5.80% YTD), +2.78% (+14.71% YTD), +4.42% (+0.18% YTD) and +1.53% (+2.16% YTD), respectively in August.
"All reported hedge fund strategies are positive year-to-date," notes Wade McKnight, Vice President of Greenwich-Van.
The Long/Short Equity Group returned +1.43% in August (+6.79% YTD). The Specialty Strategies Group, comprised of emerging markets, income and multi-strategy hedge fund strategies, returned +0.81% (+8.35% YTD). The Market Neutral Group yielded +0.75% (+7.28% YTD). The Directional Trading Group, comprised of futures, market timing and macro-oriented hedge fund strategies, returned +0.40% (+2.97% YTD).
901 funds have reported thus far. Final Index results will be calculated and posted at www.greenwich-van.com the end of September after additional funds have submitted returns.
Greenwich-Van Investable Index
The Greenwich-Van Investable Hedge Fund Index returned +0.88% in August (+5.09% YTD). The Investable Index, comprised of 45 funds, adds investability, active management and liquidity to the diversification and performance benefits of the broad Greenwich-Van Global Hedge Fund Index. Since inception, January 2003, the Investable Index achieved an annualized return of +10.12% versus +11.26% for the Greenwich-Van Global Hedge Fund Index. Its correlation of 0.95 and Beta of 0.90 to the Greenwich-Van Global Hedge Fund Index further demonstrate the Investable Index's ability to track the hedge fund universe. The Investable Index is reported monthly net of a 0.04% Index calculation fee. Past performance and Greenwich-Van Hedge Fund Indices construction rules may be viewed at www.greenwich-van.com.
Greenwich-Van Advisors, LLC manages one of the world's largest hedge fund databases and is among the oldest providers of hedge fund indices and research to institutional investors worldwide.
Accuracy of compiled manager reported information is not audited or independently verified and may not represent all hedge funds. Greenwich-Van does not necessarily perform due diligence on reporting managers. Hedge fund returns are net of underlying fees and performance allocations, the timing of which may affect the reported performance. Averages are equally weighted. Past results are not indicative of future performance.
-Greenwich-Van Advisors-
Posted by su at 11:01 AM | Comments (0)
September 4, 2006
Institutional players ensure hedge funds are here to stay
Despite so-so performance in the second quarter, hedge funds in the United States pulled in a lot of money from investors, highlighting two trends.
One is that the floodgate of institutional money, which appeared to slow last year, has reopened. The other is that hedge funds, despite their lacklustre returns, are looking attractive on a relative basis.
Hedge funds, on average, gained 0.17% in the second quarter, according to Hedge Fund Research in Chicago. But investors poured $42.1bn (£23.5bn, E34bn) of net new cash into these funds during that period. It marked the biggest jump in quarterly flows since Hedge Fund Research began tracking flows quarterly in 2003, and a large gain from the first quarter of this year, when hedge funds took in about $24bn net.
July’s returns weren’t great, with the Hedge Fund Research Composite Index down 0.21%. Still, some strategies have had good years, with emerging markets up 10.4% this year through July, energy up 11.06% and convertible arbitrage, which had been left for dead last year, up 7.01%.
A note of caution: hedge fund indexes are not as precise as, say, the Standard & Poor’s 500 or the Nasdaq 100. Rather, they are proxies for underlying returns. But these indexes do give an idea of what’s going on with hedge fund performance.
Fifteen months ago, it might have been fair to ask whether the popularity of hedge funds had peaked after several years of robust inflows from investors. The answer then would have been not yet, judging from the second-quarter flows, which marked a rebound from a wan 2005 – including fourth-quarter net outflows.
Robert Schulman, chief executive of Tremont Capital Management, a fund of funds in Rye, New York state, points out that hedge funds held up quite well relative to long-only markets. And the slight second-quarter gains many hedge-fund indexes registered outpaced the Standard & Poor’s 500 index, which fell nearly 2%. Schulman adds that institutions, including pension funds, have begun allocating a lot of money to hedge funds.
Schulman also points out that “everybody’s still chasing returns,” including structured products such as portable alpha (see box). In those portfolios, managers divide investing into two broad categories: beta, or market exposure via some kind of an underlying derivative, and alpha, which entails performance not correlated to – and presumably better than – the overall market.
What’s likely to be happening is that institutions, with billions waiting in the wings, are becoming a bigger force in the hedge fund industry than previously. A 2004 report by the Bank of New York and Casey Quirk & Associates, a consulting firm, estimated that institutional investors in the United States will have put $300bn into hedge funds within five years, up from $60bn at the time of the report.
Carrie McCabe, president of FRM Americas, whose parent has $12bn under management, points out that hedge funds, compared with equities and bonds, have done relatively well this year as investors “look for some place to make returns”. Hedge funds, she continues, “are not going away, especially in times when the traditional long-only markets are not moving” – and not in the lower-return environment that McCabe thinks is unfolding.
HedgeFund.net, which also tracks flows and returns, recorded strong second-quarter flows, as well. HedgeFund.net estimates that single-manager hedge-fund assets total about $1.7 trillion. That compares with HFR’s $1.23 trillion. Second-quarter net flows into existing hedge funds totalled $77.2bn, according to HedgeFund.net. However, investors put less emphasis on funds in the United States and paid more attention to funds with a Western European or global bent.
Investors cooled on Eastern European funds, and there were also outflows from funds focused on Japan, according to Peter Laurelli, a research analyst at HedgeFund.net.
Energy funds added significant assets in the quarter, while emerging-market funds attracted less money, although flows were positive, according to HedgeFund.net. And investors put more money into relative-value strategies, including convertible arbitrage, no doubt drawn by the improved performance. At the same time, long-short assets – the category encompassing long-short equity funds – grew by 2.6% to just under $600bn, the second lowest growth rate in 10 quarters, according to HedgeFund.net.
-The Business Online.com-
Posted by su at 11:21 AM | Comments (0)
September 1, 2006
Capitals of capital
Find a table at Nobu on a Friday night (if you can) and you will notice the sleek, Michelin-starred restaurant buzzing with a snazzy crowd. The cocktail lounge is overflowing and the sushi bar is packed. Often, those dining on yellowtail tuna with jalapeño or black cod with miso include young hedge-fund managers acting as if they are at the top of their game. Which side of the Atlantic are you on? Both.
Whether in the New York area, or London's Mayfair, it is hard to miss the stamp of the hedge-fund manager, or “hedgies” as they like to be known in the trade. They are clever, well-travelled and mostly rich. They fill up restaurants and drive up the prices of everything from apartments to art wherever they cluster.
Across the world there are more than 8,000 hedge-fund managers with over $1.1 trillion in assets under management. Attracting them to any financial centre means big business. Moreover, thanks to their complex, rapid-fire trading strategies, hedge funds are increasingly punching above their considerable financial weight—some financial experts reckon they account for half the trading volume on the world's biggest exchanges.
Since the late 1940s, when an American journalist, Alfred Winslow Jones, began taking off-setting positions in shares to hedge market risk, New York City and (more recently) a swathe of leafy suburbs radiating from Greenwich, Connecticut, have been the centre of what became the hedge-fund world. This unusual in-crowd (they often seem more inclined mathematically than socially) is keeping the money flowing in Manhattan and southern Connecticut.
Hedge funds arrived in Britain much more recently, in the early 1990s. Since then London has emerged as the centre of Europe's hedge-fund management industry, handling about two-thirds of a total $325 billion in funds under management (the funds themselves are held offshore, in tax havens like the Cayman Islands).
New York City remains home to roughly double the number of hedge-fund managers as London, but the two centres increasingly stand head and shoulders above the rest of the world. In 2005 Britain had the edge in performance, returning an average of 16.15%, almost twice the return of American funds. That may be one reason why London is attracting money—and talent—at an accelerating pace. Estimates vary, but by one count Britain has about 700 hedge-fund managers today. In 2002 the Alternative Investment Management Association (AIMA), a trade group, counted only 400.
In both cities, hedge funds are contributing to a trend that is changing the face of financial services. Increasingly, talented financial professionals are abandoning big investment banks for small firms. Tim Spangler, a London-based lawyer with hedge-fund clients around the world, says banks are “fighting to keep talent in the building.” The rewards are a large part of the attraction of hedge funds, as is the lightly regulated environment. Funds like to play up the difference by offering nicer digs, too. Greenwich is a lot greener than Manhattan. In London many small hedge funds cluster in Mayfair, far west of the City and Canary Wharf where the big banks camp out.
American fund managers say they are attracted to London as a less-crowded place where they can try different trading strategies. Data from Hedge Fund Research, a consultancy, show that in the second quarter, a share-hedging strategy involving both long and short sales was the most popular in America and Britain. But American-based managers were more likely also to trade “event-driven” strategies, based on unexpected occurrences such as takeovers. British-based funds, meanwhile, were more likely to trade in emerging markets and fixed-income.
Despite the growing clout of hedge funds in Britain (at least 100 new funds have started there this year, the AIMA reckons), many of its fund managers still rely heavily on American investors for much of their funding—as they do elsewhere in the world (see chart). “The US investor side is the broadest, the deepest and the most willing to back new managers and strategies, wherever they may be”, says Mr Spangler. A recent change in America's pension laws makes it even easier for pension fund managers to go into hedge funds; already they are far more comfortable with such investments than are their British counterparts, who invest only 3% of their funds in alternative assets, such as hedge funds.
One of the more striking differences between America and Britain is regulation. In America hedge funds are not required to register; an effort by the Securities and Exchange Commission (SEC) to impose registration by February has been struck down by a federal court.
From the British perspective, America's approach looks “bipolar”, as one London fund-manager puts it. The optimistic attitude to starting up funds—virtually anyone can create a hedge fund in America almost overnight—is followed by a legal sledgehammer when things go wrong. And they have sometimes gone wrong in spectacular fashion, as at Long-Term Capital Management in 1998 and Bayou Hedge Fund Group last year. Since June 1999 the SEC has brought 97 enforcement cases against investment advisers for defrauding hedge-fund investors or using funds to defraud others.
Contrast this with the approach in Britain, where a surprising number of big hedge-fund managers criticise the American system for being too lax. In London, one says, requirements by the Financial Services Authority (FSA), the regulator, to start a hedge fund “are sufficiently burdensome to be useful”. In addition to requiring details on everything from the firm's compliance systems to its risk controls, there is an annual report on each firm (this applies to other financial firms, not just hedge funds). A group of the largest hedge funds receive closer scrutiny, including monitoring visits, from the authorities.
Yet once hedge funds are established in Britain, the regulator uses a relatively light touch based on broad principles, including protecting consumers and promoting competition. Amazingly, the FSA has fined only one hedge-fund manager thus far—and that was for just £750,000 ($1.4m). As London catches up with New York, though, this will surely change.
-Economist-
Posted by su at 4:44 PM | Comments (0)