October 2006
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October 27, 2006
Quest for Next Wayne Rooney Lures Hedge Funds to Soccer Pitch
Hedge Funds have invested in wine, whiskey and movies in pursuit of returns that outpace stocks and bonds. Now they're taking on an even riskier bet -- the search for soccer's next Wayne Rooney.
For 250,000 pounds ($470,000), investors will have the chance to buy a piece of the next potential superstar. Two U.K.- registered funds, Hero Investments and Sports Asset Capital, plan to buy stakes in the contracts of younger athletes, then grab a slice of the transfer fees clubs pay to trade players.
The funds expect to profit from a buying spree led by Chelsea Football Club's billionaire owner, Roman Abramovich, who has helped lift transfer spending by English clubs to a record 330 million pounds this year. By taking part-ownership of a player, they will also help smaller clubs compete for talent with larger rivals, the funds say.
``It's fascinating, but you could easily burn your fingers,'' says Jacob Schmidt, founder of London-based hedge fund Schmidt Research Partners. ``Investing isn't about fun, it's about hard work. While I'm not against fun, the risk is that people who are amateurs might get involved.''
Rich soccer teams often buy the rights to players for a one-time transfer fee that nets the selling club a profit. In 2001, Real Madrid paid a record $64.5 million to Italy's Juventus for the contract of French midfielder Zinedine Zidane.
Manchester United paid as much as 27 million pounds to buy Rooney from Everton in 2004. Rooney, a 21-year-old striker, scored 36 goals in his first two seasons with the club.
`Level Playing Field'
Hedge Fund assets have more than doubled in the past five years to $1.2 trillion as investors seek returns that outpace stocks and bonds. The funds, tailored to people with at least $1 million to invest, are private pools of capital that let managers participate substantially in the gains on investments made on behalf of clients.
Nick Hely-Henderson, the 48-year-old founder of Hero Investments, says his fund will allow well-heeled soccer fans to profit while helping bring more competition to the sport.
``If we can help with the acquisition of players, we can help create a level playing field,'' Hely-Henderson says.
Hero has raised 100 million pounds to spend on contracts, Hely-Henderson says. The fund plans to invest for at least five years, and will probably acquire the rights to 20 percent to 50 percent of the transfer values for each player, he says.
Sports Asset Capital, set up by player-turned-financier Ray Ranson, 46, has 50 million pounds to invest. Ranson, a defender who had a 14-year career at clubs such as Manchester City, says his fund will buy insurance to protect it against career-ending injuries as it strives to deliver a 20 percent annual return.
Hedge fund returns averaged 9 percent over the past two years, according to Chicago-based Hedge Fund Research Inc.
Soccer Minefield
U.K. soccer has been a minefield for investors over the past 15 years. Singer & Friedlander Group Plc wrapped up a fund that invested in soccer shares in 2002, five years after it began. The original investors lost 75 percent of their initial stakes.
Fans who buy shares in their favorite clubs haven't fared much better. After Manchester United became the first to sell shares in 1991, more than 20 British teams followed suit. Manchester United was bought out last year for 300 pence a share, 26 percent less than its peak in 2000. In total, 10 teams have already returned to private ownership.
Like investors tied to a single share, the new hedge funds face an undiluted risk of losing money on players who never reach their potential or suffer career-threatening injuries. Since Newcastle United paid 16 million pounds for Michael Owen last year, the England striker has played just 11 times for his club and is now recovering from a knee operation.
Portuguese Losses
Previous hedge fund investments in individual soccer clubs haven't always been successful.
In Portugal, the FP Football Players Fund, which owns shares in Porto players, has risen 33 percent since it was created in 2004. Another, linked to Sporting Lisbon players, fell 25 percent in 2005, and one investing in Boavista has slipped 6 percent since 2003.
The U.K. funds are betting that a flood of cash from broadcasting deals will prompt more transfers.
According to a Sept. 1 report by accounting firm Deloitte & Touche LLP, clubs throughout Europe may increase spending after England's 20 Premier League clubs signed a television contract with British Sky Broadcasting Group Plc and Setanta Sports worth 1.7 billion pounds, a 67 percent increase over the previous deal.
Hedge funds may face resistance to their attempts to grab a portion of a star athlete's transfer value.
``It could be dangerous -- you could lose control over your assets,'' says Jason Rockett, chief executive officer of Premiership team Sheffield United.
The prospect of creating a superstar is exactly what attracts some investors.
``It would be jolly nice to find 50 Wayne Rooneys, but that's unlikely,'' Hely-Henderson says. ``Just as you don't expect 80 winners in a traditional portfolio, we don't expect 80 stars.''
-Bloomberg-
Posted by su at 10:33 AM | Comments (0)
October 13, 2006
European institutions diversify portfolios with alternative investments
According to new research from Greenwich Associates, the proportion of Continental institutions naming themselves as hedge fund investors increased from 26% in 2005 to 35% in 2006, and another 10% say they have plans to begin investing in hedge funds in coming months.
'Our research suggests that a large proportion of Continental pension funds, banks, insurance companies, and other institutional investors are taking significant steps away from the somewhat tradition-bound investment practices that characterized the industry for the previous 50 years,' says Greenwich Associates consultant Markus Ohlig.
As they do so, they are increasing their exposure to alternative asset classes and non-European equities, and they also taking more fundamental steps like increasing the proportion of their assets doled out to external managers. Greenwich Associates' 2006 Continental European Investment Management Research Study analyzes the strategic shifts undertaken by Continental institutions and presents the latest research findings on such critical topics as growth in assets under management; changes to asset allocation, and increases in compensation levels for Continental investment professionals.
Poised for Growth: Non-European Equities, Emerging Markets and Alternatives
Institutional assets in Continental Europe increased some 7% last year, driven by the strong performance of equity markets in 2005. However, fixed income and money market accounted for two-thirds of institutional asset allocations at the start of 2005, limiting the impact of strong equity market performance on the overall portfolios.
Strong performance of equity markets relative to fixed income was the main driver in an increase of equity allocations from 23% to 26% of total assets, whereas there is little evidence suggesting a substantial reallocation of assets from fixed income to equities.
However, Greenwich Associates research suggests that institutions are prepared to increase allocations to non-European equities. Nearly a third of European institutions say they expect to increase their allocations to Japanese equities over the next three years - a proportion six times higher than those saying they expect Japanese equity allocations to fall. Another 42% of institutions say they expect to increase their allocations to emerging market equities between now and 2009.
Continental institutions express similar enthusiasm for alternative asset classes, but to date actual allocations to alternatives have failed to keep pace. Allocations to private equity and hedge funds remained at 2% of total assets from 2004 to 2005, while real estate allocations declined marginally from 6% to 5%.
'Although allocations haven't budged, European institutions remain bullish on alternatives - at least in theory,' says Greenwich Associates consultant Tobias Miarka. 'In private equity and hedge funds, 41% of Continental Europe's institutions expect their allocations to increase by 2009, while only 1% expect them to decline. At present, the average institutional investor using hedge funds has EUR 200 million invested in the asset class, distributed among three or four managers or - more frequently - fund of hedge fund managers.'
External Expansion
The diversification of institutional investment portfolios into new regions and strategies is contributing to a hiring boom for external investment managers on the Continent. More than a third of institutional assets in continental Europe are managed by external investment management firms. The typical Continental institution increased the number of asset managers it employs to nearly 11 in 2006 from less than 10 in 2005. 'Across the Continent, almost half of all institutions hired a new external manager over the past year,' says Tobias Miarka.
This robust hiring activity took place over a 12-month period in which institutions increased the share of their total assets under management by external firms to 34% from 31%. 'Although that increase might seem negligible in percentage terms, it actually represents a shift of some EUR 75 billion,' says Chris McNickle.
-hedgeWeek.com-
Posted by su at 5:12 PM | Comments (0)
Asia-Pacific Wealth Report: Five Asian markets rank in the Top 10 fastest-growing HNWI populations worldwide
The news was reported as Merrill Lynch and Capgemini unveiled their Asia-Pacific Wealth Report, which is a regional extension of the firms' annual World Wealth Report and provides an in-depth view of the changing Asia-Pacific wealth management market.
In addition, it was reported that the region was home to five of the 10 fastest-growing HNWI populations in the world, and the number of HNWIs grew by 7.3 per cent to 2.4 million from 2004. The number of Ultra-HNWIs, those having net financial assets of more than USD 30 million, grew by 12.1 per cent, to 15,600. The total wealth of the Asia-Pacific high net worth population was USD 7.6 trillion in 2005, growing at an 8.0 per cent pace over 2004.
It was noted that above-average performance of wealth-creating economic drivers, including the primary catalysts of GDP and market capitalization, bolstered wealth accumulation in the region.
'The findings of the Asia-Pacific Wealth Report reinforce many of the themes that we have long-championed for this part of the world," said Raymundo Yu, Head of EMEA & Pacific Regions for Merrill Lynch's Global Private Client Group. He added that, "The future of the wealth management industry in Asia holds many exciting opportunities as the region is home to some of the world's fastest-growing economies."
While 2005 growth rates for GDP and market capitalization in Asia-Pacific mirrored the world's slowing trend following 2003's crest, the region's economies grew at a faster rate than those in other parts of the world. HNWIs in Asia-Pacific continued to benefit from strong economic conditions in 2005, adding wealthy investors to their ranks and expanding their financial wealth.
The Report found that wealth was more heavily concentrated in the lower HNWI wealth bands and that Ultra-HNWIs grew at a faster pace than HNWIs in 2005. This faster-paced growth in the higher wealth bands suggests that wealth will concentrate as Asian markets further develop, a trend confirmed among maturing markets.
Differences Define Market Potential
Five Asia-Pacific markets ranked among the global top 10 fastest-growing HNWI populations in 2005, according to the Report. South Korea, India and Indonesia were the three fastest growing HNWI populations in the world, surging 21.3%, 19.3% and 14.7%, respectively.
Japan maintains more than half of the HNWIs in the region, but only a 30% share of Ultra-HNWIs. Together, China and Japan hold over 65% of the region's USD 7.6 trillion financial wealth.
HNWI saturation levels differed by market, suggesting varying levels of market potential. The Report found that Hong Kong, Japan and Singapore showed higher than average levels of market saturation, while Indonesia, India and China ranked lowest in terms of their HNWI concentrations. HNWIs from China and Hong Kong had the highest average net worth.
Asset Allocations Remain Diversified and Conservative; Lack Strong international Exposure
Confirming a trend observed in the 2006 World Wealth Report, HNWIs in Asia-Pacific pursued diversified asset allocations in 2005. Favoring equities and alternative investments, HNWIs invested nearly a quarter of their portfolios, 24% and 23% respectively, into each asset class.
'While they exhibited a preference for sophisticated alternative investments, Asia-Pacific HNWIs sought to offset higher-risk investments by holding a significant portion of their assets in more conservative asset classes,' said Yu.
Asia-Pacific HNWIs' international allocations exhibited a more narrow focus compared to other regions. More than half of HNWIs' assets were invested within the Asia-Pacific region and more than a quarter of assets were allocated to North America, with the balance spread across Europe, Latin America and the Middle East.
Varying Stages of Market Development Create Opportunities for Wealth Management Providers
The Report groups each market into one of three broad stages of wealth management maturity: Emerging, Developing and Mature.
China and India represent the Emerging markets of Asia-Pacific as they provide a largely untapped pool of wealth for wealth management institutions. Currently, the wealthy sectors in these two markets, while growing rapidly, lack investment experience. Underdeveloped capital markets, capital controls, currency inconvertibility and strict licensing requirements create a thorny wealth investment environment for HNWIs looking to invest and for wealth management providers aiding in the process.
'Difficulties exist specifically in developing entry strategies, attracting clients to wealth management services and building investor sophistication' said Dirk Chanmueller, Vice President & Financial Services Leader, Capgemini Greater China.
Markets classified as Developing in the Report include Indonesia, South Korea and Taiwan. These markets prospered earlier than the Emerging markets and provide valuable lessons for wealth management institutions looking to access Emerging HNWIs. With more advanced capital markets, HNWI clients have started showing enhanced investment sophistication and the need for more complex wealth management solutions. Some clients have moved up to more sophisticated services such as trusts, philanthropy and capital-raising. 'Foreign institutions will find it more difficult to break into these markets as domestic banks control the majority stake of HNWI clients,' said Chanmueller.
Japan, Hong Kong and Singapore registered as Asia-Pacific's key Mature markets. The Japanese wealth management market is encountering strong demand. With client demand up, there is intense competition for experienced financial advisors, training personnel, and IT professionals.
Hong Kong and Singapore are the most advanced wealth management markets in Asia-Pacific and 'each has an influence span significantly wider than its own borders,' said Chan Mueller. While sharing similar traits, a competitive rivalry fuels each market's drive to be considered the best. Singapore aspires to become 'Asia-Pacific's Switzerland', an island oasis for HNWIs, while Hong Kong has long been considered the gateway to China's HNWI market.
-HedgeWeek.com-
Posted by su at 4:25 PM | Comments (0)
October 10, 2006
Hedge Funds Return +0.10% in September
The Greenwich-Van Global Hedge Fund Index returned +.10% in September according to a preliminary report released today by Greenwich-Van Advisors, LLC, a leading hedge fund index provider. In comparison, the S&P 500, NASDAQ, Nikkei 225 and the Lehman Brothers Aggregate Bond Index returned +2.58%, +3.42%, -.08% and +.88%, respectively.
"Hedge funds on the whole were up for the month, despite market conditions which continued to adversely affect certain investment strategies," notes Ben Rossman, General Manager of the Database and Index Group. "As was the case in August, short sellers ended up in negative territory, amid September's rising bond and equity markets. Declines in precious metals and energy contributed to widespread loss across futures strategies. Fixed-income funds posted strong results, owing to the bond rally during the latter half of the month. Long-biased equity strategies also fared well, encouraged by market perception of a reduced likelihood of increases in interest rates, following the US Federal Reserve's September 20 decision to hold steady the federal funds rate."
The Index represents the average performance, net of fees, of hedge fund managers that report to Greenwich-Van. Past performance and index construction methodology 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.
The September 2006 Greenwich-Van Global Hedge Fund Index preliminary results included 434 funds. An updated September return for the Index, based on a larger sample of funds, will be released in mid-October; final results will be available at the end of October. Additional Greenwich-Van Indices, which show average September hedge fund performance for individual investment strategies and broad strategy groups, will also be available at mid-month and month-end.
The accuracy of information reported by managers is not independently verified and may not be representative of 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 reported performance. Averages are equal-weighted. Past results are not indicative of future performance.
-Forbes-
Posted by su at 4:28 PM | Comments (0)
October 9, 2006
Banks' love affair with hedge funds
Hedge funds have come under fire in recent days, due in part to the recent $6 billion Amaranth debacle. But the regulatory run-ins aren't scaring off large banks, which increasingly are turning to hedge funds as a way to create serious growth.
As increased competition for deposit growth and a flattening yield curve continues to put pressure on profits, banks are eager to attract high net-worth clients and diversify their profit stream.
And while banks like Goldman Sachs and Morgan Stanley have had success in their prime brokerage units, which cater in part to servicing hedge funds, analysts say the big bucks lie in the management of actual hedge-fund assets.
Just look at the numbers: Hedge-fund managers collect 2 percent of the assets under management regardless of the fund's profitability. If a fund shows a profit, its managers receive an additional 20 percent as a performance fee.
For the banking industry, which is concerned about dwindling profits and higher interest rates, that type of fee structure is particularly appealing, analysts said.
A no-brainer for banks
High net-worth investors continue to demand hedge-fund products, making it a no-brainer for banks to enter the business and meet that demand, said Dick Bove, analyst at Punk Ziegel & Co. Hedge funds are notoriously high-risk, but offer potentially high returns to investors - thus their appeal to wealthy bank customers.
According to industry tracker Hedge Fund Research, the U.S. hedge-fund industry grew to $984 billion in assets in July - a 32 percent jump from last year. Global assets are over $1.5 trillion.
"The banking industry is in the business of gathering money wherever it may exist," he said. "If the money now exists in hedge funds, it's incumbent on the banking industry to get into that business."
But banks are doing more than just getting in to the business. They're now becoming leaders within the hedge fund industry.
Banking titans Goldman Sachs, and JPMorgan Asset Management - through JPMorgan's majority stake in Highbridge Capital Management - are currently the largest hedge fund firms in the U.S., according to a recent survey by industry magazine Absolute Return.
Goldman Sachs leads the pack with $29.5 billion in assets while JPMorgan ranks a close second with $28.8 billion. Barclays ranks sixth with $17 billion in assets under management.
It marks an impressive leap for both Goldman and JPMorgan in just one year. In 2005, Goldman Sachs ranked third with $15.3 billion while JPMorgan wasn't even in the top ten.
As hedge funds aren't required by any regulation to disclose their monthly returns, they're notoriously tight-lipped about their performance, and it's unclear what the banks' profits - if any - are on those assets.
But given the growth in assets under management at Goldman Sachs and JPMorgan, its little wonder other banks are looking to enter the hedge-fund arena as well. Morgan Stanley, most notably, has been the subject of Wall Street rumors to the effect that the bank is in talks to acquire a hedge fund. The buzz is that such a buy would fulfill part of CEO John Mack's vision of expanding the company's alternatives investments business, which includes private equity.
Still, Wall Street has long had a love-hate relationship with hedge funds. Investors love the promise of high returns and managers love the heady fees associated with running the alternative investments.
But when a large-scale meltdown occurs - such as Amaranth's roughly $6 billion loss due to bad natural-gas bets, or worse, the implosion of Long-Term Capital Management in 1998 - the closely guarded hedge-fund world suddenly becomes enemy number No. 1, raising fears of litigation and huge losses to investors.
A risky business
Indeed, banks eager to profit from hedge funds may open themselves up to increased legal risks, warned Christopher Whalen, managing director of Institutional Risk Analytics, a financial analysis and valuation firm.
"These things are highly speculative and we're likely going to see a lot more (Amaranths) coming out of the closet," he said. "If a bank-owned hedge fund blows up, the liability trial attorneys will have a field day."
And there are no guarantees that a fund will be profitable for investors or the banks that offer them. Citigroup, for instance, has been struggling with its in-house hedge fund unit. The company invested about $1.5 billion in Tribeca Global Management and currently has about $2 billion in assets. Citigroup Alternative Investment, which includes Tribeca Global Management, has total assets of about $7.5 billion, according to Absolute Return magazine.
But the unit lost its chief executive Tanya Styblo Beder after months of relatively poor returns to investors and high expenses.
There is also concern that after years of stellar growth, hedge funds may be in for a slowdown that could lead to consolidation. That could spell bad news for banks that enter the business now.
After starting the year with a 3.5 percent gain, the HFRI Fund Weighted Composite Index - a broad industry measure of hedge-fund performance - ran into a rough patch in May, June and July. The index showed losses for those three months, before rebounding modestly with a 1 percent gain in August.
The number of new funds launched has dropped, but liquidations declined apace. In the first half of 2006, 549 funds were launched and 223 liquidated. Over the same period, there were 1,211 fund and 428 liquidations.
But critics shouldn't be too quick to predict a decline in the hedge-fund industry, said Josh Rosenberg, president of Hedge Fund Research. For one thing, the HFRI index is still up almost 7 percent year to date as compared to a 5.8 percent gain on the S&P 500.
Record inflows into hedge funds
And while fund launches fell from last year, the hedge fund industry is in for a record year of inflows.
Through the first half of the year, the hedge-fund industry saw inflows of $66.1 billion, with the second quarter accounting for $42.1 billion of those flows - a record for a single quarter. And inflows in the first half of the year beat the $42.1 billion in inflows that the industry recorded for the full year of 2005.
"There's been quite a bit of fluctuation in performance during the course of this year but money still continues to flow into hedge funds," Rosenberg said.
And as money keeps flowing in, banks will continue to have an even stronger incentive to get in on the action.
"I don't know if banks will ever own the entire market," said Denise Valentine, senior analyst at independent consulting and research firm Celent LLC. "But it's a major trend that will continue because banks have tremendous resources both in technology and money to buy these firms."
-CNNMoney.com-
Posted by su at 11:32 AM | Comments (0)
Spain: retail fund of funds gain access to hedge funds
Spaniards will now be able to invest in hedge funds through fund of funds under new regulations passed by the regulator, the CNMV (Comisión Nacional del Mercado de Valores).
The new legal framework allows fund of funds registered for sale in Spain to invest a maximum 10% in hedge funds.
Due to the complex legal procedure, at the moment only six hedge funds have been registered for sale in Spain. Promoters of these six are Santander, BBVA, Deutsche Bank, Barclays, UBS and Nmás.
Several asset managers including Santander, Bancaja, and Cajamadrid have already gained authorisation to invest their fund of funds in the hedge funds.
-CityWire-
Posted by su at 11:24 AM | Comments (0)
Debt-focused hedge funds ‘leading way’
Hedge funds focused on debt markets are set to achieve some of the strongest returns in the industry this year, while others such as those focused on macro strategies or equities stumble, according to JPMorgan.
Credit funds, which represent a small but growing portion of assets under management in the industry, are achieving returns of 10-15 per cent in the year to date, analysts at the bank said.
However, the main source of these gains has been increasingly concentrated bets on the booming European leveraged loan market, which suggests the funds could be more susceptible to big losses if their chosen companies run into trouble.
“Amid all the reports of losses at a large multi-strategy fund and poor performance across the macro fund community, it is easy to overlook the performance of credit funds,” said Stephen Dulake, European credit analyst at JPMorgan.
Credit funds’ stronger performance had been a consistent theme all year, he said, as they had been able to sidestep some of the turmoil that has hit other hedge fund strategies.
Those credit funds that have lagged behind in performance have been involved in broader strategies, such as adding bets on equities to their portfolio, or have been caught up in companies that have become distressed, such as German autoparts maker Schefenacker, he added.
The most successful funds have held core stakes in European leveraged loans, the debts raised by companies with low credit ratings that are often used to fund private equity buyouts.
“One change that has taken place is that credit funds’ loan portfolios have become increasingly bifurcated,” Mr Dulake said.
The funds are increasingly taking large positions in a company’s most senior secured loans while at the same time buying the most junior, equity-return-like debt of the same company, for example PIK-loans that can see interest payments deferred. This kind of positioning is known as barbelling.
“Single-company exposures also seem to be getting bigger,” said Mr Dulake. “People seem to be betting more and more on names they like.”
While this meant funds were more exposed to the risk of particular companies struggling, Mr Dulake said the barbell strategies appeared to be more heavily weighted towards the senior debt, which would see better chances of higher recoveries if there were problems.
Demand for loans from hedge funds and other specialist investors remains very strong, which in turn allows banks to feel comfortable in continuing to lend more funds to low-rated companies helping to keep the default rate low.
-FT.com-
Posted by su at 11:22 AM | Comments (0)
Europe Loves Hedge Funds, In Theory Anyway
European institutions continue to profess their enthusiasm for alternative assets, including hedge funds, but to date they have failed to follow through on that enthusiasm by actually investing in them.
According to a new report from Greenwich Associates, the proportion of continental European institutions that said they invested in hedge funds increased to 35% in 2006 from 26% in 2005. Another 10% of institutions said they planned to begin investing in hedge funds soon. However, actual allocations to hedge funds and private equity have remained in the 2% range since 2004.
"Although allocations haven't budged, European institutions remain bullish on alternatives—at least in theory," said Tobias Miarka, a consultant at Greenwich Associates, in a statement.
The Greenwich report showed that 41% of continental European institutions expect their private equity and hedge fund allocations to increase by 2009. Only 1% said they expected such allocations to decrease. According to Greenwich's figures, the average institutional hedge fund investor in Europe has 200 million euro ($253.7 million) invested in hedge funds, usually spread among three or four individual managers, or more often among fund of funds managers.
The interest in hedge funds and other alternatives follows a trend in Europe of seeking out more non-European investments, Greenwich found. Institutional assets in continental Europe grew by 7% in 2005, driven by good stock performance. Following on that, European institutions upped their equity allocations to 26% from 23%. Even so, fully two-thirds of institutional assets sat in fixed-income and money market accounts at the start of 2005, which limited the positive effects of strong equity market performance, according to Greenwich. And there is little to suggest that institutions are prepared to break with tradition and move fixed-income assets into equities.
Rather, institutions are looking to diversify their equity exposure by increasing allocations to non-European equities, Greenwich found. Almost one-third of European institutions told Greenwich that they expected to increase allocations to Japanese equities, for example, over the next three years. Another 42% of institutions said they would up allocations to emerging markets equities by 2009.
"Our research suggests that a large proportion of Continental pension funds, banks, insurance companies, and other institutional investors are taking significant steps away from the somewhat tradition-bound investment practices that characterized the industry for the previous 50 years," Greenwich consultant Markus Ohlig said in a statement.
Not everyone is excited about hedge funds, however. Speaking to Investments & Pensions Europe, Frank Field, the former pensions minister for the United Kingdom, said he thinks future hedge fund performance won't be as good as it has been recently. In response to news that the House of Commons pension fund is considering investing in hedge funds, Mr. Field said that as hedge funds have seen more assets flow in, returns have become mediocre. In an interview with IPE, he likened hedge fund investing today to "jumping on a bandwagon whose best times are past."
The information about European institutional investing is contained in Greenwich's 2006 Continental European Investment Management Research Study, which analyzes strategic shifts by continental European institutions and documents growth in assets under management, allocation changes, and compensation levels for investment professionals.
-HedgeWorld.com-
Posted by su at 11:15 AM | Comments (0)
CalSTRS Plans 3% Increase in Alternatives Allocation
As approved at the Teachers' Retirement Board in September, the California State Teachers' Retirement System will increase allocations to alternative investments by three percentage points, and the real estate portfolio will increase by five percentage points. These changes, accounting for nearly $11.5 billion of CalSTRS's $144 billion portfolio, include shifts of 6% away from fixed-income and 1% each from U.S. equity and cash. The board initially voted to adopt new asset allocations in early September Previous HedgeWorld Story, but projected allocations were not known at that time.
In conjunction with the long-term targets, CalSTRS today [Oct. 4] began its search for investment management firms to provide transition management services as it embarks on these long-term changes to its portfolio. According to a news release, CalSTRS is seeking a pool of investment firms to handle managing, acquisition and disposal of assets, as well as portfolio rebalancing as determined by CalSTRS. The final filing date for proposals is Nov. 14, and selections are expected sometime in the spring of 2007. A request for proposal can be accessed at www.CalSTRS.com/rfp.
"We are at the inception of an unprecedented change in our portfolio," CalSTRS Chief Investment Officer Christopher J. Ailman said in a statement. "These managers will be instrumental in our long-term asset allocations strategy to shift assets from fixed-income to more aggressive blended investments that fall somewhere between our private equity and real estate asset classes."
CalSTRS is the second-largest public pension fund in the United States, with a $146 billion investment portfolio.
-HedgeWorld.com-
Posted by su at 11:13 AM | Comments (0)
October 2, 2006
Germany Aims To Boost German Hedge Fund Market
Germany plans to give the country's hedge fund sector more freedom in a bid to remove competitive disadvantages to international rivals and boost innovation and growth at home, according to the Finance Ministry.
Among key changes are plans to allow insurance and pension funds to invest more in hedge funds and to free hedge funds from having to appoint deposit banks, according to Deputy Finance Minister Thomas Mirow.
The ministry plans to redraft its Investment Act.
"It is important that the German hedge fund market continues to develop, even though it is clear that the Anglo-Saxon financial centers will in all likelihood remain dominant in this field," said Mirow at a speech to hedge fund managers late Wednesday.
"Despite this dominance, we should concentrate our efforts into securing an ever growing slice of the hedge-fund cake."
The ministry plans to allow German funds to assume internationally accepted structures.
"The German deposit bank model is not readily compatible with the normal international hedge fund structures. As a result, we plan to drop the legal requirement to appoint a deposit bank where it can be ensured that a suitable third party can evaluate the fund's assets," said Mirow.
"And finally, investment rules are to be amended so that institutional investors, in particular, can invest more in alternative asset classes so that they, like foreign insurance funds and pension funds, will be able to generate sufficient returns."
The planned amendments come as Germany's hedge fund market has so far failed to live up to expectations since Germany allowed hedge funds to sell to investors in January 2004.
According to the Finance Ministry, there were only 44 hedge funds operating under German law and managing a total of roughly EUR2.3 billion as by May 2006 while the market had been expected to reach around EUR10 billion in its first year.
"It would appear that this market is still in its infancy," Mirow said.
The ministry's efforts come as Germany is also pushing for more transparency of hedge funds.
-Dow Jones-
Posted by su at 12:06 PM | Comments (0)
Korean FSC to Ease Restrictions on Sales of Foreign Funds
The Financial Supervisory Commission says it will ease restrictions on sales of foreign funds in the country to help meet the rising demand here. Under the plan, foreign asset management firms with less than W5 trillion(US$1=W945) will be able to sell fund products in the country. Now only those with more than W5 trillion are allowed to do so. Sales of foreign real-estate funds and fund of funds will also be allowed.
Sales of foreign funds in the country have seen a sharp increase, from W2.8 trillion at the end of 2003 to more than W9 trillion at the end of July this year.
-Arirang News-
Posted by su at 12:03 PM | Comments (0)
Hedge fund bets were too large
The bets in the natural gas market that lost $6bn for hedge fund Amaranth were "much too large for its capital base", according to a new study of the losses conducted by Edhec, the French business school.
The fund's risk managers could have identified how "massively risky" the fund's positions were, even based on historical market moves that would have underestimated the difficulty of exiting the trades, the study concludes.
Nick Maounis, founder of Amaranth, has said the fund's huge losses followed "highly remote" moves in the natural gas market.
The Edhec study, based on public reports of the debacle, confirms that the price changes were extremely unlikely based on historical analysis. But it also notes that the size of Amaranth's positions made unusually sharp market moves almost inevitable as it tried to scale them down.
Hilary Till, a research associate at Edhec and a principal of Premia Capital Management in Chicago, said her analysis suggested the market moves that hit Amaranth were statistically even more improbable than those that brought down Long Term Capital Management in 1998.
The probability of those events has been likened to the chance of a meteor hitting the earth. But with positions as large relative to the market as Amaranth's, the attempt to get out of trades can itself dramatically move prices.
For her report, to be released this week, Ms Till recreated Amaranth's likely positions based on information that has been made public by the media and the fund since its losses came to light two weeks ago.
Monthly gains or losses of more than 10 per cent were not unusual for Amaranth. This volatility should have told investors the fund's energy trading was "quite risky", Ms Till concluded.
Meanwhile, those informed about specific trades would have seen that the fund's positions in over-the-counter natural gas derivatives were "massive" compared with the publicly disclosed open interest in exchange-traded futures markets.
"[That] would have given an indication of how illiquid their energy strategies were," said Ms Till.
In spite of the losses, Ms Till said Amaranth had been performing a useful function in the energy markets. "Amaranth was providing liquidity to natural gas producers," she said. Such companies and gas storage groups would have been taking the other side of many of the hedge fund's trades, helping them to manage their business risks.
-The financial Times-
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