January 2007
« November 2006 | Main | February 2007 »
January 19, 2007
Hedge fund assets up 29 pct to $1.43 trln in '06
Money continued to flood into hedge funds during 2006, swelling industry assets to a record $1.43 trillion -- up 29 percent from 2005 -- even as aggregate hedge fund returns underperformed equity indices, new data showed.
Global inflows into the lightly regulated investment vehicles slowed in the fourth quarter, but still attracted a record $126.5 billion in new money for the full year, well above the $46.9 billion it attracted in 2005, according to industry tracker Hedge Fund Research.
Hedge funds, which charge investors high fees and use complex trading strategies aimed at generating consistent above-market returns, now number an estimated 10,500 worldwide, HFR said, fueled by demand from institutional investors, pension funds and wealthy families.
Despite their promise, however, hedge funds in aggregate failed to outperform the Standard & Poor's 500 index for 2006, HFR said. The HFRI Fund Weighted Composite Index returned 12.85 percent for 2006, compared to 15.8 percent total return for the S&P 500 Index <.SPX> last year.
Still, some hedge fund strategies produced hefty returns for 2006. The HFRI Emerging Markets Index led the industry performance, returning 24.3 percent in 2006. Event-driven and merger arbitrage strategies, which bet on prospects for corporate changes like mergers and restructurings, gained 15.7 percent for the year.
"While several strategies did post outflows for the fourth quarter, the general trend continues to be positive," said Ken Heinz, HFR president. He said industry assets have increased 47 percent in the last two years.
Investors, who typically struggle to find winners amid a myriad of speculative hedge funds, placed a large portion of new money into funds of hedge funds, which charge fees to find and invest in portfolios of successful hedge funds.
In 2006, funds of hedge funds brought in $49.7 billion in new money, compared with $9.5 billion in 2005 and $33 billion in 2004, HFR said.
-Reuters-
Posted by su at 10:40 AM | Comments (0)
January 15, 2007
Hedge fund industry 'to continue growing modestly'
The hedge fund industry will continue to grow a modest pace in 2007, after enduring an eventful 2006, a global investment bank has claimed.
Deutsche Bank collated the opinions of nearly 700 institutions and over 1,000 representatives for its fifth Annual Alternative Investment Survey and found that many are favouring funds in Asia.
A "huge jump in assets" is expected for hedge funds that invest China, while respondents claimed that emerging Asia is set to be the top performing region for the second year in a row.
Investment in long/short equities was ranked as the "top performing strategy" by 18 per cent of those surveyed, while macro and event-driven /relative value strategies were favoured by 13 and 12 per cent of respondents respectively.
John Dyment, global head of the hedge fund capital group at Deutsche Bank, remarked: "Despite a series of setbacks and scares in 2006, survey respondents feel the hedge fund industry will continue to grow modestly in 2007."
He added that the survey showed that investors intend to keep some of the events surrounding hedge funds in 2006 "in perspective" by using risk management to select hedge fund managers.
Last month, JP Morgan Asset Management claimed that the performance of the yen and Japanese government bonds had reportedly been a "nightmare" for macro hedge fund managers.
-London Stock Exchange-
Posted by su at 11:27 AM | Comments (0)
January 12, 2007
School Endowments Invest 39% In Alternatives
For the sixth consecutive year, higher educational endowments in the U.S. have increased their allocations to alternative investments, according to the 2007 Commonfund Benchmarks Study of Educational Endowments. The research found that respondents allocated an average of 39% of assets to alternatives, up from 35% last year. That figure rises to 49% among the top decile institutions and 46% in the top quartile. The growth rate among the top endowments in terms of dollars in the latest research, however, is about half as that recorded the year before, which surged about 8 percentage points vs. 3 percentage to 4 percentage points in this go around.
In other findings:
27% of those polled expect to increase alternatives allocations, though that percentage rises to 56% among institutions with assets of between $500 million and $1 billion, while at the same time 65% of that group say it will cut domestic equity allocations.
33% of public institutions responded that they will up their allocations to alternatives.
Endowments in the $500 million-$1 billion group say 79.1% of their growth came from returns, while that figure drops to 75% among those with more than $1 billion in assets.
Overall returns for alternative strategies was 14.6%, compared with average total returns 11.2% for private institutions, 10.1% for public institutions and 9.6% at independent schools. In comparison, domestic equity grew by 10.2%.
Among alternative investments, energy &natural resources performed best, soaring 39.9%, followed by distressed debt (26.2%), public equity real estate (19.1%), private equity (18.9%), private equity real estate (15.5%) and hedge funds (10.6%).
For the third year in a row, allocations to hedge funds in the alternatives portfolio have dropped, from 47% to 46%.
-Institutional Investor-
Posted by su at 2:47 PM | Comments (0)
Hedge funds have biggest gains since 2003
"It was a good year, but not an outstanding year," said Winson Ho, co-head of the Alternative Assets Group at RBC Capital Markets. "We've certainly had better years in the late 1990's and in 2003."
RBC's Alternative Assets Group invests in more than 1,000 hedge funds and has created an investable index of 250 managers that was up more than 9% in 2006 through the end of November.
Emerging markets, distressed debt and convertible-arbitrage funds were among the top performers, while short sellers and global macro managers were laggards.
An index of managers compiled by HedgeFund.net rose 11.76% in 2006. Another run by Hedge Fund Research climbed 12.99% last year, while The Barclay Group's Hedge Fund Index advanced 12.35%.
All Dow Jones hedge-fund strategy indexes grew in 2006, with distressed-debt managers leading with a 15.3% return. Managers tracked by adviser Hennessee Group advanced 11.36%.
Hedge-fund returns averaged just more than 9% in 2005 and 2004 and reached almost 20% in 2003, HFR data show.
Gains last year were fueled by the strong equity market and the huge amount of cash swilling around global markets, which helped bolster credit markets.
"The story is illiquidity," Ho said. "The world is awash in cash, so people need to find places to put their money and this has inflated asset prices."
The trend helped buoy stock markets, helping long/short equity hedge funds return 13% to 14% in 2006, according to RBC's Alternative Assets Group, he added.
It also sparked a wave of mergers and acquisitions, giving more deals for merger arbitrage hedge funds to invest in, Ho added.
Still, hedge funds lagged stock-market benchmarks such as the S&P 500 Index, which climbed more than 15% in 2006. The last time hedge funds outperformed the S&P was in 2002. That year, the index slumped 22% while hedge funds lost 1.45% on average, according to HFR data.
RBC's Ho said he judges hedge fund performance against returns on risk-free assets such as Treasury bills or the London Interbank Offered Rate (LIBOR), which averaged between 4.5% and 4.75% during 2006.
Hedge funds outperformed these benchmarks by about six to seven percentage points, at the top end of the historical range, he noted.
Emerging-market hedge funds performed the best: HedgeFund.net's emerging-markets index jumped 21.72% last year.
"Emerging markets were the place to be in 2006" despite a turbulent summer, said Peter Laurelli, a research analyst at HedgeFund.net, in a statement.
Still, emerging markets got off to a rocky start this year, thanks to protectionist moves in Thailand and Venezuela. See full story.
Distressed-debt hedge funds, which trade the securities of companies close to or emerging from bankruptcy, also did well as credit spreads tightened as 2006 progressed. Distressed managers tracked by HedgeFund.net returned 14.64% on average last year.
Convertible-arbitrage hedge funds, which suffered in 2005, had a much better year in 2006, returning 12.78% on average, according to HedgeFund.net.
These managers outperformed the bond market. The Lehman Brothers Intermediate Government Corporate Bond Index finished 2006 up more than 4%.
Short sellers, which bet against stocks gaining, suffered in 2006 as the equity market rallied steadily. The S&P 500 had only one down month last year. Short sellers tracked by HFR lost 1.98% for the year.
Global-macro hedge funds, which bet on broad economic trends using a wide variety of securities, generated lackluster returns of 4.76% as some managers lost money shorting 10-year Treasury bonds during most of 2006, Hennessee Group said.
-Market Watch-
Posted by su at 9:41 AM | Comments (0)
January 10, 2007
Multi-manager funds seen growing in Asia
Demand for multi-manager funds is increasing in Asia and has been a fast-growing area of fund investments globally as investors seek better returns, a top HSBC fund manager said on Wednesday.
Unlike single-manager funds, multi-managers employ an investment team to look after clients' assets.
Multi-manager products took off in the last five years, with asset managers and consultants including HSBC, Mercer, Credit Suisse, Aon and WestLB all jumping on board, said Joanna Munro, global chief investment officer at HSBC Investments, the fund management arm of Europe's biggest bank, HSBC.
"Increasingly, as you're wanting a broader asset allocation, you're wanting to invest in high-yield structured products, hedge funds, property. Chances of one asset manager being able to do it for you becomes very remote," Munro told Reuters.
"What you need is experts in each part of your portfolio and you are already in a world where you want multiple managers."
Munro said a number of multi-managers were also trending towards more innovative products, including absolute return oriented products that have a broad range of asset classes, such as property, private equity and emerging markets.
Assets under management for multi-manager funds totalled $1.3 trillion (670 billion pounds) in 2005 globally and are expected to grow at a compound annual rate of 16 percent between 2005 and 2010, according to asset management research consulting firm Cerulli Associates.
In Asia ex-Japan, the figure was $14 billion in 2005 and projected to grow to $33 billion by 2010.
HSBC launched two new fund of funds in Taiwan last year to strong demand and is planning to offer a new one in Hong Kong next week.
While multi-manager funds tend to have higher fees and can discourage fee-sensitive investors, Munro expects better returns will eventually secure new clients.
"The fees are an issue with the wrong kind of multi-manager," she said.
"If you've got an alpha multi-manager, then it's just the same as if you're paying a stock picker because at the end of the day they've got skills and you know you're going to get a better net return."
-Reuters-
Posted by su at 3:24 PM | Comments (0)
January 9, 2007
Emerging Market Hedge Funds 2006 Returns Best In 3 Yrs - HFR
Emerging market hedge funds were the best performers in the hedge fund asset class in 2006, posting the best performance in three years, Hedge Fund Research said Monday.
The HFRI Emerging Markets index rose 25.13% in 2006, better than the 21.04% in 2005 and the best year since 2003, when it returned 39.36%, according to HFR data.
By comparison, the broad HFRI Fund Weighted Composite Index was up 12.99% on the year. The HFRI Fixed Income Convertible Bonds Index was the only one that posted similar returns to emerging markets, at 24.86% for the year.
Among the emerging market subindexes, the Eastern Europe/CIS Index was the best performer last year, with returns of 37.02%. The Asia index was up 29.08%, while the Latin America index was up 15.73%.
According to HFR, emerging market hedge funds had attracted $7.2 billion funds in the first nine months of 2006, up from $5.3 billion in the same period of 2005. At the end of the third quarter, emerging market hedge funds accounted for about 4.2% of the total hedge fund universe of about $500 billion, it said.
-NASDAQ-
Posted by su at 11:26 AM | Comments (0)