April 2007
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April 25, 2007
Emerging managers look to outsourcing
The hedge fund industry in Asia today resembles that in Europe a couple of years ago. For example, the average size of a new hedge fund launch is still relatively small at less than USD100m, although this represents an increase over the past couple of years. However, the region is starting to see one or two very large fund launches each year, and their number is certain to grow as the industry continues to develop. Funds starting up with a relatively small level of assets under management have less available to spend on getting their operations up and running and are likely to have a smaller in-house technical infrastructure. However, Asian managers remain conscious of the importance of having proper portfolio management systems - especially as to a large extent their investor base may be not necessarily Asian but Western.
With the benefit of several more years of experience and industry development, Western investors have a good idea of what they need to see in hedge fund managers to ensure their peace of mind, and a sound technology base is one of those things. Because of their more limited resources, the Asian hedge fund managers who are clients of Beauchamp Hedge Fund Solutions tend to be interested in our ASP product, because they don't want to have to manage any hardware infrastructure in-house, and because it's an economical choice for a start-up business.
One of the unique characteristics of the Asian hedge fund industry is that for many managers trading takes place in a different location to the generation of investment ideas. A substantial number of Japanese funds carry out trading through offices in Singapore, because in order to carry out trading onshore in apan funds have to be registered with the financial authorities in Japan, which is prohibitively expensive for most hedge fund start-ups. With interest in Japanese hedge funds growing among US and European investors, this is helping to boost significantly the number of fund startups in Singapore.
The number of Japanese funds using Singapore for trading is also encouraging another trend characteristic of the Asian hedge fund industry, the use of so-called hedge fund hotels or incubators. Many funds will seek to avoid the extra expense of setting up their own office in Singapore by doing all their trading through a hedge fund hotel that manages all the technology and infrastructure.
Some will not only host the fund and provide an execution platform but will help raise capital and even give the fund money to run, perhaps in exchange for a stake in the fund manager when it grows larger and moves out to set up its own operational infrastructure.
Whereas in the past most Japanese hedge funds were set up by Western managers, the past year has seen the emergence of local managers from large institutions to set up on their own. Even though this runs against the grain of Japanese culture, the economics are compelling for talented managers whose compensation within institutions is largely determined by seniority.
Alongside the emerging Asian hedge fund talent are large hedge fund managers from the US and Europe and global financial institutions that are opening offices in the region. These firms have different infrastructure needs from start-ups because they need to be able to run a centralised system that facilitates real-time communication and exchange of data with their headquarters in New York or London and any offices around the world.
-Hedgeweek.com-
Posted by su at 1:54 PM | Comments (0)
Gradual opening for Spain's hedge fund market
Barely a year after the full implementation of the first legislation to give legal recognition to hedge funds in Spain, the industry is starting to move into gear as the first wave of licensed managers begin to unveil products and the authorities fine-tune the rule book for single-manager funds and funds of hedge funds. But for managers of foreign-domiciled funds, there seems little prospect of direct market access for the foreseeable future. Spain joined other European countries that have put hedge funds on a regulated basis with the entry into force of the Regulations on Collective Investment Schemes on November 9, 2005, a royal decree that put into effect provisions of the 2003 Law on Collective Investment Institutions, which also transposed the European Union's Ucits III directive into Spanish law.
The decree established a regulatory framework completed by a ministerial order in April 2006 and a circular from Spain's securities and stock market regulator, the Comisión Nacional del Mercado de Valores (CNMV, or Spanish Securities Exchange Commission), the following month. Before May last year, the Spanish financial regulatory structure did not make any specific reference to hedge funds. The standard fund regulations, which barred leverage and greatly restricted use of derivatives, effectively ruled out domestic single-manager funds, while would-be managers of funds of hedge funds were hamstrung by a requirement that no more than 10 per cent of the assets of a fund of funds could be in unlisted securities. Sales to Spanish investors of foreign domiciled funds were theoretically possible through private placements but hard to achieve in practice.
The November 2005 decree established a regulatory framework for hedge funds, described in the regulations as 'free investment funds', and funds of hedge funds ('funds of free investment funds'). Hedge funds can only be sold to qualified investors, as defined by the provisions through which Spain has implemented the terms of the EU Prospectus Directive, according to law firm Simmons & Simmons.
Qualified investors encompass authorised financial market participants including banks, insurance companies, investment funds and their managers, pension schemes and other specialist investment businesses, state and international financial and government institutions, and large companies, as well as smaller firms that opt to be treated as qualified investors. For individuals to qualify, they must meet two of three criteria: to be regular and substantial traders in securities markets, have a securities portfolio of more than EUR500,000, or have worked in the financial industry with experience of
securities investment.
By contrast, domestic funds of hedge funds are not subject to marketing restrictions, which means they can be actively sold to retail investors. And in a package of amendments to the hedge fund regulations published in March, it was confirmed that even single-manager funds are free to accept subscriptions from retail investors who make unsolicited applications, as long as the EUR50,000 minimum investment level is respected.
Single-manager hedge funds are required to meet the liquidity, diversification and transparency requirements that the legislation enshrines as basic principles of collective investment, but otherwise they are free to invest in all categories of financial assets. Leverage is limited to five times the fund's net asset value, although the use of derivatives to achieve leverage and some other techniques are exempt from the restriction as long as this is disclosed in the prospectus. Hedge funds authorised under the regulations must have reached a minimum of 25 shareholders within a year of registration with the CNMV, and if it falls below this level the shortfall must be remedied within a year to avoid loss of authorisation or compulsory dissolution of the fund. The regulations require implementation of risk management systems and regular stress testing.
Funds are required to publish quarterly, semi-annual and annual reports, publish NAV at least quarterly unless their strategy involves investments that justify less frequent NAV publication, and must report financial statements, statistical information and details of the investment portfolio monthly to the CNMV. The CNMV circular published in May 2006 also offers more flexible regulation of prime brokerage activity than was provided in earlier drafts, according to Simmons & Simmons, on the basis that collateralisation of a fund's assets with the right to dispose of them is carried out with prime brokers that are subject to supervision in an OECD jurisdiction. Measures require that the fund's custodian, and if applicable its administrator, are informed about the status of collateral provided to prime brokers and liabilities secured against it. Funds of hedge funds must invest at least 60 per cent of their assets in domestic hedge funds, in foreign funds that are themselves domiciled in an OECD jurisdiction or whose manager is subject to supervised in an OECD jurisdictions, or in investment companies, portfolio companies or structures such as managed accounts whose investment principles and rules are similar to those of Spanish hedge funds. The March 2007 amendments made clear that Spanish funds of hedge funds could not invest in other funds of funds.
The regulations also allow synthetic exposure to hedge funds through index products or derivatives with a hedge fund or similar structure as its underlying basis in calculating compliance with the 60 per cent threshold. The maximum level of investment in a single underlying fund or structure is 10 per cent. Funds of hedge funds are subject to similar disclosure and reporting rules as single-manager funds.
The most recent amendments to the regulations have clarified various areas of uncertainty in the original rules for hedge funds and funds of hedge funds, including the explicit authorisation of lock-up periods, extended notice periods for subscriptions and redemptions, redemption gates limiting the total amount of capital investors can withdraw at any one time, and the payment of redemptions over an extended period. In addition, Spanish-domiciled funds are now authorised to act as master funds in a multifund structure.
'All these items will need to be disclosed to investors in the prospectus, but they will provide funds with much more flexibility to help them carry out their investment policies,' says Juan Sosa Pons-Sorolla, a senior lawyer with Simmons & Simmons in Madrid. 'Overall, the new features will generally provide more flexibility and should allow a wider range of products to be launched in the next few months.' As it currently stands, the Spanish regime holds out little or no hope to foreign hedge und managers of obtaining direct access to the market. They are left with a choice between selling to Spanish funds of hedge funds, offering structured or index-linked hedge fund products, marketing listed closedended funds that benefit from an EU 'passport', or opting for a presence in Spain on a standalone basis - an avenue seemingly of little appeal do far - or through a joint venture with a local financial services provider. The absence of measures to allow market access to foreign funds appears to be part of a conscious strategy on the part of the Spanish authorities to focus on development of the domestic market, according to Juan Sosa. Simmons & Simmons in Madrid has advised a number of managers based in the US and the UK on the new regime, but to date no independent manager has taken the plunge of setting up a presence that would allow them to offer Spanish domestic products.
'It seems that for the time being, the regulations are aimed at developing the domestic market for hedge funds,' he says. 'Although theoretically possible, it is very difficult for any foreign schemes with no local presence on the part of the fund manager to obtain authorisation from the regulator to be marketed in Spain. This is down to both the regulations themselves and the position of the regulator.' Foreign funds are eligible for registration with the CNMV if they comply with the same requirements as Spanish domestic hedge funds in areas such as leverage limits, minimum subscription and disclosure requirements. However, Simmons & Simmons says, the regulator can still deny funds authorisation if it deems that the jurisdiction where the fund is incorporated or in which the manager is based does not offer investors a level of protection equivalent to that in Spain. Sosa notes that even if foreign funds did obtain authorisation, they would still be handicapped by the tax treatment this would entail for Spanish investors. 'Usually investors in Spanish funds and passported Ucits funds can defer taxation until redemption, but if they invest in funds domiciled in jurisdictions that Spain defines as tax havens, they would be taxed annually on income presumed to be a minimum of 15 per cent of the fund's net asset value, unless the investor can prove otherwise. That makes it uneconomic for investors at this stage.
'According to the law it should be possible for foreign hedge funds not domiciled in offshore territories, but for instance in OECD jurisdictions, to obtain authorisation to be marketed in Spain. However, at the moment the regulator is focusing its efforts on authorising local fund managers and local hedge fund products. At this stage they do not have the resources to deal with applications for authorisation from foreign managers. I think they will ask any such applicants to wait until they are at a more advanced stage with domestic schemes.' There is no indication that the tax discrimination against foreign hedge funds will be remedied any time soon, especially as the authorities chose not to make any changes in this area when implementing a comprehensive tax reform package that took effect at the beginning of this year. Previously the tax rate on capital gains on the redemption of fund shares or units was levied at the investor's marginal rate of up to 45 per cent if the holding period was less than one year, or at 15 per cent if the investment was held longer than a year. Now all capital gains on redemption on funds, regardless of the holding period, are taxed at a flat rate of 18 per cent, as part of a move to put taxation of all savings income from products as bank deposits, bond issues and fund units or shares on the same level. Says Sosa: 'However, this huge tax reform did not take the opportunity to modify the status of other unlisted or non-Ucits fund products, so it is clear that Spain is willing to keep using taxation as a barrier, at least for individual investors.'
Demand from institutional investors for alternative investment products has been constrained up to now by statutory limitations. However, this is set to change somewhat following moves to liberalise the regimes for eligible assets of insurers and pension schemes. A decree and ministerial order setting out new rules on eligible assets for the technical provisions of insurance companies were published in February and approval of similar changes for pension funds is due in the first half of this year. According to law firm Cuatrecasas, the categories of funds that Spanish insurance companies may now hold to cover their technical provisions include Spanish-domiciled hedge funds, since all Spanish funds regulated under the 2003 Collective Investment Institutions legislation are admissible whether or not they comply with the Ucits III Directive. Foreign Ucits funds are also eligible.
The new rules deem real estate funds to be eligible as long as they are authorised or supervised by a European Economic Area regulator. In addition to shares or units in Spanish venture capital and private equity investment vehicles, the regulations now allow Spanish insurers to invest in foreign venture capital or private equity funds as long as they are domiciled in an OECD jurisdiction, their shares are freely transmissible, and the vehicles are audited.
The new regulations for insurers also loosen the eligibility rules for structured products linked to non-eligible assets such as hedge funds, which are now permissible as long as they are admitted to trading in a regulated market and are tradable. Tradable products are defined by being electronically traded or included in a traded index representative of the market, by the ability to obtain prices for the security in any of the three sessions preceding the drafting of financial statements, or by prices being offered by a market-maker. Non-traded structured products are not covered by the changes and will continue to be assessed for eligibility on the basis of their underlying assets. According to Sosa, institutional investors are also set to benefit from a European move to adopt a common set of rules for institutional investment in funds of all types through private placements. He says: 'The CNMV, as a member of the Committee of European Securities Regulators, has expressed its willingness to adopt a single private placement definition for institutional
investors.
'This should hopefully make it possible to avoid having to register funds when they are being offered to a restricted circle of qualified investors. However, we will need to see the scope of such a new unified regime in terms of what types of scheme might be covered. Certainly it would cover Ucits funds, but it remains to be seen whether it would cover hedge funds. But in the mid-term it might be good news.'
-Hedgeweek.com-
Posted by su at 11:00 AM | Comments (0)
April 18, 2007
Hedge funds beat S&P 500
Hedge funds outperformed the S&P 500 in the first three months of this year with average returns of 2.1% at a time when the industry has seen record investment in the sector.
Emerging markets funds led the charge with 5.5% in average returns with China at the top of the list. Convertible arbitrage funds, which benefited from increased volatility in the sector, also fared well with 4.67% average returns, according to Morningstar.
Although financial sector funds were undermined by poor sub-prime performance, hedge funds in the distressed company category saw 4.1% in average returns. The research was based on performance of 6,000 hedge funds and hedge fund of funds in 15 categories in Morningstar’s database.
Among the losers in hedge fund performance were funds in the managed futures category which lost 2% in the first quarter. Poor performers also included equity net neutral funds with 1.5% in average returns and global macro funds, a category that includes currency traders, which suffered from financing higher yield assets with lower yield currencies.
The returns this year built on the growth of hedge fund performance in the same period last year, when The Credit Suisse/Tremont Hedge Fund Index rose 5.46% in the first three months of 2006. That was the index’s best year since 2004.
-Financial News-
Posted by su at 4:45 PM | Comments (0)
April 17, 2007
Octane Appoints Culross
Octane Management BVI Limited announced the appointment of Culross Global Management Limited as an Investment Advisor on a conservative risk fund of funds mandate. Culross will manage a separate account for Octane, to mirror the Culross Global Fund Limited, a global multi-strategy fund of hedge funds. The two principals at Culross, Nigel Blanshard and Christopher Keen, have been managing money for over 25 years. Culross Global Management is based London and was established in 1992.
“The appointment of Culross as an Investment Advisor marks another historic step for Octane Management (BVI), as this is our first European based Investment Advisor” noted Lara Price, Head of Research at Octane. “We look forward to working with Octane, they have a solid reputation for creating customized products for their clients” says Nigel Blanshard, Director of Culross Global Management Limited.
Octane Management (BVI) Limited tailors hedge fund of fund solutions for its Institutional Investor base by combining niche fund of funds. Octane has a number of sophisticated “building blocks” that represent investment mandates with highly experienced investment professionals. These boutique funds are well established, have proven track records, and typically have significant personal investment in the funds that they manage, therefore their interests are aligned with their clients. Unique solutions are designed by combining these diverse mandates thereby ensuring that each Octane client is managed independently.
Octane, an alternative investment solution provider has institutional clients around the globe and structures Alternative Investment Solutions that are tailored to meet their individual needs. With assets under management in excess of $1.3 billion, Octane is a significant global fund of funds solution provider.
-Albourne Village-
Posted by su at 4:38 PM | Comments (0)
Credit Suisse/Tremont Hedge Fund Index Is Up 1.24% in March
The Credit Suisse/Tremont Hedge Fund Index is up 1.24% in March and up 3.34% for the first quarter of 2007 according to Oliver Schupp, President of the Credit Suisse Index Co., Inc.
"Despite getting off to a rocky start, global equity markets managed to recoup losses in the beginning of March and ended the month on a positive note. Markets were affected by remarks made by U.S. Federal Reserve Chairman, Ben Bernanke, that inflation is "uncomfortably high" promoting speculation that the U.S. central bank won't reduce interest rates to prop up the slowing economy, a weakening consumer confidence, and a growing housing slump," said Mr. Schupp. "Overall, this market environment has led to the estimation that eight of the ten hedge fund sectors will end March on a positive note. Long/Short Equity managers, in particular, were up 1.87% in March as industry themes and ongoing M&A activity provided stock specific opportunities, while superior stock selection paid off."
Posted by su at 11:32 AM | Comments (0)
Morningstar Reports First-Quarter 2007 Hedge Fund Performance
a leading provider of independent investment research, today
reported a summary of hedge fund performance for the first quarter of 2007.
Based on data from hedge funds that reported returns to Morningstar as of
April 13, 2007, hedge funds performed respectably during the first quarter,
with average total returns of 2.10%. They outperformed the major indexes,
including the S&P 500 and the MSCI World Index. Most of the quarter's gains
came in January with a return of 1.15%, but hedge funds were able to
weather the late February and early March market storm, with average
returns of 0.52% and 0.54% in those months, respectively.
Among the quarter's best performers were convertible arbitrage funds,
with 4.67% average returns. This category, with its long-option return
characteristics, benefited from increased volatility during the quarter as
well as high levels of convertible bond issuance. Funds invested in
emerging markets convertible bonds showed better results.
Emerging markets funds returned an average of 5.50%. China funds topped
the list, despite the February stock market plunge. Developed-market equity
hedge funds also fared well, with commodity (primarily energy), Europe, and
Japan funds taking the lead. The equity net long and equity variable
categories garnered 2.28% and 3.57%, respectively. Financial-sector funds,
afflicted by the subprime lending woes, did not share these results.
However, the financial turmoil proved positive for hedge funds in the
distressed companies category; these firms provide liquidity when
companies, like the subprime lenders, fall on bad times. These funds
returned 4.15% in the first three months of the year, with February being
the most lucrative month. Widening spreads and heightened volatility also
drove returns of fixed- income arbitrage funds up 2.17% for the quarter.
Event-driven and merger-arbitrage funds prospered from a flurry of
corporate activity, picking up 4.21% and 2.88%, respectively. Merger and
acquisition activity was up 27% from the first quarter of last year,
according to Thomson Financial. Allocations to these sectors allowed multi
strategy funds and hedge funds of funds to outperform as well, 2.60% and
2.86%, respectively.
Not all hedge funds thrived in early 2007. Equity net neutral funds
squeezed out only 20 basis points above the Treasury bill, at 1.51%. Global
macro funds, a category that includes currency traders, lost 47 basis
points as the business of financing higher-yielding assets with
lower-yielding currencies took a turn for the worse. The biggest loser by
far, however, was the managed futures category. Choppy markets mean bad
times for these primarily trend-following funds, which lost 2% in the first
three months of the year.
Morningstar has more than 6,000 hedge funds and hedge funds-of-funds,
grouped into 15 categories, in its database.
This press release is not intended to be an offer or solicitation for
the sale of hedge funds. The information is not warranted to be accurate,
complete, or timely. Neither Morningstar nor its content providers is
responsible for any damages or losses arising from any use of this
information. Past performance is no guarantee of future results.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment
research in the United States and in major international markets. The
company offers an extensive line of Internet, software, and print-based
products and services for individuals, financial advisors, and
institutional clients. Morningstar provides data on more than 190,000
investment offerings, including stocks, mutual funds, and similar vehicles.
The company has operations in 15 countries and minority ownership positions
in companies based in three other countries.
-Morningstar-
Posted by su at 10:32 AM | Comments (0)
London doubles hedge fund assets in four years
London's share of global hedge fund assets increased from 10% to 21% between 2002 and 2006, making London one of the fastest growing hedge fund centres according to the 2007 edition of IFSL's Hedge Funds report. Assets managed by hedge fund managers based in London totalled around USD360bn in 2006, up 40% on the previous year, and a six-fold increase from 2002.
New York remained the leading global location for hedge fund managers in 2006 with 36% of global assets. Its share was down however, from 45% in 2002 as growth of the hedge fund industry in Europe and Asia outpaced growth in the US. This was largely a result of a rise in institutional portfolio allocation into hedge funds in these regions during this period.
London is by far the largest centre for European hedge fund managers with its 900 hedge funds accounting for four-fifths of European based hedge fund assets in 2006. If figures for fund of funds and US hedge funds with a trading desk in Europe are taken into account, London's share was more than 90%. Other locations for hedge fund managers in Europe include France, Spain, Sweden and Switzerland.
Factors underpinning London's strong position include its local expertise, the proximity of clients and markets, a strong asset management industry and a favourable regulatory environment. London is also a leading centre for hedge fund services notably prime brokerage services offered by the leading London based investment banks. More than 90% of European prime brokerage activity is conducted through London.
-Hedgeweek.com-
Posted by su at 10:30 AM | Comments (0)
April 3, 2007
Japanese say hai to hedge funds
In a country where the majority of household financial assets are squirrelled away in safe bank or post office accounts earning tiny rates of interest, a retail hedge fund market might seem an outlandish proposition, writes David Turner in a special FTfm report.
But in fact a nascent market in alternative investments has emerged over the past few years, though its exact size is hard to pin down.
Industry estimates suggest the mass retail market is Y300bn ($2.5bn) but this excludes the large sums of money that high-net-worth people invest. The public placement market - which includes mass retail, much of the high-net-worth money, and some institutional money, but excludes private placements made for super high-net-worth individuals and large institutional investors - is estimated to be worth about Y1,100bn.
Household investors in hedge funds tend to be affluent but not necessarily super rich, say securities companies. An official at Nomura said typical customers are senior company executives, doctors and lawyers. Most come from the big cities. And these clients are all “relatively young” at 50 or 60, according to Nomura, whereas the average age for mutual fund investors is 60-70.
Some have even embraced the concept, slow to grow so far among Japanese household investors, of investment by portfolio - building a web of poorly correlated assets to achieve a higher return for the same risk.
But Japanese retail hedge fund investors remain conservative compared with some of their US cousins, for example. Almost all the Mitsubishi UFJ products are principal-protected. A Nomura official says the group’s most popular retail product is a multi-strategy fund of hedge funds, “which controls downside risk very carefully because real high net worth individuals tend to avoid downside risk”.
Nomura’s hedge funds are, in general, designed for high-end customers. The normal minimum subscription amount is between Y10m and Y30m, depending on the fund. “This is not a product for mass retail investors”, says a Nomura official.
Mitsubishi UFJ Securities takes a more populist tack, which has helped it to take the top spot in market share. The average investment in Mitsubishi UFJ Securities’ hedge fund products is only Y7m, with a typical minimum amount of Y3m. Its Y480bn total is almost 17 per cent of its total assets under management.
Among the big hedge fund providers, interest is showing no sign of waning. Nomura placed Y90bn with investors last year, and Mitsubishi UFJ Securities has an aspiration that hedge funds will reach 20 per cent of its total assets.
So far, so good, for Japan’s retail hedge fund market - but how long will interest last? It is not yet clear whether Japanese investors are treating hedge funds as an attractive fad at a time when domestic investments do not appeal, or a hardy perennial within their portfolios.
A Nomura official says: “Japanese investors’ interest depends on the performance of Japanese equities. If the performance is very very good, they will be less interested. They will think hedge funds are boring.” [So given the consistently underwhelming performance of Japanese equities, hedge funds ought to be very interesting through the foreseeable future]
But Daiwa, which is not a big operator in the market even though it is Japan’s second biggest securities house, is sceptical about retail investors’ interest in hedge funds. Toru Yaguchi, consultant in the fund research department of Daiwa Fund Consulting, says private investors prefer “high dividends, and high-frequency dividends”.
His theory is supported by the runaway success of Nomura’s My Story fund, a mélange of bond and equity investments paying out dividends six times a year, including large bonus dividends in January and July. Since the fund opened in May 2005 it has built up a huge net asset value of almost Y1,500bn.
But even Mr Yaguchi admits hedge funds could gain a powerful boost among retail investors if companies can come up with “a novel concept” - akin to the global macro fund launched by Goldman Sachs in Japan in 2004, which kick-started that market for retail investors.
Hedge fund providers will surely take up the challenge.
Posted by su at 3:43 PM | Comments (0)
Hedge fund trend watch - long emerging markets, short US equities
Hedge funds look likely to outperform the market for the first quarter of 2007, according to the latest edition of Merrill Lynch’s Hedge Fund Monitor.
Other points of note:
Equity futures - Large speculators remain significantly net short US equities, despite the rally from recent lows. HFs are still shorting the S&P 500; remain near a crowded short position in the NASDAQ 100; and maintain a record crowded short in the Russell 2000.
Metals - HFs remain in a crowded short in copper. They modestly added to gold and platinum longs and were flat silver. Readings are neutral pointing to further gains.
Energy - HFs fully covered their short positions in heating oil futures. They were a steady buyer of crude oil, and mildly added to shorts in natural gas. We expect continued volatility in the energy complex, Merrill added.
Forex - HFs remain in a crowed short in the US$, and a crowded long in the Euro. They were flat the Yen and (some) positions are still short. Expect volatility to remain in the currency markets, particularly as it relates to the dollar/yen carry-trade.
Emerging Markets - Macro hedge funds continued to increase their exposure to the emerging and Europe/Australasia/Far East markets after a sharp reduction at the end of the last month. Emerging market exposure now above levels prior to the recent equity pullback globally. Volatility positions are still net short.
-FT.com-
Posted by su at 3:39 PM | Comments (0)
85 per cent of mortgage-backed industry professionals expect sub-prime weakness to spread
In an online survey of attendees of the upcoming Spring ABS Show, which will be held in Miami Beach from April 29 - May 2, 85% of respondents expected that sub-prime will have at least 'partial impact' on the performance of higher rated mortgages.
Also, more than 75% of respondents believed that home prices will fall for the remainder of 2007, and that home prices are by far the most important factor in determining loan performance. In recent years, investor appetite for mortgage-backed securities has been a large factor in ensuring credit availability to home buyers.
Other important sentiments revealed by the survey include:
More than 50% of respondents expect that the ABX Index, the benchmark for sub-prime performance will trend lower in April, while less than 25% believe it will head upward.
More than three quarters of ABS investors do not see the current sell off in sub prime securities as a 'buying opportunity.'
40% of respondents viewed changes in home prices as the single greatest determinant of loan performance, more than twice the number who pointed to either employment or GDP growth.
Respondents were evenly split as to whether new national regulatory proposals will have a positive of negative impact on the health of the home mortgage market.
'Although survey participants named home prices as the most important driver of sub-prime mortgage performance, we expect that interest rates or the labour market could be just as significant, and on that front, there is much uncertainty' said Mark Adelson, head of structured finance research at Nomura Securities and a presenter at Spring ABS.
-HedgeWeek.com-
Posted by su at 2:51 PM | Comments (0)