In the week ending 20 March, 2015, hedge funds showed strong performance of 2.52% so far in 2015, Preqin said; hedge funds are outpacing stocks in 2015, various data trackers said; Brevan Howard’s largest hedge fund was up 3.6% this year after posting its first loss in 2014; Value Partners saw its net profit double last year on strong returns; APS Asset Management (APS) saw its China Alpha Fund return 4.71% in February (+7.27% YTD); and Blueshift Capital Group saw its main fund drop more than 8% last month.
One Oak Capital launched the Alpha Opportunities Fund that targets institutional investors, high net worth individuals and family offices; Gottex is preparing to launch its first low cost "risk premia" investment product; Polen Capital has launched a new global growth equity strategy fund to be managed by Julian Pick; Sandell Asset launched a new hedge fund-backed reinsurer in Bermuda; Asia Frontier Capital has announced the launch of the AFC Iraq Fund; multi-strategy asset manager CQS launched a new long-only Global Convertible Bond Fund; and Neuberger Berman has extended its liquid alternatives UCITS platform with the launch of the Neuberger Berman Global Long Short Equity Fund.
The Barclay Hedge Fund Index was up 2.2% in February (+2.14% YTD);
The Scotiabank Canadian Hedge Fund Index gained 2.04% (4.15% YTD) on asset weighted basis;
The Barclay CTA Index slipped 0.07% (+3.02% YTD);
And the Lyxor Hedge Fund Index was down 0.3% in March (est) but still outpaced the S&P 500.
Hedge funds assets grew by over $30bn
Hedge funds assets grew by over $30bn in the first two months of this year; eVestment reported that hedge fund assets rose 2.02% or $13bn in February; hedge fund managers are making enough money to take advantage of the euro’s decline; the SS&C GlobeOp Forward Redemption Indicator for March 2015 measured 3.91%, up from 3.64% in February; and big hedge funds are raking in cash as they defy industry woes.
Among investments, multi-strategy hedge funds using borrowing facilities have been helping to drive the growth in large cat bond transactions; a Morgan Stanley survey found that high-net-worth investors in New York have clear preference for alternative energy; some of the largest hedge funds are actually scared to further invest in Apple; Fiera Capital is expected to reap a 60% returns after buying Canadian debt; Co-operative Bank has approached some of the world's biggest distressed hedge funds over the sale of its £6.6bn Optimum portfolio; hedge funds are tapping into sell-offs in European banks; Stonehill Capital bought a large chunk of Phones 4U’s £430m in senior bonds; a popular legal strategy that allows hedge funds to make lucrative bets on takeover deals, and get a return even if they lose, may be about to become much less attractive; Valiant Capital and Falcon Edge Capital are in advanced talks to raise $100m to invest in Meru Cabs; hedge funds and others speculating on litigation are making more and larger bets on the lawsuit-finance market; and CapeView Capital has taken a stake in Russian gold miner Petropavlovsk.
Hedge funds boosted their short positions as oil rig count falls again; and the rise of the independent short selling research analyst has created a similar dilemma for regulators and investors.
In other miscellaneous hedge fund news, activist hedge fund firm Elliott Advisors is seeking at least three board seats in Alliance Trust; and SkyBridge Capital has started to advertise itself in West Palm Beach.
A survey by BofA Merrill Lynch has found that hedge fund investors are migrating out of U.S. equities amid expectations of Fed rate hike; the fifth annual Commonfund Investor Outlook Survey said that institutional investors remain positive in their market outlook but are keeping a cautious stance; a study by McKinsey showed that investors have doubled their alternative investments because of disillusionment in traditional asset classes; a survey by Northern Trust showed that hedge fund managers believe investors are satisfied with the level of transparency, but investors say otherwise; and a white paper from Bayshore Capital Advisors showed that private credit is becoming an increasingly attractive asset class.
Among outlooks, Man Group’s Emmanuel “Manny” Roman predicted that computers are the future of asset management; Goldman predicted that its asset management unit will grow by more than 10%; Whitebox Advisors CEO Andy Redleaf said that “it is truly a scary time”; and William Davies said he expects equity volatility to continue this year.
On the M&A scene, Blackstone Group has bought a stake in Christopher Pucillo’s Solus Alternative Asset Management; for banks and reinsurers, hedge fund managers are not the hot acquisition target they were before 2008; however Neuberger Berman’s unit Dyal Capital Partners bought a 20% stake in activist hedge fund firm Jana Partners.
Institutional investor Oregon Investment Council has tabled its decision to increase allocation into liquid alternatives; the New York City Pension Fund has committed to investing $250m to smaller firms and those owned by women and minorities; the board of New York City’s pension voted against a proposal to invest in a high-yield hedge fund; British pension funds are seeking riskier and illiquid portfolios to meet target revenues; UK rail pension fund manager Chris Hitchen said that hedge funds are too expensive; and a research by Aquila Capital has found that European institutional investors’ exposure to renewable energy has almost doubled.
In Europe, Danish central bank Deputy Governor Per Callesen said that the short collective memory of hedge funds means he expects them to rekindle speculation against its euro peg.
In Asia, a new batch of foreign fund managers have been given quotas under Shanghai’s qualified domestic limited partner (QDLP) scheme; and Asia-focused hedge funds granted Morgan Stanley more than 90 prime-broking mandates in 2014.
On the regulatory front, regulators said that big and leveraged hedge funds could be ‘systemically important’; a new report from Greenwich Associates has urged financial institutions and regulators to use automated approach in managing model risks in fund industry; SEC Chairman Mary Jo White warned that hedge funds and others who push for new board members and other changes at companies need to watch what they say; the Financial Stability Board is expected to release new definition of systemically important financial institutions (Sifi) that will net more asset managers; ESMA reminded its member states that they are not doing enough for Markets in Financial Instruments Directive, or MiFiD; and Australia’s new tax rule is seen to boost the growth of the local fund management industry.
South African hedge funds are now regulated as collective investment schemes under a new rule.
India’s Financial Services Board has set tighter regulation for hedge funds.
On the legal scene; Judge Thomas P Griesa rejected an appeal by Citigroup to lift an injunction that prevents the bank from paying investors holding Argentine bonds; Citigroup said it would shut its custody business in Argentina; but Argentina said it would not allow Citigroup to quit its custody business; William Ackman will face trial on Herbalife’s alleged stock-manipulation charges; Herbalife won dismissal of a lawsuit by a shareholder who said he lost money Ackman accused the nutrition company of being a pyramid scheme; Mark Malik was charged with stealing from his investors; Joseph Stilwell has agreed to pay $589,000 to settle with the SEC that he failed to properly disclose loans made among the funds he controlled; Ferdinand Piech and Wolfgang Porsche are among 21 people who will be asked to testify by a German court in a lawsuit suit filed by two American hedge funds; Salus Capital launched a broadside against the hedge fund lenders financing the bankrupt RadioShack’s sale strategy; Julian Rifat was sentenced to 19 months in jail by a London court in UK's largest insider dealing probe; and Kang Gao pleaded guilty to trade secret theft.
Komfie Manalo, Opalesque Asia.
And the week’s most forwarded article was: Private credit comes into focus for investors
This is one of the few emails I get and read at home. Given that most emails I get, I don't even read (at home, or the office) this is a high hurdle you have achieved. Kudos. Keep up the good work."
John Brynjolfsson, Co-Founder and CIO, Armored Wolf LLC
Opalesque changed the world by bringing transparency where there was opacity and by delivering an accurate professional reporting service.
Nigel Blanchard, Culross
“I am an Opalesque user and find the insights offered therein invaluable in assessing the landscape of our industry and determining our own business strategy and plan of attack.”
Daniel Loeb, Third Point
"I am an Opalesque subscriber, and I find it uniquely focussed and thorough in meeting our need to keep abreast quickly of important developments in the hedge fund industry."
Izzy Englander, Millennium Partners
“I find Opalesque’s daily summaries of all the hedge fund related news exceptionally helpful.”
Cliff Asness, AQR
“Opalesque is a very useful addition to my research”
CEO of CQS, London