Sun, Feb 7, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedgebay Trading: secondary market hits six month high, but correct valuation of assets remains a problem

Monday, November 15, 2010
Opalesque Industry Update - Valuation problems will continue to haunt market despite improvement, warns Hedgebay

The highest average trade price in six months may signal the return of stability to the secondary hedge fund market, according to the October edition of the Hedgebay index.

October’s average of 81% is the second consecutive monthly rise shown by the index, after averages of 74% and 78% in August and September respectively. Though still some way off the YTD peak of 91%, October’s figures show that the hedge fund market is moving steadily in the right direction. The last six months have been characterised by volatile trading patterns, and Hedgebay believes that some consistency in trading will be welcomed by hedge fund investors:

Elias Tueta, co-founder of Hedgebay, commented:

“The patterns we see in secondary market trading are so often based on investor sentiment. It is extremely difficult for investors to be secure about committing to trades when price valuation is so volatile, as it has been over the last six months. The steady rises over the last couple of months may bring a bit of added confidence to investors for the rest of the year.”

However, Tueta warned that price volatility will continue to occur as along as correct valuation of assets remains a problem for secondary market users. Many investors have admitted that they have no mechanism for discovering a fair trading price as they have no insight into underlying value. This has seen many investors choosing to hold their assets rather than trading, which has limited the extent of the recovery the market has been able to make. Hedgebay believes that for the market to reach a stage of full recovery, managers will need to provide greater transparency into the value of the underlying assets:

“At this stage, trading is being determined to too great a degree by forces external to the actual price of assets. Liquidity demands, portfolio construction and other legacy issues have all played a role in the price that trades are being made at. These factors are all dependent on the individuals trading, rather than the basic statistics of valuation, and this is why we have seen such drastic price changes of late. Investors are still too limited by a lack of firm valuation to predict whether recent price rises could be a lasting condition. Until a means of fair valuation has been established in the market, uncertainty will remain.”

Trading on the SMI continued its recent pace, with brisk volume recorded throughout the month. With trading once again taking place across the full range of asset classes, the indications are that investors are managing their portfolio positions as the end of the year approaches. In contrast to the SMI, Hedgebay’s Illiquid Asset Index, which measures trading in gated or suspended funds, recorded a considerable drop to 34.50%. After the notable stability of recent months’ trading, this month’s price difference suggests that the presence of leverage has had a negative effect on trading this month and that the market is not as stable as originally thought.

(press release)


About Hedgebay Trading Corporation
As the first and largest secondary hedge fund market provider, Hedgebay - founded in 1999 - can rely on historical illiquidity data dating back several years. The IAI and SMI primarily target investors in hedge funds, such as fund of hedge funds, pension funds, endowments, foundations, insurance companies, family offices, wealth managers and HNWIs. However, Tueta believes that the index also provides pertinent information for the wider global investment and financial services industry, including leverage providers, regulators, investment banks and prime brokers.

For nearly a decade Hedgebay Trading Corporation has provided hedge funds with a market to trade positions by matching buyers with sellers. Since its launch, Hedgebay has provided secondary market data to registered users of its website www.hedgebay.com


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. How Einhorn survived a nightmare year[more]

    From Bloomberg.com: Even when a hedge fund has an awful year, which was the case for David Einhorn's Greenlight Capital, there are lessons to be learned. Many funds would have had a tough time surviving a year like Einhorn experienced in 2015, when all the stars seemed to align against him and Green

  2. Legal - Hedge fund founder wins early release in U.S. insider trading case, Gramercy seeking $1.3 billion from Peru over land-bond dispute[more]

    Hedge fund founder wins early release in U.S. insider trading case From Reuters/Streetinsider.com: Former hedge fund manager Doug Whitman on Tuesday won a reprieve from serving the remainder of his two-year sentence for insider trading after several judges expressed skepticism that his 2

  3. Investing - David Einhorn finds a winner in Michael Kors[more]

    From Thestreetinsider.com: Greenlight Capital hedge fund manger David Einhorn took his lumps in 2015. The fund lost over 20 percent on the year amid bets gone bad being long a plunging SunEdison and short a couple high-flying FANG stocks. However, today Einhorn is again showing his stock picking pro

  4. Investing - Avenue Capital's Marc Lasry: We like European bank loans, Comment: A bunch of hedge fund managers are chasing the 'dream of crushing a major structural problem'[more]

    Avenue Capital's Marc Lasry: We like European bank loans From CNBC.com: European banks are under immense pressure, but at least one prominent hedge fund has found what it thinks is a good opportunity in the wreckage. Marc Lasry, co-founder and chief executive of hedge fund Avenue Capital

  5. Computer-driven hedge funds make money during January’s selloff[more]

    Komfie Manalo, Opalesque Asia: Commodity trading advisers (CTAs) that use computer programs to guide how they trade, made millions of dollars during last month’s market selloff on the back of declining oil prices and global equities and big moves in currencies. Data provider