Thu, Apr 27, 2017
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. Alternative asset firm YieldStreet surpasses $100m of loans funded in less than 8 quarters[more]

    Komfie Manalo, Opalesque Asia: Alternative asset investment platform YieldStreet reported that it has surpassed $100m in loans funded in less than eight quarters from accredited investors and single family offices. YieldStreet was founded by Milind Mehere and Michael Weisz. In a

  2. Investing - Investor appetite for high-growth IPOs to be tested, Apollo boosts fund's stock allowance for 'diamonds in the rough', Hedge funds uncertain over outlook for Hargreaves Lansdown[more]

    Investor appetite for high-growth IPOs to be tested From FT.com: The US listings market is poised for a busy week with deals that will test investors' appetite for high-growth - but lossmaking - companies. Eight new listings are scheduled for this week, the most since October of 2016,

  3. Hedge funds holding Puerto Rico bonds are looking at a long battle[more]

    Komfie Manalo, Opalesque Asia: Hedge funds which bought Puerto Rico's distressed debt bonds are facing the prospect of a long road ahead to recover their investments as the Caribbean island is attempting to use a U.S. Congress-approved rule that allows it to exploit a bankruptcy-like proceedings

  4. Other Voices: "Winner-take-all" dynamics and hedge fund investing[more]

    A growing stream of thinking in microeconomics is the concept of "winner-take-all" dynamics. The idea seems simple. A combination of networking economics and classic economies of scale creates situations where there are just a few dominant firms or economic agents who are able to capture significant

  5. Investing - How Chipotle's comeback attracted big data robots and value investors alike[more]

    From Forbes.com: When William Ackman's ailing hedge fund Pershing Square Capital Management bet $1 billion on shares in Chipotle Mexican Grill beginning in July 2016, the stakes couldn't have been higher. Pershing Square was reeling from what would eventually be a near $4 billion loss in drugmaker V