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Hedgebay launches service to value hedge fund 'side pockets'

Tuesday, December 21, 2010
Opalesque Industry Update - Hedgebay, the leading hedge fund secondary market provider, has launched a tailored pricing and valuation service to assist hedge fund investors in determining the present value of the assets in their portfolios.

The historical nature of the hedge fund market means that there is limited transparency.. As a result many secondary market users are forced to trade assets without all of the information necessary to make an informed decision. The consultancy service will give investors holding illiquid assets a confidential means of price discovery across their portfolio. With greater insight into their assets investors will be able to approach the market with the most effective trading strategy, and the ability to maximise the value of their securities should they wish to sell.

The Hedgebay Pricing & Valuation Consultancy Service, the first of its kind, will provide clients with valuations for their portfolios and will advise on how best to manage the component assets. The service will specialise in pricing hard-to-value assets such as those that are locked up or side-pocketed, have long redemption periods or suspended rights or those in funds that are undergoing restructuring.

The in-depth service is tailored to the needs of each investor, based on their goals for the process. Using the unparalleled secondary market data at their disposal, Hedgebay will then provide a detailed assessment of the investor’s portfolio, providing values for each asset based on a range of criteria.

Hedgebay already has a number a clients using the proprietary service, including banks, funds of funds, auditors and liquidators. In many of these cases, the service is utilized on a monthly and quarterly basis.

Elias Tueta, co-founder of Hedgebay, commented:

“This service is not only of great benefit to the individual using it, but to the secondary market as a whole. A wide-scale valuation and pricing system will bring greater transparency and efficiency to an area where there is currently only a limited amount. It will give individuals a much clearer picture of the value of the assets in their portfolio and allow them to make better informed decisions about how best to deal with them. In turn, more informed investors will be more willing to trade and will, as a result, create a deeper and more liquid market.”

Inexact valuation and a lack of transparency have caused severe problems in the hedge fund market in the last three years. With many investors lacking insight into the real value within their portfolio, trading on the secondary market has been characterised by volatile prices and trading patterns. In the absence of better information, many investors are choosing to hold onto the illiquid assets within their portfolio.

“The lack of a mechanism for valuation means that buyers and sellers on the secondary market have been basing pricing on “one-off” variable factors like liquidity demands and portfolio structure – which are determined by the needs of the individuals trading, rather than any basic statistics of valuation. This is causing volatile prices and uncertainty among investors.”

The service is the latest in Hedgebay’s suite of products designed to help investors determine asset valuation. A decade of sourcing and executing billions of dollars worth of secondary market transactions has given Hedgebay the most comprehensive insight to date into price discovery and the fair value of illiquid alternative investment assets.

(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).

Its primary service has sourced, executed and settled billions of dollars of secondary market transactions giving the company the most comprehensive insight to date into price discovery and the fair value of illiquid alternative investment assets.

Founded in 1999, the Nassau-based Hedgebay Trading Corporation through its authorised agents helps match sophisticated buyers and sellers of hedge fund interests and other illiquid alternative investment assets. Its international client base includes funds of hedge funds, ultra high net worth family offices, banks, pension funds, insurance companies, endowments, foundations and sovereign wealth funds.

Participants in the secondary market generally look to capitalise on two major themes: liquidity and access to highly sought-after fund managers. Hedgebay’s services can allow sellers to capture the opportunity cost of redeeming and exit positions before the end of the lock-up period, giving them the ability to reduce or eliminate tail-risk events. Buyers can benefit from being able to add to existing positions at discount, profit from high water marks, acquire “seasoned” shares (reduced or even no lock-up) and increase exposure to top tier managers.

- FG

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