Opalesque Industry Update - Hedgebay’s secondary market index shows further fluctuations|
Prices on the hedge fund secondary market remain volatile, according to the latest data from Hedgebay. A lack of price stability has been the recurring theme of 2010, evidenced once again when the average trade price dropped to 74% in November after registering the highest average in six months during October.
October’s high of 81% was the third time in a row the index had risen, suggesting that consistency might slowly be returning to the market after a turbulent year. However, the drop shown in November has cast doubts over that theory, with the volatility now expected to extend into 2011.
The Hedgebay Index has been inhibited by a distinct absence of funds trading near par over the last year, suggesting a continued lack of confidence in the market. A relative lack of pricing transparency has also created uncertainty in the market, although Hedgebay believe that their newly launched Pricing and Valuation Consultancy Service will help to bring greater insight to this area.
Elias Tueta, co-founder of Hedgebay, commented:
Tueta has also pointed to the recent governmental interventions at several large hedge funds as a reason for November’s drop. The interventions have made investors anxious that their managers, or managers on offer on the secondary market, could face the same treatment.
Meanwhile, Hedgebay’s Illiquid Asset Index which measures trading in gated or suspended funds rose quite significantly to 44.09%. Notably, the majority of transactions in November took place in this part of the market. Hedgebay believes that the surge of trading in these illiquid assets shows a renewed determination among investors to clean their portfolios. Two years on from the credit crisis, the ongoing cost of servicing illiquid assets has proved to be a drain on investor capital, making the disposal of such assets a necessity: