Thu, Nov 23, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Institutional investors to drive secondary hedge fund market

Tuesday, November 01, 2011
Opalesque Industry Update - Sovereign wealth funds, pension funds and family offices are allocating increasingly large tranches of capital to illiquid hedge funds in the search for high-yielding long-term investment solutions, says Florian de Sigy, CEO and founder of specialist brokerage and advisory firm Gamma Finance.

"Whilst there's a lot of attention being paid to liquid hedge fund strategies, we are also seeing allocations to dedicated portfolios of illiquid hedge funds," says de Sigy. "Over the past 12 months, we have been working with a number of large-scale, long-term investors who have been allocating tranches of $250 million to $500 million to illiquid hedge fund portfolios. Many are now returning for a second tranche at similar levels."

According to de Sigy, this trend has been facilitated by a shift in attitudes to illiquid hedge funds. "In the past, particularly in the immediate post-crisis period, there was a bit of a stigma attached to either owning or running illiquids, but with the realisation that most investors and hedge fund managers have illiquids on their books, this has changed and many investors are looking at this sector as an opportunity."

The current market conditions and regulatory environment are also impacting on the secondary market. "One of the key things we do is help buyers and sellers understand better the real value of an illiquid fund," says Ben Keefe, director of Gamma Finance’s investment advisory business. "Hence, if a bid comes in at a substantial discount, because we have the ability to do a detailed analysis of the fund's holdings, we can give an assessment of whether or not the bid represents good value against what can actually be realised from the underlying assets."

Keefe adds "equally, we are working with investors to identify good long-term buying opportunities. The brokerage business can then help the buyer find a seller."

"Illiquids look attractive for investors who want high yield, and given the low yields available from traditional assets at present, illiquid hedge funds look particularly attractive to investors with a sufficiently long-term investment horizon”, says de Sigy. “They are also a good match for pension funds against long-term liabilities,“

Regulatory changes such as Basel 3 and Solvency 2 are also changing the landscape for the secondary market. “These regulations make it much more expensive for insurance companies and banks to hold illiquid investments on their books because of the increased need for capital adequacy. In many ways this is counter-intuitive as it is often the banks and insurers who need the long-term yield profile that illiquids can offer,” comments de Sigy.

“Its probably too early to be absolutely certain, but based on current trends we can see illiquid hedge funds emerging as an asset class in their own right,” adds de Sigy. “The market is still at a very nascent stage – often the time when the best rewards are to be gained – and traditional measures of activity do not necessarily give a clear view of what is happening underneath – often giving conflicting indicators month on month. Nevertheless, the trend to institutional investors building specialist portfolios of illiquid hedge funds is fairly clear. Current levels of dedicated investment are around the $3 billion mark, and that could easily double in the next year.”

- FG

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. Tourbillon Capital, a $3.4bn hedge fund that's been sounding the alarm about 'frothy speculation,' is suffering big losses[more]

    From Businessinsider.com: Tourbillon Capital, a $3.4 billion hedge fund firm led by Jason Karp, is suffering. The firm's flagship Global Master fund is down 3.5% for the first 17 days of November, bringing performance for the year to November 17 to a loss of 10.6%, according to a note to investors s

  2. Fund Profile - The Tiger of Silicon Valley: Glen Kacher's sizzling hedge fund[more]

    From Forbes.com: When you live and work in a town where the median home costs $2.7 million and hobnob with the executives of billionaire factories like Facebook and Tesla, it's easy to see why you might think technology stocks are invincible. So far in 2017, the Nasdaq Composite index has gained 25%

  3. Launches - Asset manager launches Europe's first bitcoin mutual fund, Prime Capital Aviation Debt Fund enables aviation debt investments for institutional investors[more]

    Asset manager launches Europe's first bitcoin mutual fund From Coindesk.com: A French asset manager has announced the launch of Europe's first mutual fund centered around bitcoin. Announced today, Tobam's alternative investment fund perhaps represents the latest bid to attract institutio

  4. Legal - Consumers say hedge fund financed illegal tribal lending, New York's highest court permits shareholder of a Cayman-incorporated company to bypass Cayman law and bring derivative action in New York[more]

    Consumers say hedge fund financed illegal tribal lending From Law360.com: Vermont residents on Tuesday hit a hedge fund with a proposed class action in federal court alleging it helped concoct a sham tribal payday lending scheme meant to skirt laws preventing companies from charging cons

  5. Investing - Tech still hedge funds' sweetheart sector: Goldman Sachs, Hedge funds haven't been this leveraged to buy stocks since the bull market began, Top financials hedge fund details short bet against Morningstar, Fund CRC presents an offer for Carige's consumer credit unit, Hedge funds sell shares in Altice USA after difficult quarter[more]

    Tech still hedge funds' sweetheart sector: Goldman Sachs From Reuters.com: Tech stocks remain the largest net sector exposure for equity hedge funds, which are set to deliver their strongest returns since 2013, Goldman Sachs said on Wednesday in a note on the industry's most and l