Sat, Oct 10, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

S&P Fund Services FOHFs sector update: Emerging markets provide leading strategy but many FOHF still dealing with liquidity issues

Thursday, November 19, 2009
Opalesque Industry Updates - Gross exposures remain well below historical levels among funds of hedge funds, says Standard & Poor’s Fund Services in its latest update on the sector, available at

“Many funds of hedge funds (FOHFs) are still dealing with liquidity issues beyond the recovery in equity and credit markets,” said S&P Fund Services lead analyst Randal Goldsmith. “Underlying net market exposures within FOHFs are also below historical levels, but have increased during the third quarter. In general, net exposures have moved up only gradually because hedge fund managers held in FOHFs portfolios have not been convinced on the sustainability of the rally in markets and have preferred to concentrate on alpha generating opportunities.”

Goldsmith says this was particularly the case in Europe, where returns have generally been disappointing despite competitive returns in the underlying equity markets. Some FOHFs managers have also deliberately resisted increases in aggregate net exposure.

“GAM's David Smith maintains an agnostic view on markets and has focused GAM Diversity's portfolio on managers able to generate alpha regardless of market conditions," said Goldsmith.

Goldsmith also pointed to Charles Hovenden, CIO of Absolute Fund Managers, who deliberately reduced exposure to Crispin Odey’s hedge fund this year because the manager took net market exposure up to a higher level than he was comfortable with. “Hovenden tends to avoid equity hedge fund managers who run their portfolios with net exposures over 30%,” said Goldsmith. “On the other hand he has continued to hold a small exposure to short-biased managers despite disappointment with their slowness to cut losses on cyclical shorts.”

FOHFs returned 4% over the third quarter, and 8% over 2009 so far, with funds that focus on emerging markets leading the recovery. Among S&P Fund Services-rated FOHFs, GAM Multi-Emerging Markets has returned 20.5%, Permal Asian Holdings has returned 24.8% and Permal Emerging Markets Holdings has returned 26.1%.

One positive surprise has been Permal Japan Holdings, which has returned 16.0% over 2009 to the end of September. “Japan has been a laggard in the equity markets recovery, but Permal's team was relatively quick to go fully invested on this fund,” said Goldsmith. “Its selection of long-only managers – about 26% of the portfolio – has collectively achieved more than double the market average return. Going forward, Permal sees some of the best opportunities for alpha generation in Japan where its hedge fund managers are able to find many stocks on extremely low valuations.” Corporate website: Source

- 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. U.S. hedge funds prepare for worst finish this year since 2008[more]

    Komfie Manalo, Opalesque Asia: U.S.-focused hedge funds are preparing for their worst year since the 2008 global financial crisis, following a series of letdown including the market sell-off in August and the sell-off in healthcare and biotechnology sectors last month, reported

  2. Investing - AQR Capital and Renaissance Technologies raise stakes in Southwest Airlines[more]

    From In the previous part of this series, we saw how institutional investors played Southwest Airlines (LUV) in 2Q15. Now let’s move on to the trades executed by key hedge funds in Southwest Airlines over the same period. … Most of the hedge funds that had significant exposu

  3. Manager Profile - Pimco alternative funds flourish as 30-year bond rally fades[more]

    From Inside Pacific Investment Management Co., the bond behemoth that lost two chief investment officers last year and saw almost $500 billion of client money leave, a hidden profit engine is easing some of the pain. For more than a decade, Newport Beach, California-based Pimco has qu

  4. Niche Investing - Art investment funds: Attracting institutional and other new investors[more]

    From The Deloitte/ArtTactic Art and Finance Report 2014 (the "Art and Finance Report") noted that the "global art investment fund market was estimated to be worth at least $1.26 billion in the first half of 2014." This seems almost inconsequential when juxtaposed with the $54 billion of

  5. DoubleLine’s Jeffrey Gundlach warns of another round of market shakedown[more]

    Komfie Manalo, Opalesque Asia: DoubleLine Capital co-founder Jeffrey Gundlach is painting a bleak future as he warned that the U.S. equity market and other risk markets, such as high-yield "junk" bonds, are facing another round of selling pressure. Gundlach said in an interview with