Mon, Feb 8, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Fitch: Hedge funds performed well in Q4 2009 amid business model changes

Friday, February 05, 2010
Opalesque Industry Update - Fitch Ratings says that the hedge fund industry performed well in Q4 2009 (the broad HFRI composite index was up +2.7% in the quarter and +20.0% over 2009), and experienced a return of net new money inflows. Overall, 2009 saw the best hedge fund performance for a decade, according to Fitch's "Fund of Hedge Funds Quarterly - Q1 2010" newsletter, published today.

The hedge fund industry is experiencing fundamental changes to its business model and in its relationship with investors. "The development in 2009 of UCITS-compliant hedge funds, designed as a vehicle to provide both institutional and retail investors with a transparent and liquid access to alternative investments, has been interesting in that regard," says Aymeric Poizot, Head of Fitch's EMEA Fund and Asset Manager Rating group. The newsletter examines UCITS hedge funds in more detail and looks at the pros and cons behind these new fund structures.

Fitch observes that 2009 was dominated by "top-down" macroeconomic positioning, whereas "bottom up", individual asset selection and pure relative value trades remained on the sidelines awaiting a clearer macroeconomic picture and more fundamentally driven market conditions.
In this context, the most successful individual strategies were convertible bond arbitrage (which profited on both the equity and credit sides), emerging market equities and distressed credit, with the latter taking advantage of steadily declining corporate credit spreads.

"However, in general hedge fund managers agree that 2010 is likely to prove more challenging," says Olivier Fines, Associate Director in Fitch's EMEA Fund and Asset Manager Rating group. "Most of the evident benefits from the massive stimulus packages - liquidity and sustained demand - have probably been realised already, sovereign risk is rising, the pulse of the economy and the profitability in certain sectors are still weak and several market segments are still subject to potential default risk. For these reasons, a return to fundamental analysis may well be on the cards for 2010."

Fitch notes funds of hedge funds (FoHFs) suffered more than single-manager hedge funds from clients leaving alternative investments in 2008, and this continued into 2009 - largely because of their higher preponderance in high net worth (HNW) client portfolios. It so far remains unclear in early 2010 whether FoHFs can recover and demonstrate their legitimacy as the vehicle of choice for investors seeking to invest in the hedge fund universe. FoHFs have generally lagged hedge fund performance throughout 2009. However, Fitch believes that the use of risk-adjusted performance figures and the observation that FoHF returns show a higher consistency over time both support the perspective that these vehicles are practical providers of stable exposure (beta) to alternative investments.

The quarterly update is available at www.fitchratings.com.

- 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. Investing - Avenue Capital's Marc Lasry: We like European bank loans, Comment: A bunch of hedge fund managers are chasing the 'dream of crushing a major structural problem'[more]

    Avenue Capital's Marc Lasry: We like European bank loans From CNBC.com: European banks are under immense pressure, but at least one prominent hedge fund has found what it thinks is a good opportunity in the wreckage. Marc Lasry, co-founder and chief executive of hedge fund Avenue Capital

  2. Credit Suisse cherry picks hedge fund ideas[more]

    From FT.com: Credit Suisse Asset Management plans to cherry pick profitable concepts from hedge funds with the launch in Europe of a “best ideas” strategy. The investment arm of the Swiss bank said the strategy will separate it from other funds blighted by “overcrowding problems”. It comes at a time

  3. Investing - Hedge funds bet on risks in U.S. blue-chip debt, Hedge funds bets against bank credit risk paying off, Tiger Global still likes Internet names, gets pointers from Jeter[more]

    Hedge funds bet on risks in U.S. blue-chip debt From WSJ.com: Hedge funds are betting the next bond sector to crack will be the $4.5 trillion market for the safest U.S. corporate debt. New York’s Perry Capital has placed a $1 billion wager against investment-grade bonds issued by 10 comp

  4. Short Selling - Hedge fund manager Kyle Bass is shorting real estate—again, Top US hedge fund has €80m short position in Paddy Power Betfair[more]

    Hedge fund manager Kyle Bass is shorting real estate—again From Fortune.com: He also predicted the mortgage crisis in 2008. Hedge fund manager Kyle Bass, who runs Dallas-based Hayman Capital, tanked the stock of a little-known real estate financier Friday by revealing that he is shorting

  5. Computer-driven hedge funds make money during January’s selloff[more]

    Komfie Manalo, Opalesque Asia: Commodity trading advisers (CTAs) that use computer programs to guide how they trade, made millions of dollars during last month’s market selloff on the back of declining oil prices and global equities and big moves in currencies. Data provider