Wed, Mar 29, 2017
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. Opalesque Exclusive: FS Investments launches energy fund[more]

    Bailey McCann, Opalesque New York: $19 billion Philadelphia-based FS Investments has launched a new interval fund which will invest in energy. The FS Energy Total Return Fund is the firm's first closed-end interval fund and will invest opportunistically in energy companies and assets. FS

  2. Hedge fund liquidations in 2016 surpass 2009 levels, new launches decline[more]

    Benedicte Gravrand, Opalesque Geneva: Even as the hedge fund industry's total assets exceeded the $3tln milestone last year, hedge fund liquidations increased. So much so that 2016 had the highest number of liquidations since 2008, claims the latest HFR Market Microstructure Report, re

  3. Hedge funds find no joy in macro as returns lag Trump rally[more]

    From Gulfnews.com: In 2017, macro hedge funds were expected to shine. So far? Not so much. It's been a far from impressive first two months for funds that trade around macroeconomic events. Discretionary funds rose just 0.3 per cent through February, according to Hedge Fund Research Inc., while the

  4. Strategies - Billionaire investor Marc Lasry shares how he's playing markets right now, Classic models are failing FX hedge funds desperate for return[more]

    Billionaire investor Marc Lasry shares how he's playing markets right now From CNBC.com: Buy on the prospect of deregulation. Sell on the enactment of deregulation. That's the strategy that billionaire investor Marc Lasry is implementing, according to an interview with CNBC in Las Vegas

  5. Opalesque Exclusive: Aberdeen makes the case for the lower mid-market[more]

    Bailey McCann, Opalesque New York: Aberdeen Asset Management has released a new paper focused on lower mid-market private equity. According to the paper, this segment of the private equity market is gaining popularity with private equity investors that are looking for multiple expansion and less