Wed, Sep 3, 2014
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. Study shows what resonates with investors: 'Unwavering', 'passionate' beats 'committed', 'dedicated' and more surprises[more]

    Komfie Manalo, Opalesque Asia: A new study by Pershing, a unit of BNY Mellon company, showed that an effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now. In the study

  2. Legal – GE Capital and Petters-related hedge fund in legal battle, SEC sanctions Donald Brownstein's hedge fund over conflicts of interest[more]

    GE Capital and Petters-related hedge fund in legal battle From Startribune.com: A billion-dollar legal battle is brewing in Florida over who knew what and when about the decade-long Ponzi scheme operated by former Wayzata businessman Tom Petters. The bankruptcy trustee for two failed Flo

  3. Managed futures' global diversification is important in next phase of economic recovery[more]

    Komfie Manalo, Opalesque Asia: The global diversification provided by managed futures may prove to be extremely valuable as the markets enter the next phase of the economic recovery, said Campbell & Company, a pioneer in absolute return invest

  4. Comment – Why you should avoid the hottest hedge fund hands, Swedroe attacks Hussman over risk management, relative value strategy[more]

    Why you should avoid the hottest hedge fund hands FromCNBC/Yahoo.com: Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July. But investing with Bill Ackman and other to

  5. Ex-UBS prop trader's hedge fund Manikay Partners eyes UK launch[more]

    From eFinancialnews.com: Manikay Partners, a $1.7 billion US multi-strategy hedge fund set up in 2008 by a proprietary trader from UBS with backing from Goldman Sachs, is planning to open in the UK. New York-based Manikay's move into Europe comes after Financial News revealed on Monday that Aurelius