Wed, Nov 25, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedgebay launches Global Illiquid Asset Index for hedge funds trading in side pockets and gated funds

Monday, February 22, 2010
Opalesque industry Update - Hedgebay Trading Corporation (“Hedgebay”) has launched a new monthly index that will give the hedge fund industry a detailed insight into the average discount or premium to NAV that investors are paying for assets that have no contractual redemption rights to investors, such as “side-pockets” or for hedge funds that have suspended redemptions.

The Hedgebay Global Illiquid Asset Index (“IAI”), is the first time that a breakdown of liquidity data has been made available to investors. Illiquidity is the primary concern of hedge fund investors, with difficulties in providing accurate valuations of illiquid assets emerging as a key factor behind the collapse of several hedge funds over the last two years.

The IAI will be published each month alongside the Hedgebay Global Hedge Fund Secondary Market Index (“SMI”). The two indices work together to provide a holistic view of trends in the hedge fund sector and conditions in the overall market.

The SMI provides, among other things, a gauge of investor confidence levels, a reading on the price for liquidity of performing hedge fund assets and the IAI provides a deeper probe into the factors that are affecting investors’ valuation of assets which have no contractual redemption terms. The IAI can also be used to highlight trends occurring with the secondary market and potentially predict conditions of stress on the markets.

Elias Tueta, Co-founder of Hedgebay, commented:

“Understanding how much it costs to monetize illiquid positions is key to market recovery and this is precisely what the IAI provides. Performance of the primary hedge fund market over recent months may suggest that the industry is back to full force, but in reality this is a false dawn. This “strong performance” shadows the fact that every portfolio still holds a certain percentage of illiquid assets, and it is how investors deal with these illiquid assets on their books that will really dictate when the market recovers.

The two tiered market that currently exists is indicative of the fact that, although investors are showing confidence in liquid assets, the market is being offset by uncertainty about how investors can clear their balance sheets of illiquid assets.”

Summary of January 2010 IAI:

The average price for illiquid assets in January stands at a 43% discount to NAV, a small rise from the end of 2009. The average price for illiquid assets has held relatively steady over the last three months, suggesting that investors are still too wary of the risks illiquid assets represent to move into these assets. As a result, trading has focussed heavily on the more liquid assets within the market.

These findings have been supported by the January SMI, which has shown further development of the two-tiered market cited by Hedgebay in recent months. The average price for traded assets rose by eight points from December’s all time low average of 79% of NAV. However, while heavy trading in liquid assets drove the average price to 87%, dispersion between highest and lowest trades increased again. There was substantial trading at the lower end of the price scale, with the lowest trade occurring at just 29% of NAV. This movement at the bottom of the market was motivated largely by the illiquidity concerns highlighted by the IAI. Corporate website:

- 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 - BlackRock targets ETF investors with flexible currency hedging, Nelson Peltz bets on General Electric Company and Mondelez International, Apple plummets to 4th place among hedge holdings, from No. 1, Top Q3 equity purchases and sales of top 50 hedge funds[more]

    BlackRock targets ETF investors with flexible currency hedging From BlackRock Inc., the world’s largest asset manager, is changing course on exchange-traded funds that protect against currency volatility. After stressing the easy switch between hedged and unhedged ET

  2. Chicago-based Achievement A. M. is shutting down hedge fund following losses[more]

    Komfie Manalo, Opalesque Asia for New Managers: Achievement Asset Management, a Chicago-based hedge fund firm, has announced it is closing down its hedge fund operation following losses on energy market bets this ye

  3. Lyxor Hedge Fund Index up 0.1% (+0.4% YTD) as global macro and CTAs outperform[more]

    Komfie Manalo, Opalesque Asia for New Managers: Global macro and CTAs outperformed the hedge fund space and delivered positive returns last week amidst difficult market conditions, with the Lyxor Hedge Fund Index up

  4. BlackRock is shutting down its Global Ascent macro fund[more]

    Komfie Manalo, Opalesque Asia: BlackRock, the world’s largest asset manager, has announced plans to shut down a macro fund, Global Ascent Fund, because of "headwinds facing the industry". The hedge fund, which makes bets on stock, bond and currency markets, will return money to investors. Ac

  5. Opalesque Roundtable: Seeding deal terms can be onerous for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Executives from fund of funds firms, family offices, a placement agent, a private equity firm, and an accounting firm gathered in Connecticut last month for the