Mon, Jul 6, 2015
A A A
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: www.hedgebay.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: New systematic strategy managed alongside research firm outperforms S&P500[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging CTA manager explains how he runs his strategy, which is based on an index produced by a research firm. Peter Turk is head of

  2. Opalesque Exclusive: New systematic strategy embraces machine learning[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The founder of a New York-based systematic trading firm, which offers a hybrid between alpha strategies and alternative feta at lower fees, describes his approa

  3. Larry Robbins' hedge fund Glenview buys 1m Tenet Healthcare shares[more]

    Komfie Manalo, Opalesque Asia: Glenview Capital Management said it bought an additional 979,482 shares at Tenet Healthcare Corp valued at $53.80 million, raising its stakes in the healthcare services company to 15.16%, reported

  4. Legal - Grayson’s hedge funds under scrutiny for possible ethics violations, Court rejects hedge fund’s motion to block merger of Samsung affiliates[more]

    Grayson’s hedge funds under scrutiny for possible ethics violations From Freebeacon.com: Rep. Alan Grayson is finding himself in hot water over managing hedge funds that bear his name, actions that are in possible violation of House ethics rules. Sitting members of Congress are prohibite

  5. Hedge funds decline in June as stocks tumble on Greek woes[more]

    From Bloomberg.com: Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent

 

banner