Sat, Jun 25, 2016
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 Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Global markets fell, hedge funds gain in mid-June on Brexit, Fed rate concerns[more]

    Komfie Manalo, Opalesque Asia: Global financial markets declined through mid-June, as uncertainty associated with the upcoming Brexit referendum and expected U.S. Fed interest rate hike contributed to increases in volatility across asset classes, data provider