Tue, Oct 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedgebay Trading Corporation’s February index reveals first trade above NAV on hedge fund secondary market in almost 2 years

Friday, March 26, 2010
Opalesque Industry Update - Hedgebay Trading Corporation’s February index has revealed the first trade above NAV on the hedge fund secondary market in almost 2 years. The premium trade, which took place at 102% of the hedge fund share’s value, is the clearest indication yet that high quality hedge fund assets are once again becoming “must-have” commodities among investors.

The Hedgebay Secondary Market Index has also shown that the average trade price rose in February to 91.4%, a level more commonly seen before the financial crisis struck. This is the second consecutive month that the average price has risen, which Hedgebay feels is further encouragement for the hedge fund industry:

Elias Tueta, co-Founder of Hedgebay, said: “February’s data is very good news for the hedge fund market, or at least for the part of the market that trades in liquid assets. The first premium trade in quite some time is a highly significant event for the industry. It shows that investors are not just confident about buying hedge fund assets; they are now willing to pay over NAV to secure the most sought after funds. The prices being paid for liquid assets are rising across the secondary market, and the average price of 91% is not far off the sort of average we were seeing before the downturn.

However, Tueta warned that no matter how encouraging the SMI results, they only tell half the story. The dispersion between the highest and lowest trades widened to 70 points, with the lowest trade occurring at 32% of NAV. This has made the two-tiered market more pronounced, as investors continue to struggle to remove illiquid assets from their portfolios.

The February edition of the Illiquid Asset Index (IAI) has shown a small rise in the average price for assets that have no contractual redemption rights to investors (such as “side-pockets” or for hedge funds that have suspended redemptions). The average price stands at 46.3% of NAV, but substantial trading at this end of the market has moved Tueta to warn that the two tiered market will continue for the foreseeable future:

“The two-tiered phenomenon is here to stay for the time being, as a substantial number of funds still have illiquid assets in their portfolios. The two tiered market is being driven partly by the nature of the funds, but also by the type of investors. There is an essential difference between the outlook of investors trading in liquid assets and the outlook of those trading in illiquid ones, and what we are seeing at the moment is, in essence, two different markets – a liquid one and an illiquid one.”

“The SMI is showing the confidence of investors who favour the short term strength of liquid assets, while the IAI is displaying the investors who have done large amounts of analysis on underlying holdings and have a long term plan for the more illiquid assets. The two different investor types rarely cross over from one type to the other as that would require a fundamental change in philosophy, which leads us to believe that the two tiered market will be around for quite some time to come.” - KM - Corporate website: Source

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

Banner

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: What's next for trend followers?[more]

    Bailey McCann, Opalesque New York: New research out from Ibbotson touches on a key debate happening among investors and fund managers, specifically whether long term trend followers can survive in the new

  2. Commodities - Oil wreaking havoc on small-cap energy stocks sliding 36%[more]

    From Bloomberg.com: Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe. Hercules Offshore Inc. and Resolute Energy Corp. are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than

  3. Investing - Hedge funds favor equity long/short, Strategic bond managers hedge against further high yield sell-off[more]

    Hedge funds favor equity long/short From Securitieslendingtimes.com: Equity long/short strategies will generate good returns for hedge funds in the future, according to a panel at this year’s Risk Management Association Conference on Securities Lending in Naples, Florida. Panellists Sand

  4. Legal - Ex-hedge fund analyst weeps as judge hands down 5 year sentence, Former Columbus investment manager Steven P. Moore indicted on theft charges, SEBI confirms ban for Hong Kong hedge fund, SEC announces enforcement action against compliance officer[more]

    Ex-hedge fund analyst weeps as judge hands down 5 year sentence From Hereisthecity.com: An ex-hedge fund analyst was sentenced to 5 years in prison for his role in insider-trading scheme. The New York Post reports that former hedge fund analyst Matthew Teeple was sentenced Thursday to fiv

  5. Sparx optimistic about outlook for Japan[more]

    Benedicte Gravrand, Opalesque Geneva: According to SPARX, there are causes to be optimistic about the outlook for the Japanese market and the country's economy in general. Sparx Asset Management is a Tokyo-based asset manager, part of