Sat, Apr 25, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedgebay's hedge fund Secondary Market Index continues to fluctuate, falls for first time in 5 months

Wednesday, May 19, 2010
Opalesque Industry Update – Illiquid Index falls for the first time in five months as managers make distributions.

The average price for assets on the secondary hedge fund market has risen again to 91% of NAV, according to Hedgebay’s April index, continuing the volatile trend seen since the start of the year.

The last year of trading on Hedgebay has been characterised by fluctuating average prices, with successive price rises seen only twice since May last year. As the market slowly recovers, investors have divided their priorities between buying sought after assets and clearing unwanted assets from their portfolio. This trading, occurring at the top and bottom of the secondary market, has created a wide dispersion that continues to dominate the market.

With the highest and lowest trades occurring at 102% and 33% respectively, April’s dispersion of 69 points represents one of the widest on record, and suggests that the two tiered market created by this activity shows no signs of abating. However, Hedgebay has indicated that a positive pattern may be emerging from the vacillations in price.

Elias Tueta, co-Founder of Hedgebay, said:

“There is great deal of complexity in the patterns that we have been seeing on the secondary market, and as ever, it is difficult to draw a single conclusion from such a diverse set of results. However, what have seen since January is price rises in January, February and April, with a fall in March. It suggests that a full recovery at the top end of the market is only being held up by the need to meet redemption deadlines at the end of each quarter, as investors are forced to accept lower bids to meet their cash requirements.”

“Despite the fluctuations, the average price has held at around the 85-90% mark this year, and without the anchor of quarterly redemptions these could be even higher. It is indicative of a market that has confidence in a recovery, without yet having the market dynamics to achieve it.”

At the bottom end of the market, the Illiquid Asset Index (“IAI”), which displays the average price for assets in hedge funds that have suspended redemption rights, fell for the first time in five months. The average price had steadily risen since November, but a number of distributions by managers has seen the average fall to 43%. Managers attempting to clean up their portfolios have left investors holding onto lower priced residual assets.

As Mr Tueta explains though, this is a necessary part of the secondary market correcting itself:

“Many investors have been caught out by distributions made by managers, and this is something that investors must be aware of when selling assets on the secondary market. By definition the assets remaining after a distribution are the least liquid, and bidding would necessarily be lower for any of these outstanding assets. Distributions are an important step in the clean up process so we are expecting to see more in the near future. While this may lead to short terms drops in the IAI, and a widening of the market dispersion, it is ultimately to the long term benefit to the recovery of the secondary market.”


About Hedgebay Trading Corporation
For nearly a decade Nassau-based Hedgebay Trading Corporation has provided hedge funds with a market to trade positions by matching buyers with sellers. Since its launch, Hedgebay has provided secondary market data to registered users of its website (www.hedgebay.com).


Bg

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. U.S. does not want hedge funds to invest in offshore re-insurers for tax purposes[more]

    Komfie Manalo, Opalesque Asia: The U.S. Treasury Department on Thursday introduced a new rule aimed at limiting hedge funds’ ability to reduce their tax bills by investing in insurance companies in offshore tax havens. As a general rule, the U.S. tax laws does not allow hedge funds to use off

  2. Ruling: Hedge funds suing Argentina can have access to bond offering[more]

    Komfie Manalo, Opalesque Asia: U.S. District Judge Thomas Griesa in Manhattan ruled yesterday that hedge funds are entitled to details of a recent bond offering by Buenos Aires, reports

  3. Hedge funds looking to continue their rally in Q2[more]

    Komfie Manalo, Opalesque Asia: Hedge funds finished the first quarter on a strong note and are looking to continue the rally in the second quarter, said Lyxor Asset Management in its Weekly Brief. The Lyxor Hedge Fund Index is up 0.4% over the week

  4. Hedge funds down -0.17% in March (+1.23%YTD)[more]

    Bailey McCann, Opalesque New York: The hedge fund industry produced an aggregate return of –0.17% in March to end Q1 2015 up 1.23%, compared to the S&P 500 which increased 0.96%, according to the latest data from eVestment. Hedge fund performance returns were mixed in March amid increased equity

  5. Fund managers express concern of overvaluation in both equity and bond markets[more]

    Komfie Manalo, Opalesque Asia: According to the BofA Merrill Lynch Fund Manager Survey, investors see growing overvaluations in both

 

banner