Thu, Dec 18, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedge fund liquidations rise despite performance gains, fund of funds consolidation accelerates

Wednesday, June 09, 2010
Opalesque Industry Update - After falling steadily for four quarters, hedge fund liquidations rose again in the first quarter of 2010 with 240 funds closing during the period, according to the HFR Market Microstructure Industry Report released today by Hedge Fund Research (HFR), the leading provider of hedge fund industry data and analysis. Liquidations were disproportionately skewed towards Fund of Funds (FOF), with 102 FOF closing in the quarter, this marks the seventh consecutive quarter in which FOF liquidations have exceeded new launches.

Leverage employed by hedge funds has continued to moderate relative to five years ago, with nearly seventy percent of all funds, which manage eighty-three percent of industry capital, utilizing some form of leverage. In the HFR Special Report: Hedge Fund Leverage, Relative Value Arbitrage and Macro strategies commonly employ higher levels of leverage than Event Driven and Equity Hedge strategies. Standard leverage metrics vary broadly across the hedge fund industry, with over half of all funds typically employing between 1 and 2 times investment capital. Larger funds typically exhibit a greater usage of leverage, with nearly 30 percent of all funds greater than $1 billion employing leverage in excess of two times their investment capital.

Incentive Fees continue to fall as fund performance dispersion declines
Indicative of continued pressure from investors for more attractive investment terms, average incentive fees declined by 8 basis points to 19.12 percent in 1Q 2010, the steepest drop since 2Q 2008, although average management fees were unchanged for the quarter at 1.58 percent. Performance dispersion between the best and worst deciles of performance narrowed in the less volatile period, with the top decile of all hedge funds returning an average of +15.2 percent, while the bottom decile lost an average of -8.6 percent.

“Both investors and fund managers are continuing to exhibit a heightened sensitivity to leverage and risk, even with the benefit of the performance recovery from 2009,” said Ken Heinz, President of HFR. “Managers are employing lower levels of leverage in response to higher realized asset volatility and higher costs of obtaining leverage, as well as investor preference for a less volatile return profile.”

About HFR
Hedge Fund Research, Inc. (HFR) is the global leader in the alternative investment industry. Established in 1992, HFR specializes in the areas of indexation and analysis of hedge funds. HFR Database, the most comprehensive resource available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on both the broadest and most influential hedge fund managers. HFR has developed the industry’s most detailed fund classification system, enabling granular and specific queries for relative performance measurement, peer group analysis and benchmarking. HFR produces over 100 indices of hedge fund performance ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus. With performance dating back to 1990, the HFRI Fund Weighted Composite Index is the industry’s most widely used standard benchmark of hedge fund performance globally. The HFR suite of Analysis Products leverages the HFR Database to provide detailed, current, comprehensive and relevant aggregate reference points on all facets of the hedge fund industry. HFR also offers consulting services for clients seeking customized top-level or more nuanced analysis. For the hedge fund industry’s leading investors and hedge fund managers, Hedge Fund Research is The Institutional Standard.Source
KM

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 - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  4. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und

  5. Performance - Lansdowne, Man Group, other hedge funds profit from shorts in oil, Turmoil boosts hedge funds that bet against Russia, oil, CTAs post strongest returns since December 2010[more]

    Lansdowne, Man Group, other hedge funds profit from shorts in oil From Valuewalk.com: The rising short interest in oil companies implies that the worst for oil is yet to come. Data from Markit shows that short exposure in energy sector of S&P 500 is still looming close to the highest mar