Tue, Jul 29, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Fitch: Hedge funds resilient YTD but vulnerability highlighted in May

Tuesday, June 15, 2010
Opalesque Industry Update - Fitch Ratings says in its quarterly hedge fund newsletter today that the industry has shown resilience in the face of difficult macroeconomic and market factors for the year-to-date. However, market volatility in May highlighted funds' exposure to systemic risk and affected many strategies, including those focused on fundamental analysis and arbitrage. Global HF assets under management have benefited from positive inflows so far this year, due to a return to absolute return management from institutional investors looking for yield and asset diversification.

HFs are demonstrating a greater focus on relative value strategies in 2010 compared with last year, when the performance rebound was largely explained by the general direction of equity and credit markets.

"A period of price normalisation and dispersion based on fundamental factors and arbitrage usually follows a general and positive asset revaluation cycle," says Olivier Fines, an Associate Director in Fitch's EMEA Fund and Asset Manager Rating group. "However, Europe's sovereign crisis has affected liquidity and confidence, negatively impacting most strategies, as May returns have shown."

Given that markets continue to be volatile and despite the fact the systemic risk has somewhat retreated, Fitch will monitor how hedge funds, taken as a whole, adjust their gross exposures in the coming weeks.

This year is also demonstrating that systematic quantitative traders are having difficulties in post-2008 market conditions. But beyond the relative lack of mid-term trends, the market also highlights the need for several of these managers to conduct an in-depth review of their investment approach and research new trading models to become more flexible and more broadly diversified across markets.

The performance of funds of hedge funds (FoHFs) is still lagging the broad hedge fund indices as they continue to suffer from a lack of flexibility given legacy positions, fund restructuring and caution regarding liquidity. Fitch believes FoHFs will continue to remain a convenient way of accessing alternative investments for small and mid-size investors, provided more resources are put into researching top-down approach and portfolio construction, for better management of liquidity, beta and alpha factors.

Fitch further believes that topics such as regulation, the UCITS EU legislation for alternative investment funds, and consolidation will influence the future shape of HF management and distribution, with increased segmentation of investors (offshore or onshore, distribution or institutional) and players (specialist or generalist, performance provider or solution provider, single product provider or with tailor-making capacity).

The full newsletter, "Hedge Funds Quarterly - Q2 2010", is available at www.fitchratings.com.

Link to Fitch Ratings' Report: Hedge Funds Quarterly Q2 2010 - June 2010 (registration required): Source


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. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag

  2. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  3. Opalesque Radio: Now is a good time to buy protection cheaply in the options market[more]

    Benedicte Gravrand, Opalesque Geneva: Investors are showing an increased interest in risk parity funds and strategies, Opalesque reported last year. Risk parity strategies have the

  4. The Big Picture: Charlemagne Capital smoothes risk out of frontier market investing with portfolio approach[more]

    Benedicte Gravrand, Opalesque Geneva: Opalesque recently talked to one of the portfolio managers of the Oaks funds, which are emerging and frontier market hedge funds focusing on equity long/short with a directional approach. They are run by

  5. Winton’s low-cost equities fund tops $1bn for first time[more]

    From FT.com: Winton, the London-based hedge fund, has increased the assets in its low-cost equities fund to more than $1bn for the first time in a sign that traditional stock managers may come under increasing pressure from computer-driven rivals. Winton, which manages about $25bn in total ass