Wed, May 25, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Australia's Zenith predicts Angela Merkel will not be buying a Greek holiday home

Wednesday, January 09, 2013

Zenith Investment Partner's Daniel Liptak gives readers his predictions for 2013.

Daniel Liptak


Zenith's end of 2012 report couldn't resist the chance of predicting a few trends for 2013. "We are certain of a couple of things" Daniel Liptak writes. "Angela Merkel will not buy a holiday home in Greece and expect to be warmly welcomed by locals bearing gifts. Secondly, no one will be picking up the can in 2013, expect a bit more kicking."

However, Liptak feels that the major concerns surrounding the Eurozone debt crisis, US fiscal cliff and the state of the Chinese economy are now receding and writes: "there are now unconfirmed reports that Dawn has been sighted. 2013 could be the year when fighting the Fed and central banks might prove too costly for many fixed income investors. If so, we might see a continued return to equities for 2013 and our collective mood will rise from the darkness."

Zenith's sources suggest that investors are demonstrating more willingness to entertain broader range of strategies, even those with more of a niche focus; distressed shipping and the Australian electricity and water markets. "That being said most of our clients and industry contacts continue to have heightened interest in the more liquid and tactical strategies; credit, CTAs and equity long short. While there has been some fading of interest at the tail end of 2012 in global macro funds we believe that this will turn with performance."

Liptak believes that with the almost daily announcement of investment banks significantly downsizing their proprietary trading desks it follows that strategies with a focus on liquidity provision will continue to be a strong source of returns in 2013.

"The hunt for yield will continue through 2013. While we believe there is a chance of equities running strong this year, mutual fund flow data suggests that investors prefer credit over equities. The result of this preference is a significant underweight in equities, but on low trading volumes. In other words equities are in a position where they could move rapidly in either direction" he writes.

"During 2012 investors did allocate to new fund launches, although appetite is selective, there is an emphasis on pedigree and the quality of the business. The lure of large established managers might be a trend that may not endure with concentration risks now high."

Looking at China, Liptak writes: "The Chinese economy is tipped to grow at a faster rate than 2012 at around 9% this year, implying an uptick in commodity demand, especially metals and energy. The spot iron ore price is up 68% from the lows of last year. In other words demand is on the rise. We believe an active but risk aware approach to investing in China should be a rewarding exercise over the next 12 months."

Turning to hedge funds and their value to investors, markets and the broader economy, Liptak writes: "Hedge funds significantly outperformed traditional asset classes such as equities, bonds and commodities over the last 17 years according to a study released in April by The Centre for Hedge Fund Research at Imperial College in London. The research, commissioned by KPMG, the international audit, tax and advisory firm, and AIMA, is the most comprehensive of its kind to date. The report, entitled The Value of the Hedge Fund Industry to Investors, Markets and the Broader Economy, found that, per annum, hedge funds returned 9.07% on average after fees between 1994 and 2011, compared to 7.18% for global stocks, 6.25% for global bonds and 7.27% for global commodities."

"Moreover, hedge funds achieved these returns with considerably lower risk volatility as measured by Value-at-Risk (VaR) than either stocks or commodities. Their volatility and Value-at-Risk were similar to bonds, an asset class considered the least risky and volatile. The research also demonstrated that hedge funds were significant generators of "alpha", creating an average of 4.19% per year from 1994 - 2011. Portfolios including hedge funds also outperformed those comprising only equities and bonds, The Centre for Hedge Fund Research concluded. The study showed that such a portfolio outperformed a conventional portfolio that invested 60% in stocks and 40% in bonds. The returns of the portfolio with an allocation to hedge funds also yielded a significantly higher Sharpe ratio (which characterises how well the return of an asset compensates the investor for the risk taken) with lower "tail risk" (the risk of extreme fluctuation)."

Liptak says: "The author's meta-analysis of academic literature concluded that hedge funds are important liquidity providers to the markets with spill over benefits to efficient capital allocation, enhanced financial stability and shareholder value" and concludes: "The only issue the report did not address was that of fear and loathing of hedge funds by many investors."

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
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. Paul Tudor’s hedge fund trims fee amidst poor performance, keep investors[more]

    Komfie Manalo, Opalesque Asia: Paul Tudor’s $11.6bn hedge fund firm Tudor Investment Corp. announced on Monday it would slash down fees of one of its biggest fund to 2.25% of assets and 25% of profits amidst backlash arising from poor performa

  2. West Virginia objects to Alpha Natural sale to hedge fund[more]

    From AP/Heraldcourier.com: West Virginia's environmental authority has filed an objection to the proposed $500 million sale of Alpha Natural Resources' assets to a hedge fund, arguing that the deal could leave the state holding hundreds of millions in reclamation liabilities. The Register-Hera

  3. Mitch Petrick leaves Carlyle as his hedge fund unit suffers losses while assets expand[more]

    Komfie Manalo, Opalesque Asia: Mitch Petrick will be leaving Carlyle Group as head of its hedge funds unit overseeing about $34bn as of March 31, after several funds under his management suffered losses while assets expanded, various media reported. Petrick joined Carlyle in 2010 and was a former

  4. Institutions - Kentucky pension leans into hedge funds amid governance turmoil, Korea's NPS names finalists for initial $1 billion hedge fund-of-funds allocation[more]

    Kentucky pension leans into hedge funds amid governance turmoil From AI-CIO.com: The Kentucky Retirement Systems moved to increase its hedge fund allocation as controversy reigned over fund leadership. Following a string of high-profile hedge fund exits, the Kentucky Retirement Systems (

  5. Fund Profile - The hedge fund that couldn't stay open long enough for a big payday[more]

    From Bloomberg.com: Toby Dodson waited six months for his bet against a fragile Portuguese bank to pay off. But before the reckoning, word came down from his hedge fund bosses at Achievement Asset Management in Chicago: get ready to clear out your desk and unwind your trades, we’re shutting down. Th