Mon, Jul 24, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

The return of the fund of hedge funds predicted Downunder

Thursday, December 05, 2013

Damien Hatfield of Triple A Partners has published his latest Australian hedge fund newsletter and finds, finally, a reason to be cheery about the Australian hedge fund industry.

"2014 could be a standout year for Australian hedge funds" he writes, reporting that since the global financial crisis, Australian hedge fund managers have 'done it tough'. However, there is now something of a recovery in process, Hatfield finds, with some managers achieving good performance and improving AUM. The Bank of Bermuda Asia Hedge Aust L/S Equity Index is up 22% in the last 12 months.Hatfield writes: "Institutional investors are adding alternatives to the asset allocation and Asset Consultants are building Hedge Fund teams."

As third party marketers, Hatfield has recently seen new potential investors and old investors beefing up their intended and existing allocations to hedge funds.

However, he warns that there still exists a tendency to compare Equity Market performance against the lower volatility performance of a portfolio of hedge funds. "Fund managers can never win. They are doing the right thing by clients, by adding exposures to assets with a low correlation to Equity markets but this can reduce the net return on a portfolio that has a standard allocation to Equities. Non market professionals will look at the multiple pieces of a portfolio, see outstanding year-to- date for equities and not as good performance of alternatives and possibly Fixed Income. They will ask the question, why have you got these allocations in your portfolio, and shouldn't you be overweight this booming share market?"

Hatfield declares himself as a great believer in a steady-returning Fund of Hedge Funds. "FoFs are still quite out of favour, but I do think they will come back" he writes.

In the local Australian market, Hatfield explains that gaining exposure to a fund of funds can be hard with only Advance Global Alpha and Fauchier Partners available in the Australian market. He comments that fund of funds are different now, post the financial crisis. "The old - style products were situated as Fixed Interest alternatives because the risk as measured by volatility was similar. Super Funds reduced Fixed Income allocations in favour of HF FoFs. The GFC hit and the miscalculation was the lack of liquidity with redemptions forcing huge declines in asset values. Many of the large Supers liquidated their FoF holdings never to be seen in the sector again. That seems to be changing but the product is different. Two factors have changed the product design: fees and liquidity. The Hedge Fund industry, to survive, has had to adapt to the new environment."

Hatfield reports that he met with a Superfund that has a fee budget across their overall portfolio of 50 bpts. "They have significant exposures to Alternatives and Property. The Fund would probably set the asset allocation weightings, add low - fee beta managers allocation in each sector, then add in active managers and hedge funds (PE as well) as satellite managers" he writes. Hatfield has also observed that the rise of Smart Beta is assisting Fund of Funds in the new environment. "Products in the Fund of Fund space are now becoming a combination of Hedge Funds, CTA and Macro Managed accounts and Replication, which can be achieved by investing in Smart Betas" he writes. "One of our clients, Ramius Alternative Solutions, is a leader in the development of Smart Betas. Combined, the products offer significantly lower fees and possibly daily liquidity. I think product issuers would rather monthly, but dependent on the client requirements, daily is achievable. Putting all of this together has me seeing to increase in allocations to Fund of Funds."

 
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. Launches - Crypto boom: 15 new hedge funds want in on 84,000% returns, Crypto madness is striking VCs as Union Square analyst leaves to start new fund[more]

    Crypto boom: 15 new hedge funds want in on 84,000% returns From Forbes.com: With 43 projects raising $1.2 billion in initial coin offerings since May 1, according to Nick Tomaino's The Control, and with stratospheric returns for so many ICOs -- 82,000% for Ethereum, 56,000% for IOTA, 44,

  2. FinTech - The machines are coming... Elon Musk's grim warning, Tezos' $232 million ICO may just be the beginning, A gentle introduction to Initial Coin Offerings (ICOs), Billion dollar tokens, ICOS & crazy market swings WTF is going on!?, How AI is changing the way we invest, How the tech revolution is bringing flip-flops and beanbags to Wall Street, A 'machine-learning' approach to venture capital[more]

    The machines are coming... Elon Musk's grim warning From Tenplay.com.au: Tesla chief Elon Musk has called on US Governors to take 'decisive' action to curtail "the greatest risk we face as a civilization": Artificial Intelligence, or AI. Speaking at a meeting of the National Governor Ass

  3. News Briefs – Sears inks $200 million credit line from CEO Eddie Lampert's hedge fund, shares jump 9%, Rwanda: Global hedge fund to increase investments[more]

    Sears inks $200 million credit line from CEO Eddie Lampert's hedge fund, shares jump 9% Sears Holdings has landed a fresh line of credit, valued at $200 million, from its CEO Eddie Lampert's hedge fund, the retailer said Monday. Sears' stock climbed about 9 percent higher Monda

  4. Despite current limits, robo-advisors will be preferred investment solution for retail, gain importance for affluent and high net worth[more]

    Matthias Knab, Opalesque: Flynt, a Swiss FinTech focusing on proprietary technology platform for private and institutional clients, has published a brief paper on "Investing in the world of robo-advice and passive instruments". As investors will become more reluctant to pay for investment advi

  5. Investing - Hedge fund CQS favors structured credit, Direct lending funds' fading all-weather appeal, Funds hunt for cracks in most-prized US shopping malls[more]

    Hedge fund CQS favors structured credit From BArrons.com: A hedge fund manager that can invest across the investment landscape says in his latest semi annual report this week that he's finding opportunities in structured credit -- particularly the shorter term, floating rate kind. Exampl