Funds Hub
Money managers under the microscope
Morning Line-Up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Galleon paid banks millions for ‘edge’- FT
KI hedgie said to be linked to FBI money – laundering sting – Bloomberg
Asian team at hedgie Stark quit to launch Orchard – Reuters
Griffin rebounding from loss builds bank to rival Goldman – Bloomberg
Bearish Bullman
Stocks may have enjoyed a huge rebound this year (the S&P 500 is up 50 pct from its March low), but the rally is based on speculation, according to one hedge fund firm.
Bullman Investment Management, which runs a global macro fund, has just put on short positions on the S&P and the financials sector via ETFs, manager Nick Bullman told me.
“The rally has been a dash for trash based on speculation,” he said, arguing that while stocks are back at pre-Lehman levels, fundamentals haven’t changed.
Only a week ago Crispin Odey, who had pointed to the start of a bull market early this year, said “markets are a little overbought and will probably have a pullback”.
Bullman is also downbeat on quantitative easing and thinks this could backfire as higher inflation works its way into the system, so has gone long gold.
(See also Odey eyes market pullback and Shorts suffer in the rally)
Surely it’s not a question of if the markets will crack but when. Western govts look bankrupt having taken the (debt) pressure off the corporates but can they sustain interest payments on this debt and if so, at what cost to their economies?
from Global Investing:
Just another Snark hunt?
The Lewis Carroll poem The Hunting of the Snark (An Agony in 8 Fits), follows the misadventures of a group of seafarers, amongst them a banker and a broker, as they search for the elusive mythical beast. We are warned at the outset that catching Snarks is all well and good, but beware if your Snark is a Boojum, because - well, we'll come to that.
Alpha looks set to become as equally elusive in the next 20 to 30 years as investors switch to passive investing and exchange-traded funds (ETFs) in greater numbers, and the amount of information available to all market participants increases.
Suzanne Duncan, financial markets industry leader at the IBM Institute for Business Value, argued at the Fund Forum in Monaco this week that some 85 to 90 percent of investment returns in the next 20 to 30 years will be beta returns, as investors become increasingly disillusioned with paying for actively managed funds that fail to deliver.
"Only 15 percent of long-only active managers have outperformed their stated benchmark over the past 5, 10, 15, 20, 25, 30 or even 40 years," she says. Yet some 70 percent of the world's assets under management is currently invested in traditional long-only active strategies.
Duncan believes alpha will become increasingly hard to find as transparency - that is, nearly instantaneous and accurate information - increases. "Some academics are sceptical that there is such a thing as alpha anyway," she says.
Mark Tennant, senior adviser to JP Morgan Securities Services, points out that it is no longer as simple to add alpha in developed markets as it was in the 1970s, because more market participants have access to the key information at the same time.
"Asset managers need to recognise where they can add value and where they can't," he says. "For example, I don't think simple long-only equity products can add value any more, unlike in the 1970s say, when there was less information available to all."
