Money managers under the microscope
GLG Partners has confirmed positive client money flows are back on the agenda, reporting net sales of $2.2 billion in the second quarter in a trading statement which sparked a rise in the share price. The company also reckons strong performance among its funds has set the scene for more to come.
Barclays Capital last month predicted net inflows could reach as much as $50 billion in 2009, and GLG shows the numbers are starting to come through to support that theory. Of about 300 investors, BarCap found that some 80 percent were expecting to move back out of cash and into hedge funds this year.
The argument goes that investors burned by 2008 will get greedy again, and aggressively seek out the quickest route they can see to recoup the losses. If that theory proves true then perhaps investors were not as spooked as some have thought by the imposition of gates to redemptions when the crisis was at its height.
Longer term, it will be interesting to see if flows can recover enough to send total assets back to pre-crisis levels, because the revived love affair with hedgies is hugely vulnerable to fresh market wobbles, and is not universal. Trustees of the $40 billion Massachusetts’ state pension fund on Wednesday voted to scrap its portable alpha strategy and slash absolute return fund allocations by a quarter.
High-profile hedge fund manager Philippe Jabre has lent his voice to the view that equity investors have more to play for.
The former GLG trader, probably better known for a record FSA fine of 750,000 pounds for market abuse than for his strong track record, thinks there is “money to be made”in bombed-out stocks in sectors such as financials, energy and industrials.
Like most hedge fund firms, Polar Capital has had a tough time during the credit crisis — its full year results out today show assets practically halved between March ’08 and May ’09.
However, at the Reuters Hedge Fund & Private Equity Summit in March, Polar CEO Mark Kary said he didn’t see any further redemptions in the pipeline.
A last-minute addition to the line-up in Monaco has been GLG’s senior managing director Pierre Lagrange, a relatively low profile figure even though the firm is listed on the New York stock exchange. Lagrange was not on the conference’s original programme and only agreed last week to speak on “the pros and cons of running an alternative asset management business as a public company” today.
GLG has had its share of troubles in the past, including the Philippe Jabre scandal, last year’s departure of star manager Greg Coffey and a hefty chunk of investor redemptions. Perhaps Lagrange is taking on a more public role as the firm now feels it has a more upbeat story to tell. Having pulled off a number of hirings and the acqusition of the UK fund management unit of Societe Generale, the firm said this month that its hedge funds had risen 11.2 percent in the five months to May 31. Meanwhile, expansion into the U.S., Asia and the Middle East is also planned.
Brevan Howard Asset Management, Europe’s biggest hedge fund firm, has posted a 133 percent rise in operating profits to an astonishing 503 million pounds for the year to July 2008, demonstrating the benefits of being one of the (few) winners in last year’s market turmoil.
While the average hedge fund lost 19 percent last year, according to Hedge Fund Research, Brevan Howard’s main fund rose 21 percent.