Money managers under the microscope
There seems to be an endless wave of bad news hitting the hedge fund industry at the moment — gates and suspensions, record poor performance, the Bernard Madoff scandal and so forth – but there are still one or two reasons to be positive.
According to a survey of institutional investors by alternative assets data group Preqin, conducted in January (and therefore after the alleged Madoff fraud came to light), only 8 percent said they were no longer confident about hedge funds and would reduce investments.
By contrast, 26 percent said they would be increasing their allocations this year.
This appears to be a more positive picture than for high net worth individuals, who, according to some anecdotal evidence, have become more cautious on hedge funds.
It was the outcome most commentators were expecting.
But the defeat for hedge funds RAB Capital and SRM Global and other former shareholders claiming damages for the loss of their holdings in Northern Rock when it was nationalised last year is nevertheless a hard blow to bear.
By Alexander Smith
If redemptions are getting the better of you and you thought your industry was about to disappear, you may be amazed to hear there are still those wanting to start their own hedge funds.
An email from Financial Technologies Forum LLC brings news of a new course in New York next month giving you everything you need to get going.
Schroders today reported exceptional losses of 167 million pounds — this was largely due to 147 million of writedowns on its own investments in hedge funds, private equity, fixed income and seed capital.
Analysts at UBS noted that these four areas had total investments of 585 million pounds at September 30, meaning the group had taken a 25 percent writedown.
But one top hedge fund manager believes that equities could soon be heading for a very sharp rally.
Cazenove’s Neil Pegrum — whose fund made 9.4 percent last year while markets were plummeting — believes UK equities could soon be enjoying a “March 2003″ rally.
Ladies and Gentlemen: you may leave your ball gowns and tuxedos at home tonight.
That’s the message the badly battered hedge fund industry is sending its managers, lawyers and accountants who are planning to attend Hedge Funds Care, one of the industry’s most successful charity events in New York on Wednesday evening.
In the wake of the industry’s 19 percent loss last year, organizers scrapped the annual black-tie dinner in favor of a cocktail party, Kathryn Conroy, the charity’s executive director said.
Data from Hedge Fund Research shows they returned 0.39 percent in January, having lost 18.73 percent in 2008, although they gained 0.21 percent in December.
The start of a revival in hedge fund returns? Well, maybe, and maybe not.
One explanation is that returns are just bouncing back after losses were exacerbated by redemptions late last year.
The decline in the hedge fund industry is starting to impact some markets in which these free-wheeling vehicles once played, as Jane Baird’s article “CDS price quirks abound as arbitrage withers” demonstates.
She points out that the $45 trillion credit derivatives market is now full of pricing quirks because many hedge funds, once big arbitrageurs in the sector, no longer play here.
from Global Investing:
Wealth managers at Citi Private Bank are telling their clients to stay neutral in their exposure to hedge funds at the moment, whether the strategy be event driven, equity long/short or macro. The main reason is that capital markets are still stressed and many hedge funds still need to deleverage.
The firm points out, however, that hedge funds had a good news-bad news kind of year in 2008. Based on the HFRX Global Hedge Fund Index, it was the worst performance on record. The index lost 23.3 percent. Its next worst performance was 2002 -- and that was only a 1.5 percent decline.