Money managers under the microscope
The gloom in the hedge fund industry is well-documented but there are nevertheless bright spots.
HSBC has launched a global currency fund – technically a Ucits 3 fund rather than a hedge fund but employing the same tactics — trying to make money out of an asset class it sees as “untainted” by the credit crisis.
Meanwhile, BNP Paribas has launched the Comac fund, tracking a long-short index of commodities which is up 67.8 percent since April 30 2008.
Plenty of funds may be closing in the industry, but in some form the hedge fund industry — which can morph into pretty much any money-making opportunity it likes – is likely to survive.
The financial industry is famously flexible. Previously held shibboleths can be ditched in the blink of an eye to be replaced by more appropriate, and profitable, assumptions.
And so it is that hedge funds have embraced restructuring culture. No longer is there shame in distressed assets, forced sales and dried up liquidity. In a time when going to the wall is an everyday occurrence, the smart money, and the optimism, comes from finding opportunity in straitened times.
It is hardly uncommon in today’s markets to see an investment fall in value.
It’s encouraging to see that, even as many hedge fund investors rush for the exit, there is still some appetite to invest, as highlighted by the National Association of Pension Funds’ optimistic publication of a beginner’s guide to the industry.
Entitled Hedge Funds made simple and starting with “What is a Hedge Fund”, the guide’s blurb tells us that ”the role of hedge funds, and investing in them, has become more prominent in the last year”.
Spanish bank BBVA’s move to close down its alternative investment arms including hedge funds shows just how much things have changed in the industry, even within the past year.
The timing of the Alternative Investment Management Association’s hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.
Coming just a day after ECB President Jean-Claude Trichet called the credit crisis “a loud and clear call” for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.
It may not have been a massive surprise, but ECB President Jean-Claude Trichet had an unwelcome message for hedge fund managers today.
The current crisis is, apparently, “a loud and clear call” to roll out regulation to all important market players, “notably hedge funds and credit rating agencies”.
As politicians and regulators worldwide prepare a new blueprint to marshall the hedge fund industry, the organisers of the GAIM industry conference release the early agenda for their annual Monaco pow wow.
Unsurprisingly, the June 16-18 summit takes the theme: Transformation In A New World Order. And even less surprisingly, several sessions are set to ponder how to best snag a new breed of circumspect investors, and how to adapt to a new regulatory environment.
Shorting UK banks, it seems, is so last year.
Having profited from the implosion of the sector in 2008, many funds believe prices have fallen far enough, and in some cases are actually looking good value.
Outspoken star fund manager Crispin Odey this week revealed he’s now buying UK banks, having made money shorting them last year.
And in his latest letter to investors, Hendry has smartly rebuffed any attempt to ‘save’ him from his bond investments.