Money managers under the microscope
from Global Investing:
Emerging equities' amazing first quarter rally now seems a distant memory. In fact MSCI's main emerging markets index recently spent 11 straight weeks in the red, the longest lossmaking stretch in the history of the index. The reasons are clear -- the euro zone is in danger of breakup, growth is dire in the West and stuttering in the East. Weaker oil and metals prices are hitting commodity exporting countries.
But there may be grounds for optimism. According to this graphic from HSBC analyst John Lomax, sharp falls in emerging equity valuations have always in the past been followed by a robust market bounce.
What might swing things? First, the valuation. The 2008 crisis took emerging equity prices to an average of 8 times forward earnings for the MSCI index, down from almost 14 times before the Lehman crisis. The subsequent rebound from April 2009 saw the MSCI emerging index jump 90 percent. Emerging equities are not quite so cheap today, trading at around 9 times forward 12-month earnings but that is still well below developed peers and their own long-term average.
Macro headwinds are strong but emerging markets are looking very cheap. On a price/earnings basis they are 15 percent below historical lows which guards against further falls. In the past, whenever you bought emerging markets at such levels, you made money.
News and views on the asset management industry from Reuters and elsewhere:
News and views on the fund industry from Reuters and elsewhere:
Hedgies tiptoe away – Reuters
Foot off the gas – Bloomberg
SA hedge funds get in on the act – Business Day
Altman is a hoot – Reuters
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
What investors want from hedge funds now- Business Week
Activist investors have traditionally been kept at arm’s length by the mainstream fund houses. Fund managers at the major players haven’t felt able to align themselves with those agitating for change for fear their cosy chats with company chairmen might be compromised.
There are clear signs though that the mood has shifted.
Not only are institutions getting rapped over the knuckles for failing to apply active ownership principles, but the credit crisis has purged short-termist activists from the market, helping to soften the sector’s association with financial engineering and slash-n-burn tactics.
Bill Maldonado, head of alternative investments at HSBC’s Halbis unit, talks to Hedge Hub about how market neutral hedge funds have fared in 2008 and 2009.
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.