Money managers under the microscope
At the turn of the year managed futures funds/CTAs were the talk of the town after a stonking 2008 in which they gained 18.33 percent while the average fund lost 19.07 percent.
Six months on and they have become one of 2009′s laggards, losing 5.23 percent while the average fund is up 6.72 percent.
The problem has been a lack of clear trends in futures markets, which CTAs follow to make their money.
The worst case scenario, which has happened in some markets this year, is an apparently long-term trend suddenly reverting, catching out those who’d been betting on something a bit longer-lasting.
With the finalisation of new EU laws on regulation of hedge funds and private equity likely 6 months away, we should be prepared for an awful lot of hand-wringing and much talk of an industry exodus to lakeside retreats in Switzerland.
The latest word on this is that some managers have warned the Treasury that funds are already looking around for alternative locales where their love of leverage attracts less concern.
Tuesday’s grilling of UK hedge fund executives is likely to create plenty of noise but produce little in the way of new rules.
While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby’s position may be weaker than it has been in recent years.
Victor Haghani, a co-founder of LTCM later involved in its liquidation and now a private investor, was opining at a LSE conference on Monday that simply cutting back funds’ borrowing after the carnage of last year may not be a strong enough lesson for the industry to learn.