Deloitte's asset management services practice has launched a global full-service hedge fund emerging manager platform offering a unique mix of traditional and non-traditional professional services across audit, tax, financial advisory and consulting. The program represents the latest development in an aggressive two-year build out of the hedge fund practice.
“In today’s environment, emerging managers need recognized industry heavyweights for professional services. Deloitte has launched the hedge fund emerging manager platform to provide emerging managers with a solution that offers access to our global network, and customized, creative and responsive service,” said Cary Stier, vice chairman and Deloitte’s U.S. asset management services leader. “If you launch with Deloitte, you stay with Deloitte. A client cannot outgrow our services. Deloitte delivers results that matter.”
The emerging manager platform offers traditional services like audit, tax compliance and fund structuring bundled with non-traditional services including general partner and international tax planning, regulatory and compliance, and technology and operations on a sliding fee scale that keeps pace with the manager’s growth. The emerging manager platform is led by 23 partners, principals and directors and more than 250 specialists internationally through the Deloitte Touche Tohmatsu Limited (DTTL) member firms with operations in the United States, Dublin, London, Hong Kong, Luxembourg, Bermuda, Cyprus, Mauritius and the Cayman Islands.
“Today emerging managers face the pressure of having to operate like a mature fund before they can fully absorb the associated costs, which is why we have designed this global program to offer full service at a sliding cost. It will be difficult for emerging managers to succeed without access to the right services; we understand that and are committed to meeting that need,” said Ray Iler, director, Deloitte & Touche LLP and leader of the hedge fund emerging manager platform in the U.S. “From the investor perspective, a new manager’s choice of Deloitte provides instant creditability and confidence. And, for institutions seeding emerging managers, we can offer consistent tax and financial reporting and standardized service offerings regardless of geography.”
Deloitte’s hedge fund practice offers access to a global bench of talent in audit and tax, valuation, anti-fraud, governance and oversight, regulatory and compliance, risk management, technology and operations, structuring, and assessment of third party administrator/prime brokerage relationships. With a DTTL member firm network of more than 3,500 specialists in more than 40 countries, the practice serves 70 percent of U.S. hedge funds with more than $20 billion in assets under management, and 75 percent of global hedge funds with more than $20 billion in assets under management.
Thursday, October 21, 2010
BlackRock Reports Assets Under Management of $3.446 Trillion at September 30, 2010
BlackRock, Inc. today reported third quarter 2010 net income(1) of $551 million, up $234 million from a year ago and up $119 million compared to second quarter 2010. Operating income was $707 million and non-operating income, net of non-controlling interests, was $45 million. The operating margin was 33.8%, which included the effect of $17 million of costs related to the successful launch of the $1.2 billion Build America Bond Trust and $6 million of integration costs associated with the December 1, 2009 acquisition of Barclays Global Investors ("BGI").
Third quarter net income, as adjusted(2), was $2.75 per diluted common share, or $537 million, up 31% compared to third quarter 2009 diluted EPS, as adjusted(2), of $2.10 and up $0.38 compared to second quarter 2010. Third quarter 2010 included operating income, as adjusted(2), of $2.61 per diluted share and net non-operating income, as adjusted(2), of $0.14 per diluted share. Third quarter net income includes a tax rate benefit ($0.11 per diluted share related to first half of 2010) reflecting favorable tax rulings and resolution of certain tax positions. Operating income, as adjusted(2), of $737 million, which included $17 million of closed-end fund launch costs, improved $337 million, or 84%, compared to third quarter 2009 and declined $4 million, or 1%, compared to second quarter 2010. Compared to a year ago, operating results reflect the benefits of the BGI acquisition and improved markets. The operating margin, as adjusted(2), for year-to-date September 2010 was 38.7%, an expansion as compared to 37.4% in 2009. Third quarter income and year-to-date margin reflect positive business momentum, the benefits of our diversified business model and continued investment in the business. Non-operating income, net of non-controlling interests, as adjusted(2), in the third quarter 2010 included gains of approximately $66 million as a result of higher valuations on co-investments including private equity, distressed opportunistic funds as well as real estate equity products.
Assets under management ("AUM") totaled $3.446 trillion at September 30, 2010, up $295.5 billion or 9% during the quarter and $2.011 trillion or 140% year-over-year, including $1.756 trillion of acquired AUM net of outflows due to manager concentration considerations and active quantitative performance ("merger-related outflows"). As discussed under "Third Quarter Business Highlights," net new business during the quarter totaled $50.1 billion, including $52.6 billion in long-term products and $1.8 billion in cash management, partially offset by $4.3 billion of net distributions in advisory AUM. BlackRock Solutions(R) added 4 net new assignments during the quarter, bringing the total for the year to 34 net new mandates. Investment performance remained competitive across much of the platform, supporting new business efforts in all regions. At October 15, 2010, the pipeline of net wins funded or to be funded totaled $46.1 billion, including $40.7 billion in long-term products and $5.4 billion in cash management.
Third quarter net income, as adjusted(2), was $2.75 per diluted common share, or $537 million, up 31% compared to third quarter 2009 diluted EPS, as adjusted(2), of $2.10 and up $0.38 compared to second quarter 2010. Third quarter 2010 included operating income, as adjusted(2), of $2.61 per diluted share and net non-operating income, as adjusted(2), of $0.14 per diluted share. Third quarter net income includes a tax rate benefit ($0.11 per diluted share related to first half of 2010) reflecting favorable tax rulings and resolution of certain tax positions. Operating income, as adjusted(2), of $737 million, which included $17 million of closed-end fund launch costs, improved $337 million, or 84%, compared to third quarter 2009 and declined $4 million, or 1%, compared to second quarter 2010. Compared to a year ago, operating results reflect the benefits of the BGI acquisition and improved markets. The operating margin, as adjusted(2), for year-to-date September 2010 was 38.7%, an expansion as compared to 37.4% in 2009. Third quarter income and year-to-date margin reflect positive business momentum, the benefits of our diversified business model and continued investment in the business. Non-operating income, net of non-controlling interests, as adjusted(2), in the third quarter 2010 included gains of approximately $66 million as a result of higher valuations on co-investments including private equity, distressed opportunistic funds as well as real estate equity products.
Assets under management ("AUM") totaled $3.446 trillion at September 30, 2010, up $295.5 billion or 9% during the quarter and $2.011 trillion or 140% year-over-year, including $1.756 trillion of acquired AUM net of outflows due to manager concentration considerations and active quantitative performance ("merger-related outflows"). As discussed under "Third Quarter Business Highlights," net new business during the quarter totaled $50.1 billion, including $52.6 billion in long-term products and $1.8 billion in cash management, partially offset by $4.3 billion of net distributions in advisory AUM. BlackRock Solutions(R) added 4 net new assignments during the quarter, bringing the total for the year to 34 net new mandates. Investment performance remained competitive across much of the platform, supporting new business efforts in all regions. At October 15, 2010, the pipeline of net wins funded or to be funded totaled $46.1 billion, including $40.7 billion in long-term products and $5.4 billion in cash management.
Hedge funds recorded the largest quarterly asset jump in over three year
Hedge funds recorded the largest quarterly asset jump in over three years, with total industry capital increasing by $120 billion in 3Q10 according to data released today by Hedge Fund Research, Inc. (HFR). The capital increase reflects a combination of both performance-based gains and new capital inflows, bringing total assets invested in the hedge fund industry to $1.77 trillion as of 3Q10.
The HFRI Fund Weighted Composite Index posted a gain of +5.17 percent in the third quarter, bringing the cumulative Net Asset Value (NAV) of the broad-based index to exceed the previous record level set in October 2007. After three years, the industry has emerged from the worst cumulative performance drawdown in its history, which had exceeded -21.4 percent through the volatility of the financial crisis.
The HFRI Fund Weighted Composite Index posted a gain of +5.17 percent in the third quarter, bringing the cumulative Net Asset Value (NAV) of the broad-based index to exceed the previous record level set in October 2007. After three years, the industry has emerged from the worst cumulative performance drawdown in its history, which had exceeded -21.4 percent through the volatility of the financial crisis.
Monday, October 18, 2010
RBC HEDGE 250 INDEX® RETURNED 2.20 PERCENT IN SEPTEMBER 2010
The RBC Hedge 250 Index® had a net return of 2.20 percent for the month of September 2010. This brings the year-to-date return of the Index to 2.54 percent. These returns are estimated and will be finalized by the middle of next month. The return for August 2010 has been finalized at 0.12 percent.
The RBC Hedge 250 Index is a non-investable benchmark of the performance of the hedge fund industry. The Index operates in accordance with a unique construction methodology. The Universe on which the Index is based currently consists of 3,791 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $892 billion.
_____Index Level Sep-10 Aug-10 YTD ITD
Hedge 250 122.19 2.20% 0.12% 2.54% 22.19%
Relative Value
Convertible Arbitrage 0.42% 0.62% -1.45% 17.16%
Equity Market Neutral 1.92% -0.73% -0.72% 7.96%
Fixed Income Arbitrage 1.44% 1.40% 12.52% 26.11%
Tactical
Equity Long/Short 3.45% -0.77% 1.12% 46.70%
Macro 1.21% 1.35% 1.58% 14.20%
Managed Futures 2.13% 3.39% 3.77% 63.81%
Event Driven
Credit 1.81% -0.36% 6.50% 7.83%
Mergers & Special Situations 3.54% -0.79% 5.27% 37.38%
Multi-Strategy
Multi-Strategy 1.01% 0.30% 3.64% 3.69%
Table contains estimated returns, except for the August returns, which are final.
Inception Date is July 1, 2005. Index Level at inception was 100.00.
The RBC Hedge 250 Index is a non-investable benchmark of the performance of the hedge fund industry. The Index operates in accordance with a unique construction methodology. The Universe on which the Index is based currently consists of 3,791 hedge funds (excludes funds of hedge funds) with aggregate assets under management of $892 billion.
_____Index Level Sep-10 Aug-10 YTD ITD
Hedge 250 122.19 2.20% 0.12% 2.54% 22.19%
Relative Value
Convertible Arbitrage 0.42% 0.62% -1.45% 17.16%
Equity Market Neutral 1.92% -0.73% -0.72% 7.96%
Fixed Income Arbitrage 1.44% 1.40% 12.52% 26.11%
Tactical
Equity Long/Short 3.45% -0.77% 1.12% 46.70%
Macro 1.21% 1.35% 1.58% 14.20%
Managed Futures 2.13% 3.39% 3.77% 63.81%
Event Driven
Credit 1.81% -0.36% 6.50% 7.83%
Mergers & Special Situations 3.54% -0.79% 5.27% 37.38%
Multi-Strategy
Multi-Strategy 1.01% 0.30% 3.64% 3.69%
Table contains estimated returns, except for the August returns, which are final.
Inception Date is July 1, 2005. Index Level at inception was 100.00.
The Dow Jones Credit Suisse Hedge Fund Index rose 3.43% in September
The Dow Jones Credit Suisse Hedge Fund Index rose 3.43% in September, with nine out of ten sectors posting positive performance for the month. Among the top performing sectors were Long/Short Equity (+5.09%) and Emerging Markets (+4.77%), which benefited from long directional exposure to the global equity market rally in September. The Event Driven sector finished up 3.20% as managers continued to capitalize on increasing activity in the M&A and distressed debt space.
Performance for the Broad Index and its ten sub-strategies is calculated monthly. September, August, and year-to-date performance numbers are listed below and are available at www.hedgeindex.com.
No funds were added to the Broad Index in September.
The following funds are no longer reporting to the Broad Index: Compass Income Master Fund, Inc., Amber Master Fund SPC, Iridian Opportunity Fund.
The Broad Index is constructed using the Credit Suisse database of more than 8,000 hedge funds. It includes both open and closed funds located in the U.S. and offshore, but does not include fund of funds. In order to qualify for inclusion in the index selection universe, a fund must have a minimum of USD 50 million under management, a 12-month track record, and audited financial statements. Index funds are selected using a formula based on assets under management, which ensures that the Index represents at least 85% of total assets in each of ten strategy-based sectors in the selection universe. In order to minimize survivorship bias, funds are not excluded until they liquidate or fail to meet the reporting requirements. The Broad Index is calculated as a total return index on a monthly basis, adjusted for asset in- and outflows, including a reselection according to the procedure outlined above, on a quarterly basis.
The Dow Jones Credit Suisse family of hedge fund indexes includes four separate indexes:
- The Dow Jones Credit Suisse Hedge Fund Index (formerly known as the Credit Suisse/Tremont Hedge Fund Index) is an asset-weighted benchmark that measures hedge fund performance and seeks to provide the most accurate representation of the hedge fund universe.
- The Dow Jones Credit Suisse AllHedge Index (formerly known as the Credit Suisse/Tremont AllHedge Index) is an investable index comprised of all 10 Dow Jones Credit Suisse AllHedge Strategy Indexes weighted according to the sector weights of the Broad Index.
- The Dow Jones Credit Suisse Blue Chip Hedge Fund Index (formerly known as the Credit Suisse/Tremont Investable Hedge Fund Index) is an investable index comprised of 60 of the largest funds across the ten style-based sectors in the Broad Index.
- The Dow Jones Credit Suisse LEA Hedge Fund Index (formerly known as the Credit Suisse/Tremont LEA Hedge Fund Index) is an asset-weighted, composite index which provides insight in to three specific regions of the emerging markets hedge fund universe (Latin America, EEMEA (Emerging Europe, Middle East and Africa) and Asia).
In accordance with the Dow Jones Credit Suisse Blue Chip Hedge Fund Index Rules and the Dow Jones Credit Suisse AllHedge Strategy Index Rules, Credit Suisse Hedge Index LLC is publishing the following notice:
The following funds are in a Special Rebalancing Situation: Alexandra Global Investment Fund I Ltd., Amber Fund (Cayman) Ltd., Arpeggio Fund, Basso Investors Ltd., Bennelong Asia Pacific Multi Strategy Equity Master Fund Ltd., BlueTrend Fund Ltd., Bridgewater Pure Alpha Fund II Ltd., Canyon Value Realization Fund (Cayman) Ltd., Castlerigg International Limited, Centaur Classic Convertible Arbitrage Fund Ltd., Compass Holdings Ltd., Contrarian Fund I Offshore Ltd., Deephaven Global Multi-Strategy Fund, Drawbridge Global Macro Fund Ltd. - SPV Assets, Firebird Avrora Fund Ltd, GLG European Long Short Fund Ltd., GLG Market Neutral Fund Ltd., Global GT Ltd., Gramercy Offshore Fund (SPV) SPC, JANA Offshore Partners Ltd., Jayhawk China Fund (Cayman) Ltd., Longacre International Ltd., Owl Creek Overseas Fund Ltd., Plexus Fund Ltd., Ramius Multi-Strategy Fund Ltd., Seneca Capital International, Ltd., Shepherd Select Asset Ltd., Thales International Fund Ltd., and WGTC Ltd.
Performance for the Broad Index and its ten sub-strategies is calculated monthly. September, August, and year-to-date performance numbers are listed below and are available at www.hedgeindex.com.
Index | September 2010 | August 2010 | YTD | |
Broad Index | 3.43% | 0.23% | 5.98% | |
Convertible Arbitrage | 1.11% | 1.35% | 7.51% | |
Dedicated Short Bias | -11.28% | 5.15% | -12.49% | |
Emerging Markets | 4.77% | 0.12% | 7.72% | |
Equity Market Neutral | 3.66% | -1.55% | -0.96% | |
Event Driven | 3.20% | -0.40% | 6.31% | |
Distressed | 2.07% | -0.64% | 5.58% | |
Event Driven Multi-Strategy | 4.03% | -0.24% | 6.78% | |
Risk Arbitrage | 2.31% | 0.31% | 4.14% | |
Fixed Income Arbitrage | 1.55% | 1.24% | 9.79% | |
Global Macro | 2.72% | 1.48% | 9.33% | |
Long/Short Equity | 5.09% | -1.12% | 3.12% | |
Managed Futures | 2.77% | 4.87% | 6.44% | |
Multi-Strategy | 2.79% | 0.01% | 5.01% | |
Dow Jones Industrial Average* | 7.85% | -3.91% | 5.57% | |
Dow Jones World Index | 9.54% | -3.62% | 2.89% | |
*Total Return Index | ||||
No funds were added to the Broad Index in September.
The following funds are no longer reporting to the Broad Index: Compass Income Master Fund, Inc., Amber Master Fund SPC, Iridian Opportunity Fund.
The Broad Index is constructed using the Credit Suisse database of more than 8,000 hedge funds. It includes both open and closed funds located in the U.S. and offshore, but does not include fund of funds. In order to qualify for inclusion in the index selection universe, a fund must have a minimum of USD 50 million under management, a 12-month track record, and audited financial statements. Index funds are selected using a formula based on assets under management, which ensures that the Index represents at least 85% of total assets in each of ten strategy-based sectors in the selection universe. In order to minimize survivorship bias, funds are not excluded until they liquidate or fail to meet the reporting requirements. The Broad Index is calculated as a total return index on a monthly basis, adjusted for asset in- and outflows, including a reselection according to the procedure outlined above, on a quarterly basis.
The Dow Jones Credit Suisse family of hedge fund indexes includes four separate indexes:
- The Dow Jones Credit Suisse Hedge Fund Index (formerly known as the Credit Suisse/Tremont Hedge Fund Index) is an asset-weighted benchmark that measures hedge fund performance and seeks to provide the most accurate representation of the hedge fund universe.
- The Dow Jones Credit Suisse AllHedge Index (formerly known as the Credit Suisse/Tremont AllHedge Index) is an investable index comprised of all 10 Dow Jones Credit Suisse AllHedge Strategy Indexes weighted according to the sector weights of the Broad Index.
- The Dow Jones Credit Suisse Blue Chip Hedge Fund Index (formerly known as the Credit Suisse/Tremont Investable Hedge Fund Index) is an investable index comprised of 60 of the largest funds across the ten style-based sectors in the Broad Index.
- The Dow Jones Credit Suisse LEA Hedge Fund Index (formerly known as the Credit Suisse/Tremont LEA Hedge Fund Index) is an asset-weighted, composite index which provides insight in to three specific regions of the emerging markets hedge fund universe (Latin America, EEMEA (Emerging Europe, Middle East and Africa) and Asia).
In accordance with the Dow Jones Credit Suisse Blue Chip Hedge Fund Index Rules and the Dow Jones Credit Suisse AllHedge Strategy Index Rules, Credit Suisse Hedge Index LLC is publishing the following notice:
The following funds are in a Special Rebalancing Situation: Alexandra Global Investment Fund I Ltd., Amber Fund (Cayman) Ltd., Arpeggio Fund, Basso Investors Ltd., Bennelong Asia Pacific Multi Strategy Equity Master Fund Ltd., BlueTrend Fund Ltd., Bridgewater Pure Alpha Fund II Ltd., Canyon Value Realization Fund (Cayman) Ltd., Castlerigg International Limited, Centaur Classic Convertible Arbitrage Fund Ltd., Compass Holdings Ltd., Contrarian Fund I Offshore Ltd., Deephaven Global Multi-Strategy Fund, Drawbridge Global Macro Fund Ltd. - SPV Assets, Firebird Avrora Fund Ltd, GLG European Long Short Fund Ltd., GLG Market Neutral Fund Ltd., Global GT Ltd., Gramercy Offshore Fund (SPV) SPC, JANA Offshore Partners Ltd., Jayhawk China Fund (Cayman) Ltd., Longacre International Ltd., Owl Creek Overseas Fund Ltd., Plexus Fund Ltd., Ramius Multi-Strategy Fund Ltd., Seneca Capital International, Ltd., Shepherd Select Asset Ltd., Thales International Fund Ltd., and WGTC Ltd.
Investors Say Performance Rules in Grading U.S. Hedge Funds
York Takes Top Grade in AR Magazine's Investor Survey of U.S. Hedge Funds; Major Shift in Lineup of Top-Scoring Firms Since Last Survey
Hedge fund investors have not forgotten the carnage of 2008, and the managers who learned its lessons -- as well as those who produced stellar returns -- garnered the top marks in the latest "Hedge Fund Report Card" survey in the September issue of AR Magazine.
York Capital Management, the New York hedge fund founded by Jamie Dinan that manages $11.35 billion in assets, topped the survey, with investors praising Dinan for his integrity and the firm's investment performance. York edged Bridgewater Associates out of the lead and jumped nine notches from its tenth-place ranking in last year's survey.
The Hedge Fund Report Card is a survey of hedge fund investors--including pension funds, foundations and endowments--who collectively oversee more than $250 billion in assets. For the survey, these investors scored the top 50 firms in the AR Billion Dollar Club on six factors: alignment of interests, alpha generation, independent oversight, infrastructure, transparency and liquidity terms.
Investors have changed the way they look at many of the industry's largest hedge fund firms, as evidenced by the major shift in the lineup of the top-scoring firms since last year's survey.
They have also changed their priorities about what factors they deem to be most important. Investors say their main concern now is performance, jumping into second place of the six factors that investors took into consideration when scoring the funds.
Bridgewater, headed by Ray Dalio and managing $50.9 billion, finished a close second place in this year's survey. Investors cited the firm's client service, creativity and innovation in giving the firm high marks. Rounding out the top 10 are Bain Capital/Brookside Capital Partners, Adage Capital Management, Canyon Capital Advisors and Baupost Group (tied for fifth place), King Street Capital Management, Taconic Capital Advisors and Angelo, Gordon & Co. (tied for eighth place) and Fortress Investment Group.
Fortress gained the most over the past year, climbing to 10th place from 30th last year. Another firm that jumped significantly this year is Angelo Gordon, which tied for eighth place with Taconic, up from its 24th-place ranking last year. Not surprisingly, strong performance is the reason most of these funds gained in the rankings, according to investors.
On the flip side, several prominent and highly regarded firms plummeted in this year's rankings. Tudor Investment Corp., Paulson & Co. and Highbridge Capital Management -- in second, third, and fourth place, respectively, last year -- fell significantly.
Global Custodian Hedge Fund Administration Survey 2010
The 15th Global Custodian Hedge Fund Administration Survey provides a snapshot of an industry which, unlike other parts of the securities services industry, has continued to fragment even as it has consolidated.
Responses were received this year on behalf of 81 administrators, 2 more than a year ago, when the hedge fund industry was still struggling with the immediate aftermath of the financial markets crisis. They range in size from the smallest, administering less than $500 million, to Citco, with assets under administration of $570 billion.
The chief cause of fragmentation is, ironically, consolidation. Larger administrators prefer larger clients, creating a niche for smaller administrators to service small to medium sized funds. This trend is reinforced by the increasing volume of institutional money invested in larger hedge funds. Institutional investors demand institutional quality administrators.
The principal reason for that is memories of the collapse of Lehman Brothers and the Bernard Madoff fraud. Institutional investors want to be sure the administrators to the funds they invest in are genuinely independent, and can offer independently fund accounting, greater transparency, more frequent and detailed reporting, and SAS-70 certified operational processes.
One CEO of a hedge fund administrator recently told Global Custodian that his firm experienced a 40% increase in due diligence queries from investors in 2009. Another says "managers are now required to provide potential investors with detail on their internal infrastructure and control environment as well as information on all of the external service providers they have selected. As an administrator, we have been asked by our clients to provide much more detail to both current and prospective investors on topics ranging from our industry leading technology, our SAS-70 and the firm's business continuity plan to our AML policies and procedures."
But the core of the business remains fund accounting. The speed and accuracy of NAVs are the measure of quality mentioned most often by respondents to the 2010 survey, and those that performed well in this area almost always performed well overall. Reporting matters too. With hedge fund investors becoming ever more demanding in terms of information, the ability of hedge funds to keep their investors happy depends increasingly on their administrators.
Another important change from 2009 is the presentation of the survey results. A new category of rating, from Leading Clients, is introduced this year. It aims to measure the ability of an administrator to attract and satisfy the most sophisticated and knowledgeable types of client, and especially those familiar with more than one provider. Surveys editor Allison Cayse says that Leading Clients, which are familiar ion other Global Custodian surveys, "provide the sternest and truest test of the capabilities of a hedge fund administrator."
Goldman Sachs claimed the top spot in the new category, closely followed by State Street AIS, the second largest administrator by AuA. BNY Mellon, which will from 2011 incorporate the client base of the separately rated PNC GIS, was third.
More details here.
Responses were received this year on behalf of 81 administrators, 2 more than a year ago, when the hedge fund industry was still struggling with the immediate aftermath of the financial markets crisis. They range in size from the smallest, administering less than $500 million, to Citco, with assets under administration of $570 billion.
The chief cause of fragmentation is, ironically, consolidation. Larger administrators prefer larger clients, creating a niche for smaller administrators to service small to medium sized funds. This trend is reinforced by the increasing volume of institutional money invested in larger hedge funds. Institutional investors demand institutional quality administrators.
The principal reason for that is memories of the collapse of Lehman Brothers and the Bernard Madoff fraud. Institutional investors want to be sure the administrators to the funds they invest in are genuinely independent, and can offer independently fund accounting, greater transparency, more frequent and detailed reporting, and SAS-70 certified operational processes.
One CEO of a hedge fund administrator recently told Global Custodian that his firm experienced a 40% increase in due diligence queries from investors in 2009. Another says "managers are now required to provide potential investors with detail on their internal infrastructure and control environment as well as information on all of the external service providers they have selected. As an administrator, we have been asked by our clients to provide much more detail to both current and prospective investors on topics ranging from our industry leading technology, our SAS-70 and the firm's business continuity plan to our AML policies and procedures."
But the core of the business remains fund accounting. The speed and accuracy of NAVs are the measure of quality mentioned most often by respondents to the 2010 survey, and those that performed well in this area almost always performed well overall. Reporting matters too. With hedge fund investors becoming ever more demanding in terms of information, the ability of hedge funds to keep their investors happy depends increasingly on their administrators.
Another important change from 2009 is the presentation of the survey results. A new category of rating, from Leading Clients, is introduced this year. It aims to measure the ability of an administrator to attract and satisfy the most sophisticated and knowledgeable types of client, and especially those familiar with more than one provider. Surveys editor Allison Cayse says that Leading Clients, which are familiar ion other Global Custodian surveys, "provide the sternest and truest test of the capabilities of a hedge fund administrator."
Goldman Sachs claimed the top spot in the new category, closely followed by State Street AIS, the second largest administrator by AuA. BNY Mellon, which will from 2011 incorporate the client base of the separately rated PNC GIS, was third.
More details here.
Valuation Disputes Related to Hedge Fund Breakups Can Be Avoided
Donald M. May, Ph.D, a Director in the Litigation and Corporate Financial Advisory Services Group at Marks Paneth & Shron LLP, has published an article in the "Hedge Fund Law Report" (HFLR) that details strategies for preventing valuation disputes when hedge fund general partnerships (GPs) are dissolved.
The dissolution of a hedge fund can be dizzyingly complex, more so than in the breakup of most other types of businesses. A proper valuation of the fund's current assets and an accurate estimate of its future performance are required in order to redeem the holdings of GP limited partners and estimate the impact on investors. This is no mean feat.
In the HFLR article, Dr. May discusses ways to approach the process efficiently -- and in a way that avoids debilitating valuation disputes. He also addresses:
The process by which hedge fund GP interests and hedge fund assets should be valued.
The valuation implications of the departure of a GP limited partner. (Note: Sometimes hedge fund's general partner itself is a limited partnership. Hence the phrase "GP limited partners.")
Three specific alternative valuation methods for valuing GP limited partnership interests.
The consequences of ambiguously drafted or nonexistent distribution agreements.
Specific guidelines for drafting valuation guidelines in hedge fund general partnership agreements.
The dissolution of a hedge fund can be dizzyingly complex, more so than in the breakup of most other types of businesses. A proper valuation of the fund's current assets and an accurate estimate of its future performance are required in order to redeem the holdings of GP limited partners and estimate the impact on investors. This is no mean feat.
In the HFLR article, Dr. May discusses ways to approach the process efficiently -- and in a way that avoids debilitating valuation disputes. He also addresses:
The process by which hedge fund GP interests and hedge fund assets should be valued.
The valuation implications of the departure of a GP limited partner. (Note: Sometimes hedge fund's general partner itself is a limited partnership. Hence the phrase "GP limited partners.")
Three specific alternative valuation methods for valuing GP limited partnership interests.
The consequences of ambiguously drafted or nonexistent distribution agreements.
Specific guidelines for drafting valuation guidelines in hedge fund general partnership agreements.
Combined Assets of Billion-Dollar Hedge Funds Nearly Flat in First Half of 2010, AR Magazine Survey Finds
With hedge funds turning out small profits in 2010, it's no surprise that the amount they manage has stagnated. Hedge funds operating in the Americas hold a combined $1.202 trillion, 1.7% more than these funds managed at the beginning of the year, according to latest Billion Dollar Club, AR Magazine's survey of American hedge funds managing $1 billion or more.
Globally, hedge fund assets amount to $1.9 trillion, up slightly from the $1.82 trillion managed at the beginning of the year. Global hedge fund assets totaled $1.72 trillion on July 1, 2009.
Full results are available online at www.absolutereturn-alpha.com.
As of July 1, there were 217 hedge fund firms with assets of $1 billion or more. That's compared with 213 funds holding a combined total of $1.182 trillion at the beginning of the year, according to the survey, which appears in the October issue of AR.
Despite last year's recovery, hedge fund assets are down 28% from their market peak in July 2008, when the biggest 268 American firms managed $1.675 trillion.
Asset growth has been hampered by this year's lackluster performance as well as investor redemptions. U.S. hedge funds gained just 2.7% in 2010 through the month of August, according to the AR Composite Index. That result is due largely to a tough second quarter; in May alone, three-quarters of all hedge funds posted losses.
"The broader market's erratic behavior has challenged hedge funds, as many managers are having a tough time posting substantial returns," said Amanda Cantrell, managing editor of AR. "Though many hedge funds lost money and suffered redemptions in the first half of the year, the biggest firms in the industry still managed to increase assets, if only slightly."
Nearly half (46%) of the $1 billion-plus hedge funds in the Americas either lost assets or stayed flat in this year's first half, according to the survey. The bulk of this year's growth in assets was experienced by the biggest firms. Assets managed by firms with more than $5 billion have increased by 1%, to $851 billion, since the beginning of the year. These largest firms, which number 72, control 71% of the assets in the Billion Dollar Club, a percentage that has not changed in the past year.
Bridgewater Associates emerges as this year's biggest winner. With $50.9 billion as of July 1, Bridgewater is not only the largest American hedge fund firm but also notched the biggest gain in assets, adding $7.3 billion -- or 16.74% -- since January. The strong performance of Bridgewater's Pure Alpha Fund II powered much of this growth.
The number two spot goes to JPMorgan Asset Management, which had $41.1 billion as of July 1. That's $2.7 billion more than the firm managed on January 1, with growth attributed to inflows into JPMorgan's fund business. JPMorgan's Highbridge Capital Management unit lost assets, falling to $16.46 billion from the $17.9 billion in managed in January.
Paulson & Co. takes number three with $31 billion, $1 billion less than in January 2010.
In dollar terms, the assets of D.E. Shaw Group fell more than any other firm this year. D.E. Shaw managed $17.8 billion as of July 1, down $5.8 billion from its January 1 total. D.E. Shaw has lost more than one third of its total hedge fund assets under management in the past year. Most of that loss occurred in the second half of 2009, when the firm paid out redemptions after having suspended investor withdrawal requests in 2008.
American hedge funds control the bulk of industry assets worldwide. By far, New York remains the central hub, accounting for $714.77 billion, or 59% of assets managed by the Billion Dollar Club.
TOP TEN HEDGE FUNDS IN THE AMERICAS
Firm /AUM ($ billions)
Bridgewater Associates 50.9
JPMorgan 41.1
Paulson & Co. 31
Soros Fund Management 27
Och-Ziff Capital Management Group 25.3
BlackRock 22.83
Angelo, Gordon & Co. 22.68
Baupost Group 22
Farallon Capital Management 20
King Street Capital Management 19.3
Source: AR Magazine
Globally, hedge fund assets amount to $1.9 trillion, up slightly from the $1.82 trillion managed at the beginning of the year. Global hedge fund assets totaled $1.72 trillion on July 1, 2009.
Full results are available online at www.absolutereturn-alpha.com.
As of July 1, there were 217 hedge fund firms with assets of $1 billion or more. That's compared with 213 funds holding a combined total of $1.182 trillion at the beginning of the year, according to the survey, which appears in the October issue of AR.
Despite last year's recovery, hedge fund assets are down 28% from their market peak in July 2008, when the biggest 268 American firms managed $1.675 trillion.
Asset growth has been hampered by this year's lackluster performance as well as investor redemptions. U.S. hedge funds gained just 2.7% in 2010 through the month of August, according to the AR Composite Index. That result is due largely to a tough second quarter; in May alone, three-quarters of all hedge funds posted losses.
"The broader market's erratic behavior has challenged hedge funds, as many managers are having a tough time posting substantial returns," said Amanda Cantrell, managing editor of AR. "Though many hedge funds lost money and suffered redemptions in the first half of the year, the biggest firms in the industry still managed to increase assets, if only slightly."
Nearly half (46%) of the $1 billion-plus hedge funds in the Americas either lost assets or stayed flat in this year's first half, according to the survey. The bulk of this year's growth in assets was experienced by the biggest firms. Assets managed by firms with more than $5 billion have increased by 1%, to $851 billion, since the beginning of the year. These largest firms, which number 72, control 71% of the assets in the Billion Dollar Club, a percentage that has not changed in the past year.
Bridgewater Associates emerges as this year's biggest winner. With $50.9 billion as of July 1, Bridgewater is not only the largest American hedge fund firm but also notched the biggest gain in assets, adding $7.3 billion -- or 16.74% -- since January. The strong performance of Bridgewater's Pure Alpha Fund II powered much of this growth.
The number two spot goes to JPMorgan Asset Management, which had $41.1 billion as of July 1. That's $2.7 billion more than the firm managed on January 1, with growth attributed to inflows into JPMorgan's fund business. JPMorgan's Highbridge Capital Management unit lost assets, falling to $16.46 billion from the $17.9 billion in managed in January.
Paulson & Co. takes number three with $31 billion, $1 billion less than in January 2010.
In dollar terms, the assets of D.E. Shaw Group fell more than any other firm this year. D.E. Shaw managed $17.8 billion as of July 1, down $5.8 billion from its January 1 total. D.E. Shaw has lost more than one third of its total hedge fund assets under management in the past year. Most of that loss occurred in the second half of 2009, when the firm paid out redemptions after having suspended investor withdrawal requests in 2008.
American hedge funds control the bulk of industry assets worldwide. By far, New York remains the central hub, accounting for $714.77 billion, or 59% of assets managed by the Billion Dollar Club.
TOP TEN HEDGE FUNDS IN THE AMERICAS
Firm /AUM ($ billions)
Bridgewater Associates 50.9
JPMorgan 41.1
Paulson & Co. 31
Soros Fund Management 27
Och-Ziff Capital Management Group 25.3
BlackRock 22.83
Angelo, Gordon & Co. 22.68
Baupost Group 22
Farallon Capital Management 20
King Street Capital Management 19.3
Source: AR Magazine
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