New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight into July Hedge Fund Performance

The Dow Jones Credit Suisse Hedge Fund Index finished up 1.42% in July. A new monthly commentary offers insight into hedge fund performance through the month of July. Some key findings from the report include:



Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished July up 1.42%, with 8 out of 10 strategies in positive territory;

In total, the industry saw estimated outflows of approximately $8.5 billion in July, bringing overall assets under management for the industry to approximately $1.75 trillion;

The Equity Market Neutral and Fixed Income Arbitrage sectors experienced the largest asset inflows on a percentage basis for the second consecutive month, with inflows in July of 3.03% and 0.22% from June 2012 levels, respectively;

Managed Futures funds posted positive results in July, with the month almost a mirror image of June in which managers were able to recoup the previous months’ losses and rebuild positions according to stronger signals; and

Event Driven funds generated overall positive performance in July against the backdrop of European sovereign debt issues and growth concerns in developed economies. M&A activity experienced a slight uptick in newly announced transaction volume in July and credit strategies generated gains during the month as a result of supportive technical strength and improved risk sentiment.

Single-manager hedge funds continue to grow

Single-manager hedge funds, which include commodities trading advisors, withstood market swings, macroeconomic uncertainties and regulatory reforms in the first half of 2012, increasing their reported assets under management by 5.23% to $1.892 trillion, according to a study by PerTrac, the leading provider of analytics, reporting and communications software for investment professionals. This mid-year update to their annual study on the size and composition of the hedge fund industry also found a continued decline in the reported assets under management of funds of hedge funds. The amount of money invested in these investment vehicles, which allocate exclusively to hedge funds, declined by 4.92% during the first half of 2012 to $425 billion. Part of the slide in these funds’ assets can be attributed to the decline in the number of them reporting information to databases, which slipped by 3.81% to 3,259.

Despite the drop for funds of hedge funds, the total, reported amount invested within the hedge fund industry, including funds of hedge funds and single-manager hedge funds (of which, commodities trading advisors – or CTAs – are considered a subset in this study) climbed to $2.317 trillion in the first six months of the year. The total number of all funds reporting to databases also jumped by 4.61% to 14,013, led by single-manager hedge funds, whose ranks swelled 7.46% to 10,754 funds. Most of the gains in the number of single-manager hedge funds (75%) came from small and start-up funds with less than $25 million in assets under management.

These reported numbers suggest that asset allocators have a growing interest in alternative investments and an increasing tendency toward investing directly in hedge funds. The data also points to the resilience of hedge funds as the end of the first half of 2012 marks three and a half years of steady growth.

“Although challenging economic conditions have impacted hedge funds’ performance during the last few years, investors still see their long term value and are giving them a significant place in their portfolios,” said Brendan Dolan, President of PerTrac.

When investors allocated to alternatives in 2012, they favored the largest funds. The “billion dollar club” of single-manager hedge funds, those that oversee more than $1 billion, saw assets under management increase to $1.146 trillion from $1.08 trillion at the end of 2011. The billion-dollar-plus funds represented 60.6% of all assets invested with single-manager hedge funds at the end of the first half of 2012.

The PerTrac hedge fund study is unique because it is the only one that aggregates information from 11 leading global databases. This provides for the most holistic picture of the industry. Of those funds that report, 54% reported to only one database in 2011, according to the 9^th edition of the study. PerTrac’s proprietary analytics software also removes duplicative fund data for an added level of precision in analyzing the number of funds and assets under management.

The study also found, among reporting funds, that:

• The “billion dollar club” reigned supreme within funds of hedge funds as well. 48.7% of assets were controlled by the 3.24% of firms that each managed more than $1 billion.
• CTAs posted healthy gains in assets of 6.05% this year, bringing their total to $438 billion under management at the end of first half of 2012. The total number of CTA funds rose by 1.26% from the end of 2011 to 1,528.
• Forty-five CTAs reported managing in excess of $1 billion and they accounted for 78.1% of that sector’s assets under management.

For more information, please download the full PerTrac study by clicking here.

Greenwich Global Hedge Fund Index rose +0.93% for July

Hedge fund managers posted positive results in July 2012 on average as the Greenwich Global Hedge Fund Index rose +0.93% for the month. As indicated in our first estimates earlier this month, Futures strategies were one of the best performers in July, returning an average of +2.29%. The GGHFI’s gain of +0.93% closely follows that of global equity returns in the S&P 500 Total Return (1.39%), and MSCI World Equity (+1.20%) equity indices. 66% of constituent funds in the GGHFI ended the month with gains.

Global Index Strategy Highlights

• Futures funds are one of the best performers during the month, gaining +2.29% on average. Many managers benefitted from long positions in commodities markets, especially in agriculture. Macro managers also performed well in the month with a +1.52% gain.

• Global stock markets saw much of their gains concentrated in the last week of the month. On average, Long/Short Equity funds returned another month of modest gains (+0.19%), continuing to trail equity markets. Value strategies outperformed both Opportunistic and Growth strategies with a gain of +0.41%. Short-Biased funds were a bright spot in this group in July, rising +3.52%.

• Fixed Income Arbitrage funds were the best performers in the Market Neutral Group in July, returning +1.51%. This strategy is now up approximately 6.1% YTD, along with Convertible Arbitrage. These strategies now lag only Long-Short Credit funds for their 2012 performance (+6.14% YTD).

• Regionally, funds investing in Developed Markets (+0.99%) outperformed those investing in Emerging Markets (+0.20%) on average in July. Global Developed Markets funds had the best month (+1.60%). Perhaps surprisingly, this was followed in the Developed Markets category by Western European funds, which rose 0.95% in July. This brings them to +4.02% YTD, making this region the strongest YTD. Funds focused on Emerging Markets Europe also posted very strong results for the month, gaining +1.17% on average.

U.S. Fixed Income: Hedge Funds Expand Influence

Fixed-income trading volume generated by U.S. hedge funds increased more than 30% from Q2 2011 to Q2 2012, according to the results of Greenwich Associates 2012 North American Fixed-Income Study. That growth far surpassed the 20% increase in trading volumes among all institutions and a 14% pick-up in trading volumes among other types of funds and advisors. As a result, hedge funds increased their clout as a source of U.S. fixed-income activity.

In 2011 hedge funds generated 18% of overall fixed-income trading volume in the United States. In 2012 that share grew to 24%. "However, reflecting the broader trends in market trading flows, hedge fund trading volumes in investment-grade credit actually dropped roughly 60% during the period in our study - even as their overall fixed-income volume grew substantially," says Greenwich Associates consultant Tim Sangston. "Meanwhile, hedge fund government bond trading volumes more than doubled."

As a result of the sharp pick-up in hedge fund trading activity, these investors are expanding their presence within individual fixed-income products. In U.S. government bonds, for example, hedge funds in the year ending Q2 2011 generated just 13% of total U.S. trading volume. In the same period ending in Q2 2012, hedge funds accounted for almost a quarter (24%) of volume. In distressed debt and high-yield credit derivatives, hedge funds generated more than 70% of total trading volume in the year covered in the research

TrimTabs and BarclayHedge Report Hedge Funds Redeem $4.9 billion in June 2012

Hedge Fund Industry’s June Performance Lags S&P 500; Assets Down 29.5% Since 2008 Peak. Equity-Based Funds Are Notably Low Performers Over Past 12 Months

BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry redeemed $4.9 billion (0.3% of assets) in June, compared with inflows of $1.1 billion in May. Based on data from 3,012 funds, the TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets were $1.71 trillion in June, down 1.3% from $1.73 trillion in May and down 29.5% from their peak of $2.4 trillion set in June 2008.

“The hedge fund industry can’t seem to get out of the doldrums,” said Sol Waksman, founder and president of BarclayHedge. “Industry performance continues to lag popular benchmarks such as the S&P 500, and asset growth has been flat for most of the past year.”

Industry outflows totaled $32.1 billion from July 2011 to June 2012, compared with inflows of $103 billion for the previous 12 months, according to the report, while industry assets have hovered below $1.75 trillion for the past nine months.

Hedge fund industry performance was up only 0.6% in June, substantially less than the S&P 500 Index, which rose 3.96%. “The industry outperformed the S&P 500 in April and May, but June’s numbers returned to the trend we’ve seen all year,” Waksman said. “For the first six months of 2012, the industry earned a 2.4% return while the S&P 500 rose 8.3%.”

Meanwhile, funds of hedge funds continued to underperform the industry at large. In June, funds of funds redeemed $8.7 billion (1.7% of assets), the 13th monthly outflow in the past 18 months, and posted a 0.5% loss, lagging the industry’s returns by 110 basis points.

Among the major hedge fund categories, Fixed Income funds had the strongest inflows and the top performance over the past year. “Fixed Income funds were a haven, reliably turning profits and attracting inflows as one crisis after another whip-sawed financial markets around the globe,” said Charles Biderman, founder and CEO of TrimTabs. Equity-based hedge funds did not fare so well, Biderman noted.

“Investors hoping to cash in on hedge fund managers’ stock-picking skills must be disappointed,” Biderman said, noting that out of 13 major hedge fund categories, no equity-related categories showed a profit in the past 12 months, and two of the four worst-performing categories were represented by stock funds, Equity Long Bias (-6.1%) and Equity Long Only (-7.4%).

Hedge funds based in the Eurozone experienced the largest inflows (3.0% of assets) in June among eight global regions tracked by TrimTabs and BarclayHedge, a turnaround from the dominant trend of the past year, “when investors dumped European funds en masse and poured billions into Japanese funds in the hope of capitalizing on shifts in the value of the yen,” said Leon Mirochnik, Vice President at TrimTabs. 

Meanwhile, the July 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that fund managers were evenly divided between neutral and bearish on the S&P 500 for August. Conducted in late July, the survey of 78 hedge fund managers found that bullish sentiment on the S&P 500 dropped to an 11-month low while bearish sentiment jumped to its highest level in the past nine months.

The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies.  Click here for further information.

BarclayHedge is a leading hedge fund data vendor and one of the foremost sources for proprietary research in the field of alternative investments. From its origin as a research specialist and performance measurement firm, BarclayHedge has developed complete client services as a publisher, database and software provider, and industry consultant.

TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity--including mutual fund flows and exchange-traded fund flows--as well as weekly withheld income and employment tax collections.  Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990.  More information here.

HEDGE FUNDS ADVANCED +0.47% IN JULY, Remain Cautious; Lag Volatile Equity Markets

Hennessee Group LLC, an adviser to hedge fund investors, announced today that the Hennessee Hedge Fund Index increased +0.47% in July (+2.78% YTD), while the S&P 500 gained +1.26% (+9.68% YTD), the Dow Jones Industrial Average advanced +1.00% (+6.48% YTD), and the NASDAQ Composite Index increased +0.15% (+12.83%). Bonds were also up, as the Barclays Aggregate Bond Index increased +1.38% (+3.78% YTD) and the Barclays High Yield Credit Bond Index increased +1.90% (+9.30%).

“July was another choppy month for equity markets and risk assets in general. Financial market volatility continued in July due to slowing economic growth in the U.S. and China and concerns about the European sovereign debt and banking crisis. ‘Risk off’ assets performed well as yields on U.S. and German government bonds declined to record lows. ‘Risk on’ assets were also positive as global equity markets generally posted gains for the month,” commented Charles Gradante, Managing Principal of Hennessee Group. “Hedge funds were conservatively positioned as the European situation remained precarious, and underperformed other risk assets.”

“Managers report that shorting has been challenging. Many maintain low net exposure because they are cautious about overall market direction, but would like to have higher gross exposure,” commented Charles Gradante. “Managers state that it has been challenging to grow the short portfolio as many shorts have declined in value, which reduces short exposure. In addition, it has been difficult to find and size new ideas as the market declines. Some managers are utilizing ETFs, which detracted from performance in the sharp late month rally.”

Equity long/short managers were essentially flat in July, as the Hennessee Long/Short Equity Index advanced +0.05% (+2.63% YTD). Equity markets were volatile again punctuated by a late month “risk on” rally as money moved out of treasuries into equities, sparking a +2% rally in the broad averages. The best performing sectors were telecommunications (+5.48%), energy (+4.06%), and consumer staples (+2.61%). The worst performing sectors were materials (-1.33%), consumer discretionary (-0.34%) and financials (+0.03%). Hedge funds performed well during the first couple weeks of July when global equity markets declined amid concerns about Europe. However, hedge funds underperformed as markets rallied on the hope that the European debt problems would be fixed. Many managers were cautious about increasing exposures into the “risk on” move due to fears that relief rally would be brief and risk of getting whipsawed would be high. While July is typically a strong month for long/short equity managers due to second quarter earnings reports, many managers struggled to generate alpha. While long portfolios performed well, short portfolios detracted from performance. Despite markets climbing higher, managers remain cautiously positioned with low net exposures. Managers remain worried about slowing growth in the U.S. and China as well as unresolved issues in Europe. In addition, investors are concerned about the November elections and the year-end “fiscal cliff” of tax cuts and economic stimulus that could drive the U.S. economy into recession.

“Stocks took a leap of faith that the Fed is making plans to shore up the economy and financial markets. The market rose +3% after the GDP was reported at 1.5%.” said Lee Hennessee, Managing Principal of Hennessee Group. “Hedge funds continue to be frustrated by a challenging investment environment. Managers remain steadfast, refusing to chase brief relief rallies and risk being whipsawed. Managers are waiting for markets to fit their strategy and for macro dominance to abate before aggressively deploying risk.”

The Hennessee Arbitrage/Event Driven Index advanced +0.70% (+4.17% YTD) in July. Like equity markets, credit markets were volatile, but posted gains by month end. Treasury yields ended the month lower, as the yield on the 10 Year U.S. Treasury declined 16 basis points from 1.67% to 1.51%. The Barclays Aggregate Bond Index increased +1.38% (+3.78% YTD) and the Barclays High Yield Credit Bond Index increased +1.90% (+9.30%). The spread of the BofA Merrill Lynch High Yield Master Index tightened 28 basis points from 6.44% to 6.16%. In addition, many managers experienced gains in asset-backed securities (ABS) and especially residential mortgage backed securities (RMBS), which had a strong month as investors continued to reach for better yields. Managers still like the space but state that the easy money has been made. The Hennessee Distressed Index increased +0.91% in July (+4.01% YTD). Distressed managers experienced gains as the markets rallied. Hedges detracted from performance. Some managers experiencing outsized gains from distressed exposure in Europe. The Hennessee Merger Arbitrage Index increased +0.38% in July (+2.54% YTD). Despite the market rally, merger arbitrage managers posted modest gains due to mixed performance across core positions, including CNOOC bid for Nexen. The Hennessee Convertible Arbitrage Index advanced +1.04% (+6.00% YTD). Convertible arbitrage managers were positive as risk markets rallied, yields continued to decline, and credit spreads tightened.

“Managers like high yield bonds as there is no foreseeable reason for the yield curve to steepen with the current economic condition and monetary policy,” commented Charles Gradante. “Managers also state that government bonds are overvalued and they will begin to short them at some point in the future. It will be hard for the Fed to keep U.S. rates down indefinitely. Any good news from here could lead to a reversal. Managers believe that there will be a time when shorting Treasuries and German Bunds is going to be very profitable.”

The Hennessee Global/Macro Index advanced +1.04% (+1.33% YTD) in July, its best month since February. Global equities were volatile, but posted gains. The MSCI All-Country World Index ended the month up +1.25% (+5.51% YTD) on speculation the ECB would buy bonds to help cut borrowing costs and save the euro. The index reversed course several times in July, registering 3% swings on four separate occasions. International hedge fund managers posted gains, as the Hennessee International Index advanced +1.37% (+3.55% YTD). Emerging markets were also positive as the MSCI Emerging Markets Index gained +1.61% (+3.94% YTD). Hedge fund managers posted gains, but underperformed due to conservative exposure levels, as the Hennessee Emerging Market Index advanced +0.93% (-2.07% YTD). Macro managers posted gains in July, as the Hennessee Macro Index advanced +3.10% (+2.83% YTD). Macro managers posted a strong month with profits coming from a several trades, including long commodities, long bonds, long the U.S. dollar, and short the euro. Agricultural commodities had a strong month due to supply concerns caused by the drought in the U.S. Managers generated gains in soybeans, wheat and corn, which all rallied sharply. Oil and natural gas also posted gains. In currencies, the U.S. Dollar gained +2.5% against the Euro, while declining -1.5% against the Yen. Macro managers also had positive contributions from U.S. and German fixed income, which profited from weakening European economic conditions and a downgrade of Chinese growth forecasts by the IMF.

Hedge funds posted positive returns for July, making it the first month since February to witness healthy returns. In July, the Eurekahedge Hedge Fund Index was up 1.15%¹, as managers capitalised on trends across several asset classes. Comparatively the MSCI World Index was up 1.05%².

Key highlights for July 2012:

• Hedge funds were back in the black with positive performance numbers in July after four months of negative returns.
  
  
• CTA/managed futures funds witnessed the best monthly return since December 2010, gaining 2.56% in July 2012; systematic trading managers posted 3% returns.
  
  
• The Mizuho-Eurekahedge Top 100 Index rose 2.11% in July, which was double the gain posted by global markets³.
  
  
• Latest research showed that investors increased allocations to global macro investing funds and macro managers have raised over US$25 billion June year-to-date.
  
  
• North American fixed income hedge funds witnessed their highest monthly in more than 10 years – gaining 3.95% during the month⁴.

 

Main Indices

Main Indices	July 2012*	2012 Returns	2011 Returns
Eurekahedge Hedge Fund Index	1.15	2.62	-3.57
Eurekahedge Fund of Funds Index	0.79	1.56	-5.41
Eurekahedge (Long-Only) Absolute Return Fund Index	0.78	5.36	-13.89
Eurekahedge Islamic Fund Index	0.91	3.92	-3.40

The close of July saw most regions in positive territory with European managers posting the best gains as the underlying markets rallied strongly in the last week of the month. Rallies were driven by positive remarks from ECB President Mario Draghi, who suggested further policy support for the region. The Eurekahedge European Hedge Fund Index was up 1.36% during month with the Eurekahedge Eastern Europe & Russia Hedge Fund Index gaining 2.44%.

 

Regional Indices

Regional Indices	July 2012*	2012 Returns	2011 Returns
Eurekahedge North American Hedge Fund Index	0.67	3.26	-0.33
Eurekahedge European Hedge Fund Index	1.36	2.79	-6.21
Eurekahedge Eastern Europe & Russia Hedge Fund Index	2.44	0.32	-20.35
Eurekahedge Japan Hedge Fund Index	-1.47	-0.58	-1.35
Eurekahedge Emerging Markets Hedge Fund Index	0.89	3.08	-8.06
Eurekahedge Asia ex-Japan Hedge Fund Index	0.44	2.18	-12.43
Eurekahedge Latin American Hedge Fund Index	0.87	5.69	2.06

Among other regions, managers investing in emerging markets and Latin America posted returns of 0.89% and 0.87% respectively, profiting from trends in agricultural commodities and the Euro-spurred month-end rally. Asia ex-Japan and North American funds also witnessed positive returns in July while Japanese hedge funds were down 1.47%. The Japanese sector declined through the month due to a sombre global economic outlook, yen appreciation and European debt concerns – the Tokyo Topix lost 4.39% during the month.

 

Strategy Indices

Most strategies were positive in July amid strong trends across a number of sectors. CTA/managed futures funds posted the best results during the month with managers gaining 2.56% on average – the highest return since December 2010. Systematic/quantitative trading secondary mandates were the best performing, averaging gains of 3% as trend-following strategies proved successful across the fx and agricultural commodities space. Macro investing managers also posted gains from these sectors, delivering returns of 1.49% during the month. A number of macro managers reported gains from exposure to interest rates and fixed income as safe haven assets performed well during the month amid increasing uncertainty in the markets. The Eurekahedge Fixed Income Hedge Fund Index also registered strong returns in July, gaining 1.28%.

Strategy Indices	July 2012*	2012 Returns	2011 Returns
Eurekahedge Arbitrage Hedge Fund Index	0.79	3.90	1.35
Eurekahedge CTA/Managed Futures Hedge Fund Index	2.56	1.96	-1.39
Eurekahedge Distressed Debt Hedge Fund Index	0.42	3.05	-2.17
Eurekahedge Event Driven Hedge Fund Index	-0.08	1.69	-4.40
Eurekahedge Fixed Income Hedge Fund Index	1.28	5.11	0.85
Eurekahedge Long/Short Equities Hedge Fund Index	0.46	1.89	-6.90
Eurekahedge Macro Hedge Fund Index	1.49	1.16	-1.18
Eurekahedge Multi-Strategy Hedge Fund Index	0.82	3.42	-2.30
Eurekahedge Relative Value Hedge Fund Index	1.00	6.77	-0.78

 

Mizuho-Eurekahedge Indices	July 2012*	2012 Returns	2011 Returns
Mizuho-Eurekahedge Index - USD	1.59	2.45	-2.07
Mizuho-Eurekahedge TOP 100 Index - USD	2.11	3.39	1.87
Mizuho-Eurekahedge TOP 300 Index - USD	1.93	2.72	0.04

 

Eurekahedge indices are available for download from www.eurekahedge.com/indices/hedgefundindices.asp and are updated with the latest fund returns at 23:30 GMT every day. Index values and data can be downloaded for free and subscribers can download the full list of index constituents. Please contact indices@eurekahedge.com for more information.

Managed Futures and Credit Hedge Funds Start 2H 2012 with a Strong July

Hedge funds reporting July performance show a median return of +0.7% versus +1.4% for the S&P 500 Total Return. YTD, hedge funds are +3.1% vs. +11.0% for the S&P 500 TR. The industry's performance in July was most positively influenced by managed futures strategies which benefited not only from the return of trending USD strength, but from many which appeared well positioned to benefit from the drought induced spike in grain prices. Credit strategies produced their best month since January and have produced aggregate returns greater than 2x that of equity strategies in 2012.

• Hedge funds reporting July performance show a median return of +0.7%, in-line with regression estimates of +0.8%, versus +1.4% for the S&P 500 TR. YTD, hedge funds are +3.1% vs. +11.0% for the S&P.

• The HFN Hedge Fund Aggregate Index was +0.6% and +1.8% through July in 2011 and 2010, respectively, before finishing those years -5.0% and +10.6%.

• The Eurozone’s continuous state of flux along with poor U.S. jobs data and its impact on monetary policy expectations continued to influence global markets in July. Unlike June when multiple macro events pushed equities broadly higher, much of July’s news was negative until the ECB president’s comments on the 25th provided a questionable basis for a positive reversal.

• The industry’s performance in July was most positively influenced by managed futures strategies which benefited not only from the return of trending USD strength, but from many which appeared well positioned to benefit from the drought induced spike in grain prices.

• Prior to the month-end rally, July was challenging for directional equity strategies and those with a long bias lagged significantly. Credit strategies produced their best month since January and have produced aggregate returns greater than 2x that of equity strategies in 2012.

• Through June, hedge fund assets have fallen for four consecutive months to $2.5 trillion, a decline of $20.8 billion in June and $53.4 billion in Q2. Net outflows occurred in 8 of the last 12 months, during which $28 billion has been taken out of the industry. Redemptions from FoFs appear to be the outflows’ primary driver, offsetting what is likely healthy direct investment.

• In reaction to the theme of difficult to predict, macro driven markets, investor flows were weak across the board in June, particularly for event driven equity and emerging markets. In Q2, credit and macro strategies were two of the few sectors receiving net inflows.

Full report

ISRAEL HEDGE FUND INDUSTRY GROWS 162% IN LAST FIVE YEARS

Israel, already widely acknowledged as a global leader for innovation in technology and life sciences, is now making major strides in the financial services industry. A surveyhttp://tzurmanagement.com/tzur-management-israel-hedge-fund-survey released today, conducted by Tzur Management, the leading platform and fund administrator for the Israeli fund industry, highlights the significant expansion in the industry over the last five years. Since 2006 the number of funds in Israel has increased 162%, reflecting the emergence of a high growth investment industry in the country.

Over the past decade, deregulation and new legislation in securities and tax law, together with structural changes in the institutional market, have made it possible for a robust financial services industry to emerge. Israeli financial institutions, and particularly alternative investment funds, have evolved into sophisticated global investors with billions of dollars under management. However, a lack of knowledge and awareness of the potential of the Israeli investment industry means that less than a third of funds under management are raised from international sources, the survey has discovered.

The report’s other key findings include: .

• Assets under management in Israel grew 30% in 2011 and an additional 10% in Q1 2012.
• Israeli hedge funds (“IHF”) have consistently outperformed the HFRX Global Hedge Fund Index since the financial crisis (2009: IHF +33.7%, HFRX +13.4%; 2010; IHF +17.6%, HFRX +5.2%; 2011: IHF +7.9% HFRX -8.9%).
• Over 80% of participants agreed that foreign investors are not aware of the Israeli hedge fund industry.
• Equity Long/Short funds currently hold the largest share of the industry, with 43% of assets under management, with quantitative strategies the second largest accounting for 23% (doubling since 2008).
• Over 50% of funds invest all their capital in international markets with no direct exposure to the markets in Israel.

Yitz Raab, Founder and Managing Partner of Tzur Management, said:

“This report marks the first-ever survey of the Israeli hedge fund industry. Israel’s impressive academic and scientific infrastructure, continuing immigration of highly skilled professionals, and a developed economy with a strong entrepreneurial culture are all fueling the industry’s rapid growth. Although in its early stages, it is our belief that, as in the areas of technology and life sciences, the Israeli hedge fund industry will grow to become a recognized center of excellence over the coming decade.” .

New Dow Jones Credit Suisse Hedge Fund Index Commentary

The Dow Jones Credit Suisse Hedge Fund Index finished down 0.40% in June. A new monthly commentary offers insight into hedge fund performance through the month of June. Some key findings from the report include:

• Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished May down 0.40%, with 5 out of 10 strategies in positive territory;
• In total, the industry saw estimated outflows of approximately $2.53 billion in June, bringing overall assets under management for the industry to approximately $1.73 trillion;
• The Equity Market Neutral and Fixed Income Arbitrage sectors experienced the largest asset inflows on a percentage basis in June, with inflows of 0.93% and 0.43% from May 2012 levels, respectively;
• Long/Short Equity funds posted positive performance as June was somewhat of a “risk-on” month and select Bank exposure performed positively as Financials, in general, were positive; and
Event Driven funds generated overall negative performance in June against the continued backdrop of an uncertain economic environment.

While M&A activity experienced a slight decline in newly announced transaction volume in June, credit strategies generated gains during the month due to supportive technical conditions and improved risk appetite from investors.

Redemption Fees Becoming More Prevalent for Hedge Funds

In a recent survey of their alternative investment clients, TKS Solutions noticed a trend that more funds are enacting redemption fees as a means to retain capital. Given the struggle that has occurred between the investors’ desire for liquidity and the fund’s desire for a stable capital base, this development is not a complete surprise. However, the complications that are associated with the calculations and accounting implications often catch funds off-guard.

As a result of the recent economic turmoil, formerly dormant investors—who would happily park their money in a fund for years at a time—have become very active, always looking for sources of liquidity. This constant movement causes volatility in the fund’s capital, and firms have looked to various means to counter that movement in order to keep invested capital within their organization.

One approach is for funds to create stringent liquidity gates. While this meets the fund’s goals, investors abhor gates. They complain that managers are creating a “Hotel California for money”, which can never leave—even in times of emergency.

An alternative approach is enacting a redemption fee. This allows investors to withdrawal their money at any time they desire, but for a price. The idea being that most investors will leave their capital within the fund, rather than incur a penalty.

While redemption fees seem like a straightforward solution, they are anything but. There are two all-to-common, but often overlooked, complications in processing redemption fees: the allocation of the fees to the other investors, and the interaction of the fee with the performance fee calculation. Both of these complications combine to break many of the manual tools typically used by fund accountants.

The fees charged on redeeming investors are usually allocated to the remaining investors in the form of revenue. For redemptions which occur at the beginning of the period, capital percentages must be adjusted by the amount of the withdrawal before the “redemption fee revenue” is distributed.

For ending redemptions, a new set of percentages that excludes the withdrawn capital need to be created and used to allocate the redemption fees. Fund accountants must pay particular attention to the allocation percentages used; otherwise a portion of that income could erroneously go to the departing investor.

The other complication relates to the interaction of the incentive fee calculation and the redemption fees. Since the withdrawn amounts are typically determined after incentive fees are charged, an additional step needs to be taken for “end of period” redemptions in funds with incentive fees. For those redemptions, after the incentive fee is calculated, and after the withdrawal amounts are determined, and after the redemption fee income is allocated to the remaining investors, then the incentive fee needs to be re-calculated. That additional step is necessary since the income used to determine the incentive fee did not include the allocated redemption fee “income”. If that step is not done, then the general partner will forever lose out on charging a performance fee on the “income” that was distributed as a result of the redemption.

Funds need to maintain a stable base of capital in order to effectively invest. Investors are always looking for sources of liquidity. Redemption fees are becoming a common device for balancing these opposing desires. Funds can avail themselves to this tool, so long as their back office has the sophisticated systems/processes to handle the complications that arise from processing redemption fees.

Hedge Funds Take in Lackluster $852 Million in May 2012

BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry took in a lackluster $852 million (0.05% of assets) in May, but that was an improvement over April’s net outflows of $3.2 billion. Based on data from 3,001 funds, the May TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that the hedge fund industry assets stood at $1.72 trillion in May, down 2.0% from $1.76 trillion in April and down 29% from the peak of $2.4 trillion set in June 2008.

“The small inflows of May did not really buck the larger hedge fund industry trend of meager returns, flat asset growth, and net outflows over the past year,” said Sol Waksman, founder and president of BarclayHedge. Outflows from the industry totaled $18.8 billion from June 2011 to May 2012, compared to inflows of $96.2 billion for the previous 12 months while assets hovered around $1.7 trillion for the past nine months.

Hedge Funds Lag Equity Markets in Macro Driven Market

The Hennessee Hedge Fund Index increased +0.06% in June (+2.10% YTD), while the S&P 500 gained +3.96% (+8.66% YTD), the Dow Jones Industrial Average advanced +3.93% (+5.42% YTD), and the NASDAQ Composite Index increased +3.81% (+12.66%). Bonds were also up, as the Barclays Aggregate Bond Index increased +0.04% (+2.37% YTD) and the Barclays High Yield Credit Bond Index increased +2.11% (+7.26%).

“It looked like June was going to be another poor month for risk assets until the last trading day of the month. The agreement from European Union leaders towards a future banking union resulted in a short-covering rally,” commented Charles Gradante, Managing Principal of Hennessee Group. “The markets continue to be macro driven. Trading volume is down, volatility is up, correlation is high, and macro events are driving price swings. It remains a challenging environment for security selection. Most managers are not trying to time the market, as it is difficult to do consistently. Most are conservative, trying to generate alpha in specific opportunities.”

“Hedge funds lagged in June as traditional benchmarks posted strong positive performance. The majority of gains came at the end of the month as investor sentiment improved on the hope for stability in Europe. Hedge funds did not participate in the rally due to conservative exposures and suffered losses due to short covering. ” said Lee Hennessee, Managing Principal of Hennessee Group. “For the year, hedge funds are underperforming traditional equity benchmarks.”

Equity long/short managers posted modest positive performance, as the Hennessee Long/Short Equity Index advanced +0.63% (+2.58% YTD). After a relatively calm start to the year, the Dow posted twenty-two days of triple-digit moves during the second quarter, compared with just six in the first quarter. Equity market volatility continued in June as the S&P 500 ended the month with a gain of nearly 2.5%, bringing the monthly return to +4%. Hedge fund managers started June with conservative exposures after the sharp selloff in May. As a result, hedge funds failed to participate in the market rally.

Looking to July, managers expect volatility to continue as we enter second quarter reporting season, but are optimistic as earnings releases should lead to more dispersion among securities. Managers are seeing opportunities as equity valuations appear cheap. The S&P 500 is trading at a price-to-earnings multiple of less than 13. Although expectations for earnings have come down, many remain bullish on corporate profits. However, there are plenty of longer term concerns. While Europe remains a worry for markets, focus seems to have shifted to the U.S., where investors are concerned about whether a political stalemate will dictate performance during the second half of the year. With government policy affecting financial markets, investors are nervous about the November elections and the year-end “fiscal cliff” of tax cuts and economic stimulus that could drive the U.S. economy into recession.

“Some pundits are saying that a ‘perfect storm’ is developing due to stalled growth in the United States, the European debt crisis, a slowdown in China, and military conflict in Iran,” commented Charles Gradante. “But many managers are taking a contrarian point of view, stating that this scenario is already built into stock prices. By any measure, stocks are cheap. The S&P 500 is currently trading at a price-to-earnings (PE) ratio of 12.8. Stocks in the United Kingdom and France now are trading at only 9.5 times 2012 earnings, the lowest in 30 years. With more than 60% of corporate sales from European firms originating internationally, investing in Europe may be around the corner.”

The Hennessee Arbitrage/Event Driven Index declined -0.28% (+3.11% YTD) in June. The Barclays Aggregate Bond Index increased +0.04% (+2.37% YTD). U.S. yields ended the month slightly higher, as the yield on the 10 Year U.S. Treasury increased 8 basis points from 1.59% to 1.67%. The spread of corporate bonds in the Barclays U.S. Aggregate index over Treasuries tightened slightly, with the average yield on the bonds reaching 3.27%. High yield credit rallied, as the spread of the BofA Merrill Lynch High Yield Master Index tightened 52 basis points from 6.96% to 6.44%.

The Hennessee Distressed Index fell -1.24% in June (+2.29% YTD). Distressed funds were down for the month as core long positions and special situations declined in value.

The Hennessee Merger Arbitrage Index decreased -0.64% in June (+1.93% YTD). Managers’ performance was mixed as deal spreads widened in several core positions amid heightened volatility. Global mergers-and-acquisition activity has declined due with renewed concerns about the health of global economies.

The Hennessee Convertible Arbitrage Index advanced +1.02% (+5.04% YTD). Convertible arbitrage managers were marginally higher driven primarily from the tightening of credit spreads.

“Many managers booked gains in a short oil trade betting on a global slowdown. Signs of slowing global growth and a production increase by Saudi Arabia pushed prices to nine month lows. Most were able to book gains despite a sharp reversal at month end as oil jumped +8%,” commented Charles Gradante. “While many are short oil due to near term growth concerns, most are longer term bulls. Secular demand from emerging markets and the depletion of oil resources will provide upward pressure over the next decade.”

The Hennessee Global/Macro Index declined -0.99% (-0.25% YTD) in June. Throughout the month, investors were focused on events in Europe, and a victory for Greece’s pro-bailout party was well received by the markets. Global financial market volatility continued throughout June due to concerns about the European banking system. Global equity markets ended the month with broad-based gains, posting strong performance on the final trading day. The MSCI All-Country World Index advanced +6.79% in June (+0.77% YTD). Italy (+13.58%) and Spain (+20.63%) were top performers.

International hedge fund managers posted small gains due to conservative positioning, as the Hennessee International Index advanced +0.20% (+2.50% YTD).

Emerging markets were also positive, but underperformed the developed markets. The MSCI Emerging Markets Index gained +3.43% (+2.29% YTD). Hedge fund managers posted losses as currency exposure detracted from performance, as the Hennessee Emerging Market Index declined -1.93% (-4.79% YTD).

Macro managers were down in June, as the Hennessee Macro Index decline -1.44% (-0.64% YTD).

Managers experienced losses in currencies and fixed income as most were positioned for a continued “risk off” environment. Many macro funds attempt to follow trends, resulting in crowded trades and painful reversals. Those managers were whipsawed by the euro, which suffered its longest losing streak of the month only to reverse and post its biggest gain since October. The Dow Jones-UBS Commodity Index was up +5.49% for the month of June (-3.74%). However, performance among commodities was mixed, with a sharp decline in oil, significant gains in natural gas and agriculturals, and mixed performance across metals.

The Dow Jones Credit Suisse Core Hedge Fund Index Closed Down 0.45% in June

The Dow Jones Credit Suisse Core Hedge Fund Index closed down 0.45% in June as the index component strategies reported mixed results for June.



Dow Jones Credit Suisse Core Hedge Fund Index
-0.45%
Convertible Arbitrage
-0.77%
Emerging Markets
-0.09
Event Driven
-0.70%
Fixed Income Arbitrage
0.92%
Global Macro
0.15%
Long/Short Equity
0.02%
Managed Futures
-3.37%



Early estimates indicate the Dow Jones Credit Suisse Hedge Fund Index (“Broad Index”) finished down 0.19% in June (based on 66% of assets in the index reporting).



Strategy Estimates

Broad Benchmark Index
-0.19%
Convertible Arbitrage
0.56%
Dedicated Short Bias
-2.82%
Emerging Markets
0.60%
Equity Market Neutral
0.98%
Event Driven
0.40%
Distressed
0.05%
Event Driven Multi-Strategy
0.48%
Risk Arbitrage
0.66%
Fixed Income Arbitrage
0.71%
Global Macro
-1.16%
Long/Short Equity
0.66%
Managed Futures
-3.53%
Multi-Strategy
0.69%

HEDGE FUNDS POST NARROW JUNE GAIN TO CLOSE FIRST HALF WITH GAIN OF +1.7 PERCENT

Relative Value Arbitrage and Equity Hedge lead June gains;

Macro losses concentrated in CTA, Commodity strategies
Hedge funds posted a narrow gain to conclude the first half of the year, with the HFRI Fund Weighted Composite Index posting a gain of +0.05 percent for the month of June, according to data released today by HFR, the global leader in the indexation and analysis of the hedge fund industry.

Hedge funds overcame conservative positioning in the final days of the month, as June ended on a note of optimism with regard to the European sovereign debt crisis. Macro losses partially offset gains in Equity Hedge, Event Driven and Relative Value strategies. June marks the conclusion of a positive, but muted, first half of the year for the hedge fund industry, with the HFRI Fund Weighted Composite gaining +1.7 percent for 1H12. Hedge funds had gained nearly 5 percent in the first two months of the year before posting three consecutive months of decline, including a decline of -2.4 percent in the volatile month of May.

Indicative of the wide dispersion of hedge performance in 1H12, three of the four main hedge fund strategies posted gains higher than the broad-based composite. Fixed income-based Relative Value Arbitrage strategies posted a gain of +0.9 percent for June and +4.3 for the 1H12; Relative Value strategies have produced consistent, non-directional arbitrage gains, posting positive monthly performance in 36 of 42 months since January 2009.

Equity Hedge strategies posted a gain of +0.9 percent in June and +2.1 percent for 1H12; broad-based June gains were offset by weakness in Energy/Basic Materials and Short Bias sub-strategies. Equity Hedge strategies traded in a volatile range in 1H12, gaining nearly +7.0 percent in the first two months of the year, before experiencing a sharp decline of -4.6 percent in May.

Event Driven strategies posted a gain of +0.1 percent in June and +2.4 percent for 1H12. Corporate transaction activity remained steady for the quarter, and all ED sub-strategies posted gains for 1H12, despite specific transaction volatility, disappointing performance of several equity IPOs and continued regulatory and shareholder pressure on financial institutions.

Macro funds posted a decline of -1.6 percent for June, reducing Macro performance in 1H12 to a decline of -0.6 percent; Macro weakness was concentrated in Systematic CTA strategies, which posed a June decline of -3.0 percent, reversing most of the prior month’s gain of +3.6 percent.

Emerging Markets hedge funds posted a gain of +0.6 percent in June to end 1H12 with a gain of +1.1 percent, while Fund of Hedge Funds posted a decline of -0.50 percent in June, also ending 1H12 with a gain of +1.0 percent.

“Hedge fund performance in the first half of 2012 reflects the challenging and volatile environment created by the combination of slowing global growth, persistently low levels of investor risk tolerance and the wide-ranging impacts of the European financial crisis across asset classes and global regions,” stated Kenneth J. Heinz, President of HFR. “The broad based gains concentrated in Relative Value Arbitrage and Event Driven strategies reflect not only defensive positioning with regard to the European sovereign debt crisis, but caution with regard to regulatory and shareholder reaction to developments at specific financial institutions. Performance also reflects continued evolution of the hedge fund industry toward lower equity market beta strategies; we expect hedge fund industry growth to continue along these dynamics in coming quarters.”

Hedge funds face tough month in June amid trend reversals and shifts in risk sentiment

Hedge funds witnessed a flat to slightly negative performance in June amid reversals in market trends. The Eurekahedge Hedge Fund Index was down 0.19%1 during the month, bringing its June year-to-date performance to 1.33%. In comparison the MSCI World Index was up 3.65%2.

Key highlights for June 2012: •

Hedge funds posted negative returns for the fourth consecutive month in June, the longest losing streak since 2008._ •

North American fixed income and relative value hedge funds gained 3.71% and 3.40% respectively in June._ •

The Mizuho-Eurekahedge Long Short Equities Index was up 1.10% in June, showing that larger funds outperformed their peers._

Hedge funds down 2.4% in 2Q-2012, making it the worst second quarter on record for the industry

Hedge funds under-performed the markets during June, with most losses coming from trend-following strategies with global mandates. Most regional hedge funds delivered positive returns, with managers investing in Eastern Europe and Russia posting the largest gains. The Eurekahedge Eastern Europe & Russia Hedge Fund Index was up 3.83% in June, while the RTS Stock Index gained a strong 8.70%, following a sharp rally on the last trading day of the month. North American and Japanese hedge funds also witnessed positive returns of 0.77% and 2.15% respectively, with most managers gaining from currency exposures and long positions in equity indices and financial stocks. European and Asia ex-Japan hedge funds witnessed losses of 0.15% and 0.43% respectively as many managers had been positioned for greater declines in the markets.

Strategy Indices

Most strategies posted marginally positive returns in June with relative value and fixed income hedge funds delivering the highest returns. The Eurekahedge Relative Value Hedge Fund Index increased 1.85% as market neutral and mean reversion trades locked in profits for the managers. Macroeconomic uncertainty and recession in European economies helped fixed income hedge funds, which averaged gains of 1.18%. Distressed debt managers were down 0.38% for the month even as US high yields and leveraged loans gained through the month. The frequent changes in market sentiment due to Spain’s request for financial support and concerns over global growth made it difficult for trend-following managers to navigate successfully through the month. After an excellent performance last month, CTA/Managed futures hedge funds dropped 2.09% in June.

_Eurekahedge indices are available for download from www.eurekahedge.com/indices/hedgefundindices.asp and are updated with the latest fund returns at 23:30 GMT every day. Index values and data can be downloaded for free and subscribers can download the full list of index constituents. Please contact indices@eurekahedge.com for more information.

Investable hedge fund composite index was down 1.38% quarter-to-date

Bank of America Merrill Lynch’s Hedge Fund Monitor reports that the investable hedge fund composite index was down 1.38% quarter-to-date (QTD) as of June 27, compared to down 5.44% for the S&P 500. All seven strategies outperformed the S&P 500.

CTA Advisors and Macro performed the best and were the only strategies with positive returns, up 0.99% and 0.46%, respectively. Market Neutral and Equity Long/Short performed the worst, down 3.45% and 3.27%, respectively.

Market Neutral funds continued to cut market exposure to 1% net short from 1% net long. Equity Long/Short sold market exposure further to 23% from 26% net long. Macros added to their shorts in the S&P 500 & NASDAQ 100, partially covered commodities &10-year Treasuries, bought EM & EAFE to net longs, and maintained their long positions in USD. In addition, macros reduced small cap tilt.

Significant HF moves across asset classes based on CFTC data: •
Equities. Large specs bought the NASDAQ 100, partially covered the S&P 500 and added to their shorts in the Russell 2000. Readings are neutral.
•
Agriculture. Large specs bought soybean, corn and wheat. Soybean stays in a crowded net long, wheat is approaching a crowded long.
•
Metals. Large specs sold gold, silver, platinum and palladium, while adding to their shorts in copper. Readings are neutral.
•
Energy. Large specs sold crude oil, heating oil & gasoline, and added to their shorts in natural gas. Heating Oil is approaching a crowded short._
•
Forex. Large specs sold USD & Yen, while adding to their shorts in Euro. Euro remains in a crowded short; USD is in a crowded long.

Interest Rates. Large specs sold 30-yr and 2-yr Ts, while adding to their shorts in 10-yr Ts. 30-yr Treasuries stay in a crowded net long

Women working in hedge funds struggle to be taken seriously at work

Women working in hedge funds struggle to be taken seriously at work, according to a new study from two leading management experts.

The report from the universities of Leicester and Essex looked into the concept of "adulting" which is defined as the attempt by people to be seen as mature and responsible, professionally and socially.

The academics, who looked at men and women at a London hedge fund, found that women faced problems at every stage of adult life – from getting started in the company to keeping credibility among colleagues after giving birth.

By contrast, young male staff were given more opportunities to settle into corporate life, and suffered fewer dilemmas in juggling work and parenthood, found Jo Brewis, Professor of Organisation and Consumption at the University of Leicester School of Management, and Dr Kat Riach, Senior Lecturer in Management at Essex Business School at the University of Essex.

"Our in-depth research into life for male and female workers at a busy hedge fund showed women are never the right age in organisational terms," said Professor Brewis, who has borrowed the phrase 'never the right age' from fellow management experts Professor Wendy Loretto and Dr Colin Duncan from the University of Edinburgh Business School, who originally coined it.

Professor Brewis and Dr Riach gathered evidence in late 2010 through 53 interviews with men and women at the fund aged between 25 and 37, and 150 hours of observation.

They found that women's problems began when they entered the company. Unlike their male colleagues they were given little or no informal guidance and training as new members of a team.

When one young female employee found that she had done something incorrectly weeks before, she said: "I thought 'Why didn't they just tell me that? Were they scared I was going to burst into tears or something?' That really bothered me!"

Once they had children, women thought it necessary to hide their day-to-day parental duties as much as possible, to prevent damage to their careers. One female worker said: "I think the pressure is trying to prove (yourself), trying to act as though you haven't had a baby and still do everything exactly the same, like you've got a puppy at home."

New fathers found themselves in a much easier position, according to the research. Talking about a male colleague, one female employee described how she'd asked him how his life had changed after becoming a father. He replied: "No, I haven't noticed any difference at all." The woman added: "I was like, 'I bet your wife has!'"

These differences in the treatment of men and women existed despite proclamations of gender-blindness by the fund's staff. One male trader said: "Money doesn't know you're a woman. If you make a profit or you make a loss, the bottom line is all that matters, [that's] all that anyone takes any notice of."

GlobeOp: Redemption Indicator/ Hedge Fund Performance Index:

The GlobeOp Forward Redemption Indicator for June 2012 measured 3.71%, up from 3.31% in May.

“The June Forward Redemption Indicator is surprisingly low given that it is dominated by July redemptions, a traditionally large month for fund withdrawals,” said Hans Hufschmid, chief executive officer, GlobeOp Financial Services.

The Indicator represents the sum of forward redemption notices received from investors in hedge funds administered by GlobeOp, divided by the AuA at the beginning of the month for GlobeOp fund administration clients. Forward redemptions as a percentage of GlobeOp assets under administration have trended significantly lower since reaching a high of 19.27% in November 2008

GlobeOp Hedge Fund Performance Index for May 2012 measured 0.43%.

• Current month flash estimate 0.43%*
• Year-to-date (YTD) performance 4.15%*
• Last 12 month (LTM) performance 2.25%*
• Live to date (LTD) performance 65.31%*

*All numbers reported above are gross

The GlobeOp Hedge Fund Performance Index is an asset-weighted, independent monthly window on hedge fund performance. On the 10th business day of each month it provides a flash estimate of the gross aggregate performance of funds for which GlobeOp provides monthly administration services. Interim and final values, both gross and net, are provided in each of the two following months, respectively. Online data can be segmented by gross and net performance, and by time periods. The GlobeOp Hedge Fund Performance Index is transparent, consistent in data processing, and free from selection or survivorship bias. Its inception date is January 1, 2006.

The GlobeOp Hedge Fund Performance Index offers a unique reflection of the return on capital invested in funds. It does not overstate exposure to, or the contribution of, any single strategy to aggregate hedge fund performance. Since its inception, the correlation of the GlobeOp Performance Index to many popular equity market indices has been approximately 25% to 30%. This is substantially lower than the equivalent correlation of other widely followed hedge fund performance indices.

GlobeOp Financial Services
GlobeOp Financial Services (LSE:GO.) is an independent financial administrator specializing in middle and back office services and integrated risk-reporting to hedge funds, asset management firms and other sectors of the financial industry -- including family wealth, banks, insurance companies, pension funds and corporate treasuries. By outsourcing to GlobeOp, clients can reduce their technology investments and operational risks, while increasing their focus on asset generation and portfolio management. Established in 2000, GlobeOp serves approximately 200 clients worldwide, representing $187 billion in assets under administration. Headquartered in London and New York, GlobeOp employs over 2,300 people on three continents through its 11 offices in the Cayman Islands, India, Ireland, the UK and US. On May 31, 2012 the offer for GlobeOp Financial Services by SS&C Technologies (NASDAQ: SSNC) was declared unconditional. Further information: www.globeop.com; www.twitter.com/GlobeOp; www.globeopindex.com

About the GlobeOp Hedge Fund Index^®
The GlobeOp Hedge Fund Index (the Index) is a family of indices published by GlobeOp Financial Services (LSE:GO.). A unique set of indices by a hedge fund administrator, it offers clients, investors and the overall market a welcome transparency on liquidity, investor sentiment and performance. The Index is based on a significant platform of diverse and representative assets.

The GlobeOp Hedge Fund Index is available at http://www.globeopindex.com/home.go or through a link on the homepage of http://www.globeop.com/. Alert and RSS subscriber options are available at http://www.globeop.com/. Index Twitter comments: #HFindex.

The GlobeOp Capital Movement Index and the GlobeOp Forward Redemption Indicator provide monthly reports based on actual and anticipated capital movement data independently collected from all hedge fund clients for whom GlobeOp provides administration services.

The GlobeOp Hedge Fund Performance Index is an asset-weighted benchmark of the aggregate performance of funds for which GlobeOp provides monthly administration services. Flash estimate, interim and final values are provided, in each of three months respectively, following each business month-end.

While individual fund data is anonymized by aggregation, the GlobeOp Hedge Fund Index data will be based on the same reconciled fund data that GlobeOp uses to produce fund net asset values (NAV). GlobeOp’s total assets under administration represent approximately 10% of the estimated assets currently invested in the hedge fund sector. The investment strategies of the funds in the indices span a representative industry sample. Data for middle and back office clients who are not fund administration clients is not included in the Index, but is included in the Company’s results announcement figures.

Institutional investors looking to alternatives for both diversification and alpha

Russell 2012 Global Survey on Alternative Investing respondents cite diversification and shelter from volatility as primary reasons for investment and anticipate rising allocations to most alternative strategy types in the next one to three years

Institutional investors across the globe are demonstrating significant demand for alternatives to support investment objectives such as diversification and alpha generation, and these expanding allocations are spurring greater interest in customized, investor-driven implementation approaches, according to the 2012 Global Survey on Alternative Investing released today by Russell Investments. In 2010, when Russell last surveyed institutional investors, including corporate and public defined benefit plans, corporate defined contribution plans, non-profits and superannuation funds, attitudes about alternatives were in flux as institutions were still adjusting to the repercussions of the global financial crisis across their entire portfolios. This latest edition, the tenth issuance of the biennial survey, focused on the key drivers, barriers, influencers and implementation methods that are shaping alternative investment strategies, and the findings suggest that investors are reflecting a greater sense of calm, mixed with prudent caution.

"Since 1992, the Russell Global Survey on Alternative Investing has provided an important view into the changing nature of institutional perspectives regarding alternative investments," said Julia Cormier, director, alternative investments. "In an environment characterized by low returns, a high level of global economic uncertainty and financial market volatility, alternatives are a critical component of a diversified, multi-asset portfolio. In expectation of continued volatility and market shocks, institutions are trying to shepherd their portfolios by structuring them to prudently manage risk, even as they also seek to achieve returns in a variety of potential market environments."

Institutions participating in the Survey currently have significant allocations to alternative investments – on average, 22% of total fund assets. Diversification was cited as one of the top three reasons for using alternatives by 90% of respondents, while volatility management and low correlation to traditional investments was mentioned by 64%, and return potential was noted by 45%. Additionally, the majority of respondents indicated that allocations would remain static or increase over the next one to three years across all alternatives categories. Thirty-two percent of respondents expect to increase their investment in hedge funds and private real estate, 28% in private infrastructure, 25% in private equity, 20% in commodities, and 12% in public real estate and public infrastructure.

"Alternatives can play a unique role in helping organizations achieve their desired investment outcomes, and in today's dynamic alternative investment marketplace, institutional investors are using alternatives in multiple ways. At the same time, the factors that influence institutional investors as they evaluate and make decisions about alternatives continue to evolve," said Darren Spencer, director, alternative investment consulting, North America. "With greater experience and expanding allocations, investors are increasingly driving implementation approaches. Today there is greater appetite for customized solutions in which investors can target specific risk/return outcomes, achieve more targeted strategy exposures, and be more opportunistic with their investments. This kind of fundamental shift in alternative investment implementation can provide a rich source of portfolio flexibility."

The Survey also found that investors face a myriad of challenges in assessing the range of alternatives across the expanding spectrum of opportunities, so education is an important component for integrating alternatives into multi-asset portfolios.

Headline global findings:
• -1
Under-target alternatives could potentially be recipients of excess cash in the future. Hedge funds and private real estate lead the way, with 32% of respondents indicating that they may make increased allocations. At least 30% of respondents indicated they were below their target weights in hedge funds, private real estate and private equity, while traditional investments – cash, fixed income and equities – were more frequently over their target allocation than under their target allocation. Cash, specifically, is over-target for 45% of respondents, which may indicate that they are being cautious about taking risk and waiting for the right time to reposition cash.
•
49% of respondents who participate in hedge funds currently utilize the fund of funds structure approach. This is more than double the percentage of that for any other hedge fund implementation method, however, this year's Survey shows that participants anticipate making shifts away from the traditional fund of funds model. Only 17% of respondents using hedge funds expect to be using this traditional structure for implementation over the next one to three years. While fund of funds vehicles are anticipated to lose ground, all other implementation methods are expected to gain. Additionally, 63% of Survey respondents are obtaining customized hedge fund solutions to complement existing exposures, pursue niche opportunities and access strategy-specific expertise.
• -
Consistent with previous surveys, private equity (PE) is more prevalent in North American portfolios, although Europe is not far behind. Commitments to private equity are lower in emerging markets, Asia Pacific and Japan. The liquidity constraints of negative cash flows are making PE less attractive for Japanese defined benefit pension plans. In both North America and Europe, more investors are currently committed to small/medium buyout funds than to larger funds. Significantly, both North American and European investors expect small to modest decreases in their current PE commitments over the next one to three years. Co-investments and alternative energy are expected to show the largest increases in commitments over the same time period.
• .
Listed Real Estate Investment Trusts (REITS) and unlisted private real estate funds continue to dominate as implementation choices, with 51% of the respondents (who hold real estate currently) using them. Only 38% of these respondents, however, said real estate funds will continue to be an implementation choice in the next one to three years. Allocations to direct property investments (23%) and customized separate accounts (15%) are expected to rise in the near future.
• -
Even with inflation-sensitive characteristics, commodities remain a niche solution and future possibility (more than a current reality) for most institutional investors – except in Australia, where commodities are familiar and mainstream. Among the small sample of Survey respondents who hold commodities (32 in number), long futures exposure is the most popular type of investment (63%), with private equity (44%) and hedge funds (28%) trailing. Long/short strategies and funds have not yet made much of an impact (23%), but interest in them is rising, with 46% of current commodity investors expecting to add long/short over one to three years.
• -
Although public and private infrastructure investments command only a small share of institutional assets (just 1% of the combined asset allocations of all respondents), many signs point to growth. Private infrastructure investments appear to be attracting a growing portion of institutions' illiquidity budgets, perhaps taking share away from private equity. Although Australian and Canadian respondents have higher allocations here, the other regions represented in the Survey have not yet made significant allocations to this segment.
• -
Boards and trustees are demanding more education about alternatives and are becoming more receptive to proposals that have education included as a component. Given the dynamic nature of the alternative investment marketplace, 36% of respondents indicated that additional education about alternatives is needed within their organizations.
• -
Russell has observed a growing respect among North American (NA) investors for comprehensive due diligence since its 2010 Survey. In the 2012 Survey, 91% of NA investors said they require comprehensive operational due diligence before making new investments (vs. 68% globally). Responses to this line of questioning signal a trend in institutional investors' approach to working with external resources. Even some sophisticated investors have decided that they could better achieve their investment objectives by combining the expertise of internal and external resources to manage multi-strategy alternatives.



About the Survey

The Russell Investments' 2012 Global Survey on Alternative Investing was developed to assess the primary factors that influence institutional investors as they evaluate and make decisions about alternative investments, within the context of their objectives for their institutions. The biennial survey, which was first issued in 1992, targets the largest corporate and public defined benefit plans, corporate defined contribution plans, non-profits and superannuation funds. It is delivered in an objective format, and respondents are asked about their views and methodologies concerning alternative investments.

Between January and March 2012, 146 institutional investors in North America, Europe, Australia and Japan representing a total of $1.1 trillion in assets completed the online survey. Many respondents also participated in longer qualitative interviews that captured evolving changes in philosophies, policies, allocations and attitudes. In this year's survey, questions were developed around the following perspectives: assessing the demand for alternative investments, defining barriers to investing in alternatives, understanding key influencers and gaining insight into key implementation issues.

The high-level, global results are published in a comprehensive report, which presents data by investment category and includes detailed analysis regarding investment strategies, investment types and expectations for new investments over the next one to three years.

About Russell Investments

Russell Investments (Russell) is a global asset manager and one of only a few firms that offer actively managed multi-asset portfolios and services that include advice, investments and implementation. Working with institutional investors, financial advisors and individuals, Russell's core capabilities extend across capital markets insights, manager research, portfolio construction, portfolio implementation and Indexes.

Russell has about $155 billion in assets under management (as of 3/31/2012) and works with 2,400 institutional clients, more than 580 independent distribution partners and advisors, and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell has $2.4 trillion in assets under advisement (as of 12/31/11). It has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell traded more than $1.5 trillion in 2011 through its implementation services business. Russell calculates more than 80,000 benchmarks daily covering 98% of the investable market globally, 85 countries and more than 10,000 securities. Approximately $3.9 trillion in assets are benchmarked to the Russell Indexes.

Russell is headquartered in Seattle, Washington, USA, Russell has offices around the world including Amsterdam, Auckland, Chicago, Frankfurt, London, Melbourne, Milan, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto.

HEDGE FUND LAUNCHES ACCELERATE AS SUPPORT FOR BANK REGULATION BUILDS

Liquidations also increase to two-year high through European market turmoil;

Opportunities for industry service providers continue to evolve

New hedge fund launches in 1Q12 increased to a level not reached since 2007 as hedge fund capital rose to a record level of $2.13 trillion, according to the latest Market Microstructure Industry Report, released today by HFR (Hedge Fund Research, Inc.), the global leader in the indexation and analysis of the hedge fund industry. New fund launches totaled 304 in the first quarter, narrowly eclipsing the 298 launches in 1Q11 for the highest quarterly total since 4Q07. Hedge fund liquidations also increased during the first quarter, with 232 funds closing, the highest quarterly liquidation total since 240 funds closed in 1Q10. Fund of Hedge Funds (FOF) continued to experience a contraction in number of funds in the first quarter, with 64 FOF’s closing while 34 launched; 1Q12 was the 4th consecutive quarter of decline in number of FOF’s.

Hedge fund performance dispersion increased over the prior quarter, with the top decile of all hedge funds averaging a gain of over 20 percent in 1Q12, while the bottom decile of all funds declined by 28 percent on average. Dispersion over the trailing 12 months was essentially unchanged from the prior quarter. Hedge fund fees rose slightly in 1Q12 versus 1Q11, with average management fees of 1.63 percent and average incentive fees of 17.75 percent.



According to HFR’s research, service provider market share across prime broker, administrator, legal advisory and audit firms continued to fluctuate over the quarter, with J.P. Morgan and Goldman Sachs holding top PB shares with nearly half of all hedge fund assets globally. Administrators which experienced market share gains include BNY Mellon, GlobeOp and Citigroup.

“Innovative hedge funds are launching and finding opportunities as large financial institutions look to deemphasize trading activities as a result of anticipated regulation, realized trading losses and enhanced risk management requirements,” stated Kenneth J. Heinz, President of HFR. “Execution and risk control are integral components of successful hedge funds and these have been greatly enhanced by the evolution of transparency in recent years. These powerful trends will continue to support launches of new hedge funds designed to monetize inefficiencies in capital markets as financial institutions adapt to new reporting, risk and trading requirements.”

TrimTabs and BarclayHedge Report Hedge Funds Redeemed $5.1 Billion in April 2012

More than $12.7 Billion Flowed out of Hedge Fund Industry in 12 Months Ending April. Hedge Fund Manager Late May Survey Finds Bearish Outlook on S&P 500 Reaches Six-Month High

BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry redeemed $5.1 billion (0.3% of assets) in April, reversing a $2.8 billion inflow in March. Based on data from 3,042 funds, the April TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets stood at $1.7 trillion in April, up 1.6% for the first four months of 2012.

TrimTabs and BarclayHedge reported that more than $12.7 billion flowed out of the hedge fund industry between May 2011 and April 2012. There were net outflows in six of the 12 months. “That’s a sharp contrast from the previous 12 months, when the industry saw a net inflow of $90.7 billion and just three monthly outflows,” said Sol Waksman, founder and president of BarclayHedge.

Hedge funds lost 0.59% in April, besting the S&P 500’s April loss of 0.75%, but the industry trailed the popular financial industry benchmark for the first four months of 2012, returning 5.0% vs. a 11.2% gain for S&P 500, TrimTabs and BarclayHedge reported. “April’s results marked the first time in six months that the industry outperformed the S&P 500,” Waksman said.

Over the past 12 months, Fixed Income, Multi-Strategy and Macro funds represented the most popular strategies of hedge fund investors, attracting the largest cash inflows among 13 fund categories tracked by TrimTabs and BarclayHedge. “With interest rates near zero and central bankers flooding the markets with liquidity, Fixed-Income investors are chasing any yield they can get,” said Charles Biderman, founder and CEO of TrimTabs. Emerging Market and Equity Long Bias funds posted the highest outflows over the same time period.

Meanwhile, the May 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that 35.6% of managers were bearish on the S&P 500 for June, while 30.5% were bullish, and 33.9% were neutral. Conducted in late May, the survey of 120 hedge fund managers found bearishness on the S&P 500 at a six-month high and bullishness at an eight-month low.

In the survey, bullish sentiment on the U.S. Dollar Index surged to 61.9% in May from 35.4 in April, a 15-month high. “Managers are responding to seemingly never-ending anxiety over Eurozone sovereign debt, which is punishing the euro and bolstering demand for the greenback,” said Leon Mirochnik, a financial analyst at TrimTabs.

When asked about the likelihood of the Federal Reserve launching another round of quantitative easing this year, over 28% of managers saw more than a 60% chance of that happening, while over 47% of managers saw less than a 40% likelihood.

The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies.  Click here for further information.

BarclayHedge is a leading hedge fund data vendor and one of the foremost sources for proprietary research in the field of alternative investments. From its origin as a research specialist and performance measurement firm, BarclayHedge has developed complete client services as a publisher, database and software provider, and industry consultant.

TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity--including mutual fund flows and exchange-traded fund flows--as well as weekly withheld income and employment tax collections.  Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990.  For more information, please visit us here.