Credit Suisse has releasef its annual Global Hedge Fund Investor Survey, in which they analysz responses from over 600 institutional investors, representing $1.04 trillion of hedge fund investments, on a number of topics. These include investors’ current sentiment towards the hedge fund industry and their predictions for its growth prospects; their allocations plans across various strategies and regions; their return forecasts for the year ahead; and their views on key new trends and developments in the industry.
The title of this year’s survey, “Finding Direction in Uncertain Terrain”, reflects the quest by hedge fund managers and institutional investors alike for outperformance in the currently challenging and erratic market conditions.
Robert Leonard, Managing Director and Global Head of Capital Services at Credit Suisse commented: “Institutional investors remain positive on hedge funds and on the outlook for further industry growth. They continue to look to hedge funds to generate uncorrelated returns and to reduce overall volatility within their portfolios.”
When respondents were asked to forecast total industry assets at the end of 2012, the average prediction was US$2.13 trillion. This would represent an industry growth rate of 12%, which would come from both performance and new inflows. Investors thus generally intend to remain active in their new allocations to hedge funds this year.
Investors were then asked to forecast which hedge fund strategies will perform best during 2012. The responses were as follows:
_ 27% of respondents forecasted Global Macro as the top performer
_ 19% of respondents forecasted Long/Short Equity as the top performer
_ 18% of respondents forecasted Emerging Markets as the top performer
Respondents also shared their insights into which hedge fund strategies they anticipate allocating capital to during 2012:
_ Global Macro is currently the most sought-after strategy for 2012
_ Commodity Trading Advisors (CTA) is the second most favoured strategy
_ Fixed Income Arbitrage moved up from 15th place last year to 3rd place this year
In terms of geographic preferences, Asia and Emerging Markets have remained at the top of investors’ buy list for a second year running. As developed markets continue to wrestle with debt and deleveraging issues, many investors perceive Asia and Emerging Markets to have relatively stronger growth prospects. North America was the third most frequently mentioned region in this category.
Investors continue to show appetite for new hedge funds that can “check the box” on a number of key requirements. These include pedigree, continuity, differentiation and institutional quality. Over half the respondents indicated that they can invest in a start-up manager with a three-year-plus track record from another fund, but that number drops to only 20% for managers without an explicit track record.
The survey also uncovered a number of other key new industry trends and developments for 2012:
_ Investors have adjusted their target returns expectations for their hedge fund portfolios, to account for the current low interest rate environment and difficult market conditions. The average expectation for returns in 2012 was 8.6%, down from 11% in 2011.
_ Respondents ranked crowded trades/herd behaviour, sovereign default risk and counterparty/credit risk as the three greatest sources of risks facing the hedge fund industry today. Increasing regulatory requirements were also identified by 32% of respondents as having potential for significant impact on the hedge fund industry.
_ Investors expect to see an acceleration in the number of hedge fund consolidations/liquidations this year, predicting that only managers with demonstrated ability to generate uncorrelated alpha and manage risk within an institutional framework will continue to attract assets.
_ Founders’ share classes (featuring discounted fees) have become an increasingly popular way for new hedge funds to attract early-stage capital. Over two-thirds of investors surveyed indicated that they were interested in or already actively invested in founders’ share classes of hedge funds.
_ Investors also reported that, in order to cope with new and pending regulations, many funds have been increasing their legal and compliance staff-count and have hired a Chief Compliance Officer.
Mr Leonard added: “From this year’s survey we can conclude that institutional investors will remain active in making hedge fund allocations, as they consider hedge funds to be an important tool for risk mitigation against the backdrop of ongoing market uncertainty.”
Tuesday, March 27, 2012
Dow Jones Credit Suisse Hedge Fund Index Commentary: February Hedge Fund Performance
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The Dow Jones Credit Suisse Hedge Fund Index finished up 1.61% in February. A new monthly commentary offers insight into hedge fund performance through the month of February. The full report includes an overview of February hedge fund performance, in-depth commentary on individual hedge fund sectors and hedge fund return dispersion statistics for each strategy.
Some key findings from the report include:
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished February up 1.61%; with 9 out of 10 strategies in positive territory;
In total, the industry saw estimated inflows of approximately $3.25 billion in February, bringing overall assets under management for the industry to approximately $1.75 trillion; February experience the first month of asset inflows since August 2011;
The Convertible Arbitrage and Managed Futures sectors experienced the largest asset inflows on a percentage basis in February, with inflows of 0.97% and 0.64% from January 2012 levels, respectively;
Directional strategies, such as Long/Short Equity, experienced positive performance for the second month in a row. Managers noted that the market appeared to trade more on fundamentals as stock correlations declined and stock prices reacted in line with post earnings announcements;
Tactical trading managers showed positive performance. Global Macro managers and Managed Futures funds posted gains with the continuation of positive market sentiment driven by further global monetary easing and macroeconomic data coming in above expectations; and
On the relative value front, managers showed positive performance in February. Fixed Income Arbitrage managers posted gains as managers have, in some instances, been able to benefit from the risk-on environment through model convergence trades as volatility compressed over the course of the month.
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The Dow Jones Credit Suisse Hedge Fund Index finished up 1.61% in February. A new monthly commentary offers insight into hedge fund performance through the month of February. The full report includes an overview of February hedge fund performance, in-depth commentary on individual hedge fund sectors and hedge fund return dispersion statistics for each strategy.
Some key findings from the report include:
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished February up 1.61%; with 9 out of 10 strategies in positive territory;
In total, the industry saw estimated inflows of approximately $3.25 billion in February, bringing overall assets under management for the industry to approximately $1.75 trillion; February experience the first month of asset inflows since August 2011;
The Convertible Arbitrage and Managed Futures sectors experienced the largest asset inflows on a percentage basis in February, with inflows of 0.97% and 0.64% from January 2012 levels, respectively;
Directional strategies, such as Long/Short Equity, experienced positive performance for the second month in a row. Managers noted that the market appeared to trade more on fundamentals as stock correlations declined and stock prices reacted in line with post earnings announcements;
Tactical trading managers showed positive performance. Global Macro managers and Managed Futures funds posted gains with the continuation of positive market sentiment driven by further global monetary easing and macroeconomic data coming in above expectations; and
On the relative value front, managers showed positive performance in February. Fixed Income Arbitrage managers posted gains as managers have, in some instances, been able to benefit from the risk-on environment through model convergence trades as volatility compressed over the course of the month.
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HEDGE FUND INDUSTRY ACCELERATES INTO 2012 WITH MOST NEW LAUNCHES SINCE 2007
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Liquidations steady as investors and managers position for growth;
Fund performance dispersion falls, Fund of Funds attrition slows
Hedge fund launches in 2011 increased to the highest level since 2007, as investors and managers positioned for 2012 amid intense volatility and macroeconomic uncertainty, reported HFR (Hedge Fund Research Inc.) Hedge fund launches totaled 1,113 in 2011, including 270 in 4Q11, the highest calendar year total since 1,197 funds launched in 2007.
Fund liquidations declined from the previous quarter but rose for the full year, with 190 liquidations in 4Q11 and 775 for the year; the 2011 total represents a narrow increase over the 743 liquidations in 2010.
The total number of funds rose to 9,523 in 2011, while total hedge fund industry capital rose by 3 percent to $2.02 Trillion.
New fund launches in 2011 were concentrated in Equity Hedge and Macro strategies, with 479 and 265 fund launches, respectively; the former is the highest EH launch total since 2006, while the latter is the highest total for Macro since HFR began tracking this in 1996. Equity Hedge also experienced a high rate of liquidations, with 293 EH funds closing, the highest since 651 funds closed in 2008. Attrition in Fund of Hedge Funds declined to a pre-Financial Crisis level; FOF experienced 215 closings in 2011, the fewest liquidations since 2007. By management firm location, slightly more funds were launched in the US than Europe, while liquidations were higher in Europe, with both representing reversals from the prior year.
While the HFRI Fund Weighted Composite Index declined by -5.26 percent in 2011, constituent fund dispersion also narrowed in 2011to the lowest level since 2006, with the compression concentrated in fewer positive outliers. The worst performing decile of the broad based composite declined by -30.7 percent for 2011, while the top decile gained +19.5 percent, implying a top-bottom dispersion of just over 50 percent. This represents a decline from nearly 58 percent in 2010 and over 100 percent in both 2008 and 2009. Last year marked the lowest average performance for the top decile since HFR began tracking this metric in 2000 by a significant margin; the next lowest performance by the top HFRI decile was a gain of +39.2 in 2002, nearly twice the 2011 figure.
Average management fees were unchanged from the prior quarter at 1.57 percent; these declined 1 basis point for the year. Average incentive fees continued to decline, with these falling to 18.71 percent; incentive fees declined 1 basis point over 3Q11 and 24 bps since year end 2010.
“Despite performance volatility and macroeconomic uncertainty in the second half of the year, investors maintained a strong commitment to hedge funds, and fund managers expanded the scope and breadth of strategies offered, making 2011 the strongest year for new launches since the global financial crisis,” said Kenneth J. Heinz, President of HFR.
“While some have suggested that increased regulation may deter new fund launches, many hedge funds are launching not only as a result of increasing investor risk tolerance, but also as a result of these regulatory changes to trading activities and risk oversight at financial institutions. The hedge fund industry has and will continue to expand and innovate to offer more sophisticated and transparent strategies to meet the requirements of institutional investors.”
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Liquidations steady as investors and managers position for growth;
Fund performance dispersion falls, Fund of Funds attrition slows
Hedge fund launches in 2011 increased to the highest level since 2007, as investors and managers positioned for 2012 amid intense volatility and macroeconomic uncertainty, reported HFR (Hedge Fund Research Inc.) Hedge fund launches totaled 1,113 in 2011, including 270 in 4Q11, the highest calendar year total since 1,197 funds launched in 2007.
Fund liquidations declined from the previous quarter but rose for the full year, with 190 liquidations in 4Q11 and 775 for the year; the 2011 total represents a narrow increase over the 743 liquidations in 2010.
The total number of funds rose to 9,523 in 2011, while total hedge fund industry capital rose by 3 percent to $2.02 Trillion.
New fund launches in 2011 were concentrated in Equity Hedge and Macro strategies, with 479 and 265 fund launches, respectively; the former is the highest EH launch total since 2006, while the latter is the highest total for Macro since HFR began tracking this in 1996. Equity Hedge also experienced a high rate of liquidations, with 293 EH funds closing, the highest since 651 funds closed in 2008. Attrition in Fund of Hedge Funds declined to a pre-Financial Crisis level; FOF experienced 215 closings in 2011, the fewest liquidations since 2007. By management firm location, slightly more funds were launched in the US than Europe, while liquidations were higher in Europe, with both representing reversals from the prior year.
While the HFRI Fund Weighted Composite Index declined by -5.26 percent in 2011, constituent fund dispersion also narrowed in 2011to the lowest level since 2006, with the compression concentrated in fewer positive outliers. The worst performing decile of the broad based composite declined by -30.7 percent for 2011, while the top decile gained +19.5 percent, implying a top-bottom dispersion of just over 50 percent. This represents a decline from nearly 58 percent in 2010 and over 100 percent in both 2008 and 2009. Last year marked the lowest average performance for the top decile since HFR began tracking this metric in 2000 by a significant margin; the next lowest performance by the top HFRI decile was a gain of +39.2 in 2002, nearly twice the 2011 figure.
Average management fees were unchanged from the prior quarter at 1.57 percent; these declined 1 basis point for the year. Average incentive fees continued to decline, with these falling to 18.71 percent; incentive fees declined 1 basis point over 3Q11 and 24 bps since year end 2010.
“Despite performance volatility and macroeconomic uncertainty in the second half of the year, investors maintained a strong commitment to hedge funds, and fund managers expanded the scope and breadth of strategies offered, making 2011 the strongest year for new launches since the global financial crisis,” said Kenneth J. Heinz, President of HFR.
“While some have suggested that increased regulation may deter new fund launches, many hedge funds are launching not only as a result of increasing investor risk tolerance, but also as a result of these regulatory changes to trading activities and risk oversight at financial institutions. The hedge fund industry has and will continue to expand and innovate to offer more sophisticated and transparent strategies to meet the requirements of institutional investors.”
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Wednesday, March 21, 2012
GAO Report: Recent Developments Highlight Challenges of Hedge Fund and Private Equity Investing
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Why GAO Did This Study
Millions of Americans rely on defined benefit pension plans for their financial well-being in retirement. Plan representatives are increasingly investing in a wide range of assets, including hedge funds and private equity funds. In recent years, GAO has noted that plans may face significant challenges and risks when investing in these alternative assets. These challenges and ongoing market volatility have raised concerns about how these investments have performed since 2008.
As requested, to better understand plan sponsors’ experiences with these investments, GAO examined (1) the recent experiences of pension plans with investments in hedge funds and private equity, including lessons learned; (2) how plans have responded to these lessons; and (3) steps federal agencies and other entities have taken to help plan sponsors make and manage these alternative investments.
To answer these questions, GAO analyzed available data; interviewed relevant federal agencies and industry experts; conducted follow-up interviews with 22 public and private pension plan sponsors selected among the top 200 plans and contacted in the course of GAO’s prior related work; and surveyed 20 plan consultants, academic experts and other industry experts.
This report reemphasizes a 2008 recommendation that the Secretary of Labor provide guidance to help plans investing in hedge funds and private equity.
What GAO Found
While plan representatives GAO contacted generally stated that their hedge fund and private equity investments met expectations in recent years, a number of plans experienced losses and other challenges, such as limited liquidity and transparency. National data indicated that hedge fund and private equity investments were significantly affected by the 2008-2009 financial crisis, and plans and experts GAO contacted indicated that pension plan investments were not insulated from losses.
Most of the 22 plan representatives GAO interviewed said that their hedge fund investments met expectations overall, despite, in some cases, significant losses during the financial crisis. A few plan representatives, however, expected hedge fund investments to be much more resilient in turbulent markets, and found the losses disappointing. Given the long-term nature of private equity investments, almost all of the representatives were generally satisfied with these investments over the last 5 years. Some plan representatives described significant difficulties in hedge fund and private equity investing related to limited liquidity and transparency, and the negative impact of the actions of other investors in the fund—sometimes referred to as co-investors. For example, representatives from one plan reported they were unable to cash out of their hedge fund investments due to discretionary withdrawal restrictions imposed by the fund manager, requiring them to sell some of their stock holdings at a severe loss in order to pay plan benefits.
Most plans reviewed have taken actions to address challenges related to their hedge fund and private equity investments, including allocation reductions, modifications of investment terms, and improvements to the fund selection and monitoring process.
National data reveal that plans have continued to invest in hedge funds and private equity—for example, one survey revealed that the percentage of large plans investing in hedge funds grew from 47 percent in 2007 to 60 percent in 2010—and most plans GAO contacted have also maintained or increased their allocations to these investments. However, most plans have adjusted investment strategies as a result of recent years’ experiences. For example, three plans have reduced their allocations to hedge funds or private equity. Other plan representatives also took steps to improve investment terms, including more favorable fee structures and enhanced liquidity. However, some plan representatives and experts indicated that smaller plans would likely not be able to take some of these steps.
The Department of Labor has provided some guidance to plans regarding investing in derivatives, but has not taken any steps specifically related to hedge fund and private equity investments. In recent years, however, other entities have addressed this issue. For example, in 2009, the President’s Working Group on Financial Markets issued best practices for hedge fund investors. Further, both GAO and a Department of Labor advisory body have recommended that the department publish guidance for plans that invest in such alternative assets. To date, it has not done so, in part because of a concern that the lack of uniformity among such investments could make development of useful guidance difficult. In 2011, the Department of Labor advisory body specifically revisited the issue of pension plans’ investments in hedge funds and private equity, and a report is expected in early 2012.
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Why GAO Did This Study
Millions of Americans rely on defined benefit pension plans for their financial well-being in retirement. Plan representatives are increasingly investing in a wide range of assets, including hedge funds and private equity funds. In recent years, GAO has noted that plans may face significant challenges and risks when investing in these alternative assets. These challenges and ongoing market volatility have raised concerns about how these investments have performed since 2008.
As requested, to better understand plan sponsors’ experiences with these investments, GAO examined (1) the recent experiences of pension plans with investments in hedge funds and private equity, including lessons learned; (2) how plans have responded to these lessons; and (3) steps federal agencies and other entities have taken to help plan sponsors make and manage these alternative investments.
To answer these questions, GAO analyzed available data; interviewed relevant federal agencies and industry experts; conducted follow-up interviews with 22 public and private pension plan sponsors selected among the top 200 plans and contacted in the course of GAO’s prior related work; and surveyed 20 plan consultants, academic experts and other industry experts.
This report reemphasizes a 2008 recommendation that the Secretary of Labor provide guidance to help plans investing in hedge funds and private equity.
What GAO Found
While plan representatives GAO contacted generally stated that their hedge fund and private equity investments met expectations in recent years, a number of plans experienced losses and other challenges, such as limited liquidity and transparency. National data indicated that hedge fund and private equity investments were significantly affected by the 2008-2009 financial crisis, and plans and experts GAO contacted indicated that pension plan investments were not insulated from losses.
Most of the 22 plan representatives GAO interviewed said that their hedge fund investments met expectations overall, despite, in some cases, significant losses during the financial crisis. A few plan representatives, however, expected hedge fund investments to be much more resilient in turbulent markets, and found the losses disappointing. Given the long-term nature of private equity investments, almost all of the representatives were generally satisfied with these investments over the last 5 years. Some plan representatives described significant difficulties in hedge fund and private equity investing related to limited liquidity and transparency, and the negative impact of the actions of other investors in the fund—sometimes referred to as co-investors. For example, representatives from one plan reported they were unable to cash out of their hedge fund investments due to discretionary withdrawal restrictions imposed by the fund manager, requiring them to sell some of their stock holdings at a severe loss in order to pay plan benefits.
Most plans reviewed have taken actions to address challenges related to their hedge fund and private equity investments, including allocation reductions, modifications of investment terms, and improvements to the fund selection and monitoring process.
National data reveal that plans have continued to invest in hedge funds and private equity—for example, one survey revealed that the percentage of large plans investing in hedge funds grew from 47 percent in 2007 to 60 percent in 2010—and most plans GAO contacted have also maintained or increased their allocations to these investments. However, most plans have adjusted investment strategies as a result of recent years’ experiences. For example, three plans have reduced their allocations to hedge funds or private equity. Other plan representatives also took steps to improve investment terms, including more favorable fee structures and enhanced liquidity. However, some plan representatives and experts indicated that smaller plans would likely not be able to take some of these steps.
The Department of Labor has provided some guidance to plans regarding investing in derivatives, but has not taken any steps specifically related to hedge fund and private equity investments. In recent years, however, other entities have addressed this issue. For example, in 2009, the President’s Working Group on Financial Markets issued best practices for hedge fund investors. Further, both GAO and a Department of Labor advisory body have recommended that the department publish guidance for plans that invest in such alternative assets. To date, it has not done so, in part because of a concern that the lack of uniformity among such investments could make development of useful guidance difficult. In 2011, the Department of Labor advisory body specifically revisited the issue of pension plans’ investments in hedge funds and private equity, and a report is expected in early 2012.
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Thursday, March 15, 2012
Institutional Investor Survey Expectations Remain Strong in 2012 According to Commonfund Investor Outlook Survey™
Portfolios are expected to grow an average 7.6 percent over next five years. Expectations for hedge funds remain steady and investors see big increase in emerging market exposure
Commonfund Forum, currently being held in Orlando, Florida, released its annual survey data today showing that institutional investor expectations for 2012 remain strong. Commonfund conducted its second annual Commonfund Investor Outlook Survey™ which gauges the sentiment of the more the 500 participants at the Commonfund Forum. This year data was collected from 222 institutional investors whose combined assets were $239 billion. Commonfund is a prominent investment manager for institutional investors including pension plans, endowments and foundations, among other investors.
Overall, investor expectations for 2012 are reasonably strong with an average forecast for the S&P 500 Index of 8.3 percent and a median forecast of 9.0 percent. This was almost unchanged from last year’s average forecast of 8.55 percent and median forecast of 9.0 percent. Over a three-year period, performance expectations are still strong with an average annual forecast for the S&P 500 Index over the next three years of 6.8 percent, and 72 percent of responses in the range of 5.0 to 8.0 percent. This was slightly lower than last year’s average forecast of 7.3 percent and median forecast of 7.5 percent.
“The positive expectations for the markets and asset allocations indicate that participants continue to be positive about 2012 reflecting the continued improvement in the U.S. and much of the world economies,” said Verne Sedlacek, President and CEO of Commonfund. “Increased allocations to emerging market equities, natural resources, and commodities extend last year’s strong outlook and the recovery from 2008-2010.”
Only 44 percent expect commodities (as measured by the Dow Jones – UBS Commodities Index) to outperform, compared with 61 percent last year. 30 percent expect hedge funds (as measured by the HFRI Fund Weighted Composite) to outperform, similar to last year.
Bonds increased. Only 37 percent expect high yield bonds to lag the S&P 500 Index compared with 49 percent last year. 84 percent expect the Barclay’s Aggregate Bond Index to underperform the S&P Index over the next three years vs. 91 percent last year (only 3 percent expect it to outperform this year vs. 4 percent last year). Relative to the three-year performance expectation for the S&P 500 Index, 75 percent of respondents expect the MSCI Emerging Markets Index to outperform, a slight drop from 79 percent last year. 22 percent expect the MSCI – ex US (developed equity markets) to outperform this year.
U.S. Treasury Returns to Drop
Survey participants’ expectations for the yield on the 10-year U.S. Treasury note by year-end 2012 were as follows: 33 percent responded between 1.50 percent and 2.00 percent; 49 percent responded between 2.00 percent and 2.50 percent. Average expectations were 2.2 percent and a median 2.25 percent. This contrasts with last year, when 60 percent of respondents saw interest rates rising in 2011 and one in four expecting rates, as measured by the 10-year U.S. Treasury Note, to rise above four percent by December 2011 (versus 3.41 percent as of February month-end).
Portfolio Performance and Tail Risks
In a new question this year, participants reported overall expectations for annual performance of institution’s portfolio over the next 1, 3, and 5 years: an average 7.4 percent and a median 8.0 percent for one year; an average 7.2 percent and a median 7.0 percent over three years; and an average 7.6 percent and a median 7.0 percent over five years. Another new question asked participants about tail risks over the next 3 years. 46 percent said tail risks are increasing; 9 percent said they are decreasing; and 45 percent said they are staying the same.
The most significant tail risks participants reported relative to portfolio performance over the next 3-years include: EU Crisis (32%); Washington gridlock on US debt (23%); Oil price jump (16%); US recession (4%); China slowdown (2%); and Other (24%).
Asset Allocations
Respondents expect to increase allocations over the next 12-18 months most significantly in emerging market equities, natural resources, commodities (similar to last year’s results); as well as venture capital and private equity, and real estate. Unlike last year, this year the largest decreases were forecast for U.S. Treasuries; European equities and cash; other decreases include core U.S. fixed income and Japanese equities.
53 percent of respondents said they would increase allocations to emerging market equities, up from 40 percent last year; while only 1 percent say they would decrease allocations this year. Similarly, 44 percent cited that they would increase allocations to natural resources, up slightly from 43 percent last year. 40 percent would increase allocations to venture capital and private equity; up from 32 percent last year. 37 percent said they would increase allocations to real estate, up from 27 percent last year. 34 percent said they would increase allocations to commodities, down slightly from 37 percent last year. 31 percent said they would increase allocations to distressed debt/high yield, up significantly from 18 percent last year. 28 percent said would increase allocations to hedge funds, up slightly from 27 percent last year. 6 percent said they would increase fixed income allocations, up from 3 percent last year.
Areas of Greatest Concern
Like last year, Commonfund asked participants to rate 11 different factors and asked them to rate their concern about these factors, relative to the management of their assets. Respondents answered along a five-point scale with “1” being “no concern”; “3” being “modest concern” and “5” being “extreme concern.” The top three areas of great concern (based on respondents rating factors as a “4” or a “5”) are:
- Market (investment) volatility: 69 percent
- Shortfalls in meeting investment return objectives: 63 percent, up from only 21 percent last year
- Risk management (broadly defined): 38 percent, the same as last year
In contrast, the factors of least concern to respondents this year (rating of a “1” or a “2) were:
- Deflation: 64 percent
- Portfolio liquidity: 50 percent
- Costs of investment management: 39 percent, down from 43 percent last year
- Structure/effectiveness of investment resources (staff and board): 39 percent, down from 42% last year
- Inflation concerns were 28 percent this year, down from 53 percent last year.
Monday, March 12, 2012
eVestment|HFN Industry Estimates for February 2012
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Hedge funds were broadly positive in February, +1.94%,
and off to their best start in 12 years, since 2000. In
that year, the tech bubble burst and returns for the
industry remained positive for the year, despite the S&P
500 declining -9.10%.
• Early indications show net investor flows were positive
for the second consecutive month in February, firmly
reversing the trend of outflows seen in the second half
of 2011.
• 60% of funds reporting for February indicated positive
net investor flows during the month. 75% of large funds
(>$1 billion) have reported allocations outpaced
redemptions in February.
• Positive performance in February appeared to again be
driven by long-biased equity exposures, particularly to
emerging markets. Funds investing in Brazil and Russia
built upon their strong starts to 2012, while funds
focused on China were positive, but lagged other EM
exposures in February.
• Smaller funds appear to be outperforming their larger
peers in the current environment. Strategies with less
than $1 billion in AUM have returned greater than 100
bps more than those above to begin 2012.
• The aggregate of all equity strategies outperformed
credit and macro funds, but all classifications were
positive. Only short biased funds and FX strategies have
reported negative aggregate returns during the month.
• Mortgage strategies continued to post solid results and
are the best performing fund classification over the last
twelve months.
Complete report
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Hedge funds were broadly positive in February, +1.94%,
and off to their best start in 12 years, since 2000. In
that year, the tech bubble burst and returns for the
industry remained positive for the year, despite the S&P
500 declining -9.10%.
• Early indications show net investor flows were positive
for the second consecutive month in February, firmly
reversing the trend of outflows seen in the second half
of 2011.
• 60% of funds reporting for February indicated positive
net investor flows during the month. 75% of large funds
(>$1 billion) have reported allocations outpaced
redemptions in February.
• Positive performance in February appeared to again be
driven by long-biased equity exposures, particularly to
emerging markets. Funds investing in Brazil and Russia
built upon their strong starts to 2012, while funds
focused on China were positive, but lagged other EM
exposures in February.
• Smaller funds appear to be outperforming their larger
peers in the current environment. Strategies with less
than $1 billion in AUM have returned greater than 100
bps more than those above to begin 2012.
• The aggregate of all equity strategies outperformed
credit and macro funds, but all classifications were
positive. Only short biased funds and FX strategies have
reported negative aggregate returns during the month.
• Mortgage strategies continued to post solid results and
are the best performing fund classification over the last
twelve months.
Complete report
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Saturday, March 10, 2012
HFRI Fund Weighted Composite Index gains +2.14 percent in February
HEDGE FUNDS POST BEST START TO YEAR SINCE 2000
Equity Hedge, Emerging Markets top contributors
Hedge funds posted their strongest start to a calendar year since 2000, with significant contributions from strategy areas which underperformed in 2011, according to data released today by HFR, the leading provider of data, indices and analysis of the global hedge fund industry. The HFRI Fund Weighted Composite Index gained +2.14 percent in February, bringing performance through the first two months of 2012 to nearly 5 percent. The recent gains have nearly recovered the -5.26 percent decline from 2011, a year in which total hedge fund industry capital rose by 3 percent to $2.02 Trillion.
Equity Hedge funds have had the most significant contribution to HFRI performance in 2012, with the HFRI Equity Hedge Index gaining +6.9 percent through February . Gains have been broad-based across Equity Hedge sub-strategies, including Fundamental Growth, Value and Energy, with the only Short Bias funds detracting from gains.
Positive performance in 2012 has been broad-based across all main strategies, with Event Driven, Relative Value Arbitrage and Macro also posting gains in early 2012.
Equity, M&A and credit-sensitive strategies have posted strong gains, with the HFRI Event Driven Index gaining +1.9 percent in February (+4.6 percent YTD) with significant positive contributions from Activist and Special Situations hedge fund strategies. Similarly, fixed income-based Relative Value Arbitrage funds gained +1.7 percent in February (+3.6 percent YTD) as spread tightening and strong liquidity contributed to Arbitrage gains. Macro funds have also posted gains despite the volatile commodity and trend following environment. The HFRI Macro Index, which gained +1.2 percent in February, has gained +2.4 percent YTD despite declines across most commodity focused hedge funds. Systematic, trend following Macro funds gained +1.1 percent in February and have gained +1.5 percent for 2012.
Hedge funds investing in Emerging Markets have also posted strong gains, with the HFRI Emerging Markets (Total) Index gaining +4.3 percent in February and +9.3 percent through the first two months of 2012. While performance has been strong across all Emerging Markets regions, the strongest gains have been in funds investing in Russia and Eastern Europe, gaining +12.7 percent through early 2012.
“Hedge fund performance through early 2012 has benefitted from improvement or total reversal of the trends, sentiment and volatility which contributed to the challenging environment in 2011,” said Kenneth J. Heinz, president of HFR. “While many of the macroeconomic risks remain salient in the current environment, fundamental and convergence oriented themes and positions have gained traction on improvements and optimism across US and European economic outlooks. While equity market volatility may rise from early 2012 subdued levels, hedge funds are well positioned in the current environment to opportunistically adjust exposures and generate gains across multiple asset classes globally in 2012.”
Equity Hedge, Emerging Markets top contributors
Hedge funds posted their strongest start to a calendar year since 2000, with significant contributions from strategy areas which underperformed in 2011, according to data released today by HFR, the leading provider of data, indices and analysis of the global hedge fund industry. The HFRI Fund Weighted Composite Index gained +2.14 percent in February, bringing performance through the first two months of 2012 to nearly 5 percent. The recent gains have nearly recovered the -5.26 percent decline from 2011, a year in which total hedge fund industry capital rose by 3 percent to $2.02 Trillion.
Equity Hedge funds have had the most significant contribution to HFRI performance in 2012, with the HFRI Equity Hedge Index gaining +6.9 percent through February . Gains have been broad-based across Equity Hedge sub-strategies, including Fundamental Growth, Value and Energy, with the only Short Bias funds detracting from gains.
Positive performance in 2012 has been broad-based across all main strategies, with Event Driven, Relative Value Arbitrage and Macro also posting gains in early 2012.
Equity, M&A and credit-sensitive strategies have posted strong gains, with the HFRI Event Driven Index gaining +1.9 percent in February (+4.6 percent YTD) with significant positive contributions from Activist and Special Situations hedge fund strategies. Similarly, fixed income-based Relative Value Arbitrage funds gained +1.7 percent in February (+3.6 percent YTD) as spread tightening and strong liquidity contributed to Arbitrage gains. Macro funds have also posted gains despite the volatile commodity and trend following environment. The HFRI Macro Index, which gained +1.2 percent in February, has gained +2.4 percent YTD despite declines across most commodity focused hedge funds. Systematic, trend following Macro funds gained +1.1 percent in February and have gained +1.5 percent for 2012.
Hedge funds investing in Emerging Markets have also posted strong gains, with the HFRI Emerging Markets (Total) Index gaining +4.3 percent in February and +9.3 percent through the first two months of 2012. While performance has been strong across all Emerging Markets regions, the strongest gains have been in funds investing in Russia and Eastern Europe, gaining +12.7 percent through early 2012.
“Hedge fund performance through early 2012 has benefitted from improvement or total reversal of the trends, sentiment and volatility which contributed to the challenging environment in 2011,” said Kenneth J. Heinz, president of HFR. “While many of the macroeconomic risks remain salient in the current environment, fundamental and convergence oriented themes and positions have gained traction on improvements and optimism across US and European economic outlooks. While equity market volatility may rise from early 2012 subdued levels, hedge funds are well positioned in the current environment to opportunistically adjust exposures and generate gains across multiple asset classes globally in 2012.”
Early estimates: Dow Jones Credit Suisse Hedge Fund Index up 1.60% in February
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Early estimates indicate the Dow Jones Credit Suisse Hedge Fund Index (“Broad Index”) finished up 1.60% in February (based on 74% of assets in the index reporting).
Strategy Estimates - Feb-12
Broad Benchmark Index
1.60%
Convertible Arbitrage
1.92%
Dedicated Short Bias
-4.53%
Emerging Markets
3.37%
Equity Market Neutral
1.43%
Event Driven
1.44%
Distressed
1.70%
Event Driven Multi-Strategy
1.32%
Risk Arbitrage
0.95%
Fixed Income Arbitrage
1.09%
Global Macro
0.67%
Long/Short Equity
2.83%
Managed Futures
1.31%
Multi-Strategy
1.85%
Early estimates indicate the Dow Jones Credit Suisse Hedge Fund Index (“Broad Index”) finished up 1.60% in February (based on 74% of assets in the index reporting).
Strategy Estimates - Feb-12
Broad Benchmark Index
1.60%
Convertible Arbitrage
1.92%
Dedicated Short Bias
-4.53%
Emerging Markets
3.37%
Equity Market Neutral
1.43%
Event Driven
1.44%
Distressed
1.70%
Event Driven Multi-Strategy
1.32%
Risk Arbitrage
0.95%
Fixed Income Arbitrage
1.09%
Global Macro
0.67%
Long/Short Equity
2.83%
Managed Futures
1.31%
Multi-Strategy
1.85%
Hedge Funds Off to Best Start in Over a Decade - ADVANCE +1.72% IN FEBRUARY
Hennessee Group LLC, an adviser to hedge fund investors, announced today that the Hennessee Hedge Fund Index advanced +1.72% in February (+4.07% YTD), while the S&P 500 advanced +4.06% (+8.60% YTD), the Dow Jones Industrial Average increased +2.53% (+6.02% YTD), and the NASDAQ Composite Index climbed +5.44% (+13.89%). Bonds also advanced, as the Barclays Aggregate Bond Index declined -0.02% (+0.86% YTD) and the Barclays High Yield Credit Bond Index advanced +2.37% (+5.48%).
“Hedge funds are off to the best start since 2000,” commented Charles Gradante, Co-Founder of Hennessee Group. “During the first two months of the year, hedge funds have benefitted from a better investment environment relative to 2011, with improved investor sentiment, greater risk taking, lower correlations and lower volatility. Markets are responding to fundamentals, which is benefiting stock pickers. While many risks remain, there is optimism around a better economic outlook for the U.S. and stability in the Euro zone.”
“Hedge funds performed well in February generating gains despite conservative exposures. As the investment environment has improved over the last two months, we have seen managers increase exposure levels,” said Lee Hennessee, Managing Principal of Hennessee Group. “Hedge fund exposures are approaching historical norms, though managers remain somewhat cautious. Hedge funds are prepared to quickly adjust exposure should conditions dictate, as many feel volatility may rise from currently subdued levels.”
Equity long/short posted gains in February, as the Hennessee Long/Short Equity Index advanced +1.45% (+3.67% YTD). Financial market gains continued as investor sentiment around with the European debt crisis and U.S. economic recovery continued to improve. During the month, the Dow Jones Industrial Average and the S&P 500 reached levels not seen since 2008. Market performance was driven by reports of strong corporate earnings, encouraging economic data and accommodative measures of central banks globally. U.S. PMIs and employment data supported the domestic recovery that is continuing to build steam. Market volatility continues to decline sharply, with the VIX down -20% in the first two months of 2012. Gains were broad based and across sectors. Financials, technology and consumer discretionary were the best performing sectors. Stock-specific correlation has come down, benefiting stock-selection and allowing managers to generate alpha.
“There are some similarities between the beginning of 2012 and early 2011, and several managers have expressed some concern about a potential correction,” commented Charles Gradante. “The S&P 500 has rallied +20% since October 2011. Investor sentiment may be peaking. Some managers feel that the markets are overbought and are due for a short-term correction.”
The Hennessee Arbitrage/Event Driven Index advanced +1.53% (+4.04% YTD) in February. Along with an equity market rally, credit markets advanced for the month. Corporate credit markets experienced a tightening of spreads, significant investor inflows and a robust primary market. The Barclays High Yield Credit Bond Index advanced +2.37% in February and the S&P/LSTA Leveraged Loan Index rose +0.8% during the month. The Hennessee Distressed Index increased +1.86% in February (+4.93% YTD). Distressed strategies posted solid gains as the markets rallied, liquidity increased, and investor risk tolerance continued to improve. The Hennessee Merger Arbitrage Index advanced +1.72% in February (+2.89% YTD). During the month, corporate M&A spreads continued to tighten, benefiting portfolios. Managers are becoming bullish about the potential for increased corporate activity given pressure on companies to deploy high cash balances, low levels of volatility and attractive valuations. The Hennessee Convertible Arbitrage Index returned +1.78% (+3.79% YTD). Convertibles rallied in February driven mostly by higher equities and tighter credit spreads. Managers also reported that it appeared as though there was a pickup in outright buying as credit and equity markets rallied.
“Managers lost money in their long gold trade as the Fed denied any near term QE3, sending gold down -5% in a single day and ending down for the month,” commented Charles Gradante. “Despite the pullback, managers remain bullish on the gold thesis. They feel that we are likely to see inflation, which will lead to appreciation in the precious metal.”
The Hennessee Global/Macro Index advanced +2.65% (+5.03% YTD) in February, driven by strong gains in both global and macro strategies. During the month, the market continued to focus on the impact of the ECB’s long-term repo operations (LTRO) in reducing systemic risk in the Euro-area. International equities advanced, as the MSCI EAFE Index increased +5.44% (+10.98% YTD). International hedge fund managers were also positive, as the Hennessee International Index advanced +2.85% (+5.16% YTD) in February. Emerging market hedge funds added to their gains in February, as the Hennessee Emerging Market Index increased +2.69% (+5.07% YTD). Managers remain concerned about the debt issues in Europe and a slowing China, but have greater optimism on investment opportunities. During the month, markets became more focused on geopolitical risks in the Middle East, which led to a sharp increase in the price of crude oil. Macro managers posted solid gains in February, as the Hennessee Macro Index increased +2.02% (+2.51% YTD) for the month. Managers made profits in equities, fixed income, currency and commodity exposure. U.S. yields rose across nearly all maturities, while credit tightened for the month. Global equities and credit markets posted strong gains. A late month sell-off in gold impacted commodity gains, but oil and other metals registered positive performance for the month. The U.S. dollar declined against most major currencies as volatility fell and risk tolerance improved.
“Hedge funds are off to the best start since 2000,” commented Charles Gradante, Co-Founder of Hennessee Group. “During the first two months of the year, hedge funds have benefitted from a better investment environment relative to 2011, with improved investor sentiment, greater risk taking, lower correlations and lower volatility. Markets are responding to fundamentals, which is benefiting stock pickers. While many risks remain, there is optimism around a better economic outlook for the U.S. and stability in the Euro zone.”
“Hedge funds performed well in February generating gains despite conservative exposures. As the investment environment has improved over the last two months, we have seen managers increase exposure levels,” said Lee Hennessee, Managing Principal of Hennessee Group. “Hedge fund exposures are approaching historical norms, though managers remain somewhat cautious. Hedge funds are prepared to quickly adjust exposure should conditions dictate, as many feel volatility may rise from currently subdued levels.”
Equity long/short posted gains in February, as the Hennessee Long/Short Equity Index advanced +1.45% (+3.67% YTD). Financial market gains continued as investor sentiment around with the European debt crisis and U.S. economic recovery continued to improve. During the month, the Dow Jones Industrial Average and the S&P 500 reached levels not seen since 2008. Market performance was driven by reports of strong corporate earnings, encouraging economic data and accommodative measures of central banks globally. U.S. PMIs and employment data supported the domestic recovery that is continuing to build steam. Market volatility continues to decline sharply, with the VIX down -20% in the first two months of 2012. Gains were broad based and across sectors. Financials, technology and consumer discretionary were the best performing sectors. Stock-specific correlation has come down, benefiting stock-selection and allowing managers to generate alpha.
“There are some similarities between the beginning of 2012 and early 2011, and several managers have expressed some concern about a potential correction,” commented Charles Gradante. “The S&P 500 has rallied +20% since October 2011. Investor sentiment may be peaking. Some managers feel that the markets are overbought and are due for a short-term correction.”
The Hennessee Arbitrage/Event Driven Index advanced +1.53% (+4.04% YTD) in February. Along with an equity market rally, credit markets advanced for the month. Corporate credit markets experienced a tightening of spreads, significant investor inflows and a robust primary market. The Barclays High Yield Credit Bond Index advanced +2.37% in February and the S&P/LSTA Leveraged Loan Index rose +0.8% during the month. The Hennessee Distressed Index increased +1.86% in February (+4.93% YTD). Distressed strategies posted solid gains as the markets rallied, liquidity increased, and investor risk tolerance continued to improve. The Hennessee Merger Arbitrage Index advanced +1.72% in February (+2.89% YTD). During the month, corporate M&A spreads continued to tighten, benefiting portfolios. Managers are becoming bullish about the potential for increased corporate activity given pressure on companies to deploy high cash balances, low levels of volatility and attractive valuations. The Hennessee Convertible Arbitrage Index returned +1.78% (+3.79% YTD). Convertibles rallied in February driven mostly by higher equities and tighter credit spreads. Managers also reported that it appeared as though there was a pickup in outright buying as credit and equity markets rallied.
“Managers lost money in their long gold trade as the Fed denied any near term QE3, sending gold down -5% in a single day and ending down for the month,” commented Charles Gradante. “Despite the pullback, managers remain bullish on the gold thesis. They feel that we are likely to see inflation, which will lead to appreciation in the precious metal.”
The Hennessee Global/Macro Index advanced +2.65% (+5.03% YTD) in February, driven by strong gains in both global and macro strategies. During the month, the market continued to focus on the impact of the ECB’s long-term repo operations (LTRO) in reducing systemic risk in the Euro-area. International equities advanced, as the MSCI EAFE Index increased +5.44% (+10.98% YTD). International hedge fund managers were also positive, as the Hennessee International Index advanced +2.85% (+5.16% YTD) in February. Emerging market hedge funds added to their gains in February, as the Hennessee Emerging Market Index increased +2.69% (+5.07% YTD). Managers remain concerned about the debt issues in Europe and a slowing China, but have greater optimism on investment opportunities. During the month, markets became more focused on geopolitical risks in the Middle East, which led to a sharp increase in the price of crude oil. Macro managers posted solid gains in February, as the Hennessee Macro Index increased +2.02% (+2.51% YTD) for the month. Managers made profits in equities, fixed income, currency and commodity exposure. U.S. yields rose across nearly all maturities, while credit tightened for the month. Global equities and credit markets posted strong gains. A late month sell-off in gold impacted commodity gains, but oil and other metals registered positive performance for the month. The U.S. dollar declined against most major currencies as volatility fell and risk tolerance improved.
Hedge funds witnessed US$20 billion in net positive asset flows
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The Eurekahedge Hedge Fund Index was up 2.06%1 in February as optimism about European debt and strengthening global economy fueled rallies in the underlying markets. The MSCI World Index gained 4.55%2 as high risk appetite continued for the second month running. All regions and strategies finished the month with positive returns while the asset-weighted Mizuho-Eurekahedge Index was also up 1.64% in February.
Key highlights for February 2012:
The Eurekahedge Hedge Fund Index is up 4.30% for the first two months of the year, meaning the industry is enjoying its strongest start to a year in 12 years.
Hedge funds saw US$20 billion in net positive asset flows during January and February 2012.
Long/short equity funds have gained 6.2% year-to-date as of the end of February.
The asset weighted Mizuho-Eurekahedge Asia ex-Japan Hedge Fund Index is up nearly 10% in 2012.
Eastern Europe & Russia investing hedge funds are on a strong run in 2012, with returns up an impressive 12.57%.
All regional mandates finished the month with positive returns with managers investing in Eastern Europe & Russia and Asia ex-Japan witnessing the largest gains. The Eurekahedge Eastern Europe & Russia Hedge Fund Index was up 6.10% in February, bringing its year-to-date (YTD) return to a substantial 12.57%. In addition to the overall positive global economic view, the underlying markets have benefitted from constructive moves by regional governments while managers investing in the region also gained from the sharp gains in the local currencies against the greenback.
Asia ex-Japan hedge funds delivered a 4.40% return for the month, bringing their February YTD figure to 8.84%. The regional managers have profited from a strong performance in the consumer and industrial sectors while also profiting from strengthening local currency exposures. The asset-weighted Mizuho-Eurekahedge Asia ex-Japan Index is up 9.55% February YTD, showing that larger funds have outperformed over the last two months.
Notable among other regions is the performance of European hedge funds, the Eurekahedge European Hedge Fund Index was up 5.14% February YTD as heightened risk appetite and improving sentiment about the European debt situation led to healthy performance in the underlying markets. Additionally, early reports indicate that European hedge funds have also started to attract capital from investors, implying that confidence in the region is returning.
Strategy Indices
Hedge funds with exposure to equities raked in the largest gains in February with long/short equity managers gaining 2.92%, event driven hedge funds up 2.44% and multi-strategy managers posting returns of 2.21% for the month. Sustained rallies in the equity markets (driven by strong corporate earnings and improving US economic indicators) provided equity managers with a healthy profit-making environment. The S&P 500 gained 4.06%, bringing its YTD return to 8.59% - the best first two months of the year since 1991. Long/short equity mangers captured most of the gains on offer during January and February, with their YTD return standing at 6.17%. Event driven managers benefitted from investing in companies with strong balance sheets, which had a number of low-value opportunities to gain from. All other strategies also posted healthy returns for the month and remain in the black February YTD.
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.
The Eurekahedge Hedge Fund Index was up 2.06%1 in February as optimism about European debt and strengthening global economy fueled rallies in the underlying markets. The MSCI World Index gained 4.55%2 as high risk appetite continued for the second month running. All regions and strategies finished the month with positive returns while the asset-weighted Mizuho-Eurekahedge Index was also up 1.64% in February.
Key highlights for February 2012:
The Eurekahedge Hedge Fund Index is up 4.30% for the first two months of the year, meaning the industry is enjoying its strongest start to a year in 12 years.
Hedge funds saw US$20 billion in net positive asset flows during January and February 2012.
Long/short equity funds have gained 6.2% year-to-date as of the end of February.
The asset weighted Mizuho-Eurekahedge Asia ex-Japan Hedge Fund Index is up nearly 10% in 2012.
Eastern Europe & Russia investing hedge funds are on a strong run in 2012, with returns up an impressive 12.57%.
All regional mandates finished the month with positive returns with managers investing in Eastern Europe & Russia and Asia ex-Japan witnessing the largest gains. The Eurekahedge Eastern Europe & Russia Hedge Fund Index was up 6.10% in February, bringing its year-to-date (YTD) return to a substantial 12.57%. In addition to the overall positive global economic view, the underlying markets have benefitted from constructive moves by regional governments while managers investing in the region also gained from the sharp gains in the local currencies against the greenback.
Asia ex-Japan hedge funds delivered a 4.40% return for the month, bringing their February YTD figure to 8.84%. The regional managers have profited from a strong performance in the consumer and industrial sectors while also profiting from strengthening local currency exposures. The asset-weighted Mizuho-Eurekahedge Asia ex-Japan Index is up 9.55% February YTD, showing that larger funds have outperformed over the last two months.
Notable among other regions is the performance of European hedge funds, the Eurekahedge European Hedge Fund Index was up 5.14% February YTD as heightened risk appetite and improving sentiment about the European debt situation led to healthy performance in the underlying markets. Additionally, early reports indicate that European hedge funds have also started to attract capital from investors, implying that confidence in the region is returning.
Strategy Indices
Hedge funds with exposure to equities raked in the largest gains in February with long/short equity managers gaining 2.92%, event driven hedge funds up 2.44% and multi-strategy managers posting returns of 2.21% for the month. Sustained rallies in the equity markets (driven by strong corporate earnings and improving US economic indicators) provided equity managers with a healthy profit-making environment. The S&P 500 gained 4.06%, bringing its YTD return to 8.59% - the best first two months of the year since 1991. Long/short equity mangers captured most of the gains on offer during January and February, with their YTD return standing at 6.17%. Event driven managers benefitted from investing in companies with strong balance sheets, which had a number of low-value opportunities to gain from. All other strategies also posted healthy returns for the month and remain in the black February YTD.
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.
Wednesday, March 7, 2012
The Dow Jones Credit Suisse Core Hedge Fund Index Closed Up 1.31% in February
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The Dow Jones Credit Suisse Core Hedge Fund Index closed up 1.31% in February as all of the index component strategies reported positive results for February.
The Dow Jones Credit Suisse Core Hedge Fund Index provides daily published index values which enable investors to seek to track the impact of market events on the hedge fund industry. February, January and year-to-date 2012 performances are listed below and are available at www.hedgeindex.com.
The numbers below each index are as follows:
Feb-12
Jan-12
YTD 2012
Dow Jones Credit Suisse Core Hedge Fund Index
1.31%
2.26%
3.60%
Convertible Arbitrage
2.34%
3.47%
5.89%
Emerging Markets
1.83%
1.80%
3.66%
Event Driven
1.47%
2.90%
4.41%
Fixed Income Arbitrage
0.43%
0.93%
1.36%
Global Macro
0.93%
1.96%
2.90%
Long/Short Equity
2.05%
3.21%
5.32%
Managed Futures
0.69%
0.95%
1.65%
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The Dow Jones Credit Suisse Core Hedge Fund Index closed up 1.31% in February as all of the index component strategies reported positive results for February.
The Dow Jones Credit Suisse Core Hedge Fund Index provides daily published index values which enable investors to seek to track the impact of market events on the hedge fund industry. February, January and year-to-date 2012 performances are listed below and are available at www.hedgeindex.com.
The numbers below each index are as follows:
Feb-12
Jan-12
YTD 2012
Dow Jones Credit Suisse Core Hedge Fund Index
1.31%
2.26%
3.60%
Convertible Arbitrage
2.34%
3.47%
5.89%
Emerging Markets
1.83%
1.80%
3.66%
Event Driven
1.47%
2.90%
4.41%
Fixed Income Arbitrage
0.43%
0.93%
1.36%
Global Macro
0.93%
1.96%
2.90%
Long/Short Equity
2.05%
3.21%
5.32%
Managed Futures
0.69%
0.95%
1.65%
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Dow Jones Credit Suisse Offers Insight Into January Hedge Fund Performance
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The Dow Jones Credit Suisse Hedge Fund Index finished up 2.34% in January. A new monthly commentary offers insight into hedge fund performance through the month of January. Some key findings from the report include:
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished January up 2.34%; with 9 out of 10 strategies in positive territory;
In total, the industry saw estimated outflows of approximately $15 billion in January, bringing overall assets under management for the industry to approximately $1.72 trillion;
The Equity Market Neutral and Convertible Arbitrage sectors experienced the largest asset inflows on a percentage basis in January, with inflows of 2.27% and 0.87% from December 2011 levels, respectively;
Directional strategies, such as Long/Short Equity, experienced positive performance driven by a risky asset rally. Mean reversion was a notable trend as sectors that performed poorly for the year in 2011 performed well in January;
Tactical trading managers showed generally positive performance. Global Macro managers and Managed Futures funds posted gains as managers benefitted from macroeconomic shifts; and
On the relative value front, managers showed positive performance in January. Fixed Income Arbitrage managers posted gains despite the swift change from a risk-off to a risk-on market.
Click here to view the full report which includes an overview of January hedge fund performance, in-depth commentary on individual hedge fund sectors and hedge fund return dispersion statistics for each strategy.
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The Dow Jones Credit Suisse Hedge Fund Index finished up 2.34% in January. A new monthly commentary offers insight into hedge fund performance through the month of January. Some key findings from the report include:
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished January up 2.34%; with 9 out of 10 strategies in positive territory;
In total, the industry saw estimated outflows of approximately $15 billion in January, bringing overall assets under management for the industry to approximately $1.72 trillion;
The Equity Market Neutral and Convertible Arbitrage sectors experienced the largest asset inflows on a percentage basis in January, with inflows of 2.27% and 0.87% from December 2011 levels, respectively;
Directional strategies, such as Long/Short Equity, experienced positive performance driven by a risky asset rally. Mean reversion was a notable trend as sectors that performed poorly for the year in 2011 performed well in January;
Tactical trading managers showed generally positive performance. Global Macro managers and Managed Futures funds posted gains as managers benefitted from macroeconomic shifts; and
On the relative value front, managers showed positive performance in January. Fixed Income Arbitrage managers posted gains despite the swift change from a risk-off to a risk-on market.
Click here to view the full report which includes an overview of January hedge fund performance, in-depth commentary on individual hedge fund sectors and hedge fund return dispersion statistics for each strategy.
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Emerging Markets Index leads hedge fund industry with +4.4 percent gain in January
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Funds investing in Russia, Latin America post top gains as EM hedge fund assets rise
Emerging Markets hedge funds led broad-based performance gains across the global hedge fund industry to start 2012, with the HFRI Emerging Markets (Total) Index gaining +4.4 percent for the month of January, as reported by HFR with the most recent release of the Emerging Markets Hedge Fund Industry Report and Database. Prior to January gains, Emerging Market hedge funds concluded a challenging year in 2011, posting an average decline of -13.8 percent, the 3rd worst calendar year since 1990.
Details: HFR Emerging Markets Hedge Fund Industry Report: Year End 2011
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Funds investing in Russia, Latin America post top gains as EM hedge fund assets rise
Emerging Markets hedge funds led broad-based performance gains across the global hedge fund industry to start 2012, with the HFRI Emerging Markets (Total) Index gaining +4.4 percent for the month of January, as reported by HFR with the most recent release of the Emerging Markets Hedge Fund Industry Report and Database. Prior to January gains, Emerging Market hedge funds concluded a challenging year in 2011, posting an average decline of -13.8 percent, the 3rd worst calendar year since 1990.
Details: HFR Emerging Markets Hedge Fund Industry Report: Year End 2011
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Hedge Funds Redeem $15.2 Billion in January, Highest Outflow Since July 2009
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Hedge Fund Managers Bullish on S&P 500 in February, According to BarclayHedge/TrimTabs Survey; Plurality of Fund Managers See Equities as Best Investment for Next Three Months
BarclayHedge and TrimTabs Investment Research reported today that hedge funds redeemed an estimated $15.2 billion (0.9% of assets) in January 2012 while underperforming the S&P 500 by 110 basis points for the month. Industry assets rose to $1.70 trillion in January from $1.68 trillion in December 2011.
“Hedge funds managed a 3.1% return in January after posting losses in seven out of the last eight months of 2011,” said Sol Waksman, founder and President of BarclayHedge. The benchmark S&P 500 Index returned 4.2% in January after outperforming the hedge fund industry for all of 2011.
“January marked the biggest monthly outflow since July 2009, when hedge funds redeemed $17.7 billion,” said Leon Mirochnik, an analyst at TrimTabs. “The hedge fund industry has experienced net outflows in four out of the last five months.” Fixed Income, Multi-Strategy, and Merger Arbitrage hedge funds are the only investing strategies that have seen net inflows since September 2011.
Funds of hedge funds underperformed their hedge fund counterparts by 140 bps, returning 1.7% in January. “It seems funds-of-funds managers might have a hard time explaining their layers of fees to their clients, as funds-of-funds have underperformed hedge funds by 200 bps over the past year,” Mirochnik said.
“Multi-Strategy hedge funds pulled in $2.6 billion (1.1% of assets) in January, the heaviest inflow of the strategies we track,” Mirochnik said. “Investors seem to be piling into strategies that can benefit from geopolitical uncertainty around the world.”
Meanwhile, the latest TrimTabs/BarclayHedge Survey of Hedge Fund Managers reveals hedge fund managers remain bullish on the prospects of U.S. equities. The survey of 105 hedge fund managers found bullish sentiment on the S&P 500 at 40.0% in February 2012, down from 45.4% in January. Bearish sentiment rose to 30.5% in February from 25.0% in January. Managers were surveyed in the third week of February.
The survey also found that nearly 30.0% of managers believed that U.S. equities would be the top-performing investment over the next three months. Gold came in second at nearly 23.0% and oil received 20.0% of the vote.
Hedge Fund Managers Bullish on S&P 500 in February, According to BarclayHedge/TrimTabs Survey; Plurality of Fund Managers See Equities as Best Investment for Next Three Months
BarclayHedge and TrimTabs Investment Research reported today that hedge funds redeemed an estimated $15.2 billion (0.9% of assets) in January 2012 while underperforming the S&P 500 by 110 basis points for the month. Industry assets rose to $1.70 trillion in January from $1.68 trillion in December 2011.
“Hedge funds managed a 3.1% return in January after posting losses in seven out of the last eight months of 2011,” said Sol Waksman, founder and President of BarclayHedge. The benchmark S&P 500 Index returned 4.2% in January after outperforming the hedge fund industry for all of 2011.
“January marked the biggest monthly outflow since July 2009, when hedge funds redeemed $17.7 billion,” said Leon Mirochnik, an analyst at TrimTabs. “The hedge fund industry has experienced net outflows in four out of the last five months.” Fixed Income, Multi-Strategy, and Merger Arbitrage hedge funds are the only investing strategies that have seen net inflows since September 2011.
Funds of hedge funds underperformed their hedge fund counterparts by 140 bps, returning 1.7% in January. “It seems funds-of-funds managers might have a hard time explaining their layers of fees to their clients, as funds-of-funds have underperformed hedge funds by 200 bps over the past year,” Mirochnik said.
“Multi-Strategy hedge funds pulled in $2.6 billion (1.1% of assets) in January, the heaviest inflow of the strategies we track,” Mirochnik said. “Investors seem to be piling into strategies that can benefit from geopolitical uncertainty around the world.”
Meanwhile, the latest TrimTabs/BarclayHedge Survey of Hedge Fund Managers reveals hedge fund managers remain bullish on the prospects of U.S. equities. The survey of 105 hedge fund managers found bullish sentiment on the S&P 500 at 40.0% in February 2012, down from 45.4% in January. Bearish sentiment rose to 30.5% in February from 25.0% in January. Managers were surveyed in the third week of February.
The survey also found that nearly 30.0% of managers believed that U.S. equities would be the top-performing investment over the next three months. Gold came in second at nearly 23.0% and oil received 20.0% of the vote.
Thursday, March 1, 2012
Newly started hedge funds received $12.4 billion in deposits from 2009 through 2011
Newly started hedge funds received $12.4 billion in deposits from 2009 through 2011 from investors that believe many managers perform best during their early years, according to a Citigroup Inc. (C) report. Citigroup surveyed 90 global investors with $368 billion in assets, including funds of funds, family offices, private banks and endowments.
Investors allocated $5.6 billion to 352 start-up hedge funds in 2011 and have made $12.4 billion in day-one and early-stage investments since 2009, according to the report by Citi Prime Finance.
Researchers at Citi identified 78 investors globally that made 779 investments in hedge funds with a track record of less than one year since 2009. The average day-one or early-stage investment was $16 million, compared with $37.7 million for established managers.
Funds of hedge funds (FoHFs) accounted for around 70% of day-one and early-stage investors, followed by private banks and family offices. Institutional investors such as pension funds typically have minimum track record and ticket size constraints which preclude them from investing in start-ups.
US-based investors accounted for 63% of the universe of day-one and early-stage allocators and committed nearly three times more capital to start-up hedge funds than European groups.
Despite an up-tick in early-stage investments in 2011 compared with previous years, raising capital remains a huge challenge for start-ups. Hedge fund managers interviewed by Citi said they had to meet with as many as 100 potential investors to secure two to four allocations.
They were also pressured by investors to provide fee discounts and other concessions in exchange for capital. The average manager settles for a 1.5% management fee and a 15% performance in exchange for start-up capital.
Even then, early-stage investors tend to gravitate to funds that already have significant capital behind them, either in the form of a seed investor or personal investments from principals.
Globally, the average size of managers receiving day-one or early-stage allocations was $193 million. In the US hedge funds receiving early-stage investments tend to have more than $200 million, while in Europe and Asia the average falls to less than $100 million.
Investors allocated $5.6 billion to 352 start-up hedge funds in 2011 and have made $12.4 billion in day-one and early-stage investments since 2009, according to the report by Citi Prime Finance.
Researchers at Citi identified 78 investors globally that made 779 investments in hedge funds with a track record of less than one year since 2009. The average day-one or early-stage investment was $16 million, compared with $37.7 million for established managers.
Funds of hedge funds (FoHFs) accounted for around 70% of day-one and early-stage investors, followed by private banks and family offices. Institutional investors such as pension funds typically have minimum track record and ticket size constraints which preclude them from investing in start-ups.
US-based investors accounted for 63% of the universe of day-one and early-stage allocators and committed nearly three times more capital to start-up hedge funds than European groups.
Despite an up-tick in early-stage investments in 2011 compared with previous years, raising capital remains a huge challenge for start-ups. Hedge fund managers interviewed by Citi said they had to meet with as many as 100 potential investors to secure two to four allocations.
They were also pressured by investors to provide fee discounts and other concessions in exchange for capital. The average manager settles for a 1.5% management fee and a 15% performance in exchange for start-up capital.
Even then, early-stage investors tend to gravitate to funds that already have significant capital behind them, either in the form of a seed investor or personal investments from principals.
Globally, the average size of managers receiving day-one or early-stage allocations was $193 million. In the US hedge funds receiving early-stage investments tend to have more than $200 million, while in Europe and Asia the average falls to less than $100 million.
“Understanding the Hedge Fund Maturity Model”
As the Alternatives industry prepares for increased capital flows, Investors and Regulators look increasingly at hedge funds' organizational and infrastructure maturity.
This “Hedge Fund Maturity Model“ whitepaper takes a best practices approach and lays out a framework and taxonomy for discussing hedge fund evolution. This work is based on detailed analysis and benchmarking of the different types of funds that exist in the new landscape. It attempts to highlight the key organizational, operational and technology transitions that take place at different stages of a firm's development and provides a template for understanding the inner workings of a manager as AUM grows and as the firm's scale of operations advances.
This “Hedge Fund Maturity Model“ whitepaper takes a best practices approach and lays out a framework and taxonomy for discussing hedge fund evolution. This work is based on detailed analysis and benchmarking of the different types of funds that exist in the new landscape. It attempts to highlight the key organizational, operational and technology transitions that take place at different stages of a firm's development and provides a template for understanding the inner workings of a manager as AUM grows and as the firm's scale of operations advances.
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