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.

HEDGE FUNDS DECLINED (-1.98%) IN MAY

Hedge Funds Protect Capital as Equity Markets Drop Sharply

Hennessee Group LLC, an adviser to hedge fund investors, has announced that the Hennessee Hedge Fund Index declined -1.98% in May (+2.15% YTD), while the S&P 500 fell -6.27% (+4.19% YTD), the Dow Jones Industrial Average decreased -6.21% (+1.44% YTD), and the NASDAQ Composite Index declined -7.19% (+8.53%). Bonds were mixed, as the Barclays Aggregate Bond Index increased +0.90% (+2.33% YTD) and the Barclays High Yield Credit Bond Index declined -1.31% (+5.05%).

“May was a tough month for risk assets. European worries returned with vengeance resulting in a flight to quality and ‘risk off’ trading. Despite conservative positioning, hedge funds posted their worst monthly loss since September 2011, falling -2%,” commented Charles Gradante, Managing Principal of Hennessee Group. “Many managers are frustrated that they did not ‘sell in May and go away’. May turned out to be a repeat of the previous two Mays [2011 and 2010] due to renewed worries over a financial crisis in Europe, a hard landing in China, and an economic slowdown in the U.S.”

“While many managers anticipated a ‘risk off’ period, they still incurred losses due to a modest net long exposure. Hedge funds were able to protect capital relative to equity markets by being down only one-third the broad market. ” said Lee Hennessee, Managing Principal of Hennessee Group. “With the outperformance in May, hedge funds were able to narrow the gap on year to date performance. For the year, hedge funds are up more than +2% and have displayed significantly less volatility than the broad markets. Managers continue to be conservatively positioned with a cautious outlook for the short term.”

Equity long/short managers posted their worst monthly loss since September 2011, as the Hennessee Long/Short Equity Index declined -1.89% (+2.27% YTD). With earnings season over, equity markets were driven by macro news, poor employment data, and a somewhat disappointing result for the Facebook IPO. Weakness was broad based with the worst performing sectors being energy (-10.62%), financials (-9.32%), materials (-7.99%) and technology (-7.85%). Global equity markets also declined sharply in May as European sovereign debt and bank liquidity concerns resulted in a sharp increase in investor risk aversion.

While hedge funds were conservatively positioned at the beginning of May, managers still suffered losses due to a modest net long exposure. The best performing managers were positioned more conservatively with net short exposure or low net long exposure. As concerns about Europe began to flare, managers aggressively reduced risked. Managers remain conservatively positioned as they are cautious about the short term. In addition to the concerns about Europe, which has not fixed its structural problems, managers are concerned about the political situation in the U.S. and the impending “fiscal cliff”.

Managers expect continued volatility throughout the year and expect performance to be driven by “alpha generation” related to individual investment opportunities and themes rather than “beta exposure”.

“As May was another ‘risk-off’ month, risk assets, such as equities and commodities, registered double digit losses, while safe-haven assets, such as the U.S. dollar, U.S. Treasury bonds, and German bunds, soared,” commented Charles Gradante. “One of the challenges for long/short equity hedge fund managers is that during a ‘risk-off’ period there are insufficient counterparties to trade against. Stock markets have experienced low volume, which makes markets more volatile. Lastly, markets are reacting to political and macro events, rather than fundamentals, making this a challenging investment environment for stock pickers.”

The Hennessee Arbitrage/Event Driven Index declined -1.09% (+3.47% YTD) in May. The Barclays Aggregate Bond Index increased +0.90% (+2.33% YTD) as bonds were mixed. Treasuries experienced a significant rally as investor shifted into safe havens. The yield on the 10 Year U.S. Treasury declined 36 basis points from 1.95% to 1.59%, the lowest level in 60 years. High yield credit declined as spreads widened, which was exacerbated by the tightening of Treasury yields. The spread of the BofA Merrill Lynch High Yield Master Index widened 92 basis points from 6.04% to 6.96% as the high yield market had net outflows of over $1.5 billion, the first monthly outflow in over six months. With junk bonds yielding over +8%, several managers are becoming increasingly bullish on the opportunity set as fundamentals remain attractive. The Hennessee Distressed Index fell -1.58% in May (+3.82% YTD). The traditionally net long distressed portfolios experienced losses as the equity markets declined sharply. The flight to quality resulted in losses for several core distressed positions in May. The Hennessee Merger Arbitrage Index decreased -0.24% in May (+2.55% YTD). Managers posted small losses as deal spreads widened amid heighted volatility. While deal flow remains below historical averages, managers remain constructive as they are able to identify good investment opportunities, including Viterra & Glencore and Kinder Morgan & El Paso. The Hennessee Convertible Arbitrage Index declined -0.44% (+3.98% YTD). Convertible markets cheapened along with other risk assets, and Europe again underperformed the U.S. Losses were driven by a widening of credit spreads, which were partially offset by short equity exposure, volatility and interest rates.

“Taking their most bearish stance since the end of December, macro hedge funds significantly reduced exposure in commodities markets during the final week of May. Managers reported surpluses in excess of demand in most commodities,” commented Charles Gradante. “During the second half of the month, gold and silver were the only pockets of strength, as investors sought safety amid increasing concern over the global economy and expectations that the Federal Reserve will soon take further steps to stimulate the struggling U.S. economy.”

The Hennessee Global/Macro Index declined -3.37% (+0.49% YTD) in May, driven largely by losses in global markets. Global equities experienced significant losses, as the MSCI All-Country World Index fell -8.99% in May (-0.42% YTD). Weakness was broad based, with the Stoxx Europe 600 losing -5.8%, its worst month since August 2011, and the MSCI Asia Pacific Index falling -9.8%, its worst month since October 2008.

International hedge fund managers posted losses, as the Hennessee International Index fell -2.79% (+2.29% YTD). Emerging market experienced sharper declines amid the flight to quality, with the MSCI Emerging Markets Index falling -11.67% (-1.10% YTD). Hedge fund managers experienced losses in both equities and currencies, as the Hennessee Emerging Market Index declined -7.44% (-2.91% YTD).

Macro managers were down modestly in May, as the Hennessee Macro Index decline -0.54% (+0.24% YTD).

Managers experienced gains in currencies and fixed income, while suffering losses in equities and commodities. Yields in safe haven countries, including the U.S., Germany and Switzerland fell to historical lows.

On the short side, the Spanish 10 Year bond yield rose to 6.7%, the most since November 2011, resulting in the bonds declining -4.9%. Greek bonds lost -41% after the May election failed. The flow into U.S. and Swiss debt drove strong currency gains against the Euro. The dollar strengthened relative to all currencies except the Japanese Yen, resulting in the largest rise of the U.S. Dollar Index since September 2011.

Managers continued to profit from the weakening of the euro, which declined -6.5% and remains a key theme for macro managers.

Physical commodities experienced a major correction, driven lower due to dollar strengthening and declining risk appetites. The Dow Jones-UBS Commodity Index was down -9.14% (-8.74% YTD) for the month of May. Grains sold off following the bearish USDA report, while energy and metals dropped sharply due to concerns about a slowdown in the economic recovery of the EU and U.S. Soft Chinese data and political uncertainty in Europe also pressured the crude oil market as West Texas Crude Oil declined -17.79%. Despite historical safe haven status, gold declined in May, resulting in its 4th consecutive monthly loss.

* For a more in depth monthly review of the economy, capital markets, and hedge fund performance and strategies, the Hennessee Group offers the monthly Hennessee Hedge Fund Review (www.hennesseegroup.com/hhfr/).

Hedge funds were down for the third consecutive month in May amid broad declines in global markets

The Eurekahedge Hedge Fund Index lost 1.24% during the month, bringing the year-to-date (YTD) May return to 2.23%. In comparison the MSCI World Index was down by 9.32%.

Key highlights for May 2012:

• Hedge funds outperformed underlying markets by 8.08% in May.
  
  
• CTA/managed futures funds gain 2.60% in largely negative month, along with a 0.65% gain in the Mizuho-Eurekahedge Macro Index.
  
  
• Assets in macro hedge funds at historical high levels, cross US$140 billion for the first time.
  
  
• Nearly 350 new hedge funds have been launched in the first five months of the year.
  
  
• 920 hedge funds are up more than 10% YTD with the most prolific strategy amongst this group being long short equities.
  
  
• In addition 153 funds are up more than 20% and 10 funds are up more than 50%.

 

Main Indices

Main Indices	May 2012*	2012 Returns	2011 Returns
Eurekahedge Hedge Fund Index	-1.24	2.23	-3.76
Eurekahedge Fund of Funds Index	-1.88	0.67	-5.49
Eurekahedge (Long-Only) Absolute Return Fund Index	-6.18	3.26	-14.17
Eurekahedge Islamic Fund Index	-2.77	2.65	-3.46

May was marked by heightened risk aversion in the markets due to weak US economic data, intensifying concerns about the European debt crisis and political uncertainty in Europe. Many managers had indicated pessimistic views before May and their positions to that effect led to significant outperformance of 8.08% during the month. Investor sentiment remained on the edge from the start of the month and as political deadlock in Greece and concerns about Spanish banks led to sell-offs in equity markets and a weakening Euro.

 

Regional Indices

Regional Indices	May 2012*	2012 Returns	2011 Returns
Eurekahedge North American Hedge Fund Index	-1.77	2.47	-0.53
Eurekahedge European Hedge Fund Index	-1.63	2.31	-6.23
Eurekahedge Eastern Europe & Russia Hedge Fund Index	-8.66	-2.65	-20.37
Eurekahedge Japan Hedge Fund Index	-3.47	-0.15	-1.35
Eurekahedge Emerging Markets Hedge Fund Index	-3.19	2.29	-8.05
Eurekahedge Asia ex-Japan Hedge Fund Index	-3.43	2.30	-12.33
Eurekahedge Latin American Hedge Fund Index	-1.44	4.46	2.27

Hedge funds in all regions witnessed negative returns for the month, albeit to a much lesser extent than global markets. European and Latin American hedge funds provided the most outperformance during the month, 11.79% and 12.04% respectively. Managers were able to reign in the losses by active hedges against currency declines and cautious portfolio positions. Losing positions included exposure to sectors linked to global growth such as energy, materials and financials. Positions in consumer goods, telecommunications and media proved to be helpful for most managers. North American and Asia ex-Japan hedge funds also registered losses of 1.77% and 3.43% respectively, beating their respective market indices by 4.50% and 7.41% respectively. The losses were primarily driven the by declining employment data from the US and reports of a slowdown in China as shown by slowing industrial production, falling trade and retail sales numbers respectively.

 

Strategy Indices

Most hedge fund strategy indices ended the month in negative territory, with long/short equity managers suffering the most losses. The Eurekahedge Long/Short Equity Hedge Fund Index was down 3.41% in May as global equity markets suffered declines through the month. The S&P500 lost 6.27%, the Tokyo Topix was down 10.90%, the FTSE100 declined by 7.27% while the Hang Seng finished lower by 11.68%. A number of managers also reported losing value on the Facebook IPO, showing that hedge funds were active participants in the highly anticipated public offering.

CTA/managed futures funds delivered excellent returns of 2.60% led by black box/quantitative trading managers. Trend-followers with long exposure to bonds and the USD, as well as those with short exposures to base metals and other commodities also reported gains for the month. Arbitrage hedge funds were up 0.26% with volatility arbitrage managers reporting gains of 1.67% on average.

Strategy Indices	May 2012*	2012 Returns	2011 Returns
Eurekahedge Arbitrage Hedge Fund Index	0.26	3.41	1.10
Eurekahedge CTA/Managed Futures Hedge Fund Index	2.60	2.02	-2.18
Eurekahedge Distressed Debt Hedge Fund Index	-2.54	1.71	-2.37
Eurekahedge Event Driven Hedge Fund Index	-2.23	2.39	-4.86
Eurekahedge Fixed Income Hedge Fund Index	-1.13	2.80	0.78
Eurekahedge Long/Short Equities Hedge Fund Index	-3.41	1.62	-6.90
Eurekahedge Macro Hedge Fund Index	-0.52	0.71	-1.24
Eurekahedge Multi-Strategy Hedge Fund Index	-1.62	2.74	-2.30
Eurekahedge Relative Value Hedge Fund Index	-0.68	4.08	0.12

 

Mizuho-Eurekahedge Indices	May 2012*	2012 Returns	2011 Returns
Mizuho-Eurekahedge Index - USD	-2.00	1.11	-2.07
Mizuho-Eurekahedge TOP 100 Index - USD	-1.07	1.85	1.87
Mizuho-Eurekahedge TOP 300 Index - USD	-1.61	1.24	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.

Insight into April Hedge Fund Performance/ May Down 1.50%

The Dow Jones Credit Suisse Hedge Fund Index finished down 0.04% in April. A new monthly commentary offers insight into hedge fund performance through the month of April. Some key findings from the report include:

_ Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished April down 0.04%, with 4 out of 10 strategies in positive territory;

_ In total, the industry saw estimated outflows of approximately $8.35 billion in April, bringing overall assets under management for the industry to approximately $1.75 trillion;

_ The Managed Futures and Multi-Strategy sectors experienced the largest asset inflows on a percentage basis in April, with inflows of 0.53% and 0.14% from March 2012 levels, respectively;

_ Long/Short Equity funds finished down in April, ending a three-month positive performance run, as broader equity benchmarks finished in negative territory for the month; and

_ Global Macro generated negative performance as a whole. Funds commonly reduced risk exposures as macroeconomic data continued to show weakness.

The Dow Jones Credit Suisse Core Hedge Fund Index closed down 1.50% in May as most of the index component strategies reported negative results for May.

eVestment||HFN Industry Research: Hedge Funds Down in May,

Hedge Fund Industry Estimates for May 2012

May 2012 was very similar to September 2011 in that Europe’s sovereign crisis was a primary focus and equity and commodity markets were severely impacted as investors moved to “safer” assets, resulting in U.S. Treasury yields falling and the dollar rising against all major currencies. In that environment FX strategies performed well, and despite being negative, credit led by funds focused on government, securitized assets (primarily mortgages), managed futures and macro strategies all did well on a relative basis. Additionally, larger funds performed noticeably better across the strategy spectrum.

Early reporting funds for May are showing a median return of -0.26%, significantly outpacing the S&P 500 Total Return Index’s -6.01%, however regression estimates for the industry point to a decline of -2.01%.

May performance, as anticipated, appears to have been led by macro and managed futures strategies and funds focused on currency markets. Credit funds have again outperformed equity focused strategies and emerging markets exposure experienced higher losses than developed markets.

With difficult to manage global scenarios persisting into June, it is important to note that recent hedge fund investor flows appear to have been placed well for the current environment. Investor flows through April 2012 indicated that the vast majority of net inflows to the industry have been going to credit, macro and commodity strategies as well as more diversified multi-strategy funds. Investors have pulled a significant amount of assets from long/short equity, event driven and emerging market strategies in 2012.

Citi Survey Shows Investors’ Interest in CTA and Macro Strategies Accelerated Sharply Following 2008 Financial Crisis

Managed Futures increased market share to 14% of combined industry AUM at the end of 2011, up from 10% in 2007

Investors’ attention to Commodity Trading Advisors (CTAs) and to currency focused Macro hedge funds accelerated in recent years, particularly after the 2008 Financial Crisis, increasing market share to 14% of combined industry AUM at the end of 2011, up from 10% in 2007 according to a survey released today by Citi (C) Prime Finance at the Managed Funds Association’s Annual Conference, Forum 2012 in Chicago. The report, “Moving into the Mainstream: Liquid CTA/Macro Strategies and Their Role in Providing Portfolio Diversification,” outlines key factors that make liquid CTA/Macro managers attractive to investors relative to long-only and hedge fund strategies and provide a ready source of liquidity in times of market stress.

From their original position atop the retail and high net worth investor’s “risk pyramid,” the Liquid CTA/Macro industry has broadened out and become a core portfolio component for institutional investors in recent years – from public and corporate pensions to endowments and foundations to family offices.

The research indicates that positive, uncorrelated performance during the 2008 Global Financial Crisis helped accelerate this expansion in the industry’s investor base. Yet, the industry itself also changed to accommodate this new institutional target market. To absorb the extensive asset flows originating from institutions, the industry sought means to extend its capacity and reduce portfolio volatility.

“A significant shift in investment approach has taken place since the 2008 Global Financial Crisis and investors, particularly institutional investors, have been actively looking to diversify their portfolios to better weather periods of unusual market stress,” said Jerome Kemp, Global Head of Futures and OTC Clearing.

As the investor audience base has grown, the distribution model too has evolved. Whereas money was primarily raised for these managers by wire house financial advisors via managed futures product in the early years of the industry, managers now list their funds on institutionally focused capital raising platforms and further develop their own hedge fund-like marketing teams to directly raise assets.

The survey also finds that there has been a decisive shift within the Liquid CTA/Macro manager landscape toward systematic as opposed to discretionary trading. Whereas AUM was fairly evenly split between these two approaches in 2000 (55% systematic and 45% discretionary), according to Barclay Hedge that ratio changed dramatically to 83% systematic and 17% discretionary by the end of 2011.

“These trends are not only driving the industry to be more systematic, but they are also changing the nature of the systems being deployed by participants and allowing for increasingly dynamic and innovative trading models,” continued Sandy Kaul, US Head of Business Advisory for Citi Prime Finance.

According to the research, there has been a significant expansion in the number of models being used to evaluate opportunities, a dramatic shortening of the time frame under consideration, and broad growth in the number of markets being tracked resulting in distinct “generations” of systematic approaches:
•
Generation One – primarily a long-term trend-following system focused on the traditional commodity markets •
•
Generation Two – a set of models with broader measures such as mean reversion, momentum, volatility, and others focused on a more expansive set of financial and currency contracts •
•
Generation Three – further set of expanded models that layer multiple sets of models on top of the same market and allow prices and positions to be translated across markets and into alternative measures •

This paper is the result of a series of qualitative interviews conducted with an audience of CTAs and hedge fund managers focused on highly liquid macro strategies, as well as investors and other participants involved with allocating to these strategies. In total, the participants represented AUM of $86.5 billion USD, just over 25% of the industry’s total allocations.

The full report can be viewed at:

http://icg.citi.com/icg/global_markets/prime_finance/business_advisory.jsp

EMERGING MARKETS HEDGE FUND CAPITAL SURGES TO NEW RECORD

Funds investing in Russia, India and Latin America lead 1Q gains;

New allocations concentrated in Emerging Asia, Russia

Emerging Markets hedge funds posted their strongest start to a calendar year since 2006 with the HFRI Emerging Markets (Total) Index posting an industry-leading gain of +7.3 percent in 1Q12, according to the latest HFR Emerging Markets Industry Report, released by HFR (Hedge Fund Research, Inc), the leading provider of data, indices and analysis of the global hedge fund industry. Total capital invested in Emerging Markets hedge funds soared to a record of $127.3 billion (802 billion RMB) to end 1Q12, an increase of nearly $10 billion since year-end 2011, eclipsing the previous AUM record of $123 billion set in 2Q11. This increase in capital was driven by performance-based gains, as net new capital flows from investors remained muted, with funds experiencing inflows totaling $3.1 billion, while those experiencing outflows totaled $3.4 billion, resulting in a modest net outflow of $365 million in 1Q12. New capital flows were concentrated in Emerging Asia and Russia/Eastern Europe, which received $500 million in net new capital combined.

In addition to the strong performance across global emerging markets, hedge funds focused on specific EM regions posted even stronger gains in 1Q. The HFRI EM: Asia ex-Japan Index gained +7.3 percent, its best first quarter return since 2006, outperforming the Shanghai Composite by nearly 300 bps. The HFRX Latin America Index gained +8.4 percent, its best 1Q performance since 1999, mirroring strong gains across Latin American equities. The volatile HFRX Russia Index gained +11.0 percent, mirroring a similar gain from 2010 and the strong Hed ge Fund Research performance of Russian equities. The biggest gains in EM hedge funds were from funds investing in India, with the HFRX India Index gaining +18.8 percent during the quarter, outperforming Indian equity markets by 600 bps.

Number of Emerging Markets hedge funds eclipses record

The number of EM hedge funds continued to increase in the first quarter and now stands at 1,059 funds globally, eclipsing the previous record of 1,046 from 2007. Nearly half of all EM funds invest primarily in Emerging Asia, while the number of funds dedicated to investing in the MENA region increased by 20 percent in 1Q12. Over 15 percent invest primarily in Russia & Eastern Europe while nearly 10 percent of EM funds invest primarily in Latin America.

“Hedge funds investing in Emerging Markets continue to exhibit a resiliency to many of the developed market centric risk factors which continue to dominate investor concerns, posting record gains as developed market economies struggle with outstanding debt, low fixed income yields and weak growth prospects,” stated Kenneth J. Heinz, President of HFR. “In a similar manner to the broader global economy, EM hedge funds will play a crucial role serving as the growth engine in the expansion of the hedge fund industry by offering sophisticated, transparent investment strategies in emerging economies to a growing audience of global investors.”