“Life can only be understood backwards; but it must be lived forwards.”
- Soren Kierkegaard (1813- 1855)
Performance
The Greenwich Global Hedge Fund Index ("GGHFI") returned 1.7% in April, reversing most of the losses in March. The 12 month rolling period for the GGHFI has returned 4.8% The comparable period for the S&P 500 shows -4.7% and the ASX 200 -13.% net of underlying manager fees.
The April returns show the S&P 500 return was 4.9%, that of MSCI World Equity -5.0%, and that of the ASX 200 was 4.5%. All hedge fund strategy groups ended the month with positive returns. Long-Short Equity Group strategies returned 2.7%. Within this group, Opportunistic Strategies returned the highest 3.6% and Short Sellers detracted, falling 5.6%. Emerging Markets returned 2.4% after a March fall. The Market Neutral Group return, as befitting the low volatility strategy had a return of 1.3%, with contributions from Equity Market Neutral and Fixed Income Arbitrage sectors.
|
Greenwich Alternative Investments Hedge Fund Index |
|||||||||
Total Return |
3 Yr Annual |
5 Yr Annual |
|||||||
Index |
Apr 08 | Mar 08 |
YTD |
3 Month |
1 Year |
CAR |
STD |
CAR |
STD |
| Global Hedge Fund | 1.7% |
-2.1% |
-1.4% |
1.4% |
4.8% |
10.4% |
5.0% |
10.5% |
4.8% |
| Global Long/Short | 2.7% |
-2.5% |
-3.0% |
-3.0% |
2.8% |
11.3% |
6.5% |
11.8% |
6.4% |
| Global Market Neutral | -1.3% |
-1.4% |
-0.8% |
0.7% |
2.6% |
8.1% |
3.0% |
7.7% |
2.8% |
| Emerging Markets | 2.4% |
-4.1% |
-4.9% |
1.3% |
10.2% |
17.0% |
9.6% |
20.5% |
9.1% |
Benchmark |
Apr 08 | Mar 08 |
YTD |
3 Month |
1 Year |
CAR |
STD |
CAR |
STD |
| Lehman Bond Index | -0.2% |
0.3% |
2.0% |
0.3% |
6.9% |
4.9% |
2.8% |
4.4% |
3.6% |
| S&P 500 Index | 4.9% |
-0.4% |
-5.0% |
1.0% |
-4.7% |
8.2% |
8.9% |
10.6% |
8.7% |
| MSCI World Index | 5.0% |
-1.3% |
-5.0% |
2.9% |
-4.4% |
10.3% |
9.4% |
13.2% |
9.4% |
| ASX 200 | 4.5% |
-3.9% |
-15% |
-5.1% |
-13% |
12.2% |
11.8% |
18.1% |
10.3% |
| CAR= Cumulative Average Return, STD = Standard Deviation | Source: Greenwichai.com |
Markets
Most equity markets rallied in April, with volatilities falling for the second month in a row after falling to 21% they hit a peak of 32 in March%. Commodities continued to rally with the S&P GSCI index up 19% year to date and 50% from a year ago.
The US dollar was very volatile during the month, but ended the month little changed against the other major currencies.
Conditions ripe for hedge fund seed investors…
Investors able to provide seed capital for hedge funds are set to enjoy the most favourable conditions in years due to an abundance of talented start-ups and a lack of competing capital.
According to a report by Reuters, at a time when volatile markets, poor returns and scarcity of capital might be expected to discourage hedge fund start-ups, some managers are setting up on their own. Some of these are traders coming out of troubled investment banks, or out of larger hedge funds that have run into difficulties, who see excellent opportunities thrown up by market volatility as a result of the credit crisis...more>>
…But the market is still cautious
According to Deutche Bank's recently released Alternative Investments survey the number of early allocators (day one investors or seeders) has fallen significantly since 2007. In that year, 77% of investors indicated that under appropriate circumstances with the right manager, they were early allocators. In 2008, this number has fallen to 52%, confirming the Bank's view that investors are becoming increasingly unwilling to allocate to new launches, even to the right manager. The report says, however, that the proportion of seed investors to day one investors has remained relatively stable between 2007 and 2008, with a moderate rise in the percentage of seed investors compared with day one investors, which may be indicative of the impact that a tough fundraising environment has on new launches...more>>
$200 billion predicted to flow into Asian hedge funds this year
In another finding from Deutsche Bank's recent Alternative Investment Survey, investors may pile more than $200 billion into hedge funds this year, with strategies focused on Asia excluding Japan in greater demand despite concerns about the global economy and waning risk appetite, Deutsche Bank said recently...more>>
California drops hedge fund registration proposal
The California Department of Corporations has withdrawn a proposed amendment to its rules that would have required many hedge fund advisers doing business in the state of California to register with that department.
The proposal, issued in October 2007, came in the form of a change in the state's private adviser exemption, Rule 260.204.9. With the withdrawal of the proposal, that rule stands as is...more>>
Trends
S&P 500 Q1 earnings down 25.9%; Financials again posts negative earnings
According to preliminary figures released recently by Standard & Poor's Index Services, first quarter 2008 operating earnings for the S&P 500 declined 25.9% over the first quarter of 2007, marking the third consecutive quarter the index has reported declining earnings - an event not seen since the fourth quarter of 2001.
With 95% of the data in, first quarter operating earnings for the S&P 500 are preliminarily set at $16.59 per share, compared to $22.39 for the first-quarter of 2007. For the third consecutive quarter, S&P 500 As Reported earnings also posted a decline, falling 27.1% to $15.56 per share from the $21.33 per share posted in Q1 2007.
“The shift in earnings continues, with Energy contributing 23.2% of S&P 500 operating earnings during the first quarter, up from 13.6% a year ago,” says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. “Conversely, Financials have now become a negative contributor after accounting for 29.7% of operating earnings this time last year.”
In terms of aggregate dollars, operating earnings for the first quarter were set at $144.4 billion (versus $200.2 billion for Q1 2007) and As Reported earnings were set at $135.4 billion (versus $190.7 billion in Q1 2007).
Standard & Poor's also notes that, when excluding the 92 Financial issues that make up 16.7% of the S&P 500, the remaining issues show an 8.8% weighted gain. Similar results were seen during the fourth quarter of 2007 when the index recorded a 30.8% decline; however, when excluding Financials, the index showed a weighted earnings gain of 12.2%.
“While the negative news surrounding Financials received all of the headlines during the first quarter, 53% of the non-Financial issues within the S&P 500 recorded double-digit earnings gains. Those same issues have posted an average price gain of 11.8% since the end of the first quarter,” notes Silverblatt.
According to Silverblatt, the second quarter 2007 marked the highest level of index earnings in the index's history which sets the stage for an extremely difficult comparison for the upcoming quarter.
For more information, see www.marketattributes.standardandpoors.com.
Biggest hedge funds grow by 35%, JPMorgan keeps top spot
The hedge fund rich are getting richer, market turmoil notwithstanding.
The world's largest hedge funds grew by 35% last year, according to Alpha magazine's annual ranking. The top 100 firms manage $1.35 trillion, or 75% of all hedge fund assets under management. The top 10 firms manage $324 billion - almost one-fifth of total hedge fund assets and up 29% from 2006...more>>
Mitsubishi to set up hedge fund with Aladdin Capital
Mitsubishi will invest $300 million to establish a hedge fund in partnership with U.S. investment management group Aladdin Capital Holdings LLC, according to a Japanese media report. As part of the alliance, Mitsubishi will invest $40 million for a 20% stake in Aladdin Capital, becoming its second-largest shareholder, the Nikkei newspaper reported. The new fund will target $5 billion under management within five years, the report said. Mitsubishi was reportedly approached by Aladdin Capital after the group sought external investment to help replenish its balance sheet amid difficulties arising from the global credit squeeze last year.
General
Emerging superstars
Scott Dooley, a close associate of VanMac founder Scott MacDonald, has just been nominated in the top five of Alternative Investment News' recently published ‘The 20 Rising Stars of Hedge Funds'. One of the list's most surprising omissions was Australian Greg Coffey, the 36 yr old manager currently with GLG Partners London, who according to Alpha magazine was listed at 31 out of 50 top money earners in 2007 at USD$300m and who is apparently planning to launch his own business later this year...more>>
FoF customisation and differentiation is key
According to Infovest21's recent White Paper, Outlook for the Hedge Fund/Fund of Funds Industry, fund of hedge funds will need to differentiate themselves either through performance, identifying and providing unique investment opportunities, having a global presence, or benefiting from technological systems. Most importantly, customisation — establishing customised, tailored hedge fund solutions for investors — is key...more>>
CPDOs expose ratings flaw at Moody's
When the craze for CPDOs – constant proportion debt obligations – erupted in financial markets in late 2006, some observers quipped that these new products were like something out of a sci-fi blockbuster. Not only was the ingracious acronym amusingly close to C3PO, one of the hapless robots from the Star Wars movies, but also like the heroes of Star Trek the products seemed “to boldly go” where no credit product had gone before.
According to an article published recently by Financial Times, in a time of ever shrinking returns from investments in credit at the height of a raging bull market, early versions of these highly structured and complex deals promised to pay 200 basis points – that is 2 percentage points – over Libor, or the “risk-free” rate at which banks lend to each other. And that spread came with the top-notch triple A ratings that indicate an incredibly low probability that investors could lose their money...more>>
For the diary
ASFA 2008, the premier superannuation industry conference event will be held offshore this year, in Auckland , New Zealand from 12-14 November. Registrations for this year's event, themed Reaching New Heights, will commence on 1 April...more>>