“He that cannot abide a bad market, deserves not a good one”
- John Ray, English Proverb 1678.
Performance
Hedge fund out performed the major equity indices in June and year to date. The Greenwich Global Hedge Fund Index ("GGHFI") returned -0.4% in June, losing only a fraction of their gains in May. In contrast The S&P 500, MSCI World Equity, and ASX 200 indices posted returns of -8.4%, -8.1% and
|
Greenwich Alternative Investments Hedge Fund Index |
|||||||||
Total Return |
3 Yr Annual |
5 Yr Annual |
|||||||
Index |
Jun 08 |
May 08 |
YTD |
3 Month |
1 Year |
CAR |
STD |
CAR |
STD |
| Global Hedge Fund | -0.4% |
1.8% |
-0.1% |
3.0% |
3.1% |
10.0% |
5.1% |
9.7% |
4.7% |
| Global Long/Short | -1.3% |
2.4% |
-2.1% |
3.7% |
0.7% |
10.2% |
6.7% |
10.5% |
6.2% |
| Global Market Neutral | 0.3% |
1.5% |
0.8% |
2.8% |
2.3% |
8.3% |
3.0% |
7.6% |
2.8% |
| Emerging Markets | -3.6% |
1.5% |
-7.3% |
-0.1% |
1.2% |
16.0% |
10.0% |
17.8% |
9.2% |
Benchmark |
Jun 08 |
May 08 |
YTD |
3 Month |
1 Year |
CAR |
STD |
CAR |
STD |
| Lehman Bond Index | -0.1% |
-0.7% |
1.1% |
-1.0% |
7.1% |
4.1% |
2.8% |
3.9% |
3.6% |
| S&P 500 Index | -8.4% |
1.3% |
-11.9% |
-2.7% |
-13.1% |
4.4% |
10.2% |
7.6% |
9.5% |
| MSCI World Index | -8.1% |
1.1% |
-11.8% |
-2.5% |
-12.5% |
6.9% |
10.8% |
10.0% |
10.0% |
| ASX 200 | -7.46% |
1.53% |
-15.9% |
1.79% |
-13.4% |
11.4% |
12.8% |
16.2% |
10.8% |
| CAR= Cumulative Average Return, STD = Standard Deviation | Source: Greenwichai.com |
Markets
June saw one of the worst performances in equities for a long time as the credit crisis continued to roll out and through economies and sectors. Volatilities rose again from mid-May lows of 16% to end the month at 25% (see VIX chart below). The Australian dollar appreciated against the US Dollar and Yen, dropped against the Euro and was flat against the pound. The $A Trade weighted Index hit a high of 73.4, up 0.74% from May.
Credit Crisis
The credit crisis continued in June. The North American Investment Grade CDX Index recovered from a spread of 142 basis points at the start of the quarter to a low of 87 basis points in early May, and then widened again to end at 140 basis points as at the end of July. The North American High Yield CDX Index entered the quarter at 684 basis points and contracted to 512 basis points by mid-May, before widening again to 673 basis points at the end of June. European credit markets followed a similar path. Asian credit risk has actually fallen as implied by the market indices, with the Asian High Yield Index tightening from 676 basis points to 565 basis points over the quarter. Banks remain reluctant to fund each other in the current climate despite the slight respite in liquidity over April and May. Liquidity remains tight with both USD overnight and 1-month Libor approximately 45 basis points above the Fed Rate.
Sentiment
The Macro Managers' decidedly bearish outlook on U.S. equities last month held true, as the S&P 500 traded sharply lower putting into question the viability of a fragile U.S. economy. Based on a macro manager survey, for July, the majority of the group maintains a pessimistic view on the S&P 500, as 79% expect the index to continue moving lower vs. 21% that expect a reversal higher. The U.S. Dollar continues to remain weak; however, the group is divided on its outlook for July, as 43% report a bearish position vs. 36% bullish and 21% neutral. Lastly, the U.S. Treasury 10-Year staged an impressive rally toward the latter half of June; however, there are conflicting views for July, as 43% hold a bullish position vs. 29% bearish and 29% neutral.
Survey finds Aussie super funds are shifting focus to alternative assets
Australian super funds are planning to shift their focus from fixed income towards alternative assets, according to the Asset Allocation Industry Survey conducted recently by Terrapin Australia. Around 90% of institutional investors surveyed–of which almost half were pension funds–said they plan to cut their allocation to Australian fixed income investments, while 57% said they will probably move away from international fixed income investments...more>>
Hedge funds surpass mutual funds in equity trading volume
An equity investors study by Greenwich Associates showed trading volume generated by hedge funds surpassed mutual funds last year and now ranks second only to traditional asset-management shops. The financial-consulting firm said the influence of hedge funds as a way of generating equity trading has helped Merrill Lynch & Co. and other firms "solidify" their standing as top U.S. brokers in terms of market share...more>>
Hedge funds turn rescuers
Even as politicians and regulators accuse hedge fund short-sellers of trying to bring down banks in Britain, the US and Australia, top hedge managers are actually providing rescue capital to prop up the ailing corporate world...more>>
Pension funds cautiously explore hedges
Risk, according to Warren Buffett, "comes from not knowing what you are doing". It is no wonder then that the pension fund community, which has long been a proponent of plain vanilla equity and bond investing, finds the structured product market risky. But that is not to say pension funds have turned their backs on structured products completely, with demand for over-the-counter type structures, such as inflation or interest rate swaps, on the rise...more>>
Japan rejigs tax code to entice foreign funds
Japan has relaxed its tax code so foreign asset managers and hedge funds can avoid dual taxation, as part of Tokyo's push to revive itself as a global finance centre...more>>
Trends
Asian funds increase use of multiple prime brokers, survey says
Asian hedge funds are increasing their use of multiple prime brokers after the U.S. subprime mortgage market collapse heightened the risk of relying on a single investment bank for brokerage services, an AsiaHedge survey found...more>>
Foreign wealth pours into London's hedge funds
Foreign sovereign wealth investors are targeting London's hedge fund industry as they seek to boost returns on their vast savings, much of it generated from trade with the west in oil and other commodities...more>>
Hedge clones thriving in perfect conditions
Hedge fund performance with mutual fund-sized fees is an attractive sales proposition, and therein lies the promise of hedge fund replication. The strategy holds particular promise in Asia, where investors have been battered for months by stormy markets, and absolute returns suddenly look appealing...more>>
Millennium to start sharia-compliant hedge fund
Dubai-based Millennium Finance Corporation is set to launch its first sharia-compliant hedge fund as it seeks to tap rising international demand for investments that comply with Islamic law...more>>
General
Ideas for generating new ideas
The key to business success is to draw on the tacit knowledge contained in our insights, instincts and intuitions, and use that understanding to create encounters in which ideas breed new ideas. After all, creativity is not a linear process of knowledge creation; rather, it is often a product of a random explosion of energy born of frustration with the status quo. But how do you tap into tacit knowledge and leverage it to create new products, improve processes, reduce costs and increase return on capital? Professor A. Rajan, CEO of Create, a research consultancy specialising in the emerging business models in fund management has some ideas...more>>
Sir John Templeton’s rules for investment success
In honour of Sir John Templeton, founder of the Templeton Franklin funds, who passed away recently, we will be quoting from his 16 timeless rules for investment success...more>>
Exploding the talent myth
There is no shortage of stars in the equity, fixed-income and analytical world, but employers have no idea how to manage their investment talent and therefore they lose it. Talent, the ability to win consistently, using either rational methods, personal intuition or both, relies on self-motivated creativity to solve larger and bigger challenges. But how, in a job-hopping culture, can real talent be retained, even nurtured? According to Prof. Amin Rajan, a specialist in emerging business models in fund management, it requires infrastructure built around empowerment whereby they can maximise their creative and tactical talents, better management of misunderstandings between fund managers, and coaching, networking and lateral job transfers – not just 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, commenced on 1 April...more>>