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Investors have renewed optimism for hedge funds in 2018, says Deutsche Bank survey

Fri, 16 Feb 2018 10:07:32 +0000

Hedge fund investors are optimistic in their outlook for the industry in 2018, expecting hedge funds to receive USD41 billion in net new investor capital for the year versus USD10 billion last year. That’s according to Deutsche Bank’s 16th annual Alternative Investment Survey, which polled the views of 436 global hedge fund investors, representing 2.1 trillion US dollars in hedge fund assets, on their current sentiment and allocation plans for 2018.   The hedge fund industry grew by 6.4 per cent in 2017 and assets under management reached an all-time high of USD3.21 trillion by year-end, surpassing the USD3.14 trillion predicted by investors in last year’s survey.   “It has been a transitional time for the hedge fund industry. We are seeing a shift in momentum with improved performance and positive flows,” says Greg Bunn, Global Co-head of Prime Finance at Deutsche Bank. “One in every two investors plans to grow their allocation to hedge funds in the next 12 months. We found that the average respondent expects to boost the size of their portfolio by USD129 million this year.”   Investors from 21 different countries across the EMEA, Americas and Asia Pacific regions, representing two thirds of industry assets, completed the survey. Compiled by Deutsche Bank’s Capital Introduction Group, the survey is one of the most comprehensive in the industry, focused on pension funds, sovereign wealth funds, endowments, foundations, insurance companies, consultants and funds of hedge funds.   Marlin Naidoo (pictured), Global Head of Capital Introduction and Hedge Fund Consulting at Deutsche Bank, says: “While investors are committing more capital to hedge funds as part of their overall portfolio, the competition for these dollars remains strong. This is because most investors expect to keep their number of allocations constant, creating a “one in, one out” scenario. Fund managers need to continue to differentiate themselves via outperformance, bespoke fee arrangements and uncorrelated investment strategies.”   The context in which investors responded to the survey was after a strong year for risk assets globally. Many equity indices ended the year at or close to multi year highs. In addition, the hedge fund industry ended the year up high single digits, posting the best annual performance since 2013.   Ashley Wilson, Global Co-Head of Prime Finance and EMEA Head of Equity Trading at Deutsche Bank, said: “Investors appear more optimistic in their outlook for Europe and Asia. Our survey indicates that investor interest in European hedge funds has more than doubled year on year and that thirty per cent of respondents are planning to add exposure to Asia. These regions provide more alpha opportunities across multiple countries with diverse market structures.”   Respondents’ hedge fund portfolios broadly met their 2017 return targets, representing the first year that investors achieved their set targets in 4 years. The average respondent’s portfolio achieved a year to date return of +7.97 per cent as of 30 November 2017, compared to +2.99 per cent the prior year.   Event driven funds received USD6.9 billion of net inflows in Q4 2017, representing the largest increase in net new capital of all broad based strategies quarter on quarter. Twenty-two per cent of investors are planning to allocate to event driven managers over the next twelve months (versus 10 per cent last year), making it the most sought after strategy in 2018.   One in five respondents is planning to add to fundamental equity long/short funds in 2018, making it the second most in-demand strategy for the year ahead. This result comes in stark contrast to our findings last year where only 4 per cent of respondents were looking to add to fundamental equity long/short.   Environmental, social and governance (ESG) funds see a meaningful increase in demand. One in every five respondents currently allocates to socially responsible/environmental, social and governance (ESG) investments, up from 13 per cent last ye[...]






Bitcoin has potential to become standard measure of value, says TOBAM’s CEO

Thu, 15 Feb 2018 10:39:39 +0000

Cryptocurrencies have been a hot button topic among investors over the last 12 months but amid all the hype, the key question is: Is this a de facto asset class? Or merely an exotic star that will burn brightly only to end in a spectacular supernova? Just look at what has happened to the price of bitcoin in recent days. It is a subject that generates differing opinions and will feature at next month’s Amsterdam Investor Forum, a leading forum for institutional investors and alternative investment managers in the EMEA region, which will be held on 6 and 7 March 2018 in Amsterdam.    The panel, entitled “Crypto fever, new horizons or another tulip bubble?”, will be moderated by Jiri Krol, Deputy CEO & Global Head of Government Affairs, AIMA, and will feature Isabelle Mateos y Lago, Chief Multi-Asset Strategist, BlackRock, Yves Choueifaty (pictured), CEO, TOBAM, Roy Niederhoffer, President, R G Niederhoffer Capital and S Michael Moro, CEO, Genesis Global Trading.  Marie Demolin, Sales Director Prime at ABN AMRO Clearing says: “We are delighted to welcome Yves Choueifaty and the other panelists to the Amsterdam Investor Forum 2018. Ahead of the conference, we are excited to hear which attitude leading asset managers and trading firms have taken towards crypto-currencies and the place made for them in their investment decisions.”  Speaking with Hedgeweek, Choueifaty explains that cryptocurrency, as a concept, has been an area of research interest for TOBAM, one of France’s leading asset managers with approximately USD9 billion in AUM, for some time.  “We undertake initiatives that are only based on fundamental and empirical research so we do not look at things short-term. Over the years, we have seen that the liquidity of cryptocurrencies such as bitcoin grow. In 2016, we thought if it was going to continue, then probably 2017 would be a year in which cryptocurrencies would become compatible for investments from large investors.”  Prior to this, between 2014 and 2016, it was relatively difficult to invest in this asset class from a liquidity point of view, says Choueifaty, adding: “We were right to believe that in 2017 liquidity would grow enough for bitcoin to be considered as a potential investment by large investors.” Indeed, this culminated at the end of the year with the launch of the TOBAM Bitcoin Fund.  During the course of its research, the TOBAM team warns about the risk of the asset but identified six fundamental qualities and three empirical qualities that make cryptocurrencies a compelling investment opportunity.  Those fundamental qualities include: unchangeable, non-inflationary, non-forgeable, cannot be manipulated (i.e. by central bank authorities), exchangeable and difficult to seize.   That bitcoin cannot be manipulated, altered or interfered, given that all transactions are held on blockchain, which is immutable, is reason to believe that in time, bitcoin will have the fundamental qualities to become a potential standard of value, according to Choueifaty.  This is no different to measuring length or distance using the metre and kilometer. In economics, you produce, store and exchange goods, services etc., which is predicated on the ability to measure value.  “As soon as you want to measure value you have to define a standard. In our mind, bitcoin has the potential fundamental qualities to become a standard measurement of value.  “In terms the three empirical qualities, firstly there is the risk of bitcoin, which can be viewed two ways: from a quantitative point of view and a qualitative one. From a quantitative view, the risk of bitcoin is huge but this should be of no importance for an investor when considering an investment. The risk is only interesting in order to determine the size of the investment, not to determine whether it is a good opportunity or not,” explains Choueifaty. For example, investing USD5 billion in global equities is far riskier than investing U[...]









Wilshire Liquid Alternative Index up 1.59 per cent in January

Wed, 14 Feb 2018 08:55:29 +0000

The Wilshire Liquid Alternative Index, which provides a representative baseline for how the broad liquid alternative investment category performs, returned 1.59 per cent in January, underperforming the 2.45 per cent monthly return of the HFRX Global Hedge Fund Index. The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, the global investment management business unit of Wilshire Associates Incorporated, and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.   “The continued rally in equities led the Wilshire Liquid Alternative Global Macro IndexSM to its strongest monthly return since inception. CTAs led the charge and contributed the majority of this return, having captured the strong and long term upward trend in equity markets,” says Jason Schwarz (pictured), President of Wilshire Funds Management and Wilshire Analytics.   The Wilshire Liquid Alternative Multi-Strategy IndexSM, which includes both single and multi-manager funds, returned 1.54 per cent in January. The Wilshire Liquid Alternative Global Macro Index, meanwhile, ended the month up 2.74 per cent, underperforming the 3.80 per cent return of the HFRX Macro/CTA Index. CTAs contributed almost the entire return, 225 basis points, in January, while US equities were the strongest contributor for all managers, while all other asset classes and geographies delivered mixed performance.   Discretionary global macro contributed over 50 basis points of return, driven by equity markets and currency managers slightly detracted for the month.   The Wilshire Liquid Alternative Relative Value IndexSM ended the month up 0.63 per cent, underperforming the 1.09 per cent return of the HFRX Relative Value Arbitrage Index.   Credit and multi-strategy managers contributed the majority of the return, 47 basis points and 19 basis points of return, respectively, while volatility strategies detracted five basis points of return. Convertible arbitrage strategies also contributed positively to the return for the month.   Investment grade and high yield credit spreads tightened further, from 0.99 per cent down to 0.91 per cent for investment grade credits and from 3.63 per cent down to 3.29 per cent for high yield, while US treasury yields widened significantly, from 2.40 per cent to 2.72 per cent.   The Wilshire Liquid Alternative Equity Hedge IndexSM ended the month up 2.52 per cent, underperforming the 3.41 per cent return of the HFRX Equity Hedge Index.   Long-biased managers contributed 211 basis points of return while market neutral managers added 20 basis points of return, while long-biased strategies benefited from rising equity markets, with positive contributions coming from the Information Technology, Consumer Discretionary, Healthcare and Financials sectors. Growth-oriented strategies continued to outperform value-oriented strategies.   The Wilshire Liquid Alternative Event Driven Index ended the month up 0.87 per cent, underperforming the 1.76 per cent return of the HFRX Event Driven Index.   Credit strategies gained 31 basis points of return, while merger arbitrage strategies added 32 basis points of return, and multi-strategy event funds added 20 basis points of return.   Managers that were long credit risk contributed positively as credit spreads tightened, offering a favourable environment for merger arbitrage strategies and special situation equity positions. offResults and performanceFundsIndexesFlag: alphaq[...]






Tail risk returns as short-volatility hedge funds post biggest loss since August 2015

Tue, 13 Feb 2018 10:40:20 +0000

Hedge funds were off to a good start in the first month of 2018, with the Eurekahedge Hedge Fund Index up 2.26 per cent in January. Among volatility-focused hedge funds though, short volatility hedge funds posted the worst performance in January 2018, down 3.30 per cent, their biggest loss since August 2015. Long volatility and relative value hedge funds meanwhile, gained a modest 0.01 per cent and 0.16 per cent over the same period.   Underlying markets as represented by the MSCI AC World Index (Local) gained 3.78 per cent over the same period.   As the global risk on mode continued into January, trend following managers were positioned in good stead with holdings into equities and oil among performance contributors. Equity markets strengthened following the passing of tax reform in December, resulting in an increase of investments which drove US equities to all-time highs.   The Eurekahedge February Index Flash Update says: “Over in Europe, the growth momentum appears to be going strong with a strengthening Euro adding to gains for foreign investors in the region. Yield on sovereign bonds, particularly the Gilt and German bund, ended higher in January backed by positive signs of German coalition talks. Emerging markets led by Russia, China and Brazil have also contributed to strong gains for hedge fund managers as global risk appetite remains strong, with a weakening USD favouring exposure to EM markets where valuations remain relatively cheap. Among regional mandates, Latin American hedge fund managers topped the tables, gaining 4.47 per cent while CTA/managed futures managers posted the best returns, up 3.84 per cent among strategic mandates.   “While the full figures for February 2018 returns will start rolling in towards month-end, the spike in volatility in recent days has brought an end to the Trump rally. Short-volatility hedge fund strategies will likely see substantial losses in February, while tail-risk and long volatility strategies will finally see some redemption following double-digit losses during the exceptionally calm markets of 2017. If however this volatility spike is short-lived and the VIX trends lower towards the month end then long volatility managers will see their winnings get trimmed.”            offResults and performanceFundsIndexesFlag: alphaq[...]