Wednesday, November 25, 2009
Emerging Markets Funds Rally; Fair Value or a New Bubble?
From the Fourth Quarter, 2009 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
Oh, what a difference a year can make! This time last year the global markets were on the verge of Armageddon, and investors could not pull their capital out of any risk-based asset class fast enough, let alone one of the riskiest asset classes,
The aggregate emerging markets were hit particularly hard, with equity losses of more than 50% on $50 billion of fund outflows. It would seem that investors had finally had enough of the frivolous risk taking that has all too often driven many
a market to bubbly proportions. Fast forward nine months, however, and emerging
market equities have advanced more than 60% year-to-date through September, and fund inflows have returned to a breakneck pace. It’s not overly evident where the steam for this recent rally is coming from – whether it’s the few trillion dollars of global stimulus spending, a serious case of investor amnesia, or a sense of urgency to win back the investment losses from 2008.
Perhaps the emerging markets were just simply oversold and may not be susceptible
to the lingering economic downturn and eventual hangover effects of a few trillion dollars’ worth of debt. Whatever the cause, it appears that the emerging markets are set to post spectacular returns for all of 2009, although a keen eye may be critical to determine the inflection point between fair value and a new and improved bubble. To review the opportunities and risks in emerging market investments, we have assembled a panel of experts with hands on experience in the sector. Our panel includes:
Ajay G. Jani, Gramercy LLC
Gavin Joubert, Coronation Fund Managers
Ian McCall, MSc, Argo Group Limited
The complete article will be available on the BarclayHedge.com website in February 2010. Subscribe to receive each issue of the Barclay Managed Funds Report as it comes out.
Thursday, August 20, 2009
Equity L/S Funds Outperform S&P by 2:1 Margin at Midyear
From the Third Quarter, 2009 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
During the second quarter of 2009, the global equity markets staged a dramatic rebound and recouped a portion of the losses from the previous two quarters. The S&P 500 Index’s return of nearly +16% represented its strongest quarterly return since the fourth quarter of 1998. An improved investor appetite appeared to be fueled by extremely attractive security valuations, however, the level of exuberance seemed to have overlooked the fact that all may not be completely well in the world.
Economic figures, while improving, are still being hampered by a weak housing market. Oil prices are on the rise again as tension in the Middle East continues and the Obama administration tables alternative energy initiatives. Healthcare reform has become a front burner issue, but many questions remain as to how much reform will occur and what portions of the economy may be impacted by any major change. And finally, the specter of increased regulation within the financial industry and securities markets can be expected to have a wide ranging impact on investment opportunities.
With so much uncertainty, where do we go from here? Is there enough good news to support higher equity valuations over the next several quarters, or are equities poised for another correction? Has the environment changed to the point where even the best and brightest hedge fund managers may be challenged to add value for their investors? To discuss the equity market environment and opportunities within long/short investing, we have assembled a panel of experienced and successful
long/short equity managers. Our panel includes:
Ellen Adams, CastleRock Management
Jamie Horvat, Sprott Asset Management LP
Charles Oliver, Sprott Asset Management LP
Jaffrey B. Osher, Harvest Capital Strategies
The complete article will be available on the BarclayHedge.com website in November 2009. Subscribe to receive each issue of the Barclay Managed Funds Report at it comes out.
Monday, June 15, 2009
In the Midst of Market Meltdown, CTAs Gain 14% in Best Year Since 1990
From the Second Quarter, 2009 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
2008 was a year not soon enough forgotten as a continued global banking crisis and deepening recession propelled the financial markets toward near lockdown. With market volatility at historical highs and liquidity close to nonexistent, there were few places for investors to hide as the equity markets lost nearly one-third of their value, investment-grade and high-yield credits both ended the year in negative territory, non-US markets followed suit, and even the once skyrocketing commodities markets plummeted. Obviously, directional investing was a painful experience, unless you were among the brave few to maintain a net-short portfolio.
Arbitrageurs fared just as poorly, as every imaginable spread relationship was confounded by global deleveraging and a flight to safety. Yet through all of the chaos and value erosion, one segment of the alternative investment universe forged ahead, redefining the concept of uncorrelated returns.
Enter Commodity Trading Advisors (CTAs), which as a group, earned a +14% return in 2008. While results varied, no matter how you sliced it and diced it – discretionary, systematic, focused, diversified, etcetera – most managers defied the investment universe and posted positive returns for the year. So with a phenomenal year behind them and some evidence of the beginning of normalcy in the world’s capital markets, is there still a case for allocating to CTAs over the next 12 to 18 months? To answer this question and review the CTA landscape in more detail, we’ve assembled a panel of distinguished and seasoned practitioners. Our panel includes:
Kevin M. Heerdt, Campbell & Company, Inc.
Jaffray Woodriff, Quantitative Investment Management, LLC.
The complete article will be available on the BarclayHedge.com website in August 2009. Subscribe to receive each issue of the Barclay Managed Funds Report at it comes out.
Friday, June 12, 2009
FoFs Lose 22% in 2008, Worst Year on Record Sparks Large Outflows
From the First Quarter, 2009 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
For those who crave excitement in the form of financial market volatility, 2008 was the year for you. We witnessed a crisis of historical proportions emanating from an overheated real estate market and snowballing into a mortgage and credit calamity that triggered a global liquidity freeze, which in turn impacted almost every asset class with any sort of risk premium. Exciting enough?
Well, it seems that this was just the perfect recipe to unhinge every single Ponzi scheme that has been lying dormant for the last decade, and enough to shake the hedge fund industry to its core. For the year ended 2008, hedge funds lost 21.35% as measured by the Barclay Hedge Index, the worst annual loss in the recorded history of hedge fund performance. These losses, combined with a mass investor exodus from hedge funds resulted in a net decrease in assets under management of approximately $800 billion to $1 trillion for the year.
As we view the universe today, there exists a great dichotomy between the recent market impact on single strategy hedge funds and funds of funds. In particular, most single strategy hedge funds have reported significant liquidations and have been instituting gates to cope with liquidations in an orderly fashion. Many institutional quality funds of funds, however, report little in the way of meaningful redemptions.
How is it that funds of funds have weathered the storm? Is there another shoe left to drop in this segment of the market, or is the vast opportunity set that has been created by the market debacle enough to keep funds of funds investors on board? To address these and other critical issues presently facing fund of funds we have assembled the following panel:Rob Christian, Financial Risk Management
Fabio Savoldelli, Optima Fund Management
Scott C. Schweighauser, Harris Alternatives, LLC
The complete article is now available on BarclayHedge.com. Subscribe to receive each issue of the Barclay Managed Funds Report at it comes out.
Thursday, December 11, 2008
Barclay Roundtable: Bailouts and Privatizations of US Financial Firms Shift Landscape
From the Fourth Quarter, 2008 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
Unprecedented – a word not lost on the investment world recently to describe the global capital turmoil as we have entered a new era of change, fear, illiquidity, selling, and volatility that has not been seen in decades. It may not be easy to exactly pinpoint where it all started, but it’s safe to say that the heart of the problem was, and remains, within the financial sector. Inflated real estate values, a flood of new mortgages, overextended borrowers, highly levered securitizations, and tenuous bank balance sheets. All of the above seemed harmless, and routine, as long as the investment community continued to feed the liquidity machine. But once the music stopped, it didn’t take long for things to unravel and spark a severe chain of events: mortgage delinquencies, defaults, margin calls, bank insolvencies, frozen lending, widespread global market sell offs, and government interventions. Where does it all end? As of the writing of this article, the events have only begun to unfold, and the light at the end of the tunnel remains hazy.
From chaos and irrationality, however, comes great opportunity. Many a hedge fund manager has been uttering this sentiment for the last several weeks. No greater potential, for that matter, may be more prevalent than within the financial sector from whence the trouble started. Battered banks, high yielding REITs, severely discounted mortgage pools, stressed asset management organizations, and more. There is undoubtedly a great deal of profit to be made, but not without sidestepping some landmines.
In order to better understand the current environment and opportunity set within the financial sector, we have assembled a panel of experts with experience trading equities in this troubled area. Our panelists are:
Len Riddell, Martin Currie Investment Management, Ltd.
Nick Watkins, Texas Capital Limited.
Bo Thiara, Peninsula, LP.
The complete article will be available on the BarclayHedge.com website in January. Subscribe to receive each issue of the Barclay Managed Funds Report at it comes out.
Friday, August 15, 2008
Barclay Roundtable: Rise in Price Volatility Mirrors Increased Investor Uncertainty
From the Third Quarter, 2008 issue of Barclay Managed Funds Report. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
It seems that hardly a day passes without some breaking news story catapulting its way into the headlines and inducing turmoil in global financial and commodity markets. Daily oil price fluctuations have become a dominant force in setting the direction of equity and currency markets. Fixed income markets gyrate with ever-changing prognostications of rising inflation and deepening recession as investors grapple with whether or not Mr. Bernanke can successfully keep the ship afloat in these turbulent waters. And pandering politicians, ever determined to demonstrate to voters that they have their interests at heart, are falling over themselves in a rush to introduce new laws to protect us from unscrupulous mortgage brokers, bankers, speculators and short sellers. So what is an investor to do?
Given so many daunting crosscurrents to navigate, it may come as somewhat a surprise that global macro hedge funds are one of only five profitable hedge fund sectors in 2008. The 13 sectors in the loss column include almost all of the most popular equity-based strategies including equity long/short and emerging markets. CTAs, who are mostly momentum-based macro traders, are having their best year since 2002 and have gained more than 10% through the end of June.
In order to get a better read of how macro fund managers are viewing the impact that current events are having on the financial and commodity markets, we’ve invited a panel of distinguished and experienced practitioners to answer some of our more pressing questions and to hopefully shed light in some dark corners. Our panelists are:
Michael Howell, CrossBorder Capital Limited.
Paul Lambert, Polar Capital Partners.
Bo Thiara, Peninsula, LP.
The complete article will be available on the BarclayHedge.com website in November. Subscribe to receive each issue of the Barclay Managed Funds Report at it comes out.
Thursday, May 15, 2008
Barclay Roundtable: Soaring Commodity Prices Coupled with Fed Easing Fuels Inflation
From the Quarter 2, 2008 issue of Barclay Managed Funds Report published by BarclayHedge. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
Sebastian Barrack, MacquarieInvestment Management, Ltd.
Brad Cole, Cole Partners Asset Management LLC.
Jodie Gunzberg, CFA, The Marco Consulting Group
Hilary Till, Premia Capital Management, LLC
Our panel of experts answers these questions:
Most commodity indices are heavily weighted in energy, primarily oil. No doubt oil has been the headline over the past 12 months as prices have reached historic levels. There have, however, been significant gains by less “flashy” index components (e.g., wheat) over the past several months. In your estimation, have the most successful trading programs been oil-centric, or is there significant potential value added by straying from the typical index weights? In which commodities would you recommend an overweight position over the next 12 months? Which would you underweight or short for the same period?
Gold has also been a major headlining commodity recently despite representing only a minor portion of most commodity indices. The press tends to emphasize gold as a counter to the weakening dollar. To what extent has the weak dollar been a factor in the ascension of gold prices? Are there any other significant fundamental reasons for gold’s lofty valuations? How much have technicals supported the price?
Commodity trading strategies can rudimentarily be divided into discretionary and systematic programs. How does the current and prospective fundamental landscape favor discretionary strategies? In your opinion, which commodities continue to have favorable fundamentals? Which do you see as overvalued? What technical features of the current commodities landscape favor systematic trading programs?
Futures and options have historically been the most prevalent instruments employed to trade commodities. Over the past couple of years, however, there have been a number of commodity-linked structured products and exchange traded funds that allow participation in these markets. To what degree have these new structures been added to the mix of instruments used by professional asset managers? Are there any inherent inefficiencies within these structures that make them attractive? Unattractive?
Another angle for gaining natural resources exposure is by investing in public companies that derive a majority of their revenues from the commodities markets (e.g., oil services, mining, and storage companies). What are the advantages and disadvantage to this type of exposure? Are general equity market correlations a concern, or do these types of stocks offer significant diversification? Are there any attractive public debt, private equity, and/or private debt situations offered by these types of companies?
Historically, within the context of any perceived asset “bubble”, there always tends to be an influx of managers who ride the wave, garnering outsized returns with primarily unhedged strategies. Not surprisingly, most of these managers get carried out on a stretcher when the bubble finally bursts. In your opinion, do you believe commodities are in danger of entering bubble proportions at this time? In you estimation, are there a lot of players riding this wave without much attention to hedging and risk management? How susceptible might the entire commodity sub sector be to a downturn and mass liquidations?
Read the complete article and the panel members' answers.
Friday, February 15, 2008
Barclay Roundtable: FoFs Side Step Landmines and Post Market Beating Returns for 2007
Will Funds Migrate Toward More Liquid Strategies as Liquidity Dries Up in Some Credit Sectors?From the Quarter 1, 2008 issue of "Barclay Managed Funds Report" published by BarclayHedge. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.
John Beech, Financial Risk Management
Scott C. Schweighauser, Harris Alternatives, LLC
Stephen C. Vogt, Ph.D., Mesirow Advanced Strategies, Inc.
Our panel of experts answers these questions:
The media might have us believe that the sub prime debacle and resulting credit crisis spelled doom for the hedge fund industry. The Barclay Fund of Funds Index, however, ended the year +8.86%, proving to the contrary. In your estimation, how were the most successful funds of funds able to weather the storm? Was diversification the key, or do you suspect that there was significant active rotation away from credit exposure (and possibly positioning toward net short credit exposure)? What other strategies were favorable and why?
Some fund of funds managers have employed macro hedges in their portfolios to offset certain exposure or to even take advantage of significant dislocations (e.g., ABX protection, variance swaps, equity options and futures). Do you expect that more fund of funds managers will migrate to this type of overlay strategy, or is it best to leave the trading to the underling managers? What limitations, if any, should investors expect of their fund of funds managers who are engaged in this activity (e.g., trades should only be employed during significant periods of stress, maximum exposure levels to these trades, etc.)?
For a time investors were being paid a handsome premium for taking on illiquidity. Now, however, we are seeing the risk part of the equation in illiquid strategies. To what extent are funds of funds shifting their underlying investments to more liquid strategies? How might increased investor demand for liquidity impact the redemption and lock up terms for fund of funds and the underlying hedge funds?
Prior to the credit crisis, hedge fund and fund of fund IPOs were closing at a rapid pace. Once the markets normalize, how do you expect hedge fund and fund of fund IPO activity to progress? What are the advantages and disadvantages to the manager going public? What are the advantages and disadvantages to the investors?
It seems that the largest funds of funds continue to attract the bulk of the institutional allocations while small funds of funds struggle to grow. In what ways might consolidation be a viable option for smaller fund of funds? Do you expect the trend in consolidations to continue? What are the potential drawbacks of the big funds getting too big?
During 2007, Emerging Markets, Macro, and Merger Arbitrage were among the top performing hedge fund strategies. Over the next 12 months, which strategies do you expect to be the best performers and why? Which do you expect to underperform and why?
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