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.
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