The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Nevertheless, it didnÆt collapse on our heads, at least not for most hedge fund strategies in August 2007. Harbingers of doom anticipating the beginning of the end for the hedge fund industry have to wait a while longer.
At this point, with the credit crunch perhaps at the end of chapter one, cashed-up hedge funds are poised to acquire assets at shop-soiled prices. For example, a selection of hedge funds, including Citadel, which always seems to have spare cash to pick up legacy positions in defunct firms, are now understood to be looking to acquire the mortgage assets left at Northern Rock, a financial institution which two weeks ago experienced a bank run in the United Kingdom, the first there since 1866.
The RBC hedge 250 index showed a negative 1.7% return for August. According to RBC, the worst hedge fund strategy was macro, showing negative -4.4%, and the most profitable was fixed income arbitrage, recording a positive 0.78%.
EurekahedgeÆs hedge fund index was down 1.8% and its fund of hedge fund index fell by 2.56%. For Eurekahedge, arbitrage headed the field, with a 0.34% positive return. Managed futures were the tail-enders with a negative -2.74%.
For the Asian-specific indices, EurekahedgeÆs Japan index was down by -2.5%, trailing the Asian index, which was down by -1.95%.
ôAugust was the most volatile and eventful month in the last five to seven years,ö says Mark Reinisch, director of fund of funds FRM. ôThis will undoubtedly lead to a re-assessment of weightings. People were risk tolerant going into the summer and the question is now, how risk averse will this make investors?ö
FRM was down -1.77% in August, but had been strongly up in July, producing a net decline of just 10 basis points for those two months combined.
If your hedge fund was carrying out leveraged carry-type trades, it was a rough month, as was event arbitrage, following the narrowing of deal premiums, as uncertainty kicked in over the likelihood of deals closing. If your hedge fund was concentrated in subprime toxic clag, then it goes without saying that your sky pretty much did fall in during August.
Credit strategies looking for deep value, distressed type strategies, as a group, did reasonably well, with some, like Paulson & Co, continuing their multiplication of capital as they have experienced throughout the year.
Chinese markets seemed inscrutably oblivious to what was going on in the rest of the world, and Hong Kong has entered into a period of semi-delirious stock frenzy on the prospects of inflows of mainland liquidity, that has pushed up the Hang Seng Index 25% over the summer.
ôGreater China definitely out-performed for the whole month (but not for all managers), while a majority of Asia ex-Japan Equity long/short, particularly small cap managers, suffered the most,ö says Raj Mehta of Persistent Edge in San Francisco. In August the Persistent Edge Asia fund was up 2%.
Where did that faltering in long/short strategies stem from, given the superior stock-picking skills of long/ short managers combined with their ready access to shorting instruments?
Generally, those with long experience as their risk tool, as opposed to mathematics, did better.
ôA lot of the damage came from two themes,ö says Peter Douglas of GFIA in Singapore, a hedge fund advisory that also runs discretionary funds of funds. ôMost long/short guys were implicitly short liquidity, because they ran, for prudence, liquid short books and less liquid long books. In the run for liquidity, they got stuffed as both sides of their book were hit. Secondly a lot of the guys with rigid risk management, often those with an investment-bank trading background as opposed to money management, reduced their risk as they lost money in the first half of the month and therefore precluded themselves from participating in the rebound in the second half.ö
Regional institutions’ internal investment managers outperformed their external peers, underlining that they are just as vital as modern asset allocation strategies.
AsianInvestor describes why we chose the top funds across a series of key asset classes.
The RM82.64 billion ($20.6 billion) Malaysian Hajj fund, which recently completed a restructure, is looking to diversify globally but remains cautious of risky assets.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.