Hedgeweek Interviews
Systematic equity fund Quantology's market signals are "strongly positive", despite July dip
French systematic long/short equity hedge fund Quantology Capital Management’s flagship fund suffered its third consecutive down month in July, but its models are already exhibiting more positive signals for the period ahead.
The Quantology Absolute Return strategy, a computer-based long/short market neutral equity fund which trades Nasdaq and NYSE-listed stocks, ended last month some 0.30 per cent in the red in its USD share class. The slide leaves the fund – which finished 2020 up 6.8 per cent annually – nursing a 1.5 per cent loss since the start of 2021.
Quantology – which uses market-agnostic, algorithm-based processes to generate returns from behavioural finance indicators, share price trends, and other stock signals within companies’ quarterly earnings data – noted certain earnings releases brought positive returns for the strategy.
The firm was surprised by the number of US stocks printing all-time highs, driven by sharp upside moves on earnings news. These included software developer Atlassian, IT services advisory Gartner, and Snap, the social media and camera company which developed SnapChat.
Among its key shorts, meanwhile, were CoStar Group, the commercial property analytics and information provider, and energy drinks manufacturer Monster Beverages.
The firm said that in the past month, its models exhibited more positive signals, particularly in the listed tech space, while negative signals were concentrated on "old economy" stocks, "taking a much-needed breather" following a strong first half of 2021.
"The implication of retail non-professional investors in equities has increased the importance of psychology over value/growth principles," Quantology co-founder and portfolio manager Julien Messias said in an email to Hedgeweek.
"For Quantology models, the more players there are - whether professional or retail - the better."
He added: "As of now, two weeks into the Q2 earnings season, our sentiment is strongly positive-biased."
Paris-based Quantology – which recently unveiled a new fund, Quantology US Equity, which aims to outperform the Nasdaq 100 Index – said the flagship increased its gross exposure to 98 per cent at the end of last month, keeping a neutral net exposure.
On average, quantitative directional hedge funds advanced 1.67 per cent in July, according to Hedge Fund Research data, and are up 9.51 per cent since the start of the year.
Like this article? Sign up to our free newsletter Related Topics Long-short investing Results & performance FundsTNS extends presence in Asia-Pacific to 11 countries
Transaction Network Services (TNS) has significantly expanded its low latency global backbone across the Asia Pacific region and now offers access to most Asian exchanges including major financial players such as Hong Kong Exchanges and Clearing (HKEX), Singapore Exchange (SGX) and Japan Exchange Group (JPX).
This expansion has been engineered to make use of the lowest latency commercially available network links in the region. It employs subsea cable systems and protected network links to ensure the highest network uptime. Most importantly, this network has been designed with sufficient capacity to ensure delivery of streaming market data globally, with the ability to deliver APAC sourced market data to the US, and US sourced market data to APAC.
TNS’ already strong Asia Pacific presence now offers extensive coverage across 11 countries and 23 exchanges in Asia and continues its leadership position of delivering high performance managed solutions for the trading industry.
“The Asian financial markets include many of the world’s leading, as well as rapidly emerging, stock exchanges. Extending TNS’ presence and connectivity in Asia gives us the ability to offer traders access to these financial centres and exchanges simply, quickly and with a lower total cost of ownership,” says Tom Lazenga, TNS’ Vice President of Global Sales.
“It is a very exciting time in Asia as the financial markets are experiencing a period of significant global growth leading to opportunities for investors which we are helping to facilitate with our rapid expansion in region.” Lazenga added.
Connecting to multiple markets, however, is a complex initiative so it is advantageous to work with a managed service provider like TNS that has over 30 years’ experience, has local support in the region and can deploy the lowest latency solutions available. TNS’ Layer 1 solution delivers connectivity in as little as five to 85 nanoseconds, making it up to 10 times faster than traditional layer three architectures.
For traders looking to invest in Asia, TNS offers a full suite of low-latency services including order routing, market data access and Managed Hosting. As a managed service provider, TNS removes the complexity of researching, procuring, installing and managing trading infrastructure.
Like this article? Sign up to our free newsletter Related Topics Trading & ExecutionHedgeweek Americas Awards: CTA hedge funds rally in rollercoaster markets
With CTAs and trend-following managers maintaining their positive run this year after enduring a turbulent and unpredictable 2020, the Best CTA Hedge Fund category at this year’s Hedgeweek Americas Awards will highlight how such strategies are successfully positioning for trends as markets continue on their rollercoaster ride.
Three funds have been nominated in the category at this year’s event, which takes place in New York on 21 October: Belmont Investments’ Belmont Commodity Trend Fund, Gresham Investment Management’s GreshamQuant - ACAR Fund, and Ramsey Quantitative Systems Inc’s Global Asset Allocation Master Fund.
The Belmont Commodity Trend Fund uses a systematic investing approach to bring together long-term trend following, short-term trend following, and short-term momentum to its investment universe. The GreshamQuant ACAR Fund uses trend-following technology to trade a diversified set of more than 60 commodity markets, which also includes exposure to certain access-constrained frontier commodity markets to help diversify the portfolio composition.
The RQSI Global Asset Allocation Master Fund meanwhile has a target investment universe of 60-plus global futures markets, trading long and short across different asset classes, geographies, sectors and duration, using short equity directional signals to provide diversification and long and short directional commodity bets to capitalise on risk on/risk off market moves.
Lately, managed futures funds have successfully capitalised on commodities’ continued upward path, while also capturing directional moves in bond markets, which has helped stave off the challenges brought by more uneven trend patterns in equities. Earlier, CTAs had to overcome a tricky early start to 2021, which saw volatility tear through the sector, leaving many managers in the red.
Year-to-date, CTAs have generated gains of 7.18 per cent, more than double their full-year returns of 3.12 per cent, as measured by Societe Generale’s SG CTA Index, a key industry benchmark which tracks the daily returns of 20 of the largest managed futures hedge funds. Meanwhile, the SG Trend Index – which measures the gains and losses of the biggest trend-following hedge fund strategies – is up almost 9 per cent so far this year, outflanking 2020’s annual 6.24 per cent return.
The Best CTA Hedge Fund Award is one of 29 fund manager categories voted for by participants within the hedge fund industry itself and announced at an exclusive presentation ceremony and industry networking event held at The University Club of New York on 21 October.
Hosted by Hedgeweek, with fund manager data being provided in partnership with Bloomberg, the Awards honour excellence among hedge fund managers and service providers in the Americas region, and represent an important mark of recognition and respect among peers, investors, advisors, and counterparties.
To participate in the poll, please click here. For all information about the Hedgeweek Americas Awards, see here.
Like this article? Sign up to our free newsletter Related Topics Awards Results & performance FundsInsig partners with CarVal to develop new line of high yield and investment grade product lines
Insig AI, a data science and machine learning solutions company serving the asset management industry, is partnering with CarVal Investors (CarVal) to develop a new line of high yield (HY) and investment grade (IG) ESG products, as part of the CarVal Clean product line.
This will mark the second deployment of Insig AI’s and CarVal’s jointly developed ESG technology. This comes as the demand for data-led ESG investment strategies that provide transparent and evidence-based ESG scoring, continues to grow.
Steve Cracknell, Chief Executive of Insig AI, says: “This partnership and our ability to help CarVal accelerate the development of their CarVal Clean HY/IG product lines demonstrates the speed and scale at which a company can operate when it underpins its strategy with advanced machine learning technology.
The partnership nature of today’s agreement with an asset manager of CarVal’s stature is the most exciting development in our history. We are ideally positioned, at the exact intersection of smart investment strategy and advanced AI technology. The opportunities to innovate with new product lines and income streams are vast. We look forward to developing our partnership with CarVal and delighted to support the CarVal Clean strategy.”
Digital asset funds see sixth consecutive week of outflows
Digital assets investment products saw a sixth consecutive week of outflows totalling USD22m, bringing the total six week run of outflows to USD115 million, according to the latest Weekly Digital Assets Fund Flows report from CoinShares.
Despite the continued negative sentiment, it comes at a time of low investor participation likely due to the seasonal effects as seen in other asset classes.
Bitcoin continues to be the main release valve for investors, with outflows totalling USD22 million last week.
Multi-asset investment products, a stalwart during this most recent negative sentiment, saw minor outflows totalling USD0.3 million, the first time since June 2020.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsHedge fund industry AUM swells to USD4.32tn in June
Investors diverted an additional USD16.6 billion to hedge funds in June. The month’s inflows represented 0.4 per cent of assets and continued an inflow trend that saw USD36 billion in new assets in May, USD23.3 billion in April and USD19.1 billion in March, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.
A USD16.8 billion June trading profit brought total hedge fund industry assets to more than USD4.32 trillion.
“As positive economic trends continued, investors saw opportunity in hedge funds in June,” says Ben Crawford, Head of Research at BarclayHedge. “Rallies in equity and energy markets and declining unemployment numbers through the spring months contributed to investor confidence as did economic growth in the US and China and surging commodity prices as business activity accelerated.”
Most hedge fund sectors added to assets in June. Fixed Income funds led the way bringing in +USD8.4 billion, followed by Balanced [Stocks & Bonds] (+USD4.4 billion), Multi-Strategy funds (+USD2.3 billion) and Sector Specific funds (+USD1.9 billion).
Just a handful of sectors experienced net redemptions in June. They included Equity Long/Short funds which shed -USD2.1 billion, Event Driven funds (-USD1.0 billion) and Emerging Markets – Global (-USD717.4 million).
After seven consecutive months of inflows, the managed futures industry reversed course in June with -USD3.1 billion in redemptions, equivalent to a loss of -0.9 per cent of its assets. A -USD1.4 billion trading loss in June brought total CTA industry assets to USD339.9 billion at the end of the month.
“In contrast to Hedge Fund investors, CTA investors appeared somewhat more circumspect in June. We observed investors booking profits and trimming positions in June, breaking a seven-month run of net inflows for the managed futures industry,” says Crawford. “Whether it was news of the astonishingly-contagious Covid-19 ‘Delta variant’ or the curiously persistent ‘transitory’ inflation figures, it appears that at least some investors received a moment’s pause in June.”
The four CTA sectors tracked were split between inflows and redemptions for the month. While Hybrid CTAs added +USD165.3 million (+0.9 per cent of assets) and Multi Advisor Futures Funds were up +USD63.2 million (+0.5 per cent of assets), the much larger Systematic CTA suffered net outflows of -USD3.1 billion (-1.0 per cent of assets) and Discretionary CTAs gave up -USD131.7 million (-0.5 per cent of assets).
For the trailing 12 months ending in June, the hedge fund industry experienced USD148.8 billion in net inflows. A USD459.2 billion trading profit over the same period brought total industry assets to the USD4.32 trillion figure, up from USD4.27 trillion in May and USD3.11 trillion a year earlier.
Most hedge fund sectors continued to post 12-month inflows with 11 sectors adding to their war chests through June. Fixed Income funds were the sector leader bringing in +USD73.6 billion (+10.5 per cent of assets), while Sector Specific funds added +USD55.8 billion (+27.9 per cent of assets), and Emerging Markets – Asia funds saw +USD28.8 billion in inflows, and increase of +25.2 per cent of assets.
Others sectors adding to assets over the 12 months included Multi-Strategy funds with +USD20.0 billion (+5.8 per cent of assets), Event Driven funds +USD19.5 billion (+11.1 per cent of assets), and Merger Arbitrage funds USD8.2 billion (+10.4 per cent of assets).
Hedge fund sectors with the largest 12-month outflows included Balanced (Stocks & Bonds) funds with USD31.9 billion (-8.2 per cent of assets), Equity Long Bias funds -USD16.7 billion (-5.3 per cent of assets), Macro funds -USD16.0 billion (-9.2 per cent of assets), Equity Long/Short funds -USD8.4 billion (-5.1 per cent of assets), and Equity Market Neutral funds down -USD6.9 billion (-10.8 per cent of assets)
Over the trailing 12 months ending in June, the managed futures industry saw USD21.1 billion in net inflows. A USD21.8 billion trading profit over the period brought total industry assets to the USD339.9 billion figure at the end of June, up from USD283.1 billion a year earlier.
All four CTA sectors tracked reported 12-month inflows through June. Systematic CTAs were up +USD16.6 billion (+6.3 per cent of assets), Discretionary CTAs +USD2.7 billion (+24.3 per cent of assets), Hybrid CTAs +USD1.8 billion (+21.4 per cent of assets) and Multi Advisor Futures Funds +USD114.0 million (+1.1 per cent of assets).
Suntera Global adds non-exec director to funds board
Suntera Global has appointed Jon Trigg as a Non-Executive Director to strengthen the firm’s governance capabilities.
Trigg, currently a Director at Altair Partners, a leading provider of independent directors and governance consultancy services, joins the Board of the funds operation in Jersey. He was previously Head of Global Fund Services at Moore Management and prior to that was in a senior private equity role at State Street in Jersey. He has experience working in a number of key funds jurisdictions including Cayman, the Isle of Man and Jersey, locations where the firm also has an office presence and provides its fund administration offering.
Paul Mundy, Managing Director of Suntera’s Jersey office, and Managing Director of the Fund Services Division, says: ‘Appointing a practitioner of Jon’s calibre and experience to join us bolsters the oversight capabilities and further enhances independence at Board level. It also aligns with our strategy of deepening our governance expertise and growth in line with responsible ambition which is at the heart of everything we do.’
In June, Suntera Global was granted its funds licence by the Jersey Financial Services Commission, a vital strategic addition to its global proposition, enhancing the services offered to alternative fund managers across its network.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsEx Goldman Partner launches Japan activist fund
Gordian Capital has launched the Japan Catalyst Fund sub-advised by Tokyo based, Japan Catalyst, Inc, a 100 per cent subsidiary of listed Monex Group (TSE 8698).
Japan Catalyst invests in listed Japanese equities, seeking to generate outsized investment returns by leading the transformation of Japanese companies using a constructive approach in engagement with the senior management of these firms. The launch of the Cayman domiciled fund follows the successful launch in April 2020 of a domestic fund, the Monex Activist Mother Fund, which has generated, since inception, a net return of +43.2 per cent (end July 2021) and an excess return of 10.6 per cent compared to the TOPIX over the same period.
Japan Catalyst believes that Japan engagement can only produce positive, timely and effective results through direct and intensive dialogue with top management, engaging directly with senior management, not indirectly or through introductions or intermediaries. With its sub advisory team consisting of 9 Japan based, experienced professionals with a deep knowledge of the Japanese corporate sector, regulatory environment and culture, and with extensive networks of senior Japanese management, built over the last 3 decades, the Fund is well positioned to take advantage of a myriad of investment opportunities.
Oki Matsumoto is CIO, Chairman of Japan Catalyst, Inc, and Monex Group CEO. He began his career at Salomon Brothers in Tokyo as a trader, before joining Goldman Sachs Japan, becoming the Partner in charge of trading, risk management, capital markets and special situations. A former outside director of the Tokyo Stock Exchange, he is a member of multiple public councils related to corporate governance and capital market reforms in Japan and has built an unparalleled network amongst Japanese corporate leaders.
Taro Hirano President/Chief Portfolio Manager has over 20 years of investment experience including 16 years as a value investor at AllianceBernstein Japan. Earlier in his career he worked at McKinsey & Co for five years, bringing a rare combination of asset management and business consultancy expertise.
Emi Onozuka, COO, held several roles during her 20 years in Goldman Sachs Asset Management Japan where since 2016, she headed the Stewardship Responsibility Group, leading research in ESG and conducted company research and engagements with investee companies. Emi is also currently the Chair of the Steering Committee for Japan Stewardship Initiative (JSI) https://www.icj.co.jp/jsi/e-about-jsi/ for which the Japan Exchange Group act as secretariat and the Japan Financial Services Agency, the International Corporate Governance Network and Japan Business Association (known as “Keidanren”) sit as observers.
Matsumoto says: “Our edge is firstly, our access to key personnel including top corporate management and board members as well as senior officials in the Japanese government, secondly: our constructive approach to engagement based on long term corporate value creation including ESG and a constructive dialogue based on trust with corporate management and thirdly; working in a true partnership with the companies in the Fund’s portfolio. We believe the ideal form of engagement investment is offering an outside hand to support the management and companies when they are trying to change rather than taking an aggressive stance and forcing change for changes sake, where the counterparty is neither ready nor willing to change. Given our access to key stakeholder early in the engagement process, we can get a sense of their receptiveness to engage and willingness to transform.”
Hirano says: “Corporate governance reform in Japan since 2013 has been significant but it is still incomplete. We will be part of the catalyst in realising further reforms and help increase corporate value, realise higher equity returns, and stimulate Japanese capital markets by supporting Japanese corporate management and accelerating change. The Fund is a high conviction, highly concentrated portfolio that takes a holistic engagement approach working with government, media and industry groups.”
Emi Onozuka remarked “ESG can be a powerful engagement topic to create long-term based corporate value, and we focus on ESG themes that align with our investment philosophy and investment time horizon. A portion of our firm’s profit is given back to the local community to further stimulate improved corporate governance and transformation in Japan.”
A recent successful case of engagement for JCI’s domestic fund was due to direct and repeated dialogue with the CEO (where Oki had rapport through a long-standing relationship) of JAFCO (8595) and the JAFCO board by the Japan Catalyst team. JAFCO announced the sale of NRI and a positive approach to future shareholder returns including share buybacks.
As part of the Fund’s launch, Japan Catalyst will be leveraging Gordian Capital’s 16 years of expertise to provide operational, regulatory, and compliance support for the Fund, acting as the Manager.
Established in 2004 by capital markets professionals and alternatives industry veterans active in Asia since the 1980s, Gordian Capital is Asia’s leading institutional quality, independent fund platform specialist, currently managing USD6.2 billion. Initially launching its first operating subsidiary in Singapore in 2005, the group now has a regulated presence in Singapore, Japan and Australia and its Singapore and Tokyo operations are both registered with the US SEC as Registered Investment Advisers.
“We are pleased to be working with Matsumoto san and his team and look forward to supporting both them and the fund’s growth,” says Mark Voumard, CEO of Gordian Capital Singapore Pte. Ltd. “They bring a wealth of experience and unparalleled networks within Japan, combined with the right approach to activism for that market and seek to implement significant, measurable, positive change.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Launches & FundraisingNAV Fund Administration Group establishes Australia entity
NAV Fund Administration Group, a provider of administrative services to alternative asset managers, has launched NAV Fund Services (Australia) Pty Ltd, a new business entity in Australia.
“In evaluating Australia as a potential location, we found a market ideally positioned for the comprehensive range of services, industry expertise, responsive client support, and competitive fee structure that NAV has established over the last three decades,” says NAV COO Ambuj Garg. "We look forward to introducing Australian fund managers to our flexible administration solutions, backed by a team of 1,500 professionals and a robust and agile proprietary technology platform designed to support every fund structure and asset class traded."
NAV is recognised globally for its award-winning support for emerging funds, efficient transition of services for existing funds, and expertise in cryptocurrency fund administration and was recognized as the top global hedge fund administrator in the HFM Insights Service Provider Rankings and Ratings based on feedback from hedge fund COOs.
Since its founding in 1991, NAV has grown to more than 1,600 clients worldwide, including hedge fund, private equity and real estate Funds, cryptocurrency Funds, CTAs, and managed account providers, while maintaining a 99 per cent client retention rate. The company is headquartered in the United States, with facilities in India supporting Back Office services, and locations in the Cayman Islands and Singapore.
Like this article? Sign up to our free newsletter Author Profile Related Topics Services Fund administrationTitan launches first actively managed portfolio of cryptocurrency assets for US investors
Titan has launched Titan Crypto, an actively managed portfolio of cryptocurrency assets available to all US investors.
The mobile-first investment company allows Titan clients to access the world’s top growth investments with no previous knowledge or understanding of cryptocurrency and zero performance-based fees or lock-ups.
Until now, cryptocurrency has not been an easy class to understand or invest in. Titan plans to add tremendous value and significant returns for their customers by offering strategic investing and management of their cryptocurrency portfolio. The strategy seeks to invest in a concentrated basket of crypto assets that can outperform over a long-term time horizon and is actively managed by Titan’s in-house crypto investing team.
“The adoption of cryptocurrencies and blockchain protocols is exploding, and we expect this trend to prove structural and long-term in nature. We see the wrong debate being had - it’s not a matter of if crypto deserves a place in portfolios; it’s a matter of what percentage,” says Clay Gardner, co-founder and co-CEO at Titan.
Last month, Titan announced a USD58 million Series B round of funding led by Anish Acharya of Andreesen Horowitz (a16z). The round also features participation from an all-star line-up of pro athletes and celebrities, including Kevin Durant, Odell Beckham Jr, Jared Leto and Will Smith. To date, Titan has raised USD75 million to support its mission to lead the world to better wealth by enabling everyone to invest in the world’s success. The funds will be used to make significant strides in building out Titan’s underlying platform and suite of investment products, including Titan Crypto, alongside scaling core functional teams.
“At Titan our clients trust our portfolio selection and we see an ever-increasing likelihood that Bitcoin and other cryptoassets achieve broad adoption and value accrual. We are excited to be the first to introduce this offering to our clients,” says Max Bernardy, co-founder and CTO.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsDeFi Technologies to acquire Protos Asset Management
DeFi Technologies has entered into a letter of intent (LOI) to acquire 100 per cent of the issued and outstanding securities of Protos Asset Management (Protos).
Protos, through its various funds and investment structures, gives investors exposure to professionally managed portfolios of cryptocurrency assets and DeFi networks. The founders have 18 combined years of investing in bitcoin and cryptocurrencies.
Protos Quant accounts aim to systematically reduce risk while growing the size of its clients portfolios relative to their BTC & ETH benchmarks.
In 2017, Protos raised the first tokenised quantitative crypto fund, issuing the PRTS token (one of the first security tokens).
The LOI contemplates that DeFi Technologies and Protos will promptly negotiate and enter into a definitive agreement (Definitive Agreement), together with such other documents that may be required in order to formalise and execute the terms of the Acquisition as outlined in the LOI.
Wouter Witvoet, DeFi Technologies Chief Executive Officer, says: "Since 2017, the team at Protos have created excellent infrastructure to give institutional and individual investors access to a diversified DeFi portfolio. They were also pioneers in allowing investors to access their quantitative investment strategies via the PRTS security token. It is these kinds of developments that I am excited to bring to the DeFi Technologies family and get to real scale using the platform we have created."
Russell Starr, DeFi Technologies Executive Chairman, says: "The acquisition of Protos paired with our planned acquisition of DeFi Yield and our current Valour ETP business creates an ideal symbiotic product offering for investors looking to get diversified exposure to the DeFi universe within one publicly listed company. These additions, along with the great team Defi Yield has assembled, now allows us to execute on our plans for rapid expansion throughout the DeFi universe. DeFi Technologies is now the most holistic publicly listed DeFi company in the world and should create tremendous shareholder value as we grow both organically and through acquisitions."
Thomas Kineshanko, co-founder of Protos, says: "We believe that the combined strengths of DeFi Technologies and Protos will allow us to offer a portfolio of the highest quality DeFi products under one roof. Our team at Protos is deeply technical and passionate about DeFi and includes strong DeFi insights, quant trading and structured products capabilities. Through Protos we've brought several successful products to market early including the first tokenised hedge fund and one of the first and most successful DeFi yield hedge funds. This acquisition allows us to bring our technical experience and passion for DeFi to more users by leveraging the reach and world-class executive leadership that DeFi Technologies brings to the table."
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Acquisitions Digital Assets DeFiSecuritise this: Amid hedge funds’ green push, BlueBay eyes structured credit’s ESG credentials
Structured credit is a “naturally ESG-friendly” asset class, owing to its focus on real asset financing, underlying loan transparency, and strict governance on structures, BlueBay Asset Management portfolio managers said this week.
With the drive for sustainable assets and responsible investing maintaining its momentum, Ashley Blatter and Tom Mowl, portfolio managers at the London-headquartered credit and multi-strategy fund manager, noted how structured finance instruments – such as asset-backed securities, residential mortgage-backed securities and collateralised loan obligations – are “low risk” from an ESG perspective.
Environmental, social and governance factors are gaining ever-greater prominence within the global asset management industry, including hedge funds, with several high-profile marquee managers – such as Sir Chris Hohn’s TCI Fund, Caxton Associates, and Man Group – emerging as vocal ESG evangelists.
Earlier this summer, little-known US activist hedge fund Engine No. 1 hit the headlines after it secured three members on the board of ExxonMobil as part of its push for clean energy reforms at the US oil giant.
Citing recent stats from the Global Sustainable Investment Alliance, BlueBay noted the total size of the sustainable investment universe expanded by 15 per cent between 2018 and the start of 2020 to some USD35.3 trillion.
From an ESG perspective, asset- and mortgage-backed securities benefit from their focus on financing real economy assets such as houses and consumer purchases, according to BlueBay. Where environmental risks have been flagged, steps have been taken to address such challenges in the underlying collateral, with a focus on energy efficient homes or electric vehicles, for instance.
While certain structured finance instruments came under close scrutiny from regulators and investors in the aftermath of the 2008 Global Financial Crisis due to their central role in the crash, Blatter and Mowl pointed to the stricter regulation and increased transparency on underlying loans and cashflows.
“From a social perspective, lending regulations have generally tightened up significantly post the global financial crisis, which has led to a lending environment across geographies with stronger consumer protections,” they explained in a market note on Thursday.
ABS’s governance credentials are further bolstered, meanwhile, by the bankruptcy-remote structures of special purpose vehicles set up to hold securitised assets, they noted.
The PMs also pointed to further ESG developments within the structured credit space this year.
“The UK RMBS market has had its first issuances of ICMA-labelled green and social bonds – financing energy-efficient homes and underserved portions of the population, such as first-time buyers,” they said.
“The number of CLOs containing restrictive ESG language has increased in recent years and we are at the stage where inclusion is normal in the European market. CLO managers have also made concerted efforts to broaden ESG-related exclusions as part of their investment eligibility criteria and an increasing number of managers are reporting ESG scores for their portfolios.”
Like this article? Sign up to our free newsletter Related Topics ESG & Responsible InvestingHow alternative data is reshaping investor insights during the IPO process
The rise of alternative data, and the exponential growth of new datasets, continues to influence the decision-making process for hedge funds and other asset managers across the investment spectrum.
While the ongoing expansion and evolution of alternative datasets can help hedge funds and investors uncover detailed information and insights ahead of a company’s initial public offering, how they ultimately use that data remains critical to the success or failure of an investment idea.
For Ed Lavery, Director of Investor Solutions at web analytics provider Similarweb, alternative data sources not only help investors understand a company in isolation – but also, crucially, how the company is growing in relation to its market and competitors.
“Many of these businesses that are IPOing at the moment are growing on the premise that their market share is increasing, and that they have a sustainable customer base, and good retention of customers,” New York-based Lavery says
“But most of this kind of information is not usually reported in company prospectuses. In general, there is very little information out there on pre-public companies. When they IPO, the information provided in their S-1s is also very minimal.”
Similarweb has a particular focus on website data and browser traffic. Such data provides both a rear-view perspective on a company’s track record, while simultaneously identifying future trends, which in turn can potentially map the forward performance of a business, he says.
Mentality shift
“What you’re not doing is directly tracking the financial performance of a company. What you are looking for are trends within a business rather than the actual performance. You’re tracking customer behaviour – which is a very different way of looking at businesses – and trying to translate that into a financial signal with which you can value that company,” Lavery explains.
“This is something of a mentality shift for asset managers. It’s a lot less black and white, and it’s significantly more nuanced which can often make it harder for asset managers, I believe, to really find and realise where all the value is in a dataset.”
Expanding on this point, Lavery says one sizable challenge for data vendors is how to create something which is easy for investors or asset managers to use and digest – “in a way almost spoon-feeding them the data they need to look at” – while at the same time offering them something that offers enough flexibility to explore and manipulate data to help the alpha-generation process.
“Some customers want something very spoon-fed. Then there are others, the more sophisticated funds, who want something super-flexible that they can find the right alpha on, and explore it themselves,” he says. “A good data vendor generally will offer both options.”
For Similarweb, the key metric is website data, which helps investors gauge not only the digital reach of a company, but with engagement tracking, conversion numbers, and subscription and log-in stats, supports a better understanding of potential inflection points of a business.
“Website traffic ultimately offers a top-level view of what's going on within a business, and how it may fare in the future,” he notes.
“Engagement proxies can be used almost as predictors of what the company might be doing in the future. For an e-commerce website, for instance, you want to see customers spending longer on the site, and the average duration, going up over time.”
He continues: “Web traffic can also help examine marketing trends, so you can see the amount of traffic coming from a paid search or even PPC cost. This is actually a critical metric to look at in a pre-IPO company, because companies will often pay a lot of money to boost their traffic just ahead of an IPO so it appears as if it is performing better than it actually is. It helps you understand how organic this traffic is.”
Building confidence
Reflecting on the avalanche of new alternative data over the past few years, and its far-reaching impact on the investment management industry, Lavery believes there is a need among some managers to “open their minds” to the kinds of questions that may be asked of data.
“It’s definitely becoming much more mainstream,” he observes. “But I think the whole industry often overcomplicates it - they make it sound much scarier than it actually is. In its simplest form, data is just information that managers can use to make a decision.
“There’s an assumption that you need to be a really smart data scientist or analyst to clean the data to establish a signal and then forecast what a company is going to do. That’s quite an antiquated way of thinking.”
Underlining this point, Lavery suggests that those managers and investors who can get the most value out of datasets are the ones who can build a robust interrogation process, zeroing in on different questions and building hypotheses on a company beyond its simple financial statements.
“Data does not give the answers,” Lavery observes of the interrogation process. “You need to ask questions of the data, and it will either validate the question or contradict it.”
He adds: “Generally speaking, there are two main use cases for alternative data for hedge funds. One – does a dataset provide conviction to my hypothesis on a company? And two – does it signal a new idea, or a new inflection point for a company that I wasn’t aware of before?
“I think for hedge funds and asset managers, it’s about finding a dataset that can provide greater strength to a hypothesis that they have for both long and short term investment decisions. It may not provide them with the exact answer, but if it's something that provides them with greater confidence when they're making a decision or a call, then there’s a lot of value in that.”
Like this article? Sign up to our free newsletter Related Topics Technology & software solutionsAllianceBernstein and LSV Advisors announce strategic partnership
Global investment manager AllianceBernstein (AB) has established a strategic partnership with LSV Advisors (LSV), a special situations secondaries firm focused on liquidity solutions for hedge fund, private equity, and other alternative investment funds.
The new partnership will enhance investment offerings for the firm's private wealth business, Bernstein Private Wealth Management. The goal of the partnership is to provide clients access to LSV's investment strategy to enhance their diversification in alternative investments. As a part of the broader strategic partnership, AB will become the exclusive private wealth partner for LSV.
Founded in 2005, LSV is a pioneer in providing liquidity solutions for investors and managers of private funds, as well as direct private assets, and is currently investing its sixth round of investment funds.
"Through this innovative partnership structure with LSV, we will continue to enhance the services we offer our private wealth clients by expanding our private alternatives capabilities," says Aaron Bates, Head of Private Wealth Platform and Partnerships at Bernstein Private Wealth Management. "As alternatives become an increasingly attractive source for yield amid market volatility and low rates, this partnership demonstrates our firm's broader strategy to prioritise our clients and meet their evolving needs."
"Our clients have been our core focus over the past 16 years and the partnership with Bernstein Private Wealth is an extension of that vision and a natural collaboration of two firms with shared priorities," says David G Tisch, LSV's founder and CEO. "We are excited to expand Bernstein's product offerings by bringing our investment strategy, one of the most tenured special situations secondaries programs focused on fund restructurings, to Bernstein's clients. We believe that our expanded partnership with Bernstein is timely and highly synergistic, enabling both firms to take advantage of the current market opportunity."
The partnership expands LSV's ability to execute on its unique investment strategy within secondaries, with an increased ability to transact on its proprietary pipeline of opportunities. LSV's existing limited partner base is comprised of leading institutional investors and sophisticated family offices.
Like this article? Sign up to our free newsletter Related Topics Deals & TransactionsHedge funds down 0.34 per cent in July, says SS&C GlobeOp
The gross return of the SS&C GlobeOp Hedge Fund Performance Index for July 2021 measured -0.34 per cent.
Hedge fund flows, meanwhile, as measured by the SS&C GlobeOp Capital Movement Index advanced 0.55 per cent in August.
"SS&C GlobeOp's Capital Movement Index rose 0.55 per cent for August 2021, reflecting increased net inflows compared to the favourable 0.53 per cent gain reported for the same period a year ago," says Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "Positive capital flows together with solid performance thus far in 2021 have created strong growth in hedge fund assets under management."
Like this article? Sign up to our free newsletter Related Topics Results & performance FundsCrossTower appoints former State Street hedge fund head as CFO
CrossTower, a crypto investment and trading firm, has appointed Cory Thackeray, CA CPA, as Chief Financial Officer.
Thackeray brings 25-plus years of experience building globally recognised fund administrators to his new position. In his new role, he will be responsible for managing CrossTower’s finance functions and capital structure, ensuring that the firm’s activities continue to contribute to client service and growth of the firm.
Prior to joining CrossTower, Thackeray was Senior Managing Director and Co-Head of Hedge Funds at State Street Alternative Investment Solutions, where he oversaw operations servicing over USD600 billion in Assets under Administration (AUA). Before that, he was Global Head of Goldman Sachs Administration Services (GSAS) where he led the successful integration of the business into State Street following their acquisition of the unit, including retention of personnel and clients. His leadership helped ensure that the acquisition was accretive by working to maximising revenue synergies across the client base.
“We continue to add senior team members with deep institutional backgrounds to our leadership roster,” says CrossTower President and Co-Founder Kristin Boggiano. “Cory’s an incredible, highly experienced CFO; his background enhances our existing bench so that we can further service hedge funds and other institutional clients.”
Thackeray says: “CrossTower is a leader in crypto capital markets for institutions and I am very pleased to be joining this high-quality organization. Hedge funds and other institutions are looking for opportunities to work in crypto with reputable firms and I have been impressed with the team that has been assembled and the breadth of services offered by CrossTower.”
At GSAS, Thackeray grew the business from USD3.5 billion to USD200 billion in Assets under Administration (AUA) with strong operating margins and a ranking of 4th in industry AUA. Additionally, the business was recognized for numerous Global Custodian and HFM awards. Previously, Thackeray worked as a senior accountant for KPMG. He has a BA in Accounting from Simon Fraser University as well as holding a Chartered Professional Accountant (CPA)/Chartered Accountant (CA) designation from Canada.
Like this article? Sign up to our free newsletter Related Topics Digital Assets Moves & AppointmentsSimCorp appoints new CEO
Christian Kromann is to succeed Klaus Holse as Chief Executive Officer of SimCorp, effective 2 September, 2021. Kromann has served as SimCorp Chief Operating Officer and member of the Executive Management Board since August 2019.
Chairman of the Board of Directors Peter Schütze comments: "We are delighted to appoint Christian as our Chief Executive Officer.
The Board has followed Christian’s performance as COO for the past two years and we are pleased to have a strong and competent internal successor to take over the leadership of the company after Klaus Holse.
"Christian is an accomplished and respected leader with an impressive background from our sector, and his dedication to execution and strong client focus is what is needed to drive SimCorp’s success in the future.
"In addition, we are very happy that Klaus Holse has agreed to stay on as a member of the Executive Management Board for the rest of the year and then as Senior Advisor until the end of Q2 2022 to ensure a smooth transition. At this time, the Board and I would also like to extend our thanks and sincere gratitude for the immense contribution Klaus Holse has made to SimCorp. In his nine-year tenure, we have seen tremendous growth and significant value creation for our shareholders, and Klaus has been instrumental for initiating the ongoing transformation."
Holse says: “I am incredibly proud of what the team across the world has achieved during the nine years I have had the privilege to lead the company.
"This is a good time for me personally, as well as for the business, to pass the baton and I can’t think of a better successor than Christian.
I am confident that he will be the right leader for the team to continue the journey that has made SimCorp a global leader.”
Kromann says "I am deeply honoured to assume this responsibility after Klaus. I’m taking over an extremely strong company and I look forward to leading our dedicated employees and accelerate our transformation journey from a software to a technology-enabled service company, strengthening the value we deliver to our clients as well as our shareholders”.
Over three in five Swiss asset managers plan to cut bond exposure as inflation persists
More than three in five (61 per cent) of Swiss asset managers - including hedge and other fund managers, institutional investors and wealth advisers - plan to cut their exposure to bonds over the next year, according to new research( commissioned by Managing Partners Group (MPG), the Geneva-based international asset management group.
Only one in six (17 per cent) plan to increase their exposure over that time and 22 per cent will keep it about the same.
Just over seven in 10 (71 per cent) of those planning to reduce exposure to bonds will redirect the investments to real estate, followed by commodities (59 per cent); Life Settlements (42 per cent); hedge funds (22 per cent) and equities (22 per cent).
Virtually all (99 per cent) of Swiss asset managers have some degree of concern that inflation will reduce the real value of bond yields over the next one to two years, with 17 per cent saying they are ‘extremely’ concerned. Two in five (38 per cent) see higher inflation over this period and 46 per cent expect it to remain around the same levels. Seven in 10 (70 per cent) expect the level of default risk of corporate bonds in the US and Europe to increase over the next year.
At present, one third (33 per cent) of asset managers recommend allocating between 31-40 per cent of portfolios to bonds, while 25 per cent recommend allocating 41-50 per cent and 21 per cent recommend 21-30 per cent.
Jeremy Leach, Chief Executive Officer, Managing Partners Group, says: “Our results are significant because Swiss asset managers are prolific investors in bonds and three out of five of them planning to reduce exposure just shows the level of nervousness in the market.
“The latest official inflation rate in the US is 5.4 per cent for the second month in row, so anyone who hasn’t made that over the last year has lost money in real terms. Inflation is high and expected to rise further, which can only cause a correction in bond markets.
“A defensive model used to be to reduce exposure to equities in favour of fixed income but high inflation like this is likely to affect the pricing of both fixed income and equities, making the need to consider alternatives more important than it has been for four decades.”
MPG expects alternative assets including commodities, real estate and Life Settlements will become increasingly attractive to investors. The research shows more than seven in 10 (72 per cent) respondents anticipate that Swiss wealth managers will increase their allocations to alternative asset classes over the next three to five years.
Seven in 10 (70 per cent) say an important reason for this is the growing transparency around alternative asset classes, while 65 per cent cite an increased search for investments with low correlations to traditional asset classes and 57 per cent point to dissatisfaction with the performance of traditional asset classes.
Life Settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value and are institutionally traded through a highly regulated secondary market.
The research commissioned by MPG also shows that 94 per cent of Swiss asset managers would now consider investing in Life Settlements and 82 per cent see institutional investors raising their exposure to the asset class over the next three to five years. Over half (54 per cent) of Swiss asset managers believe Life Settlements can deliver consistently attractive returns and 49 per cent say regulatory changes have made investing in them much safer.
The Life Settlements market increasingly includes high profile institutional investors and service providers, including Apollo Global Management, GWG Life, Vida Capital, Broad River Asset Management, Red Bird Capital Partners, Partner Re, SCOR, Berkshire Hathaway, Coventry First, Wells Fargo, Bank of Utah, Wilmington Trust and Credit Suisse Life Settlements LLC.
MPG’s High Protection Fund, which is an absolute return vehicle that invests in life settlements, recorded its best year in 2020, delivering 9.91 per cent net of fees over the calendar year with no drawdowns in any month. It has returned 154.06 per cent since it was launched in July 2009. The standard deviation in its performance has been 0.18 per cent since launch and its Sharpe Ratio of 2.82 reflects its excellent consistency in outperforming the risk-free rate. The fund has no initial charges or performance fees, which has given it a performance edge on competing funds within the Life Settlements sector.
Like this article? Sign up to our free newsletter Related Topics BondsiCapital Network expands relationship with Bridgewater Associates
iCapital Network has expanded its relationship with Bridgewater Associates (Bridgewater), a specialist in institutional portfolio management, and the world's largest hedge fund.
Under this agreement, iCapital will provide a customised technology platform to give registered investment advisors (“RIAs”) and family offices seamless access to Bridgewater’s strategies for their ultra-high-net-worth clients in the US.
“Creating opportunities for wealth advisors and their qualified clients to access institutional-quality investments has always been our core mission at iCapital,” says Lawrence Calcano, Chairman and CEO of iCapital Network. “We are excited to partner with such a prominent team as Bridgewater to bring access to these strategies to the wealth management community.”
iCapital’s technology and service offering digitalises the subscription, administration, operational and reporting processes of alternative investments to overcome many of the long-standing challenges of accessing the asset class. iCapital also provides a full suite of research, due diligence and educational materials to advisors and investors.
“In this evolving economic environment, there is growing investor demand – and need – for strategies that are designed to provide diversification and are uncorrelated to traditional portfolios,” says Josh Levine, Head of Marketing and Sales. “Expanding our relationship with iCapital will enable advisors, family offices and their ultra-high-net-worth clients to now access alternative strategies designed to help support their financial goals.”
Overbond releases AI-driven margin optimisation add-on to increase profitability of automated fixed income trading
Overbond has released an AI-powered margin optimisation add-on that fully integrates with its existing suite of AI-powered fixed income analytics. Traders using the add-on can optimise their hit ratio and triple the number of RFQs they are able to profitably respond to with full or partial automation.
The structure of fixed income markets has changed dramatically over the past decade. Secondary market liquidity has declined markedly due to new regulations that have led to increased capital requirements, reduced risk limits and increased costs for dealers.
New fixed income products, the emergence of electronic all-to-all platforms and non-dealer liquidity providers are creating new competition for dealers and increasing the pressure to reduce their response time to RFQs.
“It is difficult for sell-side fixed income desks to be profitable in this environment, so trade automation has become the industry standard. Traders are realising that they can gain a competitive edge by augmenting their trading with AI. Of course, achieving an optimal hit ratio is a key part of maximising P&L. With Overbond’s AI-driven margin optimisation add-on, sell-side desks can respond to up to three times the volume of RFQs without incurring negative margin on those trades,” said Vuk Magdelinic, CEO of Overbond.
Overbond’s margin optimisation add-on captures various margin optimisation measures and converts them to one unified all-optimised distance. To train the model to the risk tolerance and execution style of the desk it calculates this optimised distance for all prior categories of RFQs processed by the desk, such as those that are accepted, rejected, covered and traded-away. Using this information, it minimises the distance-to-cover at the point of execution of all new RFQs, based on the best executable price according to Overbond’s pricing model, COBI-Pricing LIVE.
COBI-Pricing LIVE has a refresh rate of less than three seconds, enabling sell-side trading desks to fully automate 30 per cent of their RFQs and execute an additional 20 per cent with trader supervision. COBI-Pricing LIVE allows traders to automate trade flow, improve liquidity risk, improve price monitoring and reporting, and respond to 80 per cent to 120 per cent more RFQs. With the margin optimisation add-on, traders can maintain an optimal hit ratio and significantly increase desk P&L.