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Updated: 8 weeks 4 hours ago

OPIM partners with Global Traveller AM to launch special thematic hedge fund

Thu, 08/24/2017 - 12:10

Asian hedge fund platform OP Investment Management (OPIM) has partnered with Global Traveller Asset Management Company to launch an equity long-biased, Cayman-domiciled hedge fund for professional investors.

The fund, managed by Portfolio Manager and CEO Zheng Wang, utilises thematic macro strategies, as well as fundamental analysis to build on a large cap portfolio. The strategy leverages on both macroeconomic and cyclical industry analysis whilst leveraging on big data and quantitative fundamentals to discover opportunities in the US, Hong Kong, and China A-share markets. The portfolio positions can range from high tech and new economy sectors to traditional cyclical industries.
 
"Our investment strategy leverages our proprietary quant model and top down allocation. The model will identify both directionally long or short opportunities,” says Wang.
 
The Global Traveller team believes that this year is the best time for investment; with positive and consistent returns earned over a cycle of 10 per cent. The Fund's net NAV is up 40.7% year to date, and it has outperformed the NASDAQ and SZSE-300 Index for three years in a row.
 
With extensive experience in fund management, Wang previously held the role of Associate Investment director at River Fund Investment (Shanghai) Co, and was a Portfolio Manager at Lord Abett china Asset Management Company, before founding Global Traveller Asset Management and managing the Fund.
 
Wang's career began at First-Trust Fund Management as an assistant analyst, then becoming senior analyst. He obtained his Bachelor of Economics at Xiaman University and his MBA at Shanghai University of Finance and Economics in April 2012.
 
This will be OP Investment Management's first special thematic fund launched off their platform, having signed on 16 new funds for the first half of 2017.
 
"Even with the recovery in the market this year supporting both managers and investors, Global Traveller represents a unique opportunity for any investor looking for alpha, and the strong track record speaks to Wang’s rare edge in both top down and bottom up methodology,” says Alvin Fan (pictured), Chief Executive Officer of OPIM.

offFundsLaunches & Fundraising

Primeo Fund v HSBC: Grand Court rules that Madoff feeder fund was ‘the author of its own misfortune’

Thu, 08/24/2017 - 10:46

By Andrew Pullinger (pictured), Partner, Shaun Tracey, Senior Associate, and Hamid Khanbhai, Senior Associate, Campbells –  In a landmark judgment of the Grand Court of the Cayman Islands delivered on 23 August 2017 in Primeo Fund (in Official Liquidation) (Primeo) v Bank of Bermuda (Cayman) Ltd (BBCL) and HSBC Securities Services (Luxembourg) SA (HSSL),[1] Mr Justice Jones QC dismissed the claim brought by Primeo, a Madoff feeder fund, against its custodian and administrator seeking damages of approximately USD2 billion. 

Following a twelve-week trial, the Judge found that Primeo was “to a very substantial degree the author of its own misfortune”. Even though the defendants were found to be liable to Primeo in respect of the defendants’ own acts or omissions as well as, in the case of the custodian, for the wilful default of BLMIS in its capacity as sub-custodian, Primeo failed to establish the relevant causal link between such acts or omissions and the loss that was allegedly suffered. Primeo’s claim also failed on other grounds including limitation and because it infringed the rule against reflective loss. Notwithstanding the dismissal of the claim, the case illustrates the risks of providing services to funds that have an abnormal business model and provides guidance to fund service providers, particularly custodians and administrators, concerning the scope of their obligations.

Background

Primeo, a Cayman Islands investment fund, was established and managed by Bank Austria. From 1993 until December 2008, Primeo invested with Bernard L Madoff Investment Securities LLC (“BLMIS”), the company through which Bernard Madoff perpetrated his infamous Ponzi scheme.

BLMIS’s ‘holy grail’ of equity returns with bond-like volatility came with strings attached: Madoff insisted upon BLMIS performing the triple functions of investment manager, broker, and de facto custodian to its clients. Many institutional investors were willing to accept this concentration of responsibilities (and therefore risk) in exchange for the stellar returns that Madoff was apparently able to generate consistently for decades.

In 2003, Primeo began investing some of its funds with BLMIS indirectly, through two other Madoff feeder funds: Alpha Prime Fund Ltd (“Alpha”) and Herald Fund SPC (“Herald”). Following an in specie transfer on 1 May 2007, all of Primeo’s investments with BLMIS were indirect, through Primeo’s shareholding in Herald and Alpha.

Primeo appointed BBCL and HSSL as its administrator and custodian respectively (together, the “Defendants”) at a time when both of those entities were part of the Bank of Bermuda group of companies, which was subsequently acquired by HSBC in 2004.

Upon Madoff’s arrest, Primeo entered liquidation but it was not until 2013 that the liquidators of Primeo sued the Defendants for the alleged losses suffered by Primeo as a result of the fraud.

Claims and defences

As against the custodian, Primeo alleged that HSSL breached its contractual duties concerning the appointment and supervision of BLMIS as its sub-custodian. As against the administrator, Primeo alleged that BBCL breached its obligations in connection with the maintenance of books and records for Primeo, and in determining the net asset value (“NAV”) per share at the end of each month. In his judgment, Mr Justice Jones QC observed that “at the core of the administration claim is a dispute about the role of independent fund administrators”. Primeo alleged that, had the Defendants complied with their obligations, Primeo would have withdrawn its investments with BLMIS prior to the fraud being uncovered and reinvested elsewhere.

The Defendants denied they had breached their contractual obligations to Primeo. The Defendants contended further that Primeo was well aware of the risks associated with BLMIS and that it would have continued to invest with BLMIS in any event. The Defendants argued that Primeo was in any case not the proper claimant for the loss because Primeo’s losses were merely reflective of the losses suffered by Herald and Alpha, in which Primeo was a shareholder at the time of Madoff’s arrest. The Defendants also argued that Primeo’s claim was time-barred insofar as it sought to recover losses arising from a cause of action which accrued prior to 20 February 2007 (i.e. six years prior to the issue of the writ by Primeo against the Defendants). If Primeo succeeded in making out its claim for damages, the Defendants argued that a very substantial reduction would have to be made to reflect the contributory negligence on the part of Primeo.

Decision

After hearing evidence from more than 25 factual and expert witnesses including three of Primeo’s former directors and a number of experts in the fields of custody and fund administration, Mr Justice Jones QC dismissed Primeo’s claim in its entirety, on the following grounds:

• Causation: Primeo failed to prove that any breach of duty by the Defendants had caused its losses. In other words, even if the Defendants had acted as Primeo alleged they should have, the Court was not persuaded that the directors of Primeo would have decided to withdraw the investments placed with BLMIS and would have ceased to invest further with BLMIS. Although the custodian was also found to be strictly liable for any wilful default of BLMIS in its capacity as sub-custodian, there was no loss for which the Defendants could be held strictly liable. Primeo’s loss did not flow from any wilful default of BLMIS qua sub-custodian. Following the in specie transfer on 1 May 2007, BLMIS was no longer sub-custodian to Primeo; Primeo held only shares in Herald and Alpha, and they were in the custody of the custodian, HSSL.

• Reflective Loss: The rule against reflective loss operated to bar the recovery of any of Primeo’s alleged loss, because Primeo was seeking to recover losses suffered by way of a diminution in the value of its shareholdings in Herald and Alpha. As a matter of law, Herald and Alpha were the proper claimants in respect of those losses, and any recoveries obtained by Herald and Alpha would flow to Primeo as a shareholder. In arriving at this conclusion, the Court determined that the appropriate standard against which to assess the merits of the claims by Herald and Alpha against HSSL was that such claims have ‘a real prospect of success’ (as opposed to being ‘likely to succeed’ as contended by Primeo).

• Limitation: Causes of action accruing prior to 23 February 2007 are time-barred under the Limitation Law. This covered almost all claims arising from breaches that occurred while Primeo invested directly with BLMIS, as opposed to indirectly through Alpha and Herald.

In any case, the Judge determined that he would have reduced any damages awarded against the administrator by 75% on account of Primeo’s contributory negligence.

Although Primeo’s claim failed on several bases, the Judge’s findings and observations concerning the roles and responsibilities of administrators and custodians will be of significant interest to the funds industry in the Cayman Islands and abroad.

Custodian: Breach of Duty

The Judge found that during the years 1993 to 2002, the custodian was not responsible for investments placed by Primeo with BLMIS. Rather, BLMIS was the legal as well as de facto custodian of Primeo’s assets placed with BLMIS for investment.

However, in August 2002, the custodian entered into a Sub-Custody Agreement with BLMIS (the “2002 Sub-Custody Agreement”), which was governed by Luxembourg law. The validity, purpose, scope and effect of the 2002 Sub-Custody Agreement were vigorously contested.

The Judge found that the 2002 Sub-Custody Agreement was effective to appoint BLMIS as the sub-custodian in respect of Primeo’s assets held at BLMIS, because it amounted to an “implied tri-partite agreement” between HSSL, BLMIS and Primeo to do so.

It followed, according to the Judge, that from August 2002 the custodian had contractual duties to use due skill and care in the appointment of any sub-custodian, to assess the ongoing suitability of the sub-custodian, and to ensure that the most effective safeguards were in place in relation to the sub-custodian to ensure the protection of Primeo’s assets. The Judge found that the custodian was in breach of these duties.

The key issues were whether a reasonably competent global custodian would have made, and then continued, the appointment of BLMIS without requiring (or at least recommending) that BLMIS:

1. Establish a separate securities account with the central securities depository in New York, the Depositary Trust Company (DTC), for Primeo’s benefit rather than accepting that Primeo’s securities would (purportedly, because they never in fact existed) be held in BLMIS’s single omnibus client account at DTC and/or make use of a DTC reporting system known as the Institutional Delivery System (the “ID System”); and

2. Establish a separate account with the Bank of New York (“BNY”) for treasury bills that BLMIS claimed to hold for Primeo (which also never in fact existed).

In each case, Primeo argued that a reasonably competent custodian would have required or recommended those options, that, if they had done so, Primeo’s directors would then have asked BLMIS to set up such separate accounts for Primeo, and that if BLMIS had refused to do so Primeo would have withdrawn its funds from BLMIS and stopped making further investments. The Judge accepted that a reasonably competent custodian would have made such recommendations, though (as discussed above) he rejected Primeo’s causation arguments.

Separate account at DTC or ID System

BLMIS purportedly executed large scale bulk trades for all of its investment clients on an omnibus basis, and then separate agency trades for each client’s part of the bulk (i.e. the assets were purportedly segregated by BLMIS in its books and records, rather than at the DTC). A separate account at the DTC in the name of BLMIS, but designated for either Primeo or all of the custodian’s clients, would have meant that the agency trade made between BLMIS (as broker) and Primeo (acting by BLMIS as investment manager) would have been settled into the separate DTC account, with the result that the DTC would have issued a settlement notification in respect of this trade, which the custodian could have required to be sent directly either by SWIFT message or through the ID System.

Alternatively, the ID System, without a separate DTC account, would have allowed the custodian to obtain trade confirmations and settlement notifications directly from the DTC. The Judge found that the custodian could have been set up to receive a notification directly from the DTC as an ‘interested party’ whenever BLMIS identified part of a bulk trade as being allocated to Primeo.

In either case, he held, there would have been independent confirmation of an actual trade taking place and settlement into BLMIS’s account, as well as the possibility of reconciling confirmations and statements received from BLMIS with those received from DTC.

Separate account at BNY

BLMIS’s purported strategy involved investing in US treasury bills for a large part of the time, including at month-end as a means by which to protect the confidentiality of BLMIS’s purported trading strategy, and timing the trading of US equities. The treasury bills were purportedly held in BLMIS’s omnibus account with BNY. The Judge found that BLMIS could have established a separate account in its own name designated for each of Primeo and the custodian’s other clients. BLMIS could then have instructed BNY to issue monthly statements directly to the custodian and confirm year-end balances directly to Primeo’s auditors, Ernst & Young. The Judge found that there was no regulatory or practical impediment to doing so, and it would not have interfered with BLMIS’s ‘triple function’ business model – nor necessarily prevented Madoff from defrauding the custodian’s clients. However, it would have allowed the custodian to confirm the requisite value of treasury bills at each month end, making it more difficult for Madoff to perpetuate his Ponzi scheme.

Findings

The custodian argued, among other things, that these might have been possible options but they did not constitute normal commercial practice, so they could not have been required of a reasonably competent custodian, and that any failure to make such recommendations did not amount to negligence.

The Judge found that, although it was not (and is still not) normal commercial practice for custodians to segregate assets by establishing separate accounts at the DTC and at BNY for their hedge fund clients, in the particular circumstances arising out of BLMIS’s business model, a reasonably competent custodian would have done so. BLMIS’s performance of roles as broker, dealer, and de facto custodian introduced operational risks which were not addressed by the normal, commercially acceptable procedures. The Judge found that “when the normal procedure is known to be ineffective, failing to apply a readily available alternative is negligent”.

In addition to liability for its own acts and omissions, the Judge also found that, under the Custodian Agreement, the custodian was strictly liable for any wilful default of BLMIS acting as sub-custodian. But from May 2007, BLMIS was no longer Primeo’s sub-custodian. Primeo held only shares in Herald and Alpha, and they were held by the custodian. Accordingly, no loss flowed from any wilful default by BLMIS qua sub-custodian – and so there was no loss for which the custodian could be held to be strictly liable.

Administrator: Breach of Duty

The Judge held that an administrator’s role did not extend to performance of managerial and advisory functions. Rather, the core duties were the production of accounts and determination of the NAV by the exercise of independent professional judgment. The Judge held that “administrators are not expected to perform audit procedures, but they are concerned to satisfy themselves that the published NAV is accurate.” The existence of assets is verified by the process of reconciliation and the pricing of assets by reference to independent pricing services such as those provided by Bloomberg.

The Judge made no criticism of the administrator in relation to satisfying itself about the pricing reported by BLMIS, because those prices matched the publicly available sources.

Although it was agreed between the expert witnesses that administrators would normally proceed on the assumption that information received from third parties is reliable, the key issue concerned whether, and if so how, an administrator must verify the existence of reported assets.

The Defendants’ expert gave evidence that it was common for an administrator to rely on single-source reporting, especially during the period from 1993 to 2008. The administrator would “tie” to the custodian’s statement, and in this case the de facto custodian was the broker, BLMIS. Therefore, it was not negligent of the administrator to rely upon BLMIS’s monthly statements when calculating Primeo’s NAV.

However, the Judge rejected that evidence. He accepted that might have been the case within large international banking and financial services groups, promoting their own ‘in-house’ branded investment fund products, but, in such a case, all the various service providers, including the administrator itself, were likely to be separate entities within the same group. An in-house fund would have been marketed as such, but in the case of BLMIS it was the same entity carrying out all of the functions.

The Judge found that single-source reporting in relation to a hedge fund with the characteristics of BLMIS was unique in the hedge fund industry. He found that the “relatively high risk of fraud or error inherent in the BLMIS model must have been manifestly obvious to all concerned”. The Judge found the use of single-source reporting to be negligent but not grossly negligent (the contractual standard for imposing liability on the administrator) for the years 1993 to 2005, because during that period Primeo’s auditors had been content to rely upon clean (but fraudulent) audit reports from BLMIS’s auditors as evidence that Primeo’s assets existed.

The Judge found that from 2005, however, this factor no longer assisted the administrator because Primeo’s auditors began relying upon custody confirmations provided by the custodian (which confirmations had appended BLMIS’s account statements).

The Judge found that the administrator’s reliance upon information solely from BLMIS in these circumstances did not account for the risks of using single-source reporting. The administrator’s preparation of Primeo’s NAVs from 2 May 2005 onwards was therefore found to have been in breach of contract amounting to gross negligence.

Indirect investments

By May 2007, Primeo was only an indirect investor in BLMIS because its only assets were shares in Herald and Alpha. The Defendants argued that this meant the administrator had no duty to “look through” the published NAV of Herald and Alpha, but was entitled to rely upon those NAVs unless there was any obvious error (which there was not) for the purpose of calculating Primeo’s NAV.

The Judge confirmed that there is ordinarily no obligation on administrators to “look through” the NAVs published by master funds. However, HSSL also provided custody and administration services to Herald and Alpha. The Judge inferred that the NAV calculations made in respect of Herald and Alpha after May 2007 were flawed for the same reason as for Primeo’s beforehand. The Judge therefore found that the administrator’s reliance on Herald and Alpha’s published NAVs when producing Primeo’s NAVs also amounted to gross negligence.

However, the Judge also ruled that, if Primeo had made out its claim against the administrator, he would have reduced any damages award by 75% on account of Primeo’s contributory negligence: Primeo was largely the author of its own misfortune because its directors and investment advisers were well aware of the risks inherent in the BLMIS structure.

Conclusion

This judgment addresses a range of issues that will be of significant interest to fund directors and service providers. For industry professionals, the headline point is the serious risks to fund service providers posed by investment structures that are abnormal or high risk.  The judgment also establishes that a fund service provider may have an obligation to recommend a course of action to its client to address abnormal risks, even when those risks are well-understood by the client, and that a failure to do so may amount to a breach of contract.

[1] Campbells represented the successful Defendants. The factual and legal issues raised in these proceedings are complex and go beyond the scope of this brief advisory note. 
 

offNorth America

Volatility manager Runestone Capital to launch first US fund

Wed, 08/23/2017 - 03:41

Volatility management specialist Runestone Capital is to launch its first ever US fund. The systematic strategy buys or sells US equity index volatility on a one-day forward basis based on statistical probabilities.

The strategy allows investors to access pure volatility as an asset class through trading VIX related instruments such as VIX futures, exchange traded notes, and options. Historical returns have been shown to typically be uncorrelated to traditional equities and fixed income since inception in May 2015.
 
“The strategy has delivered returns in very different market conditions as the strategy is agnostic to being long or short and to pre-set market conditions,” says Rune Madsen (pictured), CIO of Runestone Capital. “The exceptional thing with volatility is that it is has a perpetual opportunity set. Volatility always exists.”
 
“Understanding volatility and how to manage its risk specifically as an asset class requires special focused expertise,” says Greg Sperrazza, US Head of Sales for Runestone Capital. “Managing volatility is all we focus on and doing it on one-day forward looking basis is something that we believe is unique. We think it helps capture opportunities that might otherwise be missed while keeping risk at a prudent level.”
 
The new fund is called Runestone Capital U.S. Fund and will run pari passu to the original Malta based SICAV, named Runestone Capital Fund. Its first day of trading is set to be Oct 1, 2017. The fund’s capacity is currently projected at USD500 million based on the size of the current VIX market.
 
Founded in 2014 by Rune Madsen and Rasmus Andersen, Runestone Capital specialises in quantitative and qualitative strategies based on volatility. Peter Clarke, the former chief executive officer of Man Group, is a senior advisor to the firm.

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Hedge funds up 1.15 per cent in July, says Preqin

Mon, 08/21/2017 - 03:58

Hedge funds generated gains in July 2017 of 1.15 per cent, continuing a streak of nine consecutive months of positive returns, according to Preqin’s latest Hedge Fund Performance Update.

This has helped the Preqin All-Strategies Hedge Fund benchmark post returns of 5.93 per cent for 2017 YTD and 9.63 per cent for the past 12 months.
 
All top-level strategies produced positive returns for July 2017, with equity strategies in particular continuing a strong year, returning 1.66 per cent, the highest return of any of its counterparts.
 
Emerging markets-focused funds were the top performers in terms of geographic region, returning 2.63 per cent, helping to bring the 2017 year-to- date cumulative return figure to 10.09 per cent. In addition, this has been closely followed by Asia-Pacific-focused funds which have generated 9.38 per cent over this period.
 
CTAs recovered well in July (+0.99 per cent) having struggled in June losing 0.89 per cent. This improved performance was predominately driven by discretionary CTAs which performed notably well, returning 1.65 per cent over the month of July. 

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Wealth managers Rathbones and Smith & Williamson in merger talks

Mon, 08/21/2017 - 03:23

Wealth managers Rathbones and Smith & Williamson are in talks to agree a merger which will create a GBP55 billion wealth management firm.

Rathbones will effectively take over Smith & Williamson as the larger firm which manages GBP36 billion, against Smith & Williamson’s GBP19 billion. The deal values Rathbones at GBP1.4 billion and Smith &Williamson at GBP600 million.

Last month Rathbone posted a 16.7 per cent rise in first-half pre-tax profit to GBP26.6 million on the back of market gains and an increase in assets under management. The combined new company would see Rathbones, led by CEO Philip Howell (pictured), able to expand its offering, adding Smith & Williamson’s tax and accounting practice.

Behind the news, rumour has it that Canadian financial firm, AGF with CAD36 billion in assets and which owns 33 per cent of Smith & Williamson, has been looking for an exit from the firm. Both firms have large shareholdings held by their staff.

inhouse contentWealthDeals and TransactionsAcquisitionsMergersFlag: alphaq

Alternative UCITS record solid performance across all strategy styles in July, says LuxHedge

Fri, 08/18/2017 - 02:58

The LuxHedge Global Alternative UCITS Index increased by 0.38 per cent during July (+1.16 per cent YTD), recording solid performance cross the board with nearly all strategy style indices posting a gain during the month.



In the Equity Hedge category, Long/Short Europe and Equity Market Neutral funds advanced with +0.65 per cent (+2.20 per cent YTD) and +0.40 per cent (+1.90 per cent YTD), respectively. In line with a clear trend in the global hedge fund market, performance was led by Asia focussed funds with the LuxHedge Equity Long/Short Asia index gaining 2.38 per cent during July (+16.05 per cent YTD). Event driven and Merger Arbitrage funds continued their 2017 winning streak, increasing+0.36 per cent (4.47 per cent YTD). 


 
Fixed Income Arbitrage and Multi Strategy UCITS funds continued to perform relatively flat in July: Fixed Income Arbitrage UCITS +0.24 per cent (1.36 per cent YTD) and Multi Strategy UCITS +0.20 per cent (+0.38 per cent YTD). July was the first month where CTA & Managed Futures funds recovered partially from their earlier 2017 losses: July +1.34 per cent (YTD -3.21 per cent). With both actual and implied volatility at very low levels, Volatility Arbitrage funds experienced another small loss in July: -0.15 per cent (-0.36 per cent YTD).


 
Alternative UCITS funds as a whole continued to gain in popularity with investors. Asset inflow into the space was strong again with total Assets Under Management reaching EUR438 billion by the end of July, an increase of 0.80 per cent over last month. 

offResults and performanceFunds

Hedge funds exit consumer discretionary sector in Q2, says S&P

Thu, 08/17/2017 - 03:06

The latest S&P Global Market Intelligence Hedge Fund Tracker shows the top hedge funds managed approximately USD154 billion in equity holdings in Q2 2017, down slightly from the USD157 billion under management in Q1 2017.

The total number of equity positions held also fell slightly from 427 in Q1 to 423 in Q2, as hedge funds made a significant exit from the consumer discretionary sector.
 
S&P’s tracker reviews 13F filings made by pure play hedge funds to provide an aggregate analysis of hedge fund equity ownership, highlighting hedge fund investments in specific stocks and sectors.
 
"Though overall equity holdings held relatively steady from Q1 to Q2, the investment mix shifted considerably among top hedge funds who were net sellers in 6 out of the 11 sectors of the S&P 500," says Pavle Sabic (pictured), Head of Market Development, S&P Global Market Intelligence. "We also see a great deal of divergence in strategy among top funds, evidenced by the fact that Microsoft is both the most bought single stock among top funds and the third-most sold single stock among top funds."
 
According to the Q2 2017 Hedge Fund Tracker, Hedge funds sold USD3 billion in consumer discretionary stock in Q2, led by USD1 billion in sales of Nike stock. The healthcare sector saw USD1.4 billion in sales among top hedge funds and the information technology sector saw USD1.1 billion in sales by large funds.
 
Within the technology sector, Facebook was the most-sold single stock with USD1.5 billion in sales during Q2, followed by Microsoft (USD1.5 billion), Apple (USD1.2 billion), and Alphabet (USD1.1 billion). However, Microsoft was also the top buy among large hedge funds, with USD1.3 billion in new investment during the quarter.
 
Hedge funds bought 18.1 million shares of Microsoft stock in Q2, for a total investment of USD1.3 billion. Other stocks receiving attention from hedge fund buyers were NXP Semiconductors (USD1.2 billion), Baker Hughes (USD1.1 billion), O'Reilly Automotive (USD697 million), and Wells Fargo & Company (USD659 million).
 
Hedge funds also sold 9.8 million shares of Facebook stock in Q2, totalling USD1.5 billion. Other stocks seeing the largest sell-off among hedge funds were Humana (USD1.3 billion), Microsoft (USD1.2 billion), Alphabet (USD1.1 billion), and PayPal (USD1.1 billion)

offResults and performanceFunds

Over 36 per cent of hedge fund managers offer reduced fees

Wed, 08/16/2017 - 03:03

The latest monthly BarclayHedge survey of hedge fund managers reveals that 36.6 per cent of survey respondents currently offer reduced or no fee alternatives to their investors and a further 20 per cent plan to offer lower or no fee products in the next three to six months.

“The hedge fund industry has been under pressure to offer lower fee alternatives for some time,” says Sol Waksman (pictured), founder and president at BarclayHedge. “We expect that these pressures will continue and that low or no fee products will continue to grow."
 
The BarclayHedge survey was conducted between July 17 and July 28 and received 134 replies from a broad range of hedge funds managers.
 
Also in the survey, managers continue to favour equity markets as the asset class most likely to outperform and confidence in developed markets fell to the lowest level since 2013. Overall, managers are less positive on the US Dollar and Crude Oil but more bullish on Gold.

offSurveys & research

SGX sees 74 per cent year-on-year growth in FX futures trading volumes

Tue, 08/15/2017 - 02:33

Singapore Exchange (SGX) has seen strong growth in its FX Futures business over the last 12 months, with the total volume of FX Futures contracts up 74 per cent year-on-year (y-o-y) to 759,983 contracts in July.

Open interest in these contracts was up 15 per cent y-o-y to 60,105 contracts as at the end of July.
 
The average daily trading volume for all SGX FX Futures through July was 36,190 contracts, representing a significant increase 74 per cent y-o-y. On a year-to-date basis, this translates to over 31,000 contracts traded per day. Since the introduction of FX Futures at the end of 2013, SGX has consistently raised the bar on the daily average trading volume as illustrated in the chart below.
 
The recent tax reform in India has been seen by market participants as a positive sign of the policy shift within the Indian government and has boosted confidence of overseas investors that continue to allocate portfolio flows to India. On the back of better fundamentals and increased investment, the Rupee has appreciated over 5 percent against the US dollar since the start of the year.
 
In July, the USD/INR remained range bound with volatility relatively low, extending the trend observed in June 2017. However, trading activity on the SGX INR/USD Futures continued to show strength with a 10 per cent month-on-month (m-o-m) growth to 596,763 contracts (USD18.5 billion) traded in July 2017. The total volume traded year-to-date has grown 18 per cent year-on-year.
 
Open interest for SGX INR/USD Futures at the end of July rose 35 per cent m-o-m to 37,569 contracts.
 
SGX Consolidates Position as Premier Exchange for Offshore Renminbi Trading for Seventh Consecutive Month
 
The Renminbi continued to strengthen against the US dollar in July, extending a trend from the previous month. However, the USD/CNH spot market traded in a narrow range resulting in low volatility that also affected overall volumes for USD/CNH Futures across various exchanges.
 
While the total exchange-traded USD/CNH Futures contracts traded globally fell 12 per cent m-o-m in July, the volume for SGX USD/CNH Futures in the month fell by 7.7 per cent m-o-m to 150,567 contracts. Despite this relatively modest drop in volume, both open interest and monthly trading volumes grew significantly by 96 per cent and 416 per cent respectively on a y-o-y basis, helping SGX to consolidate its position as the premier exchange for USD/CNH Futures.
 
July also saw increased trading activity across its broader FX futures portfolio.
 
SGX introduced new Futures contracts on MYR/USD and MYR/SGD on 17 July to address the needs of market participants. The MYR/USD Futures in particular has seen some positive trading activity since launching.
 
The volume for SGX USD/SGD Futures grew 42 per cent y-o-y to 5,292 contracts, with daily average volume for the month of 252 contracts (USD6.3 million).
 
Open interest for SGX KRW/USD Futures as at the end of the month was up 43 per cent m-o-m to 932 lots (USD20.4 million). Daily average volume for the month was 216 lots (USD4.7 million).
 

offResults and performanceMarketsTrading & Execution