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Updated: 11 weeks 2 days ago

Hedge funds up 0.62 per cent in November, says BarclayHedge

Thu, 12/14/2017 - 10:56

Hedge Funds gained 0.62 per cent in November according to the Barclay Hedge Fund Index compiled by BarclayHedge. The index is up 9.08 per cent in 2017, and has had 13 consecutive winning months during which it gained 11.20 per cent return.

“The possibility that the US Senate might pass a tax bill rallied domestic equity markets,” says Sol Waksman (pictured), founder and president of BarclayHedge. “For each of the past 13 months, the monthly close of the S&P 500 has set a new record high.”
 
Once again, the Technology Index powered upward with a 3.63 per cent return in November. Technology has had 12 months of gains in the past 13 months, and is now up 25.29 per cent for the year.
 
The Healthcare and Biotechnology Index bounced back from a 1.57 per cent loss in October with a 2.98 per cent gain in November. Equity Long Bias was up 1.63 per cent, Emerging Markets added 0.64 per cent, Distressed Securities were up 0.59 per cent, and Pacific Rim Equities rose 0.33 per cent.
 
Eight hedge fund indices lost ground in November. The Merger Arbitrage Index was down 0.79 per cent, European Equities gave up 0.57 per cent, Fixed Income Arbitrage lost 0.30 per cent, and Convertible Arbitrage slid 0.21 per cent.
 
All of Barclay’s 17 hedge fund indices are profitable after eleven months. Following the strong performance of the Technology Index, Healthcare & Biotechnology is up 18.70 per cent for the year, Emerging Markets have gained 16.40 per cent, Pacific Rim Equities are up 13.18 per cent, and the Equity Long Bias Index has added 12.67 per cent.
 
The Barclay Fund of Funds Index lost 0.03 per cent in November, but is up 5.66 per cent for the year.

offResults and performanceFundsIndexesFlag: alphaq

HFR launches blockchain, cryptocurrency indices

Thu, 12/14/2017 - 03:00

HFR has launched two new indices, the HFR Blockchain Composite Index and the HFR Cryptocurrency Index, the first family of indices designed to capture performance of hedge funds investing in this rapidly evolving space.

The HFR Blockchain Composite Index includes funds that invest directly in blockchain technology, cryptocurrency or other emerging blockchain innovations. Managers focus on how blockchain technologies have begun to, and will continue to, fundamentally change payments, banking, market trading structure, Internet of things (IoT), healthcare, remittances, supply chains, digital identity and more. In addition, key exposure themes include cloud storage, decentralised computing, digital investment platforms, distributed ledger technology and promising innovations involving token interconnectivity and transaction scalability. The HFR Blockchain Composite Index has two constituent strategies – Cryptocurrency and Infrastructure. It includes performance data starting in 2015 with annualised performance of +282 per cent since inception, punctuated by a meteoric surge of +1,522 per cent in 2017 through November.    
 
The HFR Cryptocurrency Index, a sub-strategy index of the Blockchain Composite, includes all funds which invest and trade in cryptocurrency directly, typically generating performance through an actively managed portfolio of cryptocurrency assets, including Bitcoin, Ethereum, Litecoin, Ripple and many other coins, as well as new initial coin offerings (ICOs). Managers may use a variety of trading strategies from discretionary techniques to multiple automated bitcoin trading algorithms to analyse trends and adjust their portfolios as necessary. These trading strategies are primarily Macro in nature, including both fundamental and systematic trend-following approaches, but may also include, Arbitrage and Momentum strategies. The HFR Cryptocurrency Index has annualised performance of +292 per cent since inception and has surged +1,641 per cent in 2017 through November.
 
HFR began tracking the first cryptocurrency hedge fund in 2013, though interest and growth in this area has surged in 2017 as a result of stratospheric price increases and broad proliferation of new coins via ICOs, as well as launches of listed futures contracts. In addition, trading platforms that enable trading and improve liquidity to these dynamic and evolutionary markets have expanded and become more secure.  
 
The HFR Blockchain Indices are rebalanced on a quarterly basis and are investable through tracker funds operated by HFR Asset Management. Index performance reflects a universe of over 20 products which is expected to expand rapidly into 2018.
 
“Investor interest in funds offering exposure to Blockchain technologies and Cryptocurrencies has surged in recent months as these innovations continue to move towards the mainstream and generate compelling opportunities for investors, portfolio managers, traders and other market participants,” says Kenneth J Heinz (pictured), President of HFR. “While the recent performance has been exciting, trading and investing in these evolving areas requires specialised expertise and involves substantial volatility and risks, both real and structural. Taking these risks into consideration, it is likely that the evolving fundamental disintermediation of traditional payment processing associated with blockchain and cryptocurrencies will continue to grow in an absolute sense and as a component of hedge fund exposures.”  
 
 

offCrypto currencyBlockchainIndexesFlag: alphaq

Technology is key to meeting demands for private equity reporting

Wed, 12/13/2017 - 05:37

Technology is playing a pivotal role in how fund administrators support the growing reporting needs of private equity (PE) groups. Those who have both the internal experience to handle PE funds and the technological capability to deliver effective services and reporting, are likely to be the best positioned; especially as more PE groups appoint trusted third party service providers. 

The push toward using third party administrators is largely institutional-driven. As investors look to diversify their portfolios, they expect reporting from PE groups to be similar to the reports received from hedge fund managers. 

“Increasingly, PE managers are choosing to not do their own accounting in-house and are outsourcing to a third party administrator,” confirms Chad Allen (pictured), Managing Director at UMB Fund Services “As an asset class, PE has been our biggest growth area in 2017.”

Such is the level of investor interest in PE – Preqin earlier this year estimated there was USD846 billion in dry powder – that we are fast approaching the high watermark of 2007, in terms of capital raised this year. Cambridge Associates estimates that if one includes co-investment activity, which is a non-reported figure, new capital flows for PE this year could approach USD240 billion to USD250 billion; just off the USD270 billion in capital raised in 2007.

As more institutional capital flows into the PE space, the level of expectation rises, from a reporting perspective. 

“We service quite a number of PE fund-of-funds (FoFs) and general partners like to see which portfolio companies the underlying investments hold. We can perform a full look-through to each portfolio company to provide transparency for the FoF. In addition, we have started to implement ILPA templates for reporting to limited partners. We can produce capital call, distribution and capital statements that are ILPA compliant,” explains Allen.

The ILPA template is a standardised reporting template developed by the Institutional Limited Partners Association. As a tool, the template is proving effective at helping general partners better communicate with their limited partners.  

Ultimately, says Allen, it comes down to investors wanting to feel comfortable with their investments, with the general partner, and wanting to have transparency relative to the fund’s performance. 

“The general partners need investors to help fund deals so they want to please the large limited partners. The institutional money, coming from the larger asset allocators, demands more transparency (than smaller investors),” suggests Allen.

Typically PE funds are only valued quarterly; however there can be a lot of activity during the quarter, such as calling capital and closing on deals. 

UMB Fund Services has built its systems to track all of a fund’s cash flows on a daily basis. The benefit to this is that general partners can perform accurate forecasting, have a clear insight into what money is coming in and going out of the fund and know where they stand at all times. 

“We are not only striking quarterly net asset values, we help managers throughout the quarter by giving them the timely information they need to make informed decisions.

“We have a proprietary accounting and reporting system called FastPro, which we believe gives us an advantage. PE is still somewhat of a burgeoning asset class, as far as fund administrators are concerned. As such, it is difficult to find software that can do exactly what general partner needs. We are servicing a variety of PE funds such as real estate, venture capital, buyout funds and each requires different information from the system. A proprietary system allows us to develop the software in a meaningful way to support our PE clients, so they can timely deliver funds to the market place,” explains Allen.

In terms of new technologies, he says UMB is looking at web crawlers, email listeners, OCR tools, data scraping tools, “in order to help us retrieve the underlying investment information, normalise it and have it interfaced into our system. It is something we have been looking at for quite some time and it is nice to see technology continue to improve to provide us with more real-life application capabilities.”

Regulation has also become an important factor as to why general partners face increased reporting requirements. Regulations now include FATCA, Common Reporting Standards, and Annex IV reporting under AIFMD in Europe, which PE managers have not had to deal with before. This is pushing PE managers to outsource administration as they seek out assistance in these complex reporting matters, mindful that they do not wish to become overly burdened in operational tasks that bring no value to their investors.

When asked what PE managers should look for before appointing a fund administrator, Allen refers to two points:

“First, you want to find an administrator that has experience and a good reputation. Even though an administrator might have great technology, if it does not have the experience (in servicing PE funds) it is not going to count for much. Second, if an administrator has great experience but lacks the technology capability to deliver a suite of services, the same logic holds true. You need a combination of the two. 

“We try to strike that balance. We have been servicing funds since 1991. We have also built a dynamic web portal where we can deliver information to our general partners and their investors. The portal is not just a way for us to push data, it is also a way for clients to interact with us. 

“For example, they can upload files to reduce risk associated with email communication and to manage the sharing of large files; they can submit demographic changes pertaining to their LPs; they can generate reports on an ad hoc basis. Our clients have access to the raw data and they are able to make modifications as to how fund information is presented and reported. They have a lot of tools at their fingertips.”

These are propitious times for PE managers and fund administrators as they both look to address increased reporting obligations as effortlessly as possible. One could argue that it is pushing what was once a very manual, in-house role into a more automated, external one, as PE groups become more comfortable having independent oversight of their accounting and other services.

“By having a third-party administrator, the LP is reassured that there is an independent entity overseeing cash controls in the fund. We are involved in all cash disbursements. We cannot act unilaterally; the general partner cannot act unilaterally. It has to be a joint effort and that reduces the amount of risk associated with fraud,” concludes Allen.

inhouse contentUMB Fund ServicesFund administrationTechnology and software solutions

Cboe bitcoin futures trading volume totals more than 4,000 contracts on first day of trading

Tue, 12/12/2017 - 04:35

Cboe Global Markets’ Cboe bitcoin futures (XBT) traded a reported 4,127 contracts in their first day of trading. XBT futures debuted Sunday, 10 December, at 5:00 pm CT, the beginning of Global Trading Hours. The first trading session closed at 3:15 pm CT on 11 December.

The Cboe Futures Exchange (CFE) daily settlement price for the front-month Jan Cboe Bitcoin (XBT) future for the December 11 session was USD18,545.
 
Some 20 trading firms actively participated in the December 11 session. Cboe previously announced that all transaction fees will be waived1 throughout the month of December.
 
Over the last five years, the total value of all bitcoin outstanding (market capitalisation) has grown from less than USD1 billion to over USD262 billion, with daily notional turnover on 8 December, 2017 exceeding USD21 billion. The total value of all cryptocurrency tokens outstanding is now approximately USD423.7 billion. 

offCrypto currencyBitcoinTrading & Execution

Investors see alternative assets as an important diversification tool in uncertain markets, says AllianzGI RiskMonitor Survey

Mon, 12/11/2017 - 11:49

Institutional investors are increasingly turning to alternative assets to diversify portfolios as they navigate an environment characterised by low yields, geopolitical concerns and a growing set of investment risks, finds Allianz Global Investors, one of the world’s leading active investment managers, in its annual RiskMonitor survey.

Consisting of 755 institutional investors, representing USD34.2 trillion in AUM across North America, Europe and Asia-Pacific, the RiskMonitor survey found that seven out of 10 respondents said they now invest in alternative asset classes. Diversification is the No1 reason for these allocations, cited by nearly one-third (31 per cent) of investors – the most common driver of alternative allocations. Other reasons mentioned by respondents include a low correlation with other strategies (19 per cent), higher returns than conventional debt or equity instruments (17 per cent) and the potential for reducing overall portfolio volatility (11 per cent).
 
But the research finds that nearly half of investors (48 per cent) would invest more in alternatives if they felt more confident about measuring and managing any risks associated with these asset classes. This is particularly relevant for sovereign wealth funds (66 per cent) and banks (55 per cent), compared to pension funds (44 per cent), insurance (48 per cent), family office (47 per cent) and endowment and foundations (38 per cent). More than three-fifths (62 per cent) say they need better tools to manage the risks associated with alternative assets.
 
Margaret Frost (pictured), head of UK institutional, at Allianz Global Investors, says: “We are seeing alternative investments being increasingly deployed by institutional investors to solve a variety of diversification, income, and risk management needs.”
 
“Although it may seem mainstream for some investors, it’s still an underutilised asset class that could help investors meet the return objectives of their portfolios.”
 
Demonstrating the versatility of alternative investments, institutional investors weighed in with strategies they are using to achieve particular goals.
 
Real estate equity (30 per cent), infrastructure equity (30 per cent) and relative value/arbitrage strategies (24 per cent), among others, seem to be the most popular strategies for institutional investors when they are looking to diversify or invest in strategies that have low correlation to traditional asset classes.
 
Private corporate equity (49 per cent) is used to generate higher returns along with event-driven strategies (30 per cent) and infrastructure equity (27 per cent) while real estate and infrastructure debt (37 per cent) are considered to provide a reliable income stream.
 
For risk management, 23 per cent use relative value/arbitrage strategies, 20 per cent macro strategies, 16 per cent trading strategies and 14 per cent infrastructure debt.
 
A further 19 per cent use other illiquid alternatives in their efforts to manage risk.
 
Meanwhile liquid alternative strategies – trading strategies (22 per cent), macro strategies (17 per cent), event-driven strategies (17 per cent) – seem more popular when it comes to tail hedging.
 
The research underscores the potential benefits for investors of investing in alternatives. For example, nearly two-thirds (64 per cent) of those who allocate to alternatives feel prepared to deal with investment risks – compared with only 51 per cent of investors without alternatives allocations who feel similarly prepared.
 
Given that asset class diversification is the most popular risk management strategy among the respondents, this greater preparedness seems to stem from the role that alternative assets can play within these strategies. In addition, 44 per cent of investors said that alternative investments are necessary to protect a portfolio from tail risk.

offSurveys & research

CAIS 2018 to explore transformative impact of technology on alternative investment industry

Mon, 12/11/2017 - 06:58

Next February will be the fifth instalment of the Cayman Alternative Investment Summit (CAIS), hosted by Dart Enterprises at the stunning Kimpton Seafire Resort & Spa on Grand Cayman. 

The theme of CAIS 2018 is the impact of technology on the industry: "Wired: The Rise of Alternative Investments in a Digital Age."

“Each year, we want to create a theme that is relevant to the external influences facing the alternative funds industry and ensure that all the associated speakers, panels, and demonstrations that we arrange, are appropriate,” remarks Chris Duggan, Director of CAIS and VP of Community Development at Dart Enterprises, in a conversation with Hedgeweek. 

The topic is highly pertinent. Technology is not only impacting the investment space, it is fundamentally changing the financial services industry as a whole. 

“These changes bring significant challenges but also a multitude of opportunities,” says Duggan. “The digital theme that we’ve come up with will largely take a two-pronged approach. Firstly, it will address the challenges that the industry might face as technology advances, and secondly, it will identify how best to take advantage of the opportunities that are likely to appear in the market.”

CAIS 2018 will cover an array of issues and topics that include: “Rise of Quants: The New Kings of Wall Street,” “Harnessing the Transformational Power of Technology & Machine Learning,” “The Blockchain Revolution and its Transformative Impact” and “Globalisation in Retreat: Leading the Industry into a Digital Future”.

Special guest speakers include:

  • Jeremy Bailenson – founding director of Stanford University’s Virtual Human Interaction Lab and author of the upcoming book “Experience on Demand”
  • Bettina Warburg – co-founder of Animal Ventures and a thought leader in the emerging blockchain space
  • Maurice Conti – designer, futurist, innovator and Chief Innovation Officer at Telefónica Alpha, Europe’s first moonshot factory

“We will have VR demonstrations to link back to how technology is changing the industry. It will be quite an immersive, interactive experience compared to previous CAIS events,” says Duggan.

The pace of change as disruptive technology gets adopted by the financial industry is similar to Moore’s Law. Every year, the power and array of applications seems to double, as financial organisations of all shapes and sizes seek out new ways to automate and re-engineer their business models. 

Firms are investing heavily in artificial intelligence, blockchain applications and other digital technology.

Indeed, at a recent New York City satellite event hosted by CAIS, a straw poll of attendees found that 83 per cent of firms would increase spending on data, technology or analytics in 2018. Moreover, 30 per cent said that cybersecurity was the top global threat for 2018. As cyber attacks like Wannacry become increasingly sophisticated, global fund managers need to keep on top of technology and cybersecurity trends to uphold their reputations. 

Nearly a third of those who were surveyed back in February at CAIS 2017 said that they believed artificial intelligence would be the most disruptive technology in 2017. Looking ahead, 43 per cent of industry experts believe blockchain is the technology most likely to disrupt economies over the next five years, surpassing artificial intelligence (35 per cent), self-driving cars (18 per cent) and robotics (4 per cent).

As well as industry and technology experts, CAIS 2018 will continue the tradition of inviting non-industry marquee names to share their experiences with the audience, which Duggan expects to exceed 500 people. The biggest draw is Hollywood actor and A-list celebrity, Will Smith, who will entertain the room at the end of Day 1. 

Two other prominent names include Danica Patrick, the most successful woman in the history of American stock car racing and the only woman to win an IndyCar Series race, and Robert O’Neill, a highly decorated former Navy SEAL. 

Danica will talk about her experiences of competing in a male-dominated sport, while Robert – who two years ago delivered a captivating speech that brought a standing ovation - will describe the mentality needed to succeed in a career where failure is not an option.

“We want to consider real issues facing the world on a daily basis so having non-industry speakers to provide different perspectives is really important to the event,” stresses Duggan.

“With respect to Danica, I don’t think there’s a better example of a female competing in a male-dominated industry. For her to come in and talk about how she has been so successful in that world will, I think, be highly pertinent. She is a great role model for so many women.”

Given the nature of the theme, CAIS 2018 is going to be a lot more interactive. Rather than traditional paper agendas, delegates will have access to apps on their smart phones, and within the venue the stage design will facilitate a digital experience for the audience. 

The objective of every CAIS event is to talk about the issues in a wider context. This is not an event where people ‘talk shop’. People like Maurice and Jeremy will bring a much wider perspective on how digital technology is shaping our world. Like Davos is to the banking industry, CAIS aims to educate its delegates, encourage critical thinking, deliver lively debate, and generate tangible insights that people can apply to their own businesses. 

“Among the 500-plus delegates that come to CAIS, everyone is looking for something different. We can’t be all things to all people but we try to keep it as broad as possible to ensure people get as much out of the event as possible. Bringing in non-industry speakers like Jeremy Bailenson, who can link their expertise to the industry at a high level, is beneficial as it often leads to insights and new ideas; especially with respect to how artificial intelligence and machine learning can impact the industry,” says Duggan.

He finishes by saying that CAIS 2018 aims to provide a toolbox to those who attend. 

“We want to be industry changers, and at the cutting edge of driving the alternatives industry forward. If thoughts and ideas can be shared and discussed at CAIS, and help transform the industry in a positive way…that’s ultimately what we’re looking to do,” concludes Duggan.

Registration for CAIS 2018 is now live at http://www.caymansummit.com/register with early bird prices available until 31 December, 2017. 

  offEvents

SEC delays introduction of N-PORT filing as it looks to boost EDGAR security

Mon, 12/11/2017 - 03:46

The Securities and Exchange Commission (SEC) is delaying the implementation of rules requiring large mutual funds to submit monthly details of their portfolio holdings to the Commission while it improves the security of its EDGAR filing system which was hacked in 2016.

For the first nine months after the original Form N-PORT compliance date of 1 June, 2018, larger fund groups will maintain the required information in their records and make it available to the Commission upon request instead. Smaller fund groups will have to comply with the requirements one year after larger fund groups begin filing the form.
 
The delay as the Commission carries out an assessment of it cybersecurity risk profile was announced by Chairman Jay Clayton (pictured), in May 2017.
 
"Today's Commission action is a prudent step as we continue our work to uplift EDGAR and other systems and assess our data needs, including how and when we collect market-sensitive data," says Clayton. "An important component of today’s release is the requirement that larger fund groups maintain - and Commission staff have access to - the information required on Form N-PORT."
 
The Commission adopted Form N-PORT to require registered investment companies to report enhanced information about their monthly portfolio holdings in a structured data format. Filing of Form N-PORT through the EDGAR system will begin in April 2019 for larger fund groups and in April 2020 for smaller fund groups. To ensure that investors do not lose access to important information, the Commission is requiring funds to continue filing public reports on existing Form N-Q until they begin filing reports on Form N-PORT using EDGAR.  

offCybersecurityLegal & Regulation

Hedge fund managers embrace innovation amid industry challenges and increased competition

Fri, 12/08/2017 - 09:10

The majority of hedge fund managers (57 per cent) are innovating to improve their operational efficiency in response to market disruptions, and to avoid falling behind the industry.

That’s according to the EY 2017 Global Hedge Fund and Investor Survey: ‘How will you embrace innovation to illuminate competitive advantages?’
 
The 11th annual survey found that hedge fund managers are actively seeking innovative ways to improve operational efficiency and grow their asset base, as pressure on margins shows no signs of abating. Meanwhile, investors also say they recognise the need for managers to innovate, with 30 per cent noting they want managers to do so in the front office.
 
Investors are looking for managers who can effectively implement next generation data to gain an advantage, according to the survey. Managers are beginning to notice that effective use of data is a key advantage, and nearly half say they are using non-traditional data to support the investment process. To keep pace with investor appetite for new products and innovative offerings, managers are not only reimagining their investment strategies, but are also focusing on hiring and retaining talent that is experienced in technology and data. 
 
Michael Serota (pictured), EY Global Hedge Fund Services Leader, says: "The pace at which the hedge fund industry is being disrupted continues to accelerate, as advances in technology bring new threats, but also opportunity. The evolving landscape forces managers to not only be reactive but also proactive in identifying novel solutions that allow them to deliver alpha and remain competitive. Managers of all sizes are embracing innovation to stand out in a crowded hedge fund universe and to achieve a common strategic objective: growth." 
 
Consistent with last year's survey findings, fewer investors plan to increase their allocations to hedge funds. Of those surveyed, 15 per cent of investors note they are more likely to decrease allocations in the next three years versus 11 per cent of investors who indicate they plan to increase allocations. However, the vast majority – 74 per cent of investors – still expect to keep their hedge fund allocations flat.
 
Alternative investments continue to spur competition, as 40 per cent of investors say they plan to shift certain hedge fund assets to other alternative asset classes and 20 per cent say they will begin using non-traditional hedge fund products for the first time. In particular, private equity is experiencing a dramatic shift in demand, as 76 per cent of investors currently allocate or plan to allocate funds to this alternative asset class in the next two years.
 
To attract and retain investors, the survey reveals, more than half of managers now offer separately managed accounts (56 per cent) and funds with customised fees and liquidity terms (52 per cent), and two-thirds of managers have adopted or are considering non-traditional fee structures for growth (66 per cent). The largest hedge fund managers have been able to keep momentum, making the largest investments in non-traditional product development.
 
Natalie Deak Jaros, Americas Co-Leader, Hedge Fund Services, Ernst & Young, says: "Investors are turning to customised products for a number of compelling reasons. Managers of all sizes must engage in dialogue with their investors and align product offerings that are responsive to shifting investor needs."
 
Investor expectations reflect the general excitement around FinTech and the advancements in data set analytics. Thirty per cent say they would like to see hedge funds become more innovative within front-office operations. While investors say only 24 per cent of the hedge funds to which they currently allocate use non-traditional or next generational data and tools, they expect that number to rise to 38 per cent in three years. Hedge funds are starting to see the benefits of non-traditional data, with 46 per cent saying they currently use this data. As an example, managers can deploy software to extract data from multiple earnings calls that can help evaluate information more quickly to inform the investment process.
 
The landscape is quickly changing in response to investors' demands, as managers are implementing innovative approaches to improve operational efficiency (57 per cent), attract capital (36 per cent), attracting/retaining talent (28 per cent) and the front office (25 per cent). The goal is to invest in cutting-edge technology to improve the speed and quality of data reporting. While, in 2016, only half of managers used or expected to use non-traditional data or tools in their investment processes, this year, more than three-quarters indicate they currently use this technology (46 per cent) or have future plans to do so (32 per cent). Data types of interest include social media data, private company data and credit card data.
 
Managers are looking to alleviate continued margin pressures by investing in technology to innovate their operating models
 
Until now, most managers have responded to added complexity, increased product offerings and reporting requirements with increased headcount, which in turn drives margin pressure. Simultaneously, investors continue to place management fees under scrutiny, forcing managers to lower operating expense ratios. The average operating expense ratio is currently 1.75 per cent, down from 1.95 per cent in 2015.
 
However, hedge funds are realising the need to break the cycle and invest in operational efficiency. Fifty-seven percent of managers say their organisation is investing, or will invest, in initiatives to improve their operating models.
 
Half of managers surveyed plan to tackle margin pressures by investing in technology. Forty per cent say they plan to invest in automating manual processes and more than a quarter of managers (27 per cent) have or will be making investments in artificial intelligence and robotics to strengthen their middle and back office.
 
Zeynep Meric-Smith, EMEIA Leader, Hedge Fund Services, Ernst & Youn, says: "Managers with growing businesses will often need to add to their headcount to support the business, but modern advances in technology provide helpful solutions in supporting operating models that add to the bottom line, rather than reduce it."
 
The need for tech skills and increased competition for talent are leading to a shift in talent management priorities
 
As the industry embraces innovation, the roles and responsibilities of traditional talent are shifting to account for technological and qualitative skills. The survey reveals investor confidence in future talent plans is a critical component in their decision to allocate. For their part, 30 per cent of managers say they have changed the profile of employees they seek to include these new skill sets.
 
The ability to compete for the right talent is a strategic imperative for hedge fund managers, particularly in the front office, where more than half of those surveyed (54 per cent) say they struggle to attract and retain executive investment professionals and more than a third (37 per cent) express difficulty in attracting non-executive investment professionals.  
 
Managers are also feeling pressure to provide competitive compensation and purpose-driven workplace culture. Nearly half of managers (45 per cent) say they have taken steps such as formally surveying or employing consultants to understand what employees are looking for in the workplace. As a result, they have found that collaboration, compensation and work-life balance are key.
 
Elliott Shadforth, Asia-Pacific Leader, Wealth & Asset Management, Ernst & Young, says: "Competition for talent is fierce, as hedge funds compete with others in the space as well as Silicon Valley and the FinTech community. Hedge fund managers must be attuned to the wants and needs of newer generations of talent to attract the right people and foster an unmatched work environment." 

offSurveys & research

Hedge funds up 0.5 per cent in November

Fri, 12/08/2017 - 05:18

Hedge funds extended 2017 gains through November, driven by ongoing US economic growth and significant merger and acquisition (M&A) activity, according to data released by HFR.

The HFRI Fund Weighted Composite Index® gained +0.5 per cent in November, led by Equity Hedge and Special Situations funds, marking the 13th consecutive monthly advance and bringing YTD performance to +7.5 per cent. The gain extends the record Index Value for the HFRI to 13,926.
 
Equity Hedge (EH) funds led all main strategies in November as the HFRI Equity Hedge (Total) Index advanced 1.1 per cent, bringing YTD performance to +12.1 per cent. EH sub-strategy performance was led by the HFRI EH: Healthcare Index, which climbed 2.1 per cent for the month and leads all EH sub-strategies YTD with a +17.9 per cent return. The HFRI EH: Quantitative Directional Index and HFRI EH: Fundamental Value Indices also produced strong November returns, adding 1.5 and 1.2 per cent, respectively. In addition to M&A, EH strategies have also recently increased exposures to ESG factors, which is expected to continue into 2018.
 
Event-Driven (ED) hedge funds advanced as corporate M&A activity accelerated through November and into December with large transactions at various stages of completion. These include AT&T/Time Warner, Qualcomm/Broadcom, and CVS/Aetna, with additional speculative activity involving 20th Century Fox, Google, Amazon, Facebook, Apple, Nvidia, Disney, Comcast and General Electric. The HFRI Event-Driven (Total) Index advanced 0.1 per cent for November, bringing YTD performance to +6.1 per cent. ED sub-strategy performance was led by the HFRI ED: Special Situations Index, which jumped 1.5 per cent for the month, extending YTD performance to +10.8 per cent, leading ED sub-strategies for 2017. The HFRI ED: Credit Arbitrage Index added 0.3 per cent in November, bringing the YTD return to +6.0 per cent.
 
Fixed income-based Relative Value Arbitrage (RVA) and Macro strategies posted mixed performance for the month, with the HFRI Relative Value (Total) Index up 0.05 per cent, while the HFRI Macro (Total) Index declined 0.2 per cent. The HFRI RV: Volatility Index led RVA sub-strategy performance in November, gaining 0.8 per cent, while the HFRI RV: Sovereign Index advanced 0.5 per cent. Currency and Commodity exposures both detracted from Macro performance for the month, as the HFRI Currency Index fell 1.5 per cent and the HFRI Commodity Index declined 0.3 percent. Risk Parity funds also gained in November, with the HFR Risk Parity Vol 10 Index gaining 0.6 per cent for the month, bringing YTD performance to +11.9 per cent.
 
“Hedge funds gained in November as M&A activity accelerated with investors and managers positioning for transformative impacts across retail, media, manufacturing, distribution and financial industries,” says Kenneth J Heinz (pictured), President of HFR. “Performance was also driven by positive developments regarding US tax reform, as well as improving expectations for near-term economic growth and optimism for additional strength into 2018. It is likely that these favourable trends will continue to drive industry growth through year end.”

offResults and performanceFundsFlag: alphaq

Hedge fund assets are migrating to lower cost structures, says Gemini survey

Thu, 12/07/2017 - 06:05

Thirty-three per cent of investors and senior fund managers currently use some type of platform for manager allocations, according to a poll carried out during a recent Gemini webinar moderated by James Williams (pictured), Managing Editor of Hedgeweek.

The webinar, "Managed Account Platforms: The Evolution of Hedge Fund Investing," featured industry experts discussing current trends in institutional investing and the value of managed account platforms. 

Participants also responded about the benefits they found most valuable about managed account platforms, with manager oversight being their first choice (46 per cent), followed by transparency of portfolio holdings (31 per cent), aggregated risk reporting (15 per cent), and liquidity (8 per cent).

Edward Lund, Gemini's Senior Vice President of Business Development for Institutional Sales, says: "The data shows that the industry is just now starting to reap the full impact of managed account platforms. These platforms allow institutions to allocate to dozens of managers, providing greater diversification without the need for significant internal resources. They also provide an efficient and cost effective way for institutions to implement a fund of hedge funds model."

Other benefits of a managed account platform revealed during the event include: access to managers at lower minimums than would be required of a direct relationship; better liquidity terms than is typical of a direct relationship; full transparency (trade-level data); guideline monitoring provided by a third-party; and convenience – electronic subscription, ease of allocation changes, single K-1, and single sub-doc.

Williams, noted: "With institutional investors searching for the most efficient way to optimise their exposure to hedge funds, many are discovering the myriad of benefits to using managed account platforms. Not only do they facilitate greater cash efficiency by accessing trading strategies on margin, as opposed to being fully funded in offshore structures, they give investors the chance to tailor their exposure and dial up risk. In a continued low rate environment, that is an advantage and one that looks set to support further evolution of the managed account platform model." 

Registrants were also asked what type of investments they currently allocate to, with equities being the top (80 per cent), followed by commodities (57 per cent), private equity (57 per cent), and fixed income (50 per cent).

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